-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T86jwdIJsWmJy0A9NR0jubtjUGZ6+kOIM8/csQcPfSLHwJnC9ZMRdZrcXgYDlrxY mNKRCy5qKCoas700rJswaA== 0000891531-98-000002.txt : 19980217 0000891531-98-000002.hdr.sgml : 19980217 ACCESSION NUMBER: 0000891531-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980212 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BREED TECHNOLOGIES INC CENTRAL INDEX KEY: 0000891531 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 222767118 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11474 FILM NUMBER: 98535134 BUSINESS ADDRESS: STREET 1: 5300 OLD TAMPA HWY CITY: LAKELAND STATE: FL ZIP: 33811 BUSINESS PHONE: 9416686000 MAIL ADDRESS: STREET 1: PO BOX 33050 CITY: LAKELAND STATE: FL ZIP: 33811 10-Q 1 2ND QUARTER 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended: December 31, 1997 or [ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission File No. 1-11474 BREED TECHNOLOGIES, INC. (Exact name of registrant as specified in charter) Delaware 22-2767118 (State of Incorporation) (I.R.S. Employer Identification No.) 5300 Old Tampa Highway Lakeland, Florida 33811 (Address of principal executive offices) (Zip Code) (941) 668-6000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __. As of February 12, 1998, 31,712,608 shares of the registrant's common stock, par value $.01 per share, were outstanding. INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Condensed Balance Sheets - December 31, 1997 (Unaudited)and June 30, 1997 .......... 1 Consolidated Condensed Statements of Earnings (Unaudited) Three and six months ended December 31, 1997 and 1996 3 Consolidated Condensed Statements of Cash Flows (Unaudited) Six months ended December 31, 1997 and 1996 ..... 4 Consolidated Statement of Stockholders Equity (Unaudited).. 5 Notes to Consolidated Condensed Financial Statements (Unaudited) ..................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................ 12 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders............ 16 Item 6. Exhibits and Reports on Form 8-K .............................. 17 Signatures ............................................................ 18 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Breed Technologies, Inc. Consolidated Condensed Balance Sheets In Millions, except per share data
December 31, June 30, 1997 1997 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 32.3 $ 18.7 Accounts receivable, principally trade 287.1 208.0 Inventories: Raw materials 56.1 24.8 Work in process 30.3 23.4 Finished goods 34.9 27.1 --------- ---------- Total Inventories 121.3 75.3 --------- ---------- Prepaid expenses and other current assets 61.9 13.5 --------- ---------- Total Current Assets 502.6 315.5 Property, plant and equipment, net 347.4 276.5 Intangibles, net 744.9 221.0 Net assets held for sale 22.2 52.6 Other assets 48.3 11.6 --------- ---------- Total Assets $ 1,665.4 $ 877.2 ========= ==========
See Notes to Consolidated Condensed Financial Statements. Breed Technologies, Inc. Consolidated Condensed Balance Sheets In Millions, except per share data
December 31, June 30, 1997 1997 (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current portion of long-term debt (Note 3) $ 819.0 $ 191.7 Accounts payable 262.4 121.5 Accrued expenses 240.9 49.5 --------- ---------- Total Current Liabilities 1322.3 362.7 --------- ---------- Long-term debt 31.9 231.7 Other long-term liabilities 29.8 16.3 --------- ---------- Total Liabilities 1384.0 610.7 --------- ---------- Company obligated mandatorily redeemable convertible preferred securities (Note 5) 250.0 --- Stockholders' Equity: Common stock, par value $0.01, authorized 50,000,000 shares, issued and outstanding 31,712,608 and 31,679,442 shares at December 31, 1997 and June 30, 1997, respectively 0.3 0.3 Series A Preference Stock par value $0.001, authorized 5,000,000 shares, issued and outstanding 4,883,227 shares at December 31, 1997 (Note 4) 115.0 --- Additional paid-in capital 78.0 77.5 Warrants (Note 3) 1.9 --- Retained earnings (139.3) 208.0 Foreign currency translation adjustments (24.2) (18.8) Unearned compensation (0.3) (0.5) --------- ---------- Total Stockholders' Equity 31.4 266.5 --------- ---------- Total Liabilities and Stockholders' Equity $ 1,665.4 $ 877.2 ========= ==========
See Notes to Consolidated Condensed Financial Statements. Breed Technologies, Inc. Consolidated Condensed Statements of Operations (Unaudited) In millions, except earnings per share
Three Months Ended Six Months Ended December 31, December 31, --------------------- --------------------- 1997 1996 1997 1996 Net sales $ 340.7 $ 182.6 $ 535.9 $ 341.2 Cost of sales (Note 6) 312.9 145.9 479.7 262.4 --------- -------- --------- --------- Gross profit 27.8 36.7 56.2 78.8 Operating expenses: Selling, general and administrative expenses 21.3 16.7 37.6 32.2 Research, development and engineering expenses 18.6 9.9 27.5 17.8 Repositioning charges (Note 6) 244.0 --- 244.0 --- In-process research and development expenses (Note 6) 77.5 --- 77.5 --- Amortization of intangibles 4.0 0.8 6.0 2.1 --------- -------- --------- --------- Total operating expenses 365.4 27.4 392.6 52.1 --------- -------- --------- --------- Operating income (loss) (337.6) 9.3 (336.4) 26.7 Interest expense 27.1 6.7 35.4 11.1 Other income (expense), net 0.4 2.3 (0.1) 2.5 --------- -------- --------- --------- Earnings (loss) before income taxes, distributions on Company obligation mandatorily redeemable convertible preferred securities and extraordinary item (364.3) 4.9 (371.9) 18.1 Income taxes (benefit) (Note 7) (46.5) 1.8 (49.9) 7.1 Distributions on Company obligation mandatorily redeemable convertible preferred securities (Note 5) 1.4 --- 1.4 --- --------- -------- --------- --------- Earnings (loss) before extraordinary loss (319.2) 3.1 (323.4) 11.0 Extraordinary loss, net of tax benefit of $0.4 million (0.7) --- (0.7) --- --------- -------- --------- --------- Net earnings (loss) $(319.9) $ 3.1 $(324.1) $ 11.0 ========= ======== ========= ======== Basic earning (loss) per common share (Note 8): Earnings (loss) before extraordinary loss $(10.07) $ 0.10 $(10.20) $ 0.35 Extraordinary loss (0.02) --- (0.02) --- --------- -------- --------- --------- Net earnings (loss) $(10.09) $ 0.10 $(10.22) $ 0.35 ========= ======== ========= ========= Diluted earnings (loss) per common share: Earnings (loss) before extraordinary loss $(10.07) $ 0.10 $(10.20) $ 0.34 Extraordinary loss (0.02) --- (0.02) --- --------- -------- --------- --------- Net earnings (loss) - assuming dilution $(10.09) $ 0.10 $(10.22) $ 0.34 ========= ======== ========= =========
See Notes to Consolidated Condensed Financial Statements. Breed Technologies, Inc. Consolidated Condensed Statements of Cash Flows (Unaudited) In millions
Six Months Ended December 31 --------------------------------- 1997 1996 ------------- ----------- Cash Flows from Operating Activities: Net earnings (loss) $ (324.1) $11.0 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 27.1 21.5 Non-cash items included in repositioning and other special charges 195.9 --- Accrual for repositioning and other special charges 76.5 --- Changes in working capital items and other 3.6 39.9 ------------- --------- Net cash provided by (used in) operating activities (21.0) 72.4 ------------- --------- Cash Flows from Investing Activities: Cost of acquisition, net of cash acquired (Note 2) (710.0) (211.0) Purchases of property, plant and equipment (23.4) (41.7) Proceeds from sale of assets 2.6 --- ------------- --------- Net cash used in investing activities (730.8) (252.7) ------------- ---------- Cash Flows from Financing Activities: Proceeds from (repayment of) debt, net 427.5 119.0 Proceeds from Series A Preference Stock issuance 115.0 --- Proceeds from Series B Preference Stock issuance 200.0 --- Fees associated with Series B Preference Stock issunce (10.0) --- Redemption of Series B Preference Stock issuance (200.0) --- Proceeds from Company obligated mandatorily redeemable convertible preferred securities, less relatedees 239.0 --- Cash dividends paid (2.2) (4.4) Proceeds from common stock issued 0.7 0.6 ------------- --------- Net cash provided by financing activies 770.0 115.2 ------------- --------- Effect of exchange rate changes on cash (4.6) (0.5) ------------- ---------- Net increase/(decrease) in cash and cash eqvalents 13.6 (65.6) Cash and cash equivalents at beginning oferiod 18.7 95.8 ------------- ---------- Cash and cash equivalents at end of period $ 32.3 $ 30.2 ============= ========== Cost of Acquisition: Working capital, net of cash acquired $ 39.5 $ (44.2) Property, plant and equipment (140.3) (151.2) Cost in excess of net assets acquired (683.3) (72.9) Intangibles-write-off of in-process research and development costs 77.5 --- Investments and other assets (11.8) (19.0) Long-term debt --- 33.9 Other long-term liabilities 8.4 42.4 ------------- --------- Net cost of acquisition $ (710.0) $ (211.0) ============= =========
See Notes to Consolidated Condensed Financial Statements. Breed Technologies, Inc. Consolidated Statement of Stockholders Equity (Unaudited) In Millions, except per share data
Series A Series B Additional Common Stock Preference Preference Paid-In Retained Shares Amount Stock Stock Capital Warrants Earnings ---------------------------- ------------- ------------- ------------- ------------ ------------ Balance at June 30, 1997 31,679,442 $ 0.3 --- --- $ 77.5 --- $ 208.0 Net loss (324.1) Translation adjustments Issue Series A Preference Stock, (Note 4) 115.0 Issue Series B Preference Stock, (including fees), 200.0 (10.0) (Note 5) Redemption of Series B Preference Stock, (Note 5) (200.0) Fees associated with Company obligated mandatorily redeemable convertible preferred securities (11.0) Warrants issued with Credit Facility, (Note 3) 1.9 Shares issued under Stock Option Plans 39,692 0.7 Shares terminated under Stock Incentive Plan, net of granted Shares (6,526) (0.2) Cash dividends (2.2) --------------- ----------- ------------- ------------- ------------- ------------ ------------ Balance at December 31, 1997 31,712,608 $ 0.3 $ 115.0 --- $ 78.0 $ 1.9 $ (139.3) =============== =========== ============= ============= ============= ============ ============
Foreign Currency Translation Unearned Adjustments Compensation Total --------------- ----------------- ---------- Balance at June 30, 1997 $ (18.8) $ (0.5) $ 266.5 Net Loss (324.1) Translation adjustments (5.4) (5.4) Issue Series A Preference Stock, (Note 4) 115.0 Issue Series B Preference Stock, (including fees), (Note 5) 190.0 Redemption of Series B Preference Stock, (Note 5) (200.0) Fees associated with Company obligated mandatorily redeemable convertible preferred securities (11.0) Warrants issued with Credit Facility, (Note 3) 1.9 Shares issued under Stock Option Plans 0.2 0.9 Shares terminated under Stock Incentive Plan, net of granted Shares (0.2) Cash dividends (2.2) --------------- ----------------- ---------- Balance at December 31, 1997 $ (24.2) $ (0.3) $ 31.4 =============== ================= ========== Notes to Consolidated Condensed Financial Statements (Unaudited) Note 1 - Basis of Presentation The accompanying unaudited consolidated condensed financial statements of Breed Technologies, Inc. (the "Company"or "Breed") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended December 31, 1997 are not necessarily indicative of the results that may be expected for the year ending June 30, 1998. The consolidated financial statements include the accounts of Breed and all majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 1997. Note 2 - Acquisition On October 30, 1997 the Company completed the acquisition of certain assets and the assumption of certain liabilities of the "Safety Restraints Systems" business unit of AlliedSignal, Inc. and 100% of the outstanding shares of capital stock of ICSRD Rueckhaltesysteme Fahrzeugsicherheit GmbH, a German company, BSRD Limited, an English company, AlliedSignal India, Inc., a Delaware company, Sistemas AlliedSignal de Seguridad, S.A. de C.V., a Mexican company, and AlliedSignal Cinturones de Seguridad, S.A. de C.V., a Mexican company (collectively, "SRS"). The acquisition was made pursuant to the Asset Purchase Agreement ("Agreement") dated August 27, 1997 among AlliedSignal, Inc. (and certain subsidiaries identified in the Agreement) and Breed (and certain subsidiaries identified in the Agreement). SRS produces seatbelts and airbags with principal locations in Knoxville, Tennessee; Maryville, Tennessee; Greenville, Alabama; St. Clair Shores, Michigan; Sterling Heights, Michigan; Douglas, Arizona; Brownsville, Texas; El Paso, Texas; Aqua Prieta, Mexico; Juarez, Mexico; Valle Hermoso, Mexico; Carlisle, England; Colleferro, Italy; Turin, Italy; Siena, Italy; Arzano, Italy; and Barcelona, Spain. The purchase price for the SRS acquisition was $710.0 million, which was financed with borrowings under a revolving and term credit facility, the net proceeds from the issuance and sale of Series B Preference Securities (as defined in Note 5) and the net proceeds from the issuance and sale of Series A Preference Shares to Siemens AG. The allocation of the purchase price is preliminary and subject to change. In addition, the purchase price is subject to post-closing adjustments based on the net book value of the acquired business, retained cash balances, if any, and any amounts paid with respect to certain intercompany obligations. The initial purchase price shall be increased or decreased by the amount by which the net book value of SRS as of the closing date is greater than or less than, respectively, $175.3 million. The Company has submitted to AlliedSignal, Inc. a post closing purchase price adjustment in accordance with the terms of the agreement. The final adjustment will be determined in accordance with the terms of the Agreement. The pro forma unaudited results of operations for the six months ended December 31, 1997 and 1996, assuming the acquisition of SRS had been consummated as of July 1, 1996, are as follows: Six Months Ended December 31, In millions, except per share data 1997 1996 - -------------------------------------------------------------------------------- Net sales $ 813.5 $ 852.3 Net loss $ (389.9) $ (13.5) Net loss per share - basic and diluted $ (12.30) $ (0.43) Note 3 - Borrowings On October 30, 1997, in connection with the acquisition of SRS, the Company and NationsBank entered into a new revolving and term credit facility ("Credit Facility") pursuant to which the Company has $900 million of aggregate borrowing availability. At December 31, 1997, the Company had an aggregate of $810 million of borrowings outstanding under the Credit Facility (including approximately $10.0 million of letters of credit) and the weighted average interest rate on such borrowings was approximately 8.76% per annum. The credit facility consists of a $600 million term loan and a $300 million revolver (with $75 million multicurrency and $25 million letter of credit sublimits). Both credit facilities have a 366 day term which expire on October 31, 1998. Borrowings under the Credit Facility bear interest at a per annum rate equal to, at the election of the Company, either (i) the higher of the Federal Funds Rate plus 0.5% or the NationsBank prime rate plus, in either case, an additional margin ranging from 2.0% to 5.0% based on the length of time the Credit Facility is in existence, or (ii) a rate based on the prevailing interbank offered rate plus an additional margin ranging from 3.0% to 6.0% based on the length of time the Credit Facility is in existence. The letter of credit fee ranges from 3.0% to 6.0% and, when there is more than one Lender, an additional 0.125% for the issuing bank. The Company is also required to pay a quarterly unused facility fee. In addition, the Company paid a commitment fee, upon the execution of the Credit Facility, equal to 3% of the aggregate available borrowings under the Credit Facility ($27 million). The Credit Facility has a 1.5% take-out fee ($13.5 million), subject to certain conditions, which is payable upon repayment in full of all amounts outstanding under the Credit Facility. The Credit Facility is secured by (i) a security interest in all of the personal property and assets (including inventory, accounts receivable, intellectual property, mortgages on all real property owned by the Company and the assets acquired pursuant to the SRS acquisition) of the Company and certain subsidiaries, (ii) a stock pledge by the Company and certain subsidiaries of their stock in certain domestic subsidiaries and at least 65% of the voting stock and 100% of the non- voting stock of foreign subsidiaries, (iii) a pledge of the common stock owned by A. Breed, L.P., a Texas limited partnership and J. Breed, L.P., a Texas limited partnership, (iv) an assignment of certain leases for facilities of the Company and certain subsidiaries, (v) a pledge and subordination of intercompany notes, (vi) an assignment of certain partnership interests, and (vii) an assignment of a trademark licensing agreement. The Credit Facility is guaranteed by certain of the Company's subsidiaries. The Credit Facility requires compliance with certain covenants by the Company and its subsidiaries, including, among other things: (i) maintenance of certain financial ratios and compliance with certain financial tests and limitations; (ii) limitations on the payment of dividends, incurrence of additional indebtedness and granting of certain liens; and (iii) restrictions on mergers, acquisitions, and investments. At December 31, 1997, the Company was in compliance with all covenants. In connection with the Credit Facility, the Company also entered into a warrant agreement with NationsBank providing for the issuance by the Company of a warrant to purchase common stock. The warrant is exercisable for 250,000 common shares at an exercise price of $23.125 per share. The warrants were valued at $1.9 million using the Black- Shoals model as recommended by Financial Accounting Standards Statement No. 123. The number of shares for which the warrant is exercisable may be increased to a maximum of 3,000,000 shares if the Company fails to fulfill certain obligations prior to July 26, 1998. The exercise price for such additional shares shall be the market price of the common stock on the day such warrant shares become exercisable. The warrant agreement and the warrant expire on October 30, 2000. NationsBank may elect that the warrant shares be included in certain registration statements filed by the Company under the Securities Act for the sale of common stock of the Company and, until October 30, 2002, may demand that the Company register the warrant shares on Form S-3. Note 4-Siemens Investment Joint Venture Agreement On December 24, 1997, the Company and Siemens Aktiengesellschaft (A.G.), Automotive Systems Group ("Siemens") signed an agreement forming a joint venture for the worldwide research, development, engineering, assembly and marketing of motor vehicle occupant safety restraint systems. The joint venture will be owned effectively 50% by both the Company and Siemens. Siemens will contribute to the joint venture its shares in the existing Passive Restraint Systems ("PARS") GmbH. PARS operates crash test facilities and develops occupant safety systems. It will serve as a center for the design, engineering,simulation, testing and sales of integrated occupant safety systems in Europe. Breed will form a company with its headquarters and facilities located in Michigan and will contribute various assets which are comparable to those existing at PARS. This new entity will act in the same capacity as PARS in North America. Breed will then contribute its ownership interest in the new company to the joint venture. The joint venture will be governed by a partners' committee consisting of three representatives from each of the Company and Siemens. The joint venture will operate pursuant to an operating budget approved by the partners' committee and subject to annual review. No expenditures in excess of budgeted amounts may be made without consent of the partners' committee. The parties will provide funding to the joint venture to the extent revenues and external funding sources are inadequate to cover budgeted operating expenses and capital expenditures. Neither party can be compelled to provide funding for operating expenses and capital expenditures above budgeted amounts. Any technology generated by the joint venture (either by itself or with one of the parties) will belong jointly to Siemens and the Company. Each party will be responsible for warranties and liabilities, including recall actions, arising from its components marketed by the joint venture to customers. The term of the joint venture is not fixed. However, it is subject to the right of either party to terminate the joint venture with six month prior written notice, or sooner upon mutual agreement, after the sixth anniversary date of the formation of the joint venture. Stock Purchase Agreement and the Preference Shares. Pursuant to the Stock Purchase Agreement, on October 30, 1997, Siemens acquired 4,883,227 Series A Preference Shares for an aggregate purchase price of $115 million. Pursuant to the Stock Purchase Agreement, the Company agreed to indemnify Siemens for breaches of representations, warranties, and covenants for a period of up to 18 months. The indemnification obligations of the Company are subject to a $1.5 million deductible and a cap of $30 million. Each Series A Preference Share represents one one-thousandth (1/1000th) of a share of 1997 Series A Convertible Non- Voting Preferred Stock of the Company and, subject to adjustment, each Series A Preference Share is convertible into one share of common stock. Except for voting rights required by law, and except for the right to elect as a class one director of the Company during the period that begins on the date when any Series A Preference Shares are converted into Common Stock and ends on the date of the termination of the stockholders agreement, the holders of shares of Series A Preference Shares do not have voting rights. All other rights of the holders of Series A Preference Shares are equal to the right of the holders of common stock and are shared ratably on an as-converted basis. On January 20, 1998, Siemens converted 4,883,226 of its Series A Preference Shares into 4,883,226 shares of common stock. The Make-Whole Agreement. In connection with the Siemens Investment, the Company entered into a Make-Whole Agreement (the "Make-Whole Agreement") with Siemens. Under the Make-Whole Agreement, within 30 days after a "Triggering Event," Siemens will have the right to require the Company, at the Company's election to either (i) repurchase the Series A Preference Shares purchased pursuant to the Stock Purchase Agreement (and any shares issuable with respect to such shares) for a purchase price equal to $115 million plus $15,753 per day for each day between December 15, 1997 and the exercise of the right (the"Make-Whole Price"), or (ii) if the net proceeds from the bona fide sale of such shares by Siemens to a third party financial institution does not equal the Make-Whole Price, to issue to Siemens such number of shares (subject to certain limits) the net proceeds from the sale of which would equal the amount of the deficit. Under the Make-Whole Agreement, a "Triggering Event" includes (a) the parties shall have been unable, after diligent and good faith efforts, to obtain the governmental approvals required with respect to the formation of the Siemens Joint Venture; or (b) the formation of the Siemens Joint Venture shall not have been completed by June 30, 1998. The Make-Whole Agreement terminates if (1) prior to Siemens' delivery of a notice that it has entered into an agreement to sell its shares to a third party financial institution as described above, Siemens sells or otherwise transfers any of the securities subject to the Make-Whole Agreement to any person other than a direct or indirect subsidiary of Siemens or (2) Siemens has not delivered such a notice by the later to occur of (x) July 31, 1998, or (y) 45 days after a Triggering Event. Registration Rights Agreement. In connection with the Siemens Investment, the Company entered into a Registration Rights Agreement (the "Registration Rights Agreement") with Siemens. Pursuant to the Registration Rights Agreement with Siemens, Siemens shall have the right, after June 1, 1998 and before the tenth anniversary of the date of the Registration Rights Agreement with Siemens, to require the Company to file up to three registration statements under the Securities Act to register any shares of common stock owned by Siemens for sale to the public, subject to certain limitations.The Company is required to pay all expenses (other than discounts and commissions) in connection with such demand registrations. In addition, if the Company elects to register securities under the Securities Act of 1933 for its account or for the account of other stockholders, Siemens shall have the right to register its shares under any such registration statement, subject to certain limitations. Note 5-Convertible Trust Preferred Securities In connection with the SRS acquisition, on October 30, 1997, the Company issued and sold to Prudential Securities Credit Corp. ("PSCC") $200 million of Series B Convertible Preference Stock of the Company (the "Series B Preference Securities"). On November 25, 1997, the Company issued and sold $250.0 million of 6.50% Convertible Subordinated Debentures due 2027 (the "Convertible Debentures") of the Company to BTI Capital Trust which, concurrently therewith, issued and sold $250.0 million aggregate liquidation amount of its 6.50% Company Obligated Mandatorily Redeemable Convertible Trust Preferred Securities (the "Preferred Securities") (which are guaranteed by the Company) in a private transaction under Rule 144A under the Securities Act of 1933. The Company used the net proceeds from the issuance and sale of the Convertible Debentures to BTI Capital Trust to redeem all of the outstanding Series B Preference Securities in accordance with the terms thereof and for general corporate purposes. Holders of the Preferred Securities are entitled to receive cumulative cash distributions at an annual rate of 6.50% of the liquidation amount of $50 per Preferred Security accruing from, and including November 25, 1997 and payable quarterly in arrears commencing February 15, 1998. The Company has the right at any time and from time to time to defer payments for a period not exceeding 20 consecutive quarters. Each Preferred Security is convertible on or after January 25, 1998, at the option of the holder, into shares of the Company's common stock, at a conversion rate of 2.1973 shares of common stock for each Preferred Security, subject to adjustment in certain circumstances. The Trust has the right to redeem the Preferred Securities on or after November 25, 2000, in whole or in part, from time to time, subject to certain conditions. The Preferred Securities do not have any voting rights and rank pari passu with the common stock. Note 6-Repositioning and Other Special Charges Over the past three years the Company has grown rapidly through various strategic acquisitions, increased market penetration in existing and new markets and internally developed new products. The rapid growth experienced by the Company and the demand of integrating acquired businesses out paced the development of the Company's corporate infrastructure and systems. In the first quarter of the fiscal year, management initiated a review of its global operations, cost structure and balance sheet directed at reducing its operating expenses, manufacturing costs and increasing productivity. This review focused on operational and organizational structures and systems, facilities utilization, product offerings, inventory valuation and other matters. As a result, in the second quarter ended December 31, 1997, the Company recorded $349.9 million before taxes ($318.4 after taxes) of repositioning charges (which aggregated $244.0 million) and other special charges (which aggregated $105.9 million), which are intended to have the following objectives: (i) enhance the Company's competitiveness and productivity, (ii) reduce costs and increase asset control and (iii) improve processes and systems. It is anticipated that approximately $73.4 million of these costs will result in cash outlays. The repositioning plan is expected to be substantially completed within the next 12 to 18 months. Repositioning Charges- The repositioning charge taken in the second quarter ending December 31, 1997, was primarily focused on facility utilization, operational systems and organizational structures. The repositioning charge included (i) approximately $30.8 million relating to an approximately 25% reduction of the Company's global work force (or 4,900 employees) by eliminating redundant and overlapping positions resulting from recent acquisitions; (ii) approximately $31.4 million relating to the consolidation of the Company's manufacturing, sales and engineering facilities in North America and Europe through the elimination of approximately 50% (or 32) and 33% (or 10) of such facilities, respectively; (iii) $77.6 million relating to the write-down of goodwill associated with the disposal of long-lived assets; (iv) approximately $41.3 million relating to the write-down to net realizable value of certain long-lived assets relating to businesses being divested; and (v) approximately $62.9 million relating to the write-down of impaired production and other equipment and the write-off of assets used to manufacture products being replaced by new technologies. Other Special Charges - With the acquisition of SRS (Note 2), the Company conducted an evaluation and review of the assets acquired. As a result of such review, the Company recorded a $77.5 million charge related to the write-off of in- process research and development for acquired technology that has not been established as technologically feasible. The Company also reviewed its inventories for slow-moving and excess items in light of the SRS acquisition and planned realignment of its manufacturing operations. The Company also reevaluated its customer contracts relating to products lines that will be discontinued. As a result, the Company recorded a $28.4 million charge for inventory and long-term contracts relating to manufacturing processes that will be exited (which is reflected as a charge to cost of sales). Note 7 - IncomeTaxes The estimated fiscal 1998 annual effective tax rate has been revised from a 45% benefit estimated in the first quarter of fiscal 1998 to a 13% benefit. This change is primarily the result of: (i) the impact of certain repositioning and other special charges (see Note 6) taken in jurisdictions where the Company may not be able to recognize the full income tax benefit and (ii) no tax benefit on write-down of goodwill included in the repositioning charge. Financial Accounting Standards Statement No. 109 states that a valuation allowance is recognized if, it is more likely than not, that some portion or all of the deferred tax asset will not be realized. Because of limitations on the utilization of net operating losses from foreign jurisdictions, a valuation allowance for a portion of the deferred income tax benefit related to the repositioning and the other special charges has been recorded. Note 8 - Earning per Share The following table sets forth the computation of the numerator and denominator of the basic and diluted per share calculations:
Three Months Ended Six Months Ended December 31, December 31, ----------------------------- ---------------------------- 1997 1996 1997 1996 Numerator: Net earnings (loss) $ (319.9) $ 3.1 $ (324.1) $ 11.0 ------------- ------------- ------------- ------------ Numerator for basic earnings per share-income available to common stockholders (319.9) 3.1 (324.1) 11.0 ------------- ------------- ------------- ------------ Effect of dilutive securities: Company obligated mandatorily redeemable convertible preferred securities , net of tax benefit * --- * --- ------------- ------------- ------------- ------------ Numerator for diluted earnings per share-income available to common stockholders after assumed conversions $ (319.9) $ 3.1 $ (324.1) $ 11.0 ------------- ------------- ------------- ------------ Denominator: Denominator for basic earnings per share- weighted-average shares 31,705,492 31,640,199 31,693,537 31,633,894 ------------- ------------- ------------- ------------ Effect of dilutive securities: Employee stock options * 372,006 * 326,871 Series A Preference Stock * --- * --- Company obligated mandatorily * --- * --- redeemable convertible preferred securities ------------- ------------- ------------- ------------ Dilutive potential common shares --- 372,006 --- 326,871 ------------- ------------- ------------- ------------ Denominator for diluted earnings per share- adjusted weighted-average shares and assumed conversions 31,705,492 32,012,205 31,693,537 31,960,765 ============= ============= ============= ============
* Items not assumed in the computation because their effect is antidilutive. For additional disclosures regarding the outstanding Series A Preference Stock see Note 4, and the Company obligated mandatorily redeemable convertible preferred securities, see Note 5. Options to purchase 1,755,489 shares of common stock at prices between $20.375 and $32.25 per share were outstanding as of December 31, 1997 but were not included in the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common shares and, therefore, the effect would be anti- dilutive. As part of the acquisition of VTI in June 1995, the Company issued to certain of the former stockholders of VTI warrants to purchase up to 100,000 shares of common stock between July 1, 1998 and June 30, 2000, at an exercise price of $25.75 per share. The 100,000 warrants have not been included in the computation of diluted earnings per share for the three and six month periods ended December 31, 1997 because the effect would be anti dilutive. In connection with its Credit Facility, the Company issued to NationsBank a warrant to purchase 250,000 shares of common stock of the Company at an exercise price of $23.125 per share. The 250,000 warrants have not been included in the computation of diluted earnings per share for the three and six months ended December 31, 1997 because the effect would be anti-dilutive. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations General Over the past three years the Company has grown from a single technology, single market company with gross revenues of approximately $400 million to a global provider of state-of-the-art occupant safety systems solutions with gross revenues on a pro forma basis of approximately $1.8 billion. This growth was attained principally through various strategic acquisitions, increased market penetration in existing and new markets and internally developed new products. The rapid growth experienced by the Company and the demand of integrating acquired businesses out paced the development of the Company's corporate infrastructure and systems. In addition, cost structures and working capital requirements increased to unacceptable levels. In the first quarter of the fiscal year, management initiated a review of its global operations, cost structure and balance sheet directed at reducing its operating expenses, manufacturing costs and increasing productivity. This review focused on operational and organizational structures and systems, facilities utilization, product offerings, inventory valuation and other matters. As a result, in the second quarter ended December 31, 1997, the Company recorded $349.9 million before taxes ($318.4 after taxes) of repositioning and other special charges which are intended to have the following objectives: (i) enhance the Company's competitiveness and productivity, (ii) reduce costs and increase asset control and (iii) improve processes and systems. It is anticipated that approximately $73.4 million of these costs will result in cash outlays. The repositioning plan is expected to be substantially completed within the next 12 to 18 months, and the Company believes the provisions recorded are adequate to cover the costs associated with the plan. The Company expects the repositioning program to generate approximately $855 million of total cost savings, which will be phased in through fiscal 2002. Of the $855 million in cost savings, $780 million will be cash savings primarily related to salary and benefit expense that will not be incurred in future years due to the anticipated reduction in the Company's global workforce and the consolidation of manufacturing, sales and engineering facilities. Repositioning Charges- The repositioning charge taken in the second quarter ending December 31, 1997, was primarily focused on facility utilization, operational systems and organizational structures. The repositioning charge included (i) approximately $30.8 million relating to an approximately 25% reduction of the Company's global work force (or 4,900 employees) by eliminating redundant and overlapping positions resulting from recent acquisitions; (ii) approximately $31.4 million relating to the consolidation of the Company's manufacturing, sales and engineering facilities in North America and Europe through the elimination of approximately 50% (or 32) and 33% (or 10) of such facilities, respectively; (iii) $77.6 million relating to the write-down of goodwill associated with the disposal of long-lived assets; (iv) approximately $41.3 million relating to the write-down to net realizable value of certain long-lived assets relating to businesses being divested; and (v) approximately $62.9 million relating to the write-down of impaired production and other equipment and the write-off of assets used to manufacture products being replaced by new technologies. During the quarter ended December 31, 1997, the Company started to implement its repositioning plan. Net headcount was reduced by 725 people during the quarter ended December 31, 1997, primarily in North America. Also, the Company closed three manufacturing facilities and announced the closure of an additional facility and the relocation of a major portion of a Canadian facility to Mexico. Other Special Charges - With the acquisition of SRS, the Company conducted an evaluation and review of the assets acquired. As a result of such review, the Company recorded a $77.5 million charge related to the write-off of in-process research and development for acquired technology that has not been established as technologically feasible. The Company also reviewed its inventories for slow-moving and excess items in light of the SRS acquisition and planned realignment of its manufacturing operations. The Company also reevaluated its customer contracts relating to products lines that will be discontinued. As a result, the Company recorded a $28.4 million charge for inventory and long-term contracts relating to manufacturing processes that will be exited (which is reflected as a charge to cost of sales). The repositioning and other special charges recorded in the quarter ended December 31, 1997 do not include a provision for disruption costs in accordance with Generally Accepted Accounting Principles ("GAAP"). Disruption costs are expenses incurred in connection with the closing and consolidating of manufacturing, engineering and sales facilities. Disruption costs include; (1) inefficiencies associated with consolidating manufacturing, engineering and sales facilities; (2) unabsorbed fixed overhead; (3) temporary increases in factory labor; (4) premium freight and (5) excessive inventory scrap. GAAP require that disruption costs be expensed as incurred and included in cost of sales. The Company incurred disruption costs of approximately $2.8 million and $4.5 million for the quarter and six months ended December 31, 1997, respectively, associated with the closing of three manufacturing facilities and the ongoing relocation of a North America facility to Mexico. Three and Six Months Ended December 31, 1997 (FY98) Compared to Three and Six Months Ended December 31, 1996 (FY97) Net sales for the quarter and six months ended December 31, 1997 were $340.7 million and $535.9 million, respectively, an increase of $158.1 million or 87%, and $194.7 million or 57%, respectively, from the comparable periods of the prior year. The increase in net sales was primarily due to growth from the acquisition of United Steering Systems (USS) on October 25, 1996, Custom Trim on February 25, 1997, and SRS on October 30, 1997. These three acquisitions accounted for approximately $177.0 million and $235.2 million of the increase in net sales for the three and six months ended December 31, 1997, respectively. The increases were partially offset by a decline in sales of EMS sensors and inflator and airbag systems products. EMS sensor sales for the quarter and six months ended December 31, 1997 were $28.1 million and $54.7 million, a decrease of 23% and 32%, respectively, from the comparable prior year periods. These decreases are primarily due to lower demand as major customers continue to shift from EMS to electronic sensors that are sourced internally. Inflator and airbag module sales decreased 18% and 37% to $18.7 million and $35.3 million, respectively, for the quarter and six months ended December 31, 1997 as compared to the comparable prior year periods. The decrease was primarily due to the planned phase-out of all mechanical airbag systems at Chrysler and Fiat, and the reduction of shipments into Asia of all inflators and airbags. Net sales for the quarter ended December 31, 1997, increased 75% to $340.7 million from $195.2 million in the first quarter ended September 30, 1997. The quarter over quarter increase in net sales was primarily attributable to the acquisition of SRS on October 30, 1997. Excluding the acquisition of SRS, net sales for the quarter ended December 31, 1997 would have increased 4% over the quarter ended September 30, 1997. Cost of sales for the quarter and six months ended December 31, 1997 were $312.9 and $479.7, respectively, as compared to $145.9 million and $262.4 million, respectively, for the quarter and six months ended December 31, 1996. The increase primarily reflected the additional production costs of $151.0 million and $203.7 million for the quarter and six months ended December 31, 1997, resulting from the acquisitions of USS and Custom Trim during fiscal 1997 and the acquisition of SRS in fiscal 1998. In addition, the Company incurred approximately $2.8 million and $4.5 million during the quarter and six months ended December 31, 1997 related to disruption costs associated with the closing of three manufacturing facilities and the ongoing relocation of a facility in North America to Mexico, as well as a $28.4 million charge related to other special charges (see "Repositioning and Other Special Charges" above). Gross profit as a percentage of net sales was 8% and 10% for the three and six months ended December 31, 1997, respectively, compared to 20% and 23%, respectively, for the comparable periods of the prior year. The decrease in gross margins was primarily attributable to a shift in product mix from high margin EMS sensors to those of lower margin products acquired in recent acquisitions and certain special charges aggregating $28.4 million. Excluding these special charges, gross profit as a percentage of net sales would have been 17% and 16% for three and six months ended December 31, 1997, respectively. Selling, general and administrative expenses for the three and six months ended December 31, 1997 were $21.3 million and $37.6 million (6% and 7% of net sales), respectively, compared to $16.7 million and $32.2 million (in each case 9% of net sales) for the comparable periods of the prior year. Selling, general and administrative expenses as a percentage of net sales decreased primarily as a result of cost improvements associated with the reduction of headcount and reduced spending. Research, development and engineering expenses for the quarter and six months ended December 31, 1997 were $18.6 million and $27.5 million, respectively, as compared to $9.9 million and $17.8 million for the comparable periods in the prior year. These increases reflected costs associated with acquired businesses of $9.3 million and $10.1 million for the three and six months ended December 31, 1997, respectively. Operating income (loss) for the three and six months ended December 31, 1997 decreased significantly from last year's comparable periods primarily due to items mentioned above and the repositioning and other special charges aggregating $349.9 million included in cost of sales and operating expenses (see "Repositioning and Other Special Charges" above). Exclusive of the effects of the repositioning and other special charges, operating income would have been $12.3 million and $13.5 million for the three and six months ended December 31, 1997, respectively. Operating income before repositioning and other special charges for the three months ended December 31, 1997 reflected an improvement over the three months ended September 30, 1997. Operating income was $12.3 million or 4% of net sales in the three months ended December 31, 1997 compared to $1.2 million or 1% of net sales in the three months ended September 30, 1997. The quarter over quarter increase in operating income was primarily attributable to the SRS acquisition, higher sales volumes, and personnel reductions. Excluding the SRS acquisition, operating income would have been approximately $7.9 million or 4% of net sales for the three months ended December 31, 1997. The operating margin improvement from 1% of net sales in the three months ended September 30, 1997 to 4% of net sales for the three months ended December 31, 1997 was primarily attributable to personnel reductions resulting from the repositioning program. Interest expense for the three and six months ended December 31, 1997 was $27.1 million and $35.4 million, an increase of $20.4 million and $24.3 million, respectively, from the comparative prior year periods. The increase in interest expense was primarily due to the increase in average outstanding borrowings as a result of the acquisitions of USS and Custom Trim in fiscal 1997 and SRS in fiscal 1998. In addition the fees associated with the Credit Facility (approximately $30.0 million) are being amortized over a six month period. The estimated fiscal 1998 annual effective tax rate has been revised from a 45% benefit estimated in the three months ended September 30, 1997 to a 13% benefit to reflect the impact of certain repositioning and other special charges (i) taken in jurisdictions where the Company may not be able to recognize the full income tax benefit due to limitations imposed by Financial Accounting Standards Statement No. 109 (SFAS 109) and (ii) no tax benefit on write-down of goodwill included in the repositioning charge. SFAS 109 states that a valuation allowance is recognized if, it is more likely than not, that some portion or all of the deferred tax asset will not be realized. Because of limitations on the utilization of net operating losses from foreign jurisdictions, a valuation allowance for a portion of the deferred income tax benefit related to the repositioning and the other special charges has been recorded. The extraordinary loss recorded in the three months ended December 31, 1997 related to the write-off of unamortized debt costs of the previous bank credit facility. Liquidity and Capital Resources The Company's primary cash requirements are for working capital, capital expenditures and interest payments on outstanding indebtedness. The Company believes that cash generated from operations, borrowings available under the Credit Facility and net proceeds received in connection with the issuance of debt and equity securities will be sufficient to meet the Company's working capital, capital expenditures and debt service needs for the foreseeable future. Cash flows from operating activities for the six months ended December 31, 1997, were a deficit of $21.0 million compared with a $72.4 million surplus for the six months ended December 31, 1996. The decrease in cash flows was primarily attributed to the net loss of $324.1 and changes in working capital items. Capital expenditures aggregated $23.4 million for the six months ended December 31, 1997. The Company continues to invest capital to expand capacity and tool new products. Investments continue to be made to support productivity improvements, cost reduction programs, and added capability for existing and new products. Although the Credit Facility restricts the amount of capital expenditures the Company can incur in any given quarter, the Company does not believe that this covenant will adversely affect the Company's capital expenditure plans . On October 30, 1997, in connection with the acquisition of SRS, the Company and NationsBank entered into the Credit Facility, pursuant to which the Company has $900 million of aggregate borrowing availability. At December 31, 1997, the Company had an aggregate of $810 million of borrowings outstanding under the Credit Facility (including approximately $10.0 million letters of credit), and the weighted average interest rate on such borrowings was approximately 8.76% per annum. The Credit Facility consists of a 366-day revolving credit facility providing up to $300 million of availablity, including a $25 million sublimit for the issuance of standby letters of credit and a $75 million sublimit for multi-currency borrowings, and a 366-day $600 million term loan. The Company is currently in negotiations with a number of financial institutions, to replace the current credit facility with longer term credit facilities. The Company expects to replace the existing credit facility during its third quarter. On October 14, 1997, the Company and Siemens entered into the Stock Purchase Agreement pursuant to which, on October 30, 1997, the Company issued and sold 4,883,227 Series A Preference Shares to Siemens for an aggregate purchase price of $115.0 million. The $115.0 million of proceeds was used to fund a portion of the purchase price for the SRS acquisition. On January 20, 1998, Siemens converted 4,883,226 of its Series A Preference Shares into 4,883,226 shares of common stock. In connection with the SRS acquisition, on October 30, 1997, the Company issued and sold to PSCC $200 million of Series B Preference Securities. On November 25, 1997, the Company issued and sold $250.0 million of Convertible Debentures to BTI Capital Trust which, concurrently therewith, issued and sold $250.0 million aggregate liquidation amount of Preferred Securities (which are guaranteed by the Company) in a private transaction under Rule 144A under the Securities Act of 1933. The Company used the net proceeds from the issuance and sale of the Convertible Debentures to BTI Capital Trust to redeem all of the outstanding Series B Preference Securities in accordance with the terms thereof and for general corporate purposes. Forward Looking Statements Based on a recent assessment, the company determined that it will be required to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. The Company presently believes that with modifications to existing software and conversions to new software, the Year 2000 issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not timely completed, the Year 2000 Issue could have a material impact on the operations of the Company. Statements herein regarding estimated cost savings and the Company's anticipated performance in future periods constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such statements are subject to certain risks and uncertainties that could cause actual amounts to differ materially from those projected. With respect to estimated cost savings, management has made assumptions regarding, among other things, the timing of plant closures, the amount and timing of expected short-term operating losses and reductions in fixed labor costs. The realization of cost savings is subject to certain risks, including, among other things, the risks that expected operating losses have been underestimated, expected cost reductions have been overestimated, unexpected costs and expenses will be incurred and anticipated operating efficiencies will not be achieved. Further, statements herein regarding the Company's performance in future periods are subject to risks relating to, among other things, difficulties in integrating acquired businesses, deterioration of relationships with material customers, possible significant product liability claims, decreases in demand for the Company's products and adverse changes in general market and industry conditions. Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on such forward-looking statements, which are based on current expectations. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the Company's Annual Meeting of Stockholders held on November 20, 1997, the following proposal was adopted by the votes specified below: Broker
Proposal For Against Withheld Abstain Nonvotes Election of Directors: Allen K. Breed 28,236,791 -- 72,118 -- -- Johnnie Breed 28,236,724 -- 72,185 -- -- Larry W. McCurdy 28,242,144 -- 66,765 -- -- Charles J. Speranzella 28,241,290 -- 67,619 -- -- Robert W. Shower 28,241,602 -- 67,307 -- -- Fred J. Musone 28,237,926 -- 70,983 -- -- Alberto Negro 28,237,622 -- 71,287 -- -- Dr. Ing. Franz Wressnigg 28,238,510 -- 70,399 -- -- An increase in the number of shares of Common Stock available for issuance under the 1994 Stock Incentive Plan from 2,500,000 to 3,700,000 shares 27,621,781 598,656 -- 88,472 --
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Stock Purchase Agreement, dated as of October 14, 1997, by and between Breed Technologies, Inc., a Delaware corporation and Siemens Akfiengesellschaft, a company organized under the laws of the Federal Republic of Germany 10.1.1 Make-Whole Agreement, dated as of October 14, 1997, by and between Breed Technologies, Inc., a Delaware corporation and Siemens Akfiengesellschaft, a company organized under the laws of the Federal Republic of Germany 10.1.2 Registration Rights Agreement, dated as of October 14, 1997, between Breed Technologies, Inc., a Delaware corporation, and Siemens Akfiengesellschaft, a company organized under the laws of the Federal Republic of Germany 10.1.3 Stockholders Agreement, dated as of October 14, 1997, among Breed Technologies, Inc. and certain of its subsidiaries. 10.2 Credit Agreement, dated as of October 30, 1997, by and among Breed Technologies, Inc. and certain subsidiaries designated as Borrowers herein, NationsBank National Association as agent and as lender and the lenders party hereto from time to time. 10.3 Warrant Agreement, dated as of October 30, 1997, between NationsBank, N.A. and Breed Technologies, Inc. 10.4 Joint Venture Agreement, dated as of December 24, 1997, between Siemens Akfiengesellschaft and Breed Technologies, Inc. (b) Reports on Form 8-K - The Company filed Form 8-K/A on January 13, 1998 amending the original filing that reported the acquisition of certain assets and assumption of certain liabilities of the "Safety Restraints Systems" business of AlliedSignal, Inc. to include Financial Statements of business acquired, Pro Forma Financial Information and Exhibits as required under Item 7. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Breed Technologies, Inc. (Registrant) February 12, 1998 By: /s/ Frank J. Gnisci Frank J. Gnisci Executive Vice President and Chief Financial Officer EX-10.1 2 STOCK PURCHASE AGREEMENT Exhibit 10.1 STOCK PURCHASE AGREEMENT by and between BREED TECHNOLOGIES, INC. and SIEMENS AKTIENGESELLSCHAFT dated as of October 14, 1997 TABLE OF CONTENTS Page Section 1. Definitions and Principles of Construction................ 1 1.01 Defined Terms............................................. 1 1.02 Principles of Construction................................ 5 Section 2. Sale and Purchase of Stock................................ 5 2.01 Sale and Purchase of Stock................................ 5 2.02 Purchase Price; Number of Shares to be Purchased.......... 5 2.03 Closing................................................... 5 Section 3. Representations and Warranties of the Company............. 6 3.01 Organization and Good Standing............................ 6 3.02 Authorization............................................. 6 3.03 Enforceability............................................ 7 3.04 Approvals................................................. 7 3.05 Capitalization............................................ 7 3.06 Subsidiaries.............................................. 7 3.07 Compliance with Laws and Orders........................... 8 3.08 SEC Reports and Financial Statements...................... 8 3.09 Absence of Certain Changes or Events...................... 9 3.10 Absence of Undisclosed Liabilities........................ 9 3.11 Legal Proceedings......................................... 9 3.12 Patents and Trademarks..................................... 9 3.13 Taxes..................................................... 10 3.14 Employee Benefit Plans.................................... 10 3.15 Environmental............................................. 11 3.16 Affiliate Transactions.................................... 11 3.17 AlliedSignal Transaction...................................11 3.18 Disclosure.................................................12 3.19 Brokers....................................................12 Section 4. Representations and Warranties of Purchaser....... 12 4.01 Investment Intent......................................... 12 4.02 No Registration of Securities............................. 12 4.03 Investor Status........................................... 12 4.04 Authority to Execute and Perform Agreement................ 13 4.05 Brokers................................................... 13 4.06 Approvals................................................. 13 Section 5. Covenants of the Company and Purchaser.................... 13 5.01 Company................................................... 13 5.02 Purchaser................................................. 15 Section 6. Conditions Precedent to Obligations of Purchaser.......... 15 Section 7. Conditions Precedent to Obligations of the Company........ 18 Section 8. Notices................................................... 19 Section 9. Survival of Representations and Warranties................ 20 Section 10. Indemnification................................... 20 10.01 Indemnity by the Company.................................. 20 10.02 Purchaser's Indemnity..................................... 21 10.03 Procedure................................................. 21 10.04 Basket and Cap Provisions................................. 23 Section 11. Termination....................................... 23 11.01 Termination............................................... 23 11.02 No Liability.............................................. 24 11.03 Notice.................................................... 24 Section 12. Miscellaneous..................................... 24 12.1 Amendment or Waiver....................................... 24 12.2 Consent to Jurisdiction................................... 24 12.3 Release of Siemens Aktiengesellschaft..................... 24 12.4 Waiver of Jury Trial; Trial Costs......................... 25 12.5 Assignment................................................ 25 12.6 Entire Agreement.......................................... 25 12.7 Expenses.................................................. 25 12.8 Public Announcements...................................... 25 Schedule 3.02 Authorization Schedule 3.04 Approvals for Company Schedule 3.05(b) Options Schedule 3.06 Subsidiaries Schedule 3.08(a) SEC Filings Schedule 3.08(b) Treatment of Subsidiaries on Financial Statements Schedule 3.09 Absence of Changes Schedule 3.10 Undisclosed Liabilities Schedule 3.11 Legal Proceedings Schedule 3.12 Intellectual Property Schedule 3.14 Employee Benefit Plans Schedule 3.15 Environmental Matters Schedule 3.16 Transactions with Affiliates Schedule 3.17 AlliedSignal Agreement Schedule 4.06 Approvals for Purchaser Schedule 6(l) Financing Terms Exhibit A Form of Certificate of Designations Exhibit B Form of Make-Whole Agreement Exhibit C Opinion of Special Counsel to the Company Exhibit D Form of Registration Rights Agreement Exhibit E Form of Stockholders Agreement Exhibit F Opinions of Counsel to Purchaser This STOCK PURCHASE AGREEMENT, dated as of October 14, 1997, is by and between Breed Technologies, Inc., a Delaware corporation (the "Company"), and Siemens Aktiengesellschaft, a company organized under the laws of the Federal Republic of Germany ("Purchaser"). WHEREAS, the Company has entered into an agreement to acquire the automotive safety restraints business of AlliedSignal Inc. (the "AlliedSignal Acquisition"); WHEREAS, Purchaser desires to invest in the Company as a result and in furtherance of the AlliedSignal Acquisition; and WHEREAS, the Company and Purchaser (through their respective Affiliates) intend to form a joint venture for the worldwide research, development and marketing of motor vehicle occupant safety restraint systems (the "Joint Venture"); In consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: Section 1. Definitions and Principles of Construction. 1.01 Defined Terms. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Additional Shares" has the meaning set forth in Section 2.02(c). "Adjustment Period" means the period beginning on the date of this Agreement and ending six months after the date of the Closing. "Affiliate" means any Person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether by Contract or otherwise. In any event, and without limitation of the previous sentence, any Person owning more than fifty (50%) of the voting securities of a second Person shall be deemed to control that second Person. "Agreement" means this Agreement, as the same may be amended, supplemented or modified in accordance with the terms hereof. "AlliedSignal Acquisition" has the meaning set forth in the forepart of this Agreement. "AlliedSignal Agreement" has the meaning set forth in Section 3.17. "Benefit Plan" has the meaning set forth in Section 3.14. "Best Price" means the Initial Price Per Share less an amount equal to the Initial Price multiplied by the Biggest Discount. "Biggest Discount" means the largest Stock Sale Discount. "Breed Stockholders" means Allen K. Breed, Johnnie Cordell Breed, A. Breed, L.P. and J. Breed, L.P. "Business Day" means any day other than a Saturday or a Sunday or a day when commercial banks are permitted or required by law to be closed in New York City. "Certificate of Designations" means a Certificate of Designations in substantially the form attached hereto as Exhibit A. "Charter Amendment" means an amendment to the Company's Certificate of Incorporation for the purpose of increasing the maximum number of shares of Common Stock that the Corporation is authorized to issue to 75,000,000. "Claim Notice" has the meaning set forth in Section 10.03. "Closing" has the meaning set forth in Section 2.03(a). "Closing Date" shall mean the date on which the Closing occurs. "Code" means the Internal Revenue Code of 1986, as amended. "Common Stock" means the Common Stock of the Company, $.01 par value per share. "Company" means Breed Technologies, Inc. "Company Financial Statements" has the meaning set forth in Section 3.08. "Company Permits" has the meaning set forth in Section 3.07. "Company SEC Reports" has the meaning set forth in Section 3.08. "Damages" has the meaning set forth in Section 10.01. "ERISA" has the meaning set forth in Section 3.14. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Governmental or Regulatory Authorities" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, the Federal Republic of Germany, any foreign jurisdiction, the European Community or any political subdivision of any of the foregoing. "HSR Act" means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder. "Indemnified Party" and "Indemnifying Party" have the meanings set forth in Section 10.03. "Initial Price Per Share" means the Purchase Price divided by the number of Initial Shares. "Initial Shares" has the meaning set forth in Section 2.02(b). "Joint Venture" means the joint venture contemplated by the Memorandum of Understanding to be formed between the parties hereto (or through their respective Affiliates) in connection with motor vehicle occupant safety restraint systems. "Knowledge" means, as to any specified facts or information, that those facts or information are within the actual knowledge of any executive officer or senior vice president of any division, and in addition, as to Section 3.17(b) only, the actual knowledge of the Company's Director of Corporate Compliance. "Law" means any law, statute, rule, regulation, ordinance or other pronouncement having the effect of law in the United States, the Federal Republic of Germany, the European Community or any political subdivision of the foregoing. "Lien" means any lien, pledge, hypothecation, mortgage, security interest, claim, lease, charge, option, right of first refusal, easement encroachment, transfer restriction, or other encumbrance of any kind. "Make-Whole Agreement" means an agreement in substantially the form attached hereto as Exhibit B. "Material Adverse Effect" means a material adverse effect upon the business, assets, condition (financial or otherwise) or operations of the Company and its Subsidiaries, taken as a whole. "Memorandum of Understanding" means the memorandum of understanding (including the related Term Sheet) between the Company and Purchaser, dated the same date as this Agreement, with respect to a joint venture between the parties or their affiliates. "NYSE" means the New York Stock Exchange, Inc. "Notice Period" has the meaning set forth in Section 10.03(a). "Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority. "Person" means an individual, partnership, corporation, association, trust, joint venture, unincorporated organization, and any government, governmental department or agency or political subdivision thereof. "Purchase Price" has the meaning set forth in Section 2.02. "Purchaser" means Siemens Aktiengesellschaft. "Registration Rights Agreement" means an agreement in the form attached as Exhibit D. "Related Agreements" means the Make-Whole Agreement, the Registration Rights Agreement and the Stockholders Agreement. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "SEC" means the Securities and Exchange Commission. "Series A Preference Share" means a share, authorized by the Certificate of Designations, which represents one one-thousandth (1/1,000) of a share of the Company's 1997 Series A Convertible Non-Voting Preferred Shares, $.001 par value per share, is convertible by the holder thereof at any time after issuance into Common Stock, and has the other rights, qualifications, limitations, restrictions and preferences set forth in the Certificate of Designations. "Shares" has the meaning set forth in Section 2.01. "Stockholders Agreement" means the agreement in substantially the form attached as Exhibit E. "Stock Sale Discount" means, with respect to any sale of Common Stock by the Company, the amount, if any, by which the purchase price per share paid by the purchaser in such sale is less than the last reported sale price of the Common Stock on the NYSE on the last Trading Day preceding the date the Company first became contractually committed to make such sale, expressed as a percentage of such last reported sale price. "Subsidiaries" has the meaning set forth in Section 3.06. "Taxes" means any federal, state, county, local or foreign taxes, charges, fees, levies, or other assessments, including all net income, gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, production, business and occupation, disability, employment, payroll, license, estimated, stamp, custom duties, severance or withholding taxes or charges imposed by any governmental entity, including any interest and penalties (civil or criminal) on or additions to any such taxes and any expenses incurred in connection with the determination, settlement or litigation of any Tax liability. "Tax Return" means a report, return or other information required to be supplied to a governmental entity with respect to Taxes including, where permitted or required, combined or consolidated returns for any group of entities that include the Company or any Subsidiary. "Trading Day" means a day on which the NYSE opens for trading. 1.02 Principles of Construction. (a) All references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified. 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 provisions of this Agreement. (b) All accounting terms used in this Agreement shall be construed in accordance with generally accepted accounting principles in the United States. Section 2. Sale and Purchase of Stock. 2.01 Sale and Purchase of Stock. The Company agrees to issue and sell to Purchaser, and, subject to the terms and conditions hereof and in reliance on the representations, warranties and covenants set forth or referred to herein, Purchaser agrees to purchase from the Company, the number of Series A Preference Shares determined in accordance with Section 2.02 (the "Shares"). The rights, qualifications, limitations, restrictions and preferences of the Shares shall be as set forth in the Certificate of Designations. 2.02 Purchase Price; Number of Shares to be Purchased. (a) The aggregate purchase price for the Shares (the "Purchase Price") shall be $115,000,000. (b) The number of Shares (the "Initial Shares") to be issued and sold by the Company at the Closing in consideration of the Purchase Price shall be 4,883,227. If there is a Best Price, then the number of Shares issued and sold shall equal the Purchase Price divided by the Best Price. (c) Not later than five days after the end of the Adjustment Period, the Company shall issue and deliver to Purchaser a number of Shares (the "Additional Shares") equal to the excess of (i)the number of Shares that is equal to the Purchase Price divided by the Best Price over (ii) the number of Initial Shares. 2.03 Closing. (a) Subject to the other provisions of this Agreement, the closing of the purchase and sale of the Initial Shares (the "Closing") will take place at the same time and place as the closing of the AlliedSignal Acquisition. (b) On the Closing Date, Purchaser will pay the Purchase Price in immediately available funds, by wire transfer to an account designated by the Company not less than two Business Days prior to the Closing Date or, if the Company fails to so designate an account within the required time, by delivery of a certified or official bank check payable to the order of the Company. (c) Simultaneously with Purchaser's payment of the Purchase Price, the Company will deliver to Purchaser a certificate representing the Initial Shares. Section 3 Representations and Warranties of the Company. The Company represents and warrants to and for the benefit of Purchaser as follows (Notwithstanding anything in the Agreement to the contrary, except for the representations and warranties contained in Section 3.17, neither the Company nor any Subsidiary is making any representation or warranty concerning the AlliedSignal Agreement, the AlliedSignal Acquisition or the business, assets or operations being acquired by the Company or any Subsidiary as a result of the AlliedSignal Acquisition.): 3.01 Organization and Good Standing. Each of the Company and each Subsidiary (a) is duly organized and existing in good standing in its jurisdiction of formation, (b) is duly qualified and authorized to do business in all other jurisdictions in which the nature of its business or property makes such qualification necessary, except where such failure to qualify would not have a Material Adverse Effect, and (c) has the power to own its properties and to carry on its business as now conducted and as proposed to be conducted. 3.02 Authorization. Except as set forth on Schedule 3.02, the execution, delivery and performance by the Company of this Agreement and the Related Agreements, the issuance and sale by the Company of the Shares and the issuance of the Common Stock upon conversion of the Shares, (a) are within the Company's corporate power and authority, (b) have been duly authorized by all necessary corporate proceedings, (c) do not and will not conflict with or result in any breach or violation of any provision of the Certificate of Incorporation or Bylaws of the Company, (d) do not and will not conflict with or result in any breach or violation of any provision of any law, regulation, order, judgment, writ, injunction, license or permit, applicable to the Company or any Subsidiary, and (e) do not and will not conflict with or result in any breach or violation of any of the terms or conditions of, or constitute (or with notice or lapse of time or both constitute) a default under, or give rise to the creation of any lien upon any of the property or assets of the Company or any Subsidiary, under any contract, agreement, lease or other instrument to which the Company or any Subsidiary is a party (including without limitation all agreements and instruments to be executed and delivered in connection with the financing of the AlliedSignal Acquisition) or by which any of their respective assets or properties is bound, the consequences of which, with respect to this clause (e), could reasonably be expected to result in a Material Adverse Effect. 3.03 Enforceability. Each of this Agreement and the Related Agreements has been duly executed and delivered by the Company and constitutes the valid and legally binding obligation of the Company enforceable against it in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies. 3.04 Approvals. Except as set forth on Schedule 3.04, the execution, delivery and performance by the Company of this Agreement and the Related Agreements, the purchase and sale of the Shares and the issuance of the number of shares of Common Stock specified in the Certificate of Designations upon conversion of the Shares, do not and will not require the approval or consent of, or any filing with, any governmental authority or agency or any other Person. 3.05 Capitalization. (a) The authorized capital stock of the Company consists solely of (i)50,000,000 shares of Common Stock, $.01 par value per share, and (ii) 5,000,000 shares of preferred stock of the Company, $.001 par value per share. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable. Upon issuance and sale to Purchaser in accordance with this Agreement the Shares will be, and the Common Stock issuable upon conversion of the Shares will upon issuance be, duly authorized, validly issued, fully paid and nonassessable and free and clear of all Liens. (b) Except for the Make-Whole Agreement and as otherwise set forth on Schedule 3.05(b), neither the Company nor any Subsidiary has outstanding any rights (either pre-emptive or other) or options to subscribe for or purchase from the Company or such Subsidiary or any warrants or other agreements providing for or requiring the issuance or purchase or other acquisition by or on behalf of the Company or such Subsidiary of, any capital stock or other equity interests or any securities convertible into or exchangeable for the Company's or such Subsidiary's capital stock or other equity interests. Except as set forth on Schedule 3.05(b), there are no voting trusts or other agreements or understandings with respect to the voting of the capital stock or other equity interests of the Company or such Subsidiary nor any restrictions on the transferability or sale of such shares or other equity interests except as provided under the Securities Act, state "blue sky" or securities laws, this Agreement and the Related Agreements. Neither the Company nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire, redeem or retire any shares of capital stock or other equity interests of the Company or such Subsidiary or any securities convertible into or exchangeable for any such capital stock or other equity interests. 3.06. Subsidiaries. Schedule 3.06 sets forth the name, jurisdiction of organization, and amount of the Company's and each other record owner's equity interest in each corporation or other entity in which the Company directly or indirectly owns or has the power to vote shares of any capital stock or other ownership interests having ordinary voting power to elect a majority of the directors of such corporation, or other persons performing similar functions for such entity, as the case may be, and each partnership and limited liability company in which such corporation or entity is a general partner or manager or member, as the case may be (the "Subsidiaries"). Except for ownership by the Company of the Subsidiaries as set forth on Schedule 3.06 or as otherwise set forth on Schedule 3.06 neither the Company nor any Subsidiary directly or indirectly owns any capital stock of, or other equity interest in, any person or participates in any joint venture or similar arrangement with any person. Except as set forth on Schedule 3.06, all of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable, and are owned, beneficially and of record, directly or indirectly, by the Company free and clear of all Liens. 3.07 Compliance with Laws and Orders. The Company and its Subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental and Regulatory Authorities necessary for the lawful conduct of their respective businesses (the "Company Permits"), except for failures to hold such permits, licenses, variances, exemptions, orders and approvals which, individually or in the aggregate, are not having and could not be reasonably expected to have a Material Adverse Effect. The Company and its Subsidiaries are in compliance with the terms of the Company Permits, except failures so to comply which, individually or in the aggregate, are not having and could not be reasonably expected to have a Material Adverse Effect. Except as disclosed in the Company SEC Reports (as defined in Section 3.08) filed prior to the date of this Agreement, the Company and its Subsidiaries are not in violation of or default under any Law or Order of any Governmental or Regulatory Authority, except for violations which, individually or in the aggregate, are not having and could not be reasonably expected to have a Material Adverse Effect. 3.08 SEC Reports and Financial Statements. The Company delivered to Purchaser prior to the execution of this Agreement a true and complete copy of each form, report, schedule, registration statement and other document (together with all amendments thereof and supplements thereto) filed by the Company or any of its Subsidiaries with the SEC since December 31, 1996 (as such documents have since the time of their filing been amended or supplemented, the "Company SEC Reports"), which, except as disclosed on Schedule 3.08(a), are all the documents (other than preliminary material) that the Company and its Subsidiaries were required to file with the SEC since such date. Except as disclosed in Schedule 3.08(a), and in the cases where the Company SEC Reports have been amended, as of their respective dates, the Company SEC Reports (i) complied as to form in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except as disclosed in Schedule 3.08(b), the audited consolidated financial statements and unaudited interim consolidated financial statements (including, in each case, the notes, if any, thereto) included in the Company SEC Reports (the "Company Financial Statements") complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly present in all material respects (subject, in the case of the unaudited interim financial statements, to normal, recurring year-end audit adjustments which are not expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries taken as a whole) the consolidated financial position of the Company and its consolidated subsidiaries as at the respective dates thereof and the consolidated results of their operations and cash flows for the respective periods then ended. Except as set forth in Schedule 3.08(b), each Subsidiary of the Company is treated as a consolidated subsidiary of the Company in the Company Financial Statements for all periods covered thereby. 3.09 Absence of Certain Changes or Events. Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement or as disclosed on Schedule 3.09, (a) since June 30, 1997 there has not been any change, event or development having, or that could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect and (b) between such date and the date hereof the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice. 3.10 Absence of Undisclosed Liabilities. Except for matters reflected or reserved against in the balance sheet for the period ended June 30, 1997 included in the Company Financial Statements or as disclosed in Schedule 3.10, neither the Company nor any of its Subsidiaries had at such date, or has incurred since that date, any liabilities or obligations (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due) of any nature that would be required by generally accepted accounting principles, applied on a basis consistent with prior practice, to be reflected on a consolidated balance sheet of the Company and its consolidated subsidiaries (including the notes thereto), except liabilities or obligations (i) which were incurred in the ordinary course of business consistent with past practice; (ii) which have not, and could not reasonably be expected to have, individually or in the aggregate, a Materially Adverse Effect. 3.11 Legal Proceedings. Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement or in Schedule 3.11, (i) there are no actions, suits, arbitrations or proceedings pending or, to the Knowledge of the Company, threatened against, relating to or affecting, nor to the Knowledge of the Company are there any Governmental or Regulatory Authority investigations or audits pending or threatened against, relating to or affecting, the Company or any of its Subsidiaries or any of their respective assets and properties which, if determined adversely to the Company or any of its Subsidiaries, individually or in the aggregate, could be reasonably expected to have a Material Adverse Effect, or a material adverse effect on the Company's ability to consummate the transactions contemplated by this Agreement or the Related Agreements and (ii) neither the Company nor any of its Subsidiaries is subject to any Order of any Governmental or Regulatory Authority which, individually or in the aggregate, is having or could be reasonably expected to have a Material Adverse Effect or a material adverse effect on the Company's ability to consummate the transactions contemplated by this Agreement or the Related Agreements. 3.12 Patents and Trademarks. Each of the Company and each Subsidiary owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights, know-how and processes necessary for its business as now conducted. To the Knowledge of the Company, no material activity of the Company or any Subsidiary materially conflicts with or infringes on the intellectual property rights of any other Person. Except as disclosed on Schedule 3.12, there are no outstanding options, licenses, or agreements of any kind relating to the foregoing, nor is the Company or any Subsidiary bound by or a party to any options, licenses or agreements of any kind with respect of the patents, trademarks, service marks, trade names copyrights, trade secrets, licenses, information, proprietary rights and processes of any other person or entity. 3.13 Taxes. Each of the Company and, to the Company's Knowledge, each Subsidiary has filed all Tax Returns required to be filed. All Tax Returns were in all material respects true, complete and correct and have been filed on a timely basis. Each of the Company and each Subsidiary have paid, in the time and manner prescribed by law, all Taxes that are due and payable. Except for the liens of property taxes being disputed in good faith, there are no Tax liens on any property of the Company or any Subsidiary. Each of the Company and each Subsidiary has complied in all material respects with the provisions of Code Sections 1441-1464, 3401-3406, 6041 and 6049 (and similar provisions under any other laws) and have, in the time and manner prescribed by law, withheld from employee wages and have paid to the proper governmental authorities all amounts required. Each of the Company and each Subsidiary has established on their books and records reserves adequate to pay all Taxes not yet due and payable. There are no agreements, waivers or other arrangements providing for an extension of time with respect to the filing of any returns or the assessment of any Tax or deficiency against the Company or any of the Subsidiaries nor are there any known actions, suits, proceedings, investigations or claims pending against the Company or any of the Subsidiaries in respect of any Tax, assessment or governmental charge, or any other matters under discussion between the Company or any of the Subsidiaries and any federal, state or local authority relating to any Tax assessments, or governmental charges or any known claims against the Company or any of the Subsidiaries for additional Taxes, assessments, or any governmental charges asserted by any such authority. 3.14 Employee Benefit Plans. The plans listed in Schedule 3.14 are the only employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and plans, programs, policies, practices arrangements or contracts (whether group or individual) providing for payments, benefits or reimbursements to employees of the Company or any Subsidiary, former employees, their beneficiaries and dependents, under which such employees, former employees, their beneficiaries and dependents, are covered through an employment relationship with the Company or any entity required to be aggregated in a controlled group or affiliated service group with the Company for purposes of ERISA or the Code (including without limitation, under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA, at any relevant time ("Benefit Plans"). With respect to each Benefit Plan, to the extent applicable: (i) such Benefit Plan has been maintained and operated in material compliance with its terms and with the applicable provisions of ERISA, the Code and all other applicable governmental laws and regulations; each such Benefit Plan intended to qualify under Section 401(a) of the Code is the subject of a favorable unrevoked determination letter issued by the Internal Revenue Service as to its tax-qualified status under the Code, (ii) there is no material suit, action, dispute, claim, arbitration or legal, administrative or other proceeding or governmental investigation pending, or threatened, alleging any breach of the terms of any such Benefit Plan or of any fiduciary duties thereunder or violation of any applicable statue, law, rule or regulation with respect to any Benefit Plan, and (iii) neither Purchaser nor any plan maintained by Purchaser or any of its Affiliates shall be subject to any tax, fine, penalty or other liability of any kind whatsoever, that would not have been incurred by Purchaser or any of its Affiliates but for the transactions contemplated hereby. 3.15 Environmental. Except as set forth on Schedule 3.15: (a) To the Company's Knowledge, there has not been, as of the date hereof, any "release" (as defined in 42 U.S.C. ss. 9601(22)) of any "hazardous waste" (as defined in 42 U.S.C. ss. 9601(14)) or oil on or about any of the real property currently or previously owned, leased or operated by the Company). (b) To the Company's Knowledge, the Company has not by contract, agreement or otherwise arranged for disposal or treatment, or arranged with a transporter for the transport for disposal or treatment, of hazardous waste at any "facility" (as defined in 42 U.S.C. ss. 9601(9)) owned or operated by another person or entity. (c) To the Company's Knowledge, the Company has not accepted any hazardous waste for transport to disposal or treatment facilities or sites selected by the Company. (d) To the Company's Knowledge, as of the date hereof, the Company and its use of its real property is in compliance with all applicable laws, rules and regulations of any federal, state or local governmental authority relating to environmental protection, underground storage tanks, toxic waste, hazardous waste, oil or hazardous substance handling, treatment, storage, disposal or transportation or arranging therefor, products or materials previously or now located on, delivered to, transmitted from, or in transit to or from, such real property. (e) To the Company's Knowledge, all of the Company's past disposal practices relating to hazardous waste have been accomplished in accordance in all material respects with applicable laws, rules, regulations and ordinances. (f) To the Company's Knowledge, the Company has not been notified of any potential liability of the Company with respect to the clean-up of any waste disposal site and has no information to the effect that any site at which it has disposed of hazardous waste or oil has been or is under investigation by any federal, state or local governmental body, authority or agency. 3.16 Affiliate Transactions. As of the date of this Agreement, except as disclosed on Schedule 3.16 and except for bona-fide intercompany obligations among the Company and its Subsidiaries, (i) there are no outstanding amounts of indebtedness in excess of $250,000, and (ii) there are no contracts or agreements, between the Company and the Subsidiaries, or the Company and any officer, director or Affiliate of the Company. 3.17 AlliedSignal Transaction. ( a) A true, complete and correct copy of the Purchase Agreement, dated as of August 27, 1997, among AlliedSignal Inc., the other sellers named therein and the Company (the "AlliedSignal Agreement"), including all exhibits, schedules and appendices thereto, has been furnished to Purchaser. The AlliedSignal Agreement is in full force and effect and (except for an amendment dated October 3, 1997, a true, complete and correct copy of which has been furnished to Purchaser) has not been modified or amended. (b) To the Knowledge of the Company, except as disclosed on Schedule 3.17, none of the representations or warranties contained in the AlliedSignal Agreement is false or inaccurate in any material respect. 3.18 Disclosure. No representation, warranty or statement made by the Company or any Subsidiary in this Agreement or the Related Agreements, or in any agreement, certificate, statement or document required to be delivered pursuant hereto, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in this Agreement or the Related Agreements or in such other agreement, certificate, statement or document not misleading in light of the circumstances in which they were made. 3.19 Brokers. All negotiations relative to this Agreement or the Related Agreements and the transactions contemplated hereby have been carried out by the Company directly with Purchaser without the intervention of any Person on behalf of the Company in such manner as to give rise to any valid claim by any Person against any Purchaser or its Affiliates for a finder's fee, brokerage commission or similar payment. Section 4. Representations and Warranties of Purchaser. Purchaser represents and warrants to and for the benefit of the Company as follows: 4.01 Investment Intent. Purchaser is acquiring the Shares for investment, and not with a view to selling or otherwise distributing the Shares. 4.02 No Registration of Securities. Purchaser is aware that the Shares have not been registered under the Securities Act or under state securities or blue sky laws in reliance upon certain exemptions from such registration, and may not be transferred except pursuant to an effective registration under the Securities Act and under state securities or blue sky laws or in a transaction exempt from such registration. 4.03 Investor Status. (a) Purchaser is able to bear the economic risk of the investment of Purchaser in the Shares and has such knowledge and experience in financial and business matters, so as to be capable of evaluating the merits and risks of the prospective investment in the Shares. (b) Purchaser is aware that no Federal or state agency has (i) made any finding or determination as to the fairness of any aspect of the investment in the Shares or (ii) passed on or endorsed the merits of the offering of the Shares. (c) Purchaser is an "accredited investor," as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. 4.04 Authority to Execute and Perform Agreement. Purchaser has the legal right and power and all authority required to enter into, execute and deliver this Agreement. Each of this Agreement and the Related Agreements has been duly executed and delivered and is the valid and binding obligation of such Purchaser enforceable in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies. The execution, delivery and performance by Purchaser of this Agreement and the Related Agreements, and the purchase by Purchaser of the Shares hereunder, (a) are within Purchaser's corporate power and authority, (b) have been duly authorized by all necessary corporate proceedings of Purchaser, (c) do not conflict with or result in any breach or violation of any provision of the Certificate of Incorporation (or similar organizational documents) or Bylaws (or similar governing documents) of such Purchaser, (d) do not conflict with or result in any breach or violation of any provision of any law, regulation, order, judgment, writ, injunction, license or permit, applicable to such Purchaser, or (e) conflict with or result in any breach or violation of any of the terms or conditions of, or constitute (or with notice or lapse of time or both constitute) a default under, or give rise to the creation of any lien upon any of the property or assets of Purchaser, under any contract, agreement, lease or other instrument to which Purchaser is a party or by which any of its respective assets or properties is bound, the consequences of which, with respect to this clause (e), could reasonably be expected to have a material adverse effect on the validity or enforceability of this Agreement or the Related Agreements or on the ability of Purchaser to perform its obligations under any of such agreements. 4.05 Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby, including, but not limited to, the Joint Venture, have been carried out by Purchaser directly with the Company without the intervention of any Person on behalf of Purchaser in such manner as to give rise to any valid claim by any Person against the Company or any Subsidiary for a finder's fee, brokerage commission or similar payment. 4.06 Approvals. Except as set forth on Schedule 4.06, the execution, delivery and performance by Purchaser of this Agreement and the Related Agreements, and the purchase and sale of the Shares, do not require the approval or consent of, or any filing with, any governmental authority or agency or any other Person. Section 5. Covenants of the Company and Purchaser. 5.01 Company. The Company covenants and agrees that, except with the written consent of Purchaser (which consent shall not unreasonably be withheld), it shall: (i) Conduct of Business. From the date hereof to the Closing Date, except as disclosed to Purchaser, operate its business and the business of each of its subsidiaries in a manner consistent with the manner in which it is being operated at the date of this Agreement. (ii) Best Efforts. Use its best efforts to cause all of the conditions set forth in Section 6 to be fulfilled as promptly as practicable after the date of this Agreement. (iii) Antitrust, Competition Law Requirements. Take promptly (and in any event within five days after the Closing) all actions necessary to make the filings required of the Company or its Affiliates with any Governmental or Regulatory Authorities in connection with Purchaser's acquisition of Common Stock upon conversion of the Shares, including without limitation those required under the HSR Act and European Community and German competition Laws, comply at the earliest practicable date with any request for additional information received by the Company or its Affiliates from any Governmental or Regulatory Authority in respect of such filing and cooperate with Purchaser in connection with any similar or comparable filing required to be made by Purchaser and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by any Governmental or Regulatory Authority. (iv) Investigation by Purchaser. The Company will, and will cause the Subsidiaries to, (A) provide Purchaser and its officers, directors, employees, agents, counsel, accountants, financial advisors, consultants and other representatives with full access, upon reasonable prior notice and during normal business hours, to all officers, employees, agents and accountants of the Company and the Subsidiaries and their assets, properties, books and records, and (B) furnish Purchaser and such other Persons with all such information and data concerning the business and operations of the Company and the Subsidiaries, and (to the extent possible without causing unreasonable disruption) the business and assets to be acquired in the AlliedSignal Acquisition as Purchaser or any of such other Persons reasonably may request in connection with such investigation. (v) Notice of Events. Promptly give Purchaser notice of (A) any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a material violation or breach of this Agreement or (B) any event, occurrence, transaction or other item which would have been required to have been disclosed on any Schedule or statement delivered hereunder, had such event, occurrence, transaction or item existed on the date hereof other than items arising in the ordinary course of business which would not render any representation or warranty of such parties materially misleading. (vi) Equality of Rights. Grant to Purchaser (in addition to rights already held by Purchaser) rights substantially equivalent to those obtained by any other equity holder who acquires from the Company or any Affiliate thereof an equal or smaller percentage of voting interest in the Company than Purchaser. (vii) Joint Venture. Use its best efforts (i) to cause the execution and delivery of the definitive documentation with respect to the Joint Venture to be executed and delivered by December 15, 1997, (ii) to obtain the requisite governmental clearances, approvals or terminations of waiting periods required or applicable (including under antitrust or competition laws) with respect to the formation of the Joint Venture and the conversion of the Shares into Common Stock (provided, however, that the foregoing shall not require the Company to consent to the imposition of any conditions deemed by it to be unduly onerous) and (iii) to cause the formation of the Joint Venture based on the terms contained in the Memorandum of Understanding prior to June 30, 1998. 5.02 Purchaser. Purchaser covenants and agrees that, except with the written consent of the Company (which consent shall not unreasonably be withheld), it shall: (a) Best Efforts. Use its best efforts to cause all of the conditions set forth in Section 7 to be fulfilled as promptly as practicable after the date of this Agreement. Without limiting the generality of the foregoing, Purchaser will (i) take promptly (and in any event within five Business Days after the Closing) all actions necessary to make the filings required of Purchaser or its Affiliates with any Governmental or Regulatory Authorities, including without limitation those required under the HSR Act and European Community and German competition Laws, (ii) comply at the earliest practicable date with any request for additional information received by Purchaser or its Affiliates from any Governmental or Regulatory Authority in respect of such filing and (iii) cooperate with the Company in connection with any similar or comparable filing required to be made by the Company and in connection with resolving any investigation or other regulatory inquiry concerning the transactions contemplated by this Agreement commenced by any Governmental or Regulatory Authority. (b) Joint Venture. Use its best efforts (i) to cause the execution and delivery of the definitive documentation with respect to the Joint Venture to be executed and delivered by December 15, 1997, (ii) to obtain the requisite governmental clearances, approvals or terminations of waiting periods required or applicable (including under antitrust or competition laws) with respect to the formation of the Joint Venture and the conversion of the Shares into Common Stock and (iii) to cause the formation of the Joint Venture based on the terms contained in the Memorandum of Understanding prior to June 30, 1998. Section 6. Conditions Precedent to Obligations of Purchaser. Purchaser's obligation to purchase the Shares at the Closing pursuant to this Agreement is subject to compliance by the Company with its agreements herein contained and to the satisfaction, on or prior to the Closing Date with respect to Purchaser's obligation to consummate the Closing, of the following conditions: (a) Charter Documents; Good Standing Certificate. Purchaser shall have received from the Company (i) a certificate from a duly authorized officer thereof dated as of the Closing Date certifying as to (A) the absence of any amendment to the Certificate of Incorporation since the date of the Secretary of State's certificate referred to in clause (ii) below, and (B) the completeness and accuracy of the By-Laws of the Company as in effect on the Closing Date, (ii) a long-form certificate, dated not more than ten days prior to the Closing Date, of the Secretary of State of Delaware listing the Certificate of Incorporation and each amendment thereto on file in his office and certifying that (A) the attached copy of the Certificate of Incorporation and each amendment thereto is a true and correct copy thereof, (B) such amendments are the only amendments on file in his office, (C) that the Company has paid all franchise taxes to the date of such certificate and (D) that the Company is duly incorporated and in good standing under the laws of the State of Delaware. (b) Proof of Corporate Action. Purchaser shall have received from the Company copies, certified by a duly authorized officer thereof to be true and complete as of the Closing Date, of the resolutions of the Board of Directors and (to the extent required under applicable Law or the requirements of the NYSE) the stockholders of the Company authorizing the Charter Amendment, the Certificate of Designations and the execution, delivery and performance of this Agreement, the Stockholders Agreement and the Make-Whole Agreement. (It is understood that, following the Closing, the Company may seek further approvals of its stockholders, but the results of any such proceeding will not in any event affect the validity of the corporate approvals referred to in this paragraph (b), all of which will have been obtained prior to the Closing.) (c) Incumbency Certificate. Purchaser shall have received from the Company an incumbency certificate, dated the Closing Date, signed by a duly authorized officer thereof, and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of the Company, this Agreement and to give notices and to take other action on behalf of the Company under this Agreement. (d) Legal Opinion. Purchaser shall have received from Hale & Dorr LLP special counsel to the Company, at the Closing their opinion, dated the Closing Date, substantially in the form of Exhibit C hereto. (e) Representations and Warranties; Officers' Certificates. The representations and warranties of the Company contained herein shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though such representations and warranties were made on and as of such date (except for representations and warranties which by their terms are made expressly as of an earlier date, which shall be true and correct as of such earlier date) and the Company shall have performed and complied in all material respects with all conditions, covenants and agreements required to be performed or complied with by it prior to the Closing Date; and Purchaser shall have received on the Closing Date a certificate to this effect signed by an authorized officer of the Company. (f) Legality; Authorization; Consents. The purchase of the Shares shall not be prohibited by any Law or Order. All necessary consents, approvals, licenses, permits, orders and authorizations of, or registrations, declarations and filings with, any Governmental or Regulatory Authority or of or with any other Person, with respect to any of the transactions contemplated by this Agreement shall have been fully obtained or made and shall be in full force and effect and any waiting period imposed under any applicable Law shall have expired or been terminated. (g) Litigation, Etc. No suit, action, investigation, inquiry or other proceeding (including, without limitation, the enactment or promulgation of a statute or rule) by or before any arbitrator or any governmental injunction or order by a state or federal court shall have been entered (i) as of the Closing Date in connection with this Agreement, the Related Agreements or any of the transactions contemplated hereby or (ii) which would have a Material Adverse Effect or a material adverse effect on the consummation of the transactions contemplated by this Agreement or the Related Agreements, including, without limitation, the acquisition of the Shares, contemplated hereby. (h) Make-Whole Agreement. The Company shall have executed and delivered the Make-Whole Agreement to Purchaser. (i) Registration Rights Agreement. The Company shall have executed and delivered the Registration Rights Agreement to Purchaser. (j) Stockholders Agreement; Board Representative. The Company, Allen K. Breed, Johnnie Cordell Breed and each other Breed Stockholder shall have executed and delivered the Stockholders Agreement. (k) Completion of AlliedSignal Acquisition. All of the conditions precedent to the AlliedSignal Acquisition shall have been satisfied and the Company shall have delivered to Purchaser fully executed copies of all documents relating thereto (including any related financing documents). (l) Satisfaction with Capital Structure. Purchaser shall have confirmed to its satisfaction that the terms of the Company's financing arrangements in connection with the AlliedSignal Acquisition are consistent with the terms described in the commitment letters or term sheets attached hereto as Schedule 6(l) and will include the consent of any pledgee of Common Stock to a right of first refusal in favor of Purchaser on terms reasonably satisfactory to Purchaser. (m) Certificate of Designations. The Company shall have duly executed and filed the Certificate of Designations in accordance with the applicable requirements of Delaware law and shall have furnished Purchaser with a certificate of the Delaware Secretary of State to that effect. (n) NYSE Requirements. The NYSE shall (i) have approved for listing on the NYSE, subject to notice of issuance, the shares of Common Stock issuable upon conversion of the Shares and (ii) issued to the Company a letter confirming that (A) the obligations to be undertaken by the Company under the Stockholders Agreement (including without limitation the right of first refusal to be granted thereunder by the Company in favor of Purchaser) will satisfy the requirements of the NYSE, provided the right of first refusal is first approved by a majority vote of the holders of the Company's Common Stock, and (B) no further approval of the Company's stockholders will be required under the NYSE's rules or policies in connection with the Company's performance of its obligations under the Stockholders Agreement. (o) General. All instruments and legal, governmental, administrative and corporate proceedings in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to Purchaser, and Purchaser shall have received copies of all documents, including, without limitation, records of corporate or other proceedings, opinions of counsel, consents, licenses, approvals, permits and orders which Purchaser may have reasonably requested in connection therewith. Section 7. Conditions Precedent to Obligations of the Company. The Company's obligation to issue and sell the Shares pursuant to this Agreement is subject to compliance by Purchaser with the agreements herein contained, and to the satisfaction, on or prior to the Closing Date with respect to its obligation to consummate the Closing of the following conditions: (a) Representations and Warranties. The representations and warranties of Purchaser contained herein shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though such representations and warranties were made on and as of such date (except for representations and warranties which by their terms are made expressly as of an earlier date, which shall be true and correct as of such earlier date) and Purchaser shall have performed and complied with all conditions, covenants and agreements required to be performed or complied in all material respects with by it prior to the Closing Date; and the Company shall have received on the Closing Date a certificate to this effect signed by an authorized officer of Purchaser with respect to the certificate to be issued on the Closing Date. (b) Legality; Authorization; Consents. The issuance and sale of the Shares shall not be prohibited by any Law or Order, and shall not subject the Company to any penalty, special tax or other onerous condition. All necessary consents, approvals, licenses, permits, orders and authorizations of, or registrations, declarations and filings with, any Governmental or Regulatory Authority or of or with any other Person, with respect to any of the transactions contemplated by this Agreement shall have been fully obtained or made and shall be in full force and effect and any waiting period under any applicable Law shall have expired or been terminated. (c) Stockholders Agreement. Purchaser shall have executed and delivered the Stockholders Agreement. (d) Legal Opinion. The Company shall have received from counsel for Purchaser their legal opinions, dated the Closing Date, as to the matters described in Exhibit F. (e) Completion of AlliedSignal Acquisition. All of the conditions precedent to the AlliedSignal Acquisition shall have been satisfied. (f) Incumbency Certificate. The Company shall have received from Purchaser an incumbency certificate, dated the Closing Date, signed by a duly authorized officer thereof, and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of Purchaser, this Agreement and to give notices and to take other action on behalf of Purchaser under this Agreement. (g) Litigation, Etc. No suit, action, investigation, inquiry or other proceeding (including, without limitation, the enactment or promulgation of a statute or rule) by or before any arbitrator or any governmental injunction or order by a state or federal court shall have been entered (i) as of the Closing Date in connection with this Agreement, the Related Agreements or any of the transactions contemplated hereby or (ii) which would have a Material Adverse Effect or a material adverse effect on the consummation of the transactions contemplated by this Agreement or the Related Agreements, including, without limitation, the sale of the Shares, contemplated hereby. (h) General. All instruments and legal, governmental, administrative and corporate proceedings in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Company and the Company shall have received copies of all documents, including, without limitation, records of corporate or other proceedings, opinions of counsel, consents, licenses, approvals, permits and orders which the Company may have reasonably requested in connection therewith. Section 8. Notices. Any notice or other communication in connection with this Agreement shall be deemed to be delivered if in writing (or in the form of a telecopy) addressed as provided below and if either (a) actually delivered or telecopied to said address or (b) in the case of a letter, three Business Days shall have elapsed after the same shall have been deposited in the United States mail, postage prepaid and registered or certified: If to the Company: Breed Technologies, Inc. 5300 Old Tampa Highway Lakeland, Florida 33811 Attention: Charles J. Speranzella, Jr. and General Counsel Telecopier: (941) 668-6016 If to Purchaser: Siemens Aktiengesellschaft Legal Department ZFR3 Werner-von-Siemens-Strasse 50 D-91052 Erlangen Germany Attention: Counsel for Automotive Systems Group Telecopier: 011-49-9131-729001 With a copy to: Siemens Corporation Legal Department 1301 Avenue of the Americas New York, New York Attention: General Counsel Telecopier: (212) 258-4945 Section 9. Survival of Representations and Warranties. All agreements, representations and warranties made herein or in any certificate or other document required to be delivered to Purchaser pursuant hereto shall be deemed to have been relied on by Purchaser, notwithstanding any investigation made by Purchaser or on Purchaser's behalf, and shall survive (i) with respect to representations and warranties contained herein, until the first to occur of (x) the date which is 18 months after the Closing Date or (y) the date of delivery of the Make-Whole Notice as defined in the Put Agreement, and (ii) with respect to each other covenant and agreement contained herein until the last date on which such covenant or agreement specifies it is to be performed, or, if no such date is specified, indefinitely. Section 10. Indemnification. 10.01 Indemnity by the Company. Subject to the provisions of this Section 10, the Company from and after the Closing Date shall indemnify and hold Purchaser and its respective officers, directors, stockholders, managers, agents, employees, representatives, affiliates, successors and assigns, harmless from and against any and all damage, loss (including loss of value), cost, obligation, claims, demands, assessments, settlements, judgments or liability (whether based on contract, tort, product liability, strict liability or otherwise), including Taxes, and all expenses (including interest, penalties and attorneys' and accountants' fees and disbursements) (collectively referred to herein as "Damages") incurred in litigation or otherwise, and any investigation relating thereto, by any of the above-named persons, directly or indirectly, arising from or in connection with: the inaccuracy, untruth or incompleteness, as of the date made or deemed made, of any representation or warranty by the Company in this Agreement or in any other agreement, certificate (including without limitation the certificates delivered by the Company pursuant to Section 6), schedule, exhibit or writing required to be delivered to Purchaser pursuant to this Agreement; provided, however, that if any such representation or warranty is qualified in any respect by materiality or in any similar respect, for purposes of this Section such qualification will be in all respects ignored; and any breach of or failure to perform any covenant or agreement made by the Company in this Agreement. 10.02 Purchaser's Indemnity. Subject to the provisions of this Section 10, Purchaser, from and after the Closing Date, shall indemnify and hold the Company, and its respective officers, directors, stockholders, agents, employees, representatives, affiliates, successors and assigns, harmless from and against any Damages incurred in litigation or otherwise, and any investigation related thereto, by the Company, directly or indirectly, arising from or in connection with: the inaccuracy, untruth or incompleteness, as of the date made or deemed made, of any representation or warranty by Purchaser in this Agreement or in any other agreement, certificate (including without limitation the certificates delivered by Purchaser pursuant to Section 7), schedule, exhibit or writing delivered to the Company pursuant to this Agreement; provided, however, that if any such representation or warranty is qualified in any respect by materiality or in any similar respect, for purposes of this Section such qualification will be in all respects ignored; and any breach of or failure to perform any covenant or agreement made by Purchaser in this Agreement. 10.03 Procedure. No claim for indemnification shall be valid unless made prior to the expiration (pursuant to Section 9) of the applicable representation, warranty or covenant on which it is based. All claims for indemnification by a party under this Section 10 (the party claiming indemnification and the party against whom such claims are asserted being hereinafter called the "Indemnified Party" and the "Indemnifying Party," respectively) shall be asserted and resolved as follows: (a) In the event that any claim or demand for which an Indemnifying Party would be liable to an Indemnified Party hereunder is asserted against or sought to be collected from such Indemnified Party by a third party, such Indemnified Party shall with reasonable promptness give notice (the "Claim Notice") to the Indemnifying Party of such claim or demand, specifying the nature of and specific basis for such claim or demand and the amount or the estimated amount thereof to the extent then feasible (which estimate shall not be conclusive of the final amount of such claim and demand); provided, however, that no failure to give, or delay in giving, any such Claim Notice shall excuse or diminish the Indemnifying Party's obligations to the Indemnified Party under this Section 10, unless such failure or delay is prejudicial to Indemnifying Party. The Indemnifying Party shall have ten days from the date the Claim Notice is given in accordance with Section 8 of this Agreement (the "Notice Period") to notify the Indemnified Party (i) whether or not it disputes the liability of the Indemnifying Party to the Indemnified Party hereunder with respect to such claim or demand, and (ii) whether or not it desires, at the cost and expense of the Indemnifying Party, to defend the Indemnified Party against such claim or demand; provided, however, that any Indemnified Party is hereby authorized, but is not obligated, prior to and during the Notice Period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against such claim or demand, the Indemnifying Party shall, subject to the last sentence of this paragraph, have the right to control the defense against the claim by all appropriate proceedings, and any settlement negotiations. If the Indemnifying Party assumes the defense of a proceeding, (i) no compromise or settlement of such claims may be effected by the Indemnifying Party without the Indemnified Party's consent (such consent not to be unreasonably withheld or delayed) unless the sole relief provided is monetary damages that are paid in full by the Indemnifying Party; and (ii) the Indemnified Party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If the Indemnified Party desires to participate in, but not control, any such defense, it may do so at its sole cost and expense. If the Indemnifying Party fails to respond to the Indemnified Party within the Notice Period or otherwise elects not to defend the Indemnified Party, or after electing to defend fails to commence or diligently pursue such defense, then the Indemnified Party shall have the right, but not the obligation, to undertake or continue such defense and to compromise or settle (exercising reasonable business judgment) the claim or other matter, all on behalf, for the account and at the risk of the Indemnifying Party. Notwithstanding the foregoing, if the basis of the proceeding relates to a condition of operations which existed or were conducted both prior to and after the Closing Date, or if the Indemnified Party would otherwise be adversely affected as a result of an adverse decision of such proceeding, then each party shall have the same right to participate in the proceeding at its own expense and at its own risk without either party having the right of control. (b) If requested by the Indemnifying Party, the Indemnified Party agrees, at the Indemnifying Party's expense and upon presentation of adequate security for the payment of such expenses, to cooperate with the Indemnifying Party and its counsel in contesting any claim or demand which the Indemnifying Party elects to contest, or, if appropriate and related to the claim in question, in making any counterclaim against any person asserting the third- party claim or demand, or any cross-complaint against any person. No claim as to which indemnification is sought under this Agreement may be settled without the consent of the Indemnifying Party. (c) If any Indemnified Party should have a claim against the Indemnifying Party hereunder which does not involve a claim or demand being asserted against or sought to be collected from it by a third party, the Indemnified Party shall send a Claim Notice with respect to such claim to the Indemnifying Party. If the Indemnifying Party disputes such claim, such dispute shall be resolved by litigation in an appropriate court of competent jurisdiction described in Section 12.2. If the Indemnifying Party does not dispute such claim, then the Indemnifying Party shall pay to the Indemnified Party the amount of such claim within thirty days after receipt of such Claim Notice. (d) In connection with the matters for which indemnification is sought hereunder (i) the Company agrees to give Purchaser and its representatives reasonable access during regular business hours and upon five days' prior written notice to the Company, to the books, records and employees of the Company to the extent such reasonably relate to the matters to which the Claim Notice relates and (ii) Purchaser agrees to give the Company and its representatives reasonable access, during regular business hours and upon five days' prior written notice to Purchaser, to the books, records and employees of Purchaser to the extent they reasonably relate to the matters to which the Claim Notice relates. 10.04 Basket and Cap Provisions. Notwithstanding any other provision of this Agreement: (a) (i) no amount shall be payable by the Company to Purchaser as indemnification pursuant to this Section 10 unless and until the aggregate amount of all Damages suffered by Purchaser exceeds $1,500,000, in which event the Company shall be liable only for the amount of such Damages in excess of $1,500,000; and (ii) the aggregate liability of the Company for indemnification under this Section 10 shall not exceed $30,000,000. (b) (i) no amount shall be payable by Purchaser to the Company as indemnification pursuant to this Section 10 unless and until the aggregate amount of all damages suffered by the Company exceeds $1,500,000, in which event Purchaser shall be liable only for the amount of such Damages in excess of $1,500,000; and (ii) the aggregate liability of Purchaser for indemnification under this Section 10 shall not exceed $30,000,000. (c) Except for claims based on fraud, the rights of Purchaser and the Company under this Section 10 shall be the exclusive remedy with respect to claims resulting from or relating to any misrepresentation, breach of warranty or a failure to perform any covenant or agreement of the other party contained in this Agreement or in any certificate or other document (other than a Related Agreement) delivered to the other party pursuant hereto. Section 11. Termination. 11.01 Termination. This Agreement may be terminated at any time prior to the Closing: (a) By mutual agreement of the Company and Purchaser; (b) By either Purchaser or the Company if the Closing has not taken place on or before November 7, 1997 and the failure to consummate the Closing is not caused by a breach of this Agreement by a terminating party; (c) By the Company or Purchaser, as the case may be, (i) if any of the conditions precedent to the performance of the obligations of the party giving notice of termination shall not have been fulfilled and cannot be fulfilled on or prior to the Closing and shall not have been waived in writing by such party, or (ii) if a material default shall be made by the other party in the due and timely performance of any of the covenants and agreements herein contained that cannot be cured on or prior to the Closing and shall not have been waived in writing by the non-defaulting parties; provided, however, that a party may not terminate this Agreement pursuant to this paragraph (e) on the basis of an act, omission, occurrence, event or state of affairs that has been disclosed in writing to such party unless such party exercises such right of termination within 30 days of such disclosure; and (d) At the option of the Company or Purchaser, if any action or proceeding shall have been instituted and remain pending before any Governmental or Regulatory Authorities to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or if the Federal Trade Commission, the Department of Justice or any other Governmental or Regulatory Authority, including without limitation the European Community or the Federal Republic of Germany, or any political subdivision or agency thereof, shall have taken any action to restrain or otherwise enjoin the consummation of the transactions contemplated hereby, provided that neither the Company nor Purchaser shall have the option to terminate this Agreement as provided herein after any such action or notice by any federal, state or local government or governmental agency or other person shall be withdrawn or after any action by the Federal Trade Commission, the Department of Justice or any other governmental action shall be settled. 11.02 No Liability. In the event of a termination of this Agreement pursuant to paragraph 11.01(a) or paragraph 11.01(d), there shall be no liability on the parties hereto or any of their respective directors, officers, shareholders, members, managers, or affiliates as a result of such termination of this Agreement. A termination under paragraph 11.01(b) or 11.01(c) shall not prejudice any claim for damages which any party may have hereunder or in law or in equity as a consequence of any breach by any other party of this Agreement. 11.03 Notice. Any party hereto may exercise its right of termination of this Agreement only by delivering written notice to that effect to the other parties hereto, provided that such notice is received by the latter party prior to the Closing. Section 12. Miscellaneous. 12.1 Amendment or Waiver. Neither this Agreement nor any terms hereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Company and Purchaser. 12.2 Consent to Jurisdiction. Subject to the provisions of Section 12.3, each of the Company and Purchaser hereby agrees to submit to the exclusive jurisdiction of the U.S. Federal courts in the Southern District of the State of New York, and consents that service of process with respect to all such courts may be made by registered mail to such Person at the address of such Person set forth in Section 8 with respect to any disputes arising out of this Agreement. 12.3 Release of Siemens Aktiengesellschaft. If Purchaser assigns its rights and obligations under this Agreement pursuant to Section 12.5, so long as Siemens Corporation is subject to the jurisdiction of the Federal, state or local courts of the United States with respect to claims or disputes relating to this Agreement, the Related Agreements or the transactions contemplated hereby or thereby, the Company for itself and its Affiliates hereby irrevocably and unconditionally waive and release all rights and claims that it or any of them may thereafter have that Purchaser is or has been at any time subject to the jurisdiction of the Federal, state or local courts of the United States arising out of claims or disputes relating to this Agreement, the Related Agreements or the transactions contemplated hereby or thereby. 12.4 Waiver of Jury Trial; Trial Costs. Each of the Company, for itself and its Affiliates, and Purchaser hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to the actions of the Company and Purchaser or its Affiliates pursuant to this Agreement in the negotiation, administration, performance or enforcement thereof. The party in whose favor a final judgment is rendered shall be entitled to reasonable costs and reasonable attorneys' fees. 12.5 Assignment. This Agreement is not assignable except by operation of law or as each of the parties hereto may agree in writing and any attempted assignment in violation of this provision shall be null and void. Notwithstanding the foregoing, Purchaser may assign this Agreement to any of its wholly-owned subsidiaries or Affiliates who have the economic resources to fulfill Purchaser's obligations under this Agreement agree in writing to be bound by the terms hereof. 12.6 Entire Agreement. This Agreement (including the Exhibits and Schedules) sets forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby and supersede any prior written or oral understandings with respect thereto including without limitation any letters of intent. The invalidity or unenforceability of any terms or provisions hereof shall not affect the validity or enforceability of any other term or provision hereof. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts which together shall constitute one instrument and shall be governed by and construed in accordance with laws of the State of Delaware without giving regard to the principles of conflicts of law, and shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 12.7 Expenses. Except as otherwise expressly provided in this Agreement, the Company agrees to pay, without right of reimbursement from Purchaser, the costs incurred by the Company, and Purchaser agrees to pay, without right of reimbursement from the Company, the costs incurred by Purchaser, incident to the preparation and execution of this Agreement and the Related Agreements and performance of their respective obligations hereunder, whether or not the transactions contemplated by this Agreement and the Related Agreements shall be consummated, including, without limitation, the fees and disbursements or legal counsel, accountants and consultants employed by the respective parties in connection with the transactions contemplated by this Agreement and the Related Agreements. 12.8 Public Announcements. At all times at or before the Closing, except as required by law or on the advice of counsel, the Company and Purchaser will not issue or make any release to the press or other public disclosure with respect to this Agreement or the transactions contemplated hereby without the consent of the other party, will not make any statement to any customer or supplier of the Company with respect to this Agreement or the transactions contemplated hereby. The Company and Purchaser will also obtain the other party's prior approval of any press release to be issued immediately following the Closing announcing the consummation of the transactions contemplated by this Agreement. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. BREED TECHNOLOGIES, INC. By: Name: Title: 19 SIEMENS AKTIENGESELLSCHAFT By: Name: Title: By: Name: Title: EX-10.1.1 3 MAKE-WHOLE AGREEMENT Exhibit 10.1.1 MAKE-WHOLE AGREEMENT AGREEMENT, dated as of October 30, 1997 by and between BREED TECHNOLOGIES, INC., a Delaware corporation (the "Company") and SIEMENS AKTIENGESELLSCHAFT, a company organized under the laws of the Federal Republic of Germany (together with its permitted assigns, the "Holder"). WHEREAS, at a closing held on the date of this Agreement, the Company has issued and sold to the Holder 4,883,227 of the Company's Series A Preference Shares (the "Shares"), each of which (i) represents one-one thousandth of a share of the Company's 1997 Series A Convertible Non-Voting Preferred Stock, par value $.001 per share and (ii) is convertible into the Company's common stock, par value $.01 per share (the "Common Stock") at an initial rate of one share of Common Stock per Series A Preference Share, subject to adjustment (the Shares, any additional Series A Preference Shares which in the future are issued and paid as dividends on the Shares and the securities into which they may be converted in the future are sometimes hereinafter collectively referred to as the "Securities"); and WHEREAS, the Company and the Holder have entered into a memorandum of understanding, dated the same date as this Agreement, providing for the formation of a joint venture (the "Joint Venture"); and WHEREAS, in order to induce the Holder to purchase the Shares, the Company has agreed to grant to the Holder the rights set forth in this Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: Section 1. Make-Whole Right. (a) At any time after the occurrence of a Triggering Event (as hereinafter defined), the Holder shall have the right (the "Make-Whole Right"), exercisable within 30 days after the Triggering Event, to require the Company to take the action specified in Section 1(b). The Make-Whole Right shall be exercisable by delivery of a written notice to the Company (the "First Make-Whole Notice"). (b) Upon the exercise of the Make-Whole Right, the Company may elect, at the Company's sole option, either (i) to purchase all (but not less than all) of the Securities for the Make-Whole Price (as hereinafter defined) at a closing (the "Purchase Closing") to be held at a time and place specified by the Holder in the First Make-Whole Notice or (ii) to comply with any Second Make-Whole Notice that may be delivered as described in Section 2(a). The Company shall advise the Holder of its election by delivery of a notice (the "Company Election Notice") to the Holder not later than the last to occur of (x) 10 days after delivery of the First Make-Whole Notice and (y) June 1, 1998. (c) If the Company makes the election described in Section 1(b)(i), then, at the Purchase Closing (and subject to Section 2), the Company shall purchase the Securities and the Holder shall convey good and valid title to the Securities to the Company, free and clear of all liens, security interests and similar encumbrances (collectively, "Liens") by delivering to the Company against payment therefor certificates for the Securities, duly endorsed in blank or with stock powers attached. (d) For purposes of this Agreement: (i) "Triggering Event" means any of the following: (A) the Company and the Holder shall have abandoned their negotiations with respect to the Joint Venture; (B) the definitive documentation with respect to the Joint Venture shall not have been executed and delivered by December 15, 1997; (C) the parties shall have been unable after diligent and good faith efforts to obtain the requisite governmental clearances, approvals, or terminations of waiting periods required or applicable (including under antitrust or competition laws) with respect to the formation of the Joint Venture or conversion of the Shares into Common Stock without the imposition of materially adverse conditions; or (D) the formation of the Joint Venture shall not have been completed, in accordance with the definitive agreements entered into by the Company and the Holder, by June 30, 1998. (ii) "Make-Whole Price" means $115,000,000 plus $15,753 multiplied by the number of days elapsed between December 15, 1997 and the first to occur of (i) payment in full in cash by the Company of the Make- Whole Price; (ii) delivery by the Company of the Make-Whole Shares; and (iii) the receipt by Siemens of sale proceeds as described in Section 2(c). Section 2. Make-Whole Provision. (a) If (i) the Company makes the election described in Section 1(b)(ii), or (ii) the Company fails to furnish the Company Election Notice within the time specified in Section 1(b), or (iii) the Company shall have failed by the later of (x) the date that is 10 days after delivery of the First Make-Whole Notice and (y) June 1, 1998 to establish to the satisfaction of the Holder that the Company has access to the funds required to purchase the Securities when and as required by Section 1, and that such purchase will not be prohibited under the terms of the Company's material contractual obligations, the Holder may elect in its sole discretion to deliver a notice (a "Second Make Whole Notice") to the Company to the effect that (x) the Holder has entered into a bona fide arm's-length agreement with a financial institution to sell the Securities and the Make-Whole Shares to the institution at a price (the "Sale Price") not less than (1) if the Securities are sold at a time when a registration statement is in effect under the Securities Act with respect to those shares and the Make-Whole Shares (as hereinafter defined), 90% of the last reported sale price per share of the Common Stock on the New York Stock Exchange on the last trading day preceding at the date of the Make-Whole Notice or (2) otherwise, 75% of such last reported sale price; and (y) the number (the "Make-Whole Number") of shares of Common Stock that will be required to be sold at the Sale Price in order for the Holder to realize net proceeds from such sale equal to the Make-Whole Price. (b) Not later than the first to occur of (i) three New York Stock Exchange trading days after the date of the Second Make-Whole Notice and (ii) July 1, 1998, the Company shall convey to the Holder good and valid title, free and clear of all Liens, to a number of shares of Common Stock equal to the Make-Whole Number ( the "Make-Whole Shares"). (c) Nothing in this Agreement shall restrict the right of the Holder to sell or otherwise dispose of the Securities at any time; subject, however, to the provision of Section 3(c). If after the delivery of a First Make-Whole Notice when the Holder disposes of the Securities it realizes net proceeds in excess of the Make-Whole Price, it will promptly remit the amount of such excess to the Company. (d) Siemens will not issue a press release or make any other similar public announcement regarding any intention to sell or otherwise dispose of any Securities, except to the extent required by law or on the advice of counsel. Section 3. Amendment and Modification; Termination. (a) This Agreement may be amended or modified, or any provision hereof may be waived, provided that such amendment, modification or waiver is set forth in writing executed by the Company and the Holder. No course of dealing or course of conduct between or among any persons having any interest in this Agreement will be deemed effective to modify, amend or waive any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (c) This Agreement shall terminate (i) if at any time prior to the delivery of a Second Make-Whole Notice the Holder shall sell or otherwise transfer any of the Securities to any person other than a direct or indirect subsidiary of the Holder or (ii) if the Holder shall not have delivered a Second Make-Whole Notice by the later to occur of (x) July 31, 1998 or (y) 45 days after a Triggering Event. Section 4. Successors and Assigns; Entire Agreement. Neither party may assign its rights or delegate its obligations under this Agreement, except that Siemens Aktiengesellschaft may transfer the Securities, and in connection therewith assign its rights under this Agreement, to any direct or indirect subsidiary. Subject to the foregoing, this Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement and the other agreements referred to herein together set forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. Section 5. Separability. In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected. Section 6. Notices. (a) All notices provided for or permitted hereunder shall be made in writing by hand-delivery, telecopier or air courier overnight delivery service to the other at the following addresses (or at such other address as shall be specified in a notice given by any party to the others in accordance with this Section): If to the Company to: Breed Technologies, Inc. 5300 Old Tampa Highway Lakeland, Florida 33811 Attention: Charles J. Speranzella, Jr. and General Counsel Telecopier: (941) 668-6016 If to the Holder: Siemens Aktiengesellschaft Legal Department ZFR3 Werner-von-Siemens Strasse D-91052 Erlangen Germany Telecopier: 011-49-9317-29001 Attention: Counsel for Automotive Systems Group With a copy to: Siemens Corporation 1301 Avenue of the Americas New York, New York 10019 Attention: General Counsel Telecopier: (212) 258-4945 (b) All such notices shall be deemed to have been duly given: when delivered by hand, if personally delivered; upon receipt, if received prior to 5:00 p.m. local time on a Business Day (and otherwise on the next succeeding Business Day), if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Section 7. Governing Law; Jurisdiction; Waiver of Jury Trial. (a)The validity, performance, construction and effect of this Agreement is governed by and shall be construed in accordance with the internal laws of the State of Delaware, without giving effect to principles of conflicts of law. (b) Subject to the provisions of Section 12, each of the Company and the Holder each hereby agrees to submit to the exclusive jurisdiction of the U.S. Federal courts in the Southern District of the State of New York, and consents that service of process with respect to all such courts may be made by registered mail to such Person at the address of such Person set forth in Section 6 with respect to any disputes arising out of this Agreement. (c) Each of the Company, for itself and its affiliates, and the Holder hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to the actions of the Company and the Holder or its affiliates pursuant to this Agreement in the negotiation, administration, performance or enforcement thereof. The party in whose favor a final judgment is rendered shall be entitled to reasonable costs and reasonable attorneys' fees. Section 8. Headings and Counterparts. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect. This Agreement may be executed in two or more counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same instrument. Section 9. Further Assurances. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. Section 10. Remedies. In the event of a breach by any party to this Agreement of its obligations under this Agreement, any party injured by such breach, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, for breach of such provision will be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. In the event of any breach of this Agreement by any party hereto, each such breaching party agrees to indemnify the persons to whom a representation and warranty is given or an obligation is owed under this Agreement for all damages, costs and expenses (including reasonable attorneys' fees) actually incurred as a result of any such breach. Section 11. Pronouns. Whenever the context may require, any pronouns used herein shall be deemed also to include the corresponding single, plural, neuter, masculine or feminine forms. Section 12. Consent to Jurisdiction. Subject to the provisions of Section 7, each of the Company and the Holder hereby agrees to submit to the exclusive jurisdiction of the U.S. Federal courts in the Southern District of the State of New York, and consents that service of process with respect to all such courts may be made by registered mail to such Person at the address of such Person set forth in Section 6 with respect to any disputes arising out of this Agreement. Section 13. Release of Siemens Aktiengesellschaft. If the Holder assigns its rights and obligations under this Agreement pursuant to Section 4, so long as Siemens Corporation is subject to the jurisdiction of the Federal, state or local courts of the United States relating to claims arising out of, or disputes relating to, this Agreement or the transaction contemplated hereby, the Company and its Affiliates hereby irrevocably and unconditionally waive and release all rights and claims that it or any of them may thereafter have that Holder is or has been at any time subject to the jurisdiction of the Federal, state or local courts of the United States relating to claims arising out of, or disputes relating to, this Agreement or the transactions contemplated hereby. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. BREED TECHNOLOGIES, INC. By: Name: Title: SIEMENS AKTIENGESELLSCHAFT By: Name: Title: By: Name: Title: EX-10.1.2 4 REGISTRATION RIGHTS AGREEMENT Exhibit 10.1.2 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of October 30, 1997, between BREED TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and SIEMENS AKTIENGESELLSCHAFT, a company organized under the laws of the Federal Republic of Germany (together with its permitted assigns under this Agreement, the "Holder"). WHEREAS, the Company and the Holder have entered into a Stock Purchase Agreement, dated as of October 14, 1997 (the "Stock Purchase Agreement"), by and between the Company and the Holder, pursuant to which the Company has issued and sold to the Holder 4,883,227 shares (the "Series A Preference Shares," each such Series A Preference Share representing one one-thousandth (1/1,000) of a share of the Company's 1997 Convertible Non-Voting Preferred Stock, par value $.001 per share); WHEREAS, the Series A Preference Shares are convertible at the option of the Holder into shares of Common Stock (as hereinafter defined); and WHEREAS, in order to induce the Holder to enter into the Stock Purchase Agreement and to purchase the Series A Preference Shares, the Company agreed to grant to the Holder the registration rights set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: SECTION 1 Definitions. As used in this Agreement, the following terms shall have the following meanings: "Advice" shall have the meaning set forth in Section 5. "Affiliate" means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day that is not a Saturday, a Sunday or a legal holiday on which banking institutions in the State of New York are not required to be open. "Capital Stock" means, with respect to the Company, any and all shares, interests, participations or other equivalents (however designated) of capital stock issued by the Company, including each class of common stock and preferred stock of the Company. "Common Stock" means the Common Stock, par value $.01 per share, of the Company or any other shares of capital stock or other securities of the Company into which such shares of Common Stock shall be reclassified or changed, including, by reason of a merger, consolidation, reorganization or recapitalization. If the Common Stock has been so reclassified or changed, or if the Company pays a dividend or makes a distribution on the Common Stock in shares of capital stock, or subdivides (or combines) its outstanding shares of Common Stock into a greater (or smaller) number of shares of Common Stock, a share of Common Stock shall be deemed to be such number of shares of stock and amount of other securities to which a holder of a share of Common Stock outstanding immediately prior to such change, reclassification, exchange, dividend, distribution, subdivision or combination would be entitled. "Company" has the meaning set forth in the introductory clauses. "Delay Period" has the meaning set forth in Section 2(d). "Demand Notice" has the meaning set forth in Section 2(a). "Demand Registration" has the meaning set forth in Section 2(b). "Effectiveness Period" has the meaning set forth in Section 2(d). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Holdback Period" has the meaning set forth in Section 4. "Holder" has the meaning set forth in the introductory clauses and includes any assignee thereof in accordance with Section 9 of this Agreement. "Indemnified Party" has the meaning set forth in Section 8(c). "Indemnifying Party" has the meaning set forth in Section 8(c). "Inspectors" has the meaning set forth in Section 5(j). "Interruption Period" has the meaning set forth in Section 5. "Losses" has the meaning set forth in Section 8(a). "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Piggyback Registration" has the meaning set forth in Section 3(a). "Prospectus" means the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Shares covered by such Registration Statement and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. "Records" has the meaning set forth in Section 5(j). "Registrable Shares" means Series A Preference Shares or shares of Common Stock owned by a Holder at any time during the Registration Period, unless (i) they have been effectively registered under Section 5 of the Securities Act and disposed of pursuant to an effective Registration Statement, (ii) such securities can be freely sold and transferred without restriction under Rule 144 or any other restrictions under the Securities Act or (iii) such securities have been transferred pursuant to Rule 144 under the Securities Act or any successor rule such that, after any such transfer referred to in this clause (iii), such securities may be freely transferred without restriction under the Securities Act. "Registration" means registration under the Securities Act of an offering of Registrable Shares pursuant to a Demand Registration or a Piggyback Registration. "Registration Period" has the meaning set forth in Section 2(a). "Registration Statement" means any registration statement under the Securities Act of the Company that covers any of the Registrable Shares pursuant to the provisions of this Agreement, including the related Prospectus, all amendments and supplements to such registration statement, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Series A Preference Shares" has the meaning set forth in the introductory clauses. "Shelf Registration" has the meaning set forth in Section 2(b). "Stock Purchase Agreement" has the meaning set forth in the introductory clauses. "Underwritten Registration or Underwritten Offering" means a registration under the Securities Act in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2 Demand Registration. (a) The Holder shall have the right, during the period (the "Registration Period") commencing on June 1, 1998 and ending on the tenth anniversary of the date of this Agreement, by written notice (the "Demand Notice") given to the Company, to request the Company to register under and in accordance with the provisions of the Securities Act all or any portion of the Registrable Shares designated by such Holder; provided, however, that the aggregate number of Registrable Shares requested to be registered pursuant to any Demand Notice and pursuant to any related Demand Notices received pursuant to the following sentence shall be at least 1,000,000 (subject to adjustment) and provided, further, however, that such registration shall, at the option of the Company, be on Form S-3 (or its successor form) if such form is then available for use by the Company. Upon receipt of any such Demand Notice, the Company shall promptly notify any other Holders of the receipt of such Demand Notice and allow them the opportunity to include Registrable Shares held by them in the proposed registration by submitting their own Demand Notice. In connection with any Demand Registration in which more than one Holder participates, in the event that such Demand Registration involves an Underwritten Offering and the managing underwriter or underwriters participating in such offering advise in writing the Holders of Registrable Shares to be included in such offering that the total number of Registrable Shares to be included in such offering exceeds the amount that can be sold in (or during the time of) such offering without delaying or jeopardizing the success of such offering (including the price per share of the Registrable Shares to be sold), then the amount of Registrable Shares to be offered for the account of such Holders shall be reduced pro rata on the basis of the number of Registrable Shares to be registered by each such Holder. The Holders as a group shall be entitled to three Demand Registrations pursuant to this Section 2 unless any Demand Registration does not become effective or is not maintained for a period (whether or not continuous) of at least 120 days (or such shorter period as shall terminate when all the Registrable Shares covered by such Demand Registration have been sold pursuant thereto), in which case the Holders will be entitled to an additional Demand Registration pursuant hereto. (b) The Company, within 30 days of the date on which the Company receives a Demand Notice given by Holders in accordance with Section 2(a) hereof, shall file with the SEC, and the Company thereafter shall use its best efforts to cause to be declared effective, a Registration Statement on the appropriate form (subject to the last proviso of the first sentence of Section 2(a)) for the registration and sale, in accordance with the intended method or methods of distribution, of the total number of Registrable Shares specified by the Holders in such Demand Notice, which may include a "shelf" registration (a "Shelf Registration") pursuant to Rule 415 under the Securities Act (a "Demand Registration"). (c) The Company shall use commercially reasonable efforts to keep each Registration Statement filed pursuant to this Section 2 continuously effective and usable for the resale of the Registrable Shares covered thereby (i) in the case of a Registration that is not a Shelf Registration, for a period of 120 days from the date on which the SEC declares such Registration Statement effective and (ii) in the case of a Shelf Registration, continuously from the date on which the SEC declares such Registration Statement effective, in either case (x) until all the Registrable Shares covered by such Registration Statement have been sold pursuant to such Registration Statement), and (y) as such period may be extended pursuant to this Section 2. (d) The Company shall be entitled to postpone the filing of any Registration Statement otherwise required to be prepared and filed by the Company pursuant to this Section 2, or suspend the use of any effective Registration Statement under this Section 2, for a reasonable period of time, but not in excess of 45 days (a "Delay Period"), if any executive officer of the Company determines that in such executive officer's reasonable judgment and good faith the registration and distribution of the Registrable Shares covered or to be covered by such Registration Statement would materially interfere with any pending material financing, acquisition or corporate reorganization or other material corporate development involving the Company or any of its subsidiaries or would require premature disclosure thereof and promptly gives the Holders written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the period of the anticipated delay; provided, however, that (i) the aggregate number of days included in all Delay Periods during any consecutive 12 months shall not exceed the aggregate of (x) 90 days minus (y) the number of days occurring during all Holdback Periods (as defined in Section 4) and Interruption Periods (as defined in Section 5(k)) during such consecutive 12 months and (ii) a period of at least 60 days shall elapse between the termination of any Delay Period, Holdback Period or Interruption Period and the commencement of the immediately succeeding Delay Period. If the Company shall so postpone the filing of a Registration Statement, the Holders of Registrable Shares to be registered shall have the right to withdraw the request for registration by giving written notice from the Holders of a majority of the Registrable Shares that were to be registered to the Company within 45 days after receipt of the notice of postponement or, if earlier, the termination of such Delay Period (and, in the event of such withdrawal, such request shall not be counted for purposes of determining the number of requests for registration to which the Holders of Registrable Shares are entitled pursuant to this Section 2). The time period for which the Company is required to maintain the effectiveness of any Registration Statement shall be extended by the aggregate number of days of all Delay Periods, all Holdback Periods and all Interruption Periods occurring during such Registration and such period and any extension thereof is hereinafter referred to as the "Effectiveness Period." The Company shall not be entitled to initiate a Delay Period unless it shall (A) to the extent permitted by agreements with other security holders of the Company, concurrently prohibit sales by such other security holders under registration statements covering securities held by such other security holders and (B) in accordance with the Company's policies from time to time in effect, forbid purchases and sales in the open market by senior executives of the Company. (e) Except to the extent required by agreements with other security holders of the Company entered into prior to the date of the Stock Purchase Agreement, the Company shall not include any securities that are not Registrable Shares in any Registration Statement filed pursuant to this Section 2 without the prior written consent of the Holders of a majority in number of the Registrable Shares covered by such Registration Statement. (f) Holders of a majority in number of the Registrable Shares to be included in a Registration Statement pursuant to this Section 2 may, at any time prior to the effective date of the Registration Statement relating to such Registration, revoke such request by providing a written notice to the Company revoking such request. The Holders of Registrable Shares who revoke such request shall reimburse the Company for all its out-of-pocket expenses incurred in the preparation, filing and processing of the Registration Statement; provided, however, that, if such revocation was based on the Company's failure to comply in any material respect with its obligations hereunder, such reimbursement shall not be required. SECTION 3 Piggyback Registration. (a) Right to Piggyback. If at any time during the Registration Period the Company proposes to file a registration statement under the Securities Act with respect to a public offering of securities of the same type as the Registrable Shares pursuant to a firm commitment underwritten offering solely for cash for its own account (other than a registration statement (i) on Form S-4 or Form S-8 or any successor forms thereto, or (ii) filed solely in connection with a dividend reinvestment plan or employee benefit plan covering officers or directors of the Company or its Affiliates) or for the account of any holder of securities of the same type as the Registrable Shares or the securities into which the Registrable Securities then are convertible (to the extent that the Company has the right to include Registrable Shares in any registration statement to be filed by the Company on behalf of such holder), then the Company shall give written notice of such proposed filing to the Holders at least 15 days before the anticipated filing date. Such notice shall offer the Holders the opportunity to register such amount of Registrable Shares as they may request (a "Piggyback Registration"). Subject to Section 3(b), the Company shall include in each such Piggyback Registration all Registrable Shares with respect to which the Company has received written requests for inclusion therein within 10 days after notice has been given to the Holders. Each Holder shall be permitted to withdraw all or any portion of the Registrable Shares of such Holder from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration; provided, however, that if such withdrawal occurs after the filing of the Registration Statement with respect to such Piggyback Registration, the withdrawing Holders shall reimburse the Company for the portion of the registration expenses payable with respect to the Registrable Shares so withdrawn. (b) Priority on Piggyback Registrations. The Company shall permit the Holders to include all such Registrable Shares on the same terms and conditions as any similar securities, if any, of the Company included therein. Notwithstanding the foregoing, if the Company or the managing underwriter or underwriters participating in such offering advise the Holders in writing that the total amount of securities requested to be included in such Piggyback Registration exceeds the amount which can be sold in (or during the time of) such offering without delaying or jeopardizing the success of the offering (including the price per share of the securities to be sold), then the amount of securities to be offered for the account of the Holders and other holders of securities who have piggyback registration rights with respect thereto shall be reduced (to zero if necessary) pro rata on the basis of the number of common stock equivalents requested to be registered by each such Holder or holder participating in such offering. (c) Right To Abandon. Nothing in this Section 3 shall create any liability on the part of the Company to the Holders if the Company in its sole discretion should decide not to file a registration statement proposed to be filed pursuant to Section 3(a) or to withdraw such registration statement subsequent to its filing, regardless of any action whatsoever that a Holder may have taken, whether as a result of the issuance by the Company of any notice hereunder or otherwise. SECTION 4 Holdback Agreement. If (i) during the Effectiveness Period, the Company shall file a registration statement (other than in connection with the registration of securities issuable pursuant to an employee stock option, stock purchase or similar plan or pursuant to a merger, exchange offer or a transaction of the type specified in Rule 145(a) under the Securities Act) with respect to the Common Stock or similar securities or securities convertible into, or exchangeable or exercisable for, such securities and (ii) with reasonable prior notice, the Company (in the case of a non- underwritten public offering by the Company pursuant to such registration statement) advises the Holders in writing that a public sale or distribution of such Registrable Shares would materially adversely affect such offering or the managing underwriter or underwriters (in the case of an underwritten public offering by the Company pursuant to such registration statement) advises the Company in writing (in which case the Company shall notify the Holders) that a public sale or distribution of Registrable Shares would materially adversely impact such offering, then each Holder shall, to the extent not inconsistent with applicable law, refrain from, and agree in a writing to the Company and the underwriter or underwriters to refrain from, effecting any public sale or distribution of Registrable Shares during the ten days prior to the effective date of such registration statement and until the earliest of (A) the abandonment of such offering, (B) 90 days from the effective date of such registration statement and (C) if such offering is an underwritten offering, the termination in whole or in part of any "hold back" period obtained by the underwriter or underwriters in such offering from the Company in connection therewith but in no event longer than 120 days (each such period, a "Holdback Period"). SECTION 5. Registration Procedures. In connection with the registration obligations of the Company pursuant to and in accordance with Sections 2 and 3 (and subject to Sections 2 and 3), the Company shall use commercially reasonable efforts to effect such registration to permit the sale of such Registrable Shares in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall as expeditiously as possible (but subject to Sections 2 and 3): (a) prepare and file with the SEC a Registration Statement for the sale of the Registrable Shares on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate in accordance with such Holders' intended method or methods of distribution thereof, subject to the last proviso of the first sentence of Section 2(a), Section 2(b), and, subject to the Company's right to terminate or abandon a registration pursuant to Section 3(c), use commercially reasonable Efforts to cause such Registration Statement to become effective and remain effective as provided herein; (b) prepare and file with the SEC such amendments (including post-effective amendments) to such Registration Statement, and such supplements to the related Prospectus, as may be required by the rules, regulations or instructions applicable to the Securities Act during the applicable period in accordance with the intended methods of disposition specified by the Holders of the Registrable Shares covered by such Registration Statement, make generally available earnings statements satisfying the provisions of Section 11(a) of the Securities Act (provided that the Company shall be deemed to have complied with this clause if it has complied with Rule 158 under the Securities Act), and cause the related Prospectus as so supplemented to be filed pursuant to Rule 424 under the Securities Act; provided, however, that before filing a Registration Statement or Prospectus, or any amendments or supplements thereto (other than reports required to be filed by it under the Exchange Act), the Company shall furnish to the Holders of Registrable Shares covered by such Registration Statement and their counsel for review and comment, copies of all documents required to be filed; (c) notify the Holders of any Registrable Shares covered by such Registration Statement promptly and (if requested) confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to such Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC for amendments or supplements to such Registration Statement or the related Prospectus or for additional information regarding such Holders, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or the initiation of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and (v) of the happening of any event that requires the making of any changes in such Registration Statement, Prospectus or documents incorporated or deemed to be incorporated therein by reference so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (d) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such Registration Statement, or the lifting of any suspension of the qualification or exemption from qualification of any Registrable Shares for sale in any jurisdiction in the United States; (e) furnish to the Holder of any Registrable Shares covered by such Registration Statement, each counsel for such Holders and each managing underwriter, if any, without charge, one conformed copy of such Registration Statement, as declared effective by the SEC, and of each post-effective amendment thereto, in each case including financial statements and schedules and all exhibits and reports incorporated or deemed to be incorporated therein by reference; and deliver, without charge, such number of copies of the preliminary prospectus, any amended preliminary prospectus, each final Prospectus and any post-effective amendment or supplement thereto, as such Holder may reasonably request in order to facilitate the disposition of the Registrable Shares of such Holder covered by such Registration Statement in conformity with the requirements of the Securities Act; (f) prior to any public offering of Registrable Shares covered by such Registration Statement, use commercially reasonable efforts to register or qualify such Registrable Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Holders of such Registrable Shares shall reasonably request in writing; provided, however, that the Company shall in no event be required to qualify generally to do business as a foreign corporation or as a dealer in any jurisdiction where it is not at the time so qualified or to execute or file a general consent to service of process in any such jurisdiction where it has not theretofore done so or to take any action that would subject it to general service of process or taxation in any such jurisdiction where it is not then subject; (g) upon the occurrence of any event contemplated by paragraph 5(c)(v), prepare a supplement or post-effective amendment to such Registration Statement or the related Prospectus or any document incorporated or deemed to be incorporated therein by reference and file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares being sold thereunder (including upon the termination of any Delay Period), such Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (h) use commercially reasonable efforts to cause all Registrable Shares covered by such Registration Statement to be listed on each securities exchange or automated interdealer quotation system, if any, on which similar securities issued by the Company are then listed or quoted; (i) on or before the effective date of such Registration Statement, provide the transfer agent of the Company for the Registrable Shares with printed certificates for the Registrable Shares covered by such Registration Statement, which are in a form eligible for deposit with The Depository Trust Company; (j) if such offering is an underwritten offering, make available for inspection by any Holder of Registrable Shares included in such Registration Statement, any underwriter participating in any offering pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such Holder or underwriter (collectively, the "Inspectors"), all financial and other records and other information, pertinent corporate documents and properties of any of the Company and its subsidiaries and affiliates (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibilities; provided, however, that the Records that the Company determines, in good faith, to be confidential and which it notifies the Inspectors in writing are confidential shall not be disclosed to any Inspector unless such Inspector signs a confidentiality agreement reasonably satisfactory to the Company (which shall permit the disclosure of such Records in such Registration Statement or the related Prospectus if necessary to avoid or correct a material misstatement in or material omission from such Registration Statement or Prospectus) or either (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction; provided further, however, that (A) any decision regarding the disclosure of information pursuant to subclause (i) shall be made only after consultation with counsel for the applicable Inspectors and the Company and (B) with respect to any release of Records pursuant to subclause (ii), each Holder of Registrable Shares agrees that it shall, promptly after learning that disclosure of such Records is sought in a court having jurisdiction, give notice to the Company so that the Company, at the Company's expense, may undertake appropriate action to prevent disclosure of such Records; and (k) if such offering is an underwritten offering, enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other appropriate and reasonable actions requested by the Holders of a majority of the Registrable Shares being sold in connection therewith (including those reasonably requested by the managing underwriters) in order to expedite or facilitate the disposition of such Registrable Shares, and in such connection, (i) use commercially reasonable efforts to obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters and counsel to the Holders of the Registrable Shares being sold), addressed to each selling Holder of Registrable Shares covered by such Registration Statement and each of the underwriters as to the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such counsel and underwriters, (ii) use commercially reasonable efforts to obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling holder of Registrable Shares covered by the Registration Statement (unless such accountants shall be prohibited from so addressing such letters by applicable standards of the accounting profession) and each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings, (iii) if requested and if an underwriting agreement is entered into, provide indemnification provisions and procedures substantially to the effect set forth in Section 8 hereof with respect to all parties to be indemnified pursuant to such Section. The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required thereunder. The Company may require each Holder of Registrable Shares covered by a Registration Statement to furnish such information regarding such Holder and such Holder's intended method of disposition of such Registrable Shares as it may from time to time reasonably request in writing. If any such information is not furnished within a reasonable period of time after receipt of such request, the Company may exclude such Holder's Registrable Shares from such Registration Statement. Each Holder of Registrable Shares covered by a Registration Statement agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v), that such Holder shall forthwith discontinue disposition of any Registrable Shares covered by such Registration Statement or the related Prospectus until receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(g), or until such Holder is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amended or supplemented Prospectus or any additional or supplemental filings which are incorporated, or deemed to be incorporated, by reference in such Prospectus (such period during which disposition is discontinued being an "Interruption Period") and, if requested by the Company, the Holder shall deliver to the Company (at the expense of the Company) all copies then in its possession, other than permanent file copies then in such holder's possession, of the Prospectus covering such Registrable Shares at the time of receipt of such request. Each Holder of Registrable Shares covered by a Registration Statement further agrees not to utilize any material other than the applicable current preliminary prospectus or Prospectus in connection with the offering of such Registrable Shares. SECTION 6. Registration Expenses. Whether or not any Registration Statement is filed or becomes effective, the Company shall pay all costs, fees and expenses incident to the Company's performance of or compliance with this Agreement, including (i) all registration and filing fees, including NASD filing fees, (ii) all fees and expenses of compliance with securities or Blue Sky laws, including reasonable fees and disbursements of counsel in connection therewith, (iii) printing expenses (including expenses of printing certificates for Registrable Shares and of printing prospectuses if the printing of prospectuses is requested by the Holders or the managing underwriter, if any), (iv) messenger, telephone and delivery expenses, (v) fees and disbursements of counsel for the Company, (vi) fees and disbursements of all independent certified public accountants of the Company (including expenses of any "cold comfort" letters required in connection with this Agreement) and all other persons retained by the Company in connection with such Registration Statement, (vii) fees and disbursements of one counsel, other than the Company's counsel, selected by Holders of a majority of the Registrable Shares being registered, to represent all such Holders, (viii) fees and disbursements of underwriters customarily paid by the issuers or sellers of securities and (ix) all other costs, fees and expenses incident to the Company's performance or compliance with this Agreement. Notwithstanding the foregoing, the fees and expenses of any persons retained by any Holder, other than one counsel for all such Holders, and any discounts, commissions or brokers' fees or fees of similar securities industry professionals and any transfer taxes relating to the disposition of the Registrable Shares by a Holder, will be payable by such Holder and the Company will have no obligation to pay any such amounts. SECTION 7. Underwriting Requirements. (a) Subject to Section 7(b), any Holder shall have the right, by written notice, to request that any Demand Registration provide for an underwritten offering. (b) In the case of any underwritten offering pursuant to a Demand Registration, the Holders of a majority of the Registrable Shares to be disposed of in connection therewith shall select the institution or institutions that shall manage or lead such offering, which institution or institutions shall be reasonably satisfactory to the Company. In the case of any underwritten offering pursuant to a Piggyback Registration, the Company shall select the institution or institutions that shall manage or lead such offering. No Holder shall be entitled to participate in an underwritten offering unless and until such Holder has entered into an underwriting or other agreement (including a "holdback agreement" to the effect set forth in Section 4) with such institution or institutions for such offering in such form as the Company and such institution or institutions shall determine. SECTION 8. Indemnification. (a) Indemnification by the Company. The Company shall, without limitation as to time, indemnify and hold harmless, to the full extent permitted by law, each Holder of Registrable Shares whose Registrable Shares are covered by a Registration Statement or Prospectus, the officers, directors and agents and employees of each of them, each Person who controls each such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling person, to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgment, costs (including, without limitation, costs of preparation and reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in such Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are based upon information furnished in writing to the Company by or on behalf of such Holder expressly for use therein; provided, however, that the Company shall not be liable to any such Holder to the extent that any such Losses arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus if (i) having previously been furnished by or on behalf of the Company with copies of the Prospectus, such Holder failed to send or deliver a copy of the Prospectus with or prior to the delivery of written confirmation of the sale of Registrable Shares by such Holder to the person asserting the claim from which such Losses arise and (ii) the Prospectus would have corrected in all material respects such untrue statement or alleged untrue statement or such omission or alleged omission; and provided further, however, that the Company shall not be liable in any such case to the extent that any such Losses arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission in the Prospectus, if (x) such untrue statement or alleged untrue statement, omission or alleged omission is corrected in all material respects in an amendment or supplement to the Prospectus and (y) having previously been furnished by or on behalf of the Company with copies of the Prospectus as so amended or supplemented, such Holder thereafter fails to deliver such Prospectus as so amended or supplemented, prior to or concurrently with the sale of Registrable Shares. (b) Indemnification by Holder of Registrable Shares. In connection with any Registration Statement in which a Holder is participating, such Holder shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with such Registration Statement or the related Prospectus and agrees to indemnify, to the full extent permitted by law, the Company, its directors, officers, agents or employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) and the directors, officers, agents or employees of such controlling Persons, from and against all Losses arising out of or based upon any untrue or alleged untrue statement of a material fact contained in such Registration Statement or the related Prospectus or any amendment or supplement thereto, or any preliminary prospectus, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue or alleged untrue statement or omission or alleged omission is based upon any information so furnished in writing by or on behalf of such Holder to the Company expressly for use in such Registration Statement or Prospectus. (c) Conduct of Indemnification Proceedings. If any Person shall be entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall give prompt notice to the party from which such indemnity is sought (the "Indemnifying Party") of any claim or of the commencement of any proceeding with respect to which such Indemnified Party seeks indemnification or contribution pursuant hereto; provided, however, that the delay or failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any obligation or liability except to the extent that the Indemnifying Party has been prejudiced by such delay or failure. The Indemnifying Party shall have the right, exercisable by giving written notice to an Indemnified Party promptly after the receipt of written notice from such Indemnified Party of such claim or proceeding, to assume, at the Indemnifying Party's expense, the defense of any such claim or proceeding, with counsel reasonably satisfactory to such Indemnified Party; provided, however, that (i) an Indemnified Party shall have the right to employ separate counsel in any such claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless: (1) the Indemnifying Party agrees to pay such fees and expenses; (2) the Indemnifying Party fails promptly to assume the defense of such claim or proceeding or fails to employ counsel reasonably satisfactory to such Indemnified Party; or (3) the named parties to any proceeding (including impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it that are inconsistent with those available to the Indemnifying Party or that a conflict of interest is likely to exist among such Indemnified Party and any other indemnified parties (in which case the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party); and (ii) subject to clause (3) above, the Indemnifying Party shall not, in connection with any one such claim or proceeding or separate but substantially similar or related claims or proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one firm of attorneys (together with appropriate local counsel) at any time for all of the indemnified parties, or for fees and expenses that are not reasonable. Whether or not such defense is assumed by the Indemnifying Party, such Indemnified Party shall not be subject to any liability for any settlement made without its consent. The Indemnifying Party shall not consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release, in form and substance reasonably satisfactory to the Indemnified Party, from all liability in respect of such claim or litigation for which such Indemnified Party would be entitled to indemnification hereunder. (d) Contribution. If the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any Losses (other than in accordance with its terms), then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such indemnifying party, on the one hand, and indemnified party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue statement of a material fact or omission or alleged omission to state a material fact, has been taken by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provision of this Section 8(d), an indemnifying party that is a Holder shall not be required to contribute any amount which is in excess of the amount by which the total proceeds received by such Holder from the sale of the Registrable Shares sold by such Holder (net of all underwriting discounts and commissions) exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. SECTION 9. Transfer of Registration Rights. The rights to cause the Company to register Registrable Shares pursuant to this Agreement may not be assigned by a Holder to a transferee or assignee of such securities except to (i) a Person who acquires at least 1,000,000 Registrable Shares (subject to adjustment) and who has agreed to be bound by the terms of this Agreement as if such Person were a Holder and is (A) a Person to whom a Holder has transferred Registrable Shares pursuant to Rule "4(1-1/2)" (or any similar private transfer exemption), or (B) upon the death of any Holder, the executor of the estate of such Holder or any of such Holder's heirs, devisees, legatees or assigns or (ii) upon the disability of any Holder, any guardian or conservator of such Holder. SECTION 10. Miscellaneous. (a) Termination. This Agreement and the obligations of the Company and the Holders hereunder (other than Section 8) shall terminate on the first date on which no Registrable Shares remain outstanding. (b) Notices. All notices or communications hereunder shall be in writing (including telecopy or similar writing), addressed as follows: To the Company: Breed Technologies, Inc. 5300 Old Tampa Highway Lakeland, Florida 33811 Attention: Charles J. Sperenzella, Jr. And General Counsel Telecopier: (941) 668-6016 To the Holder: Siemens Aktiengeselleschaft Legal Department ZFR3 Werner-von-Siemens Strasse D-91052 Erlangen Germany Telecopier: 011-49-91317-29001 Attention: Counsel for Automotive Systems Group with a copy to: Siemens Corporation Legal Department 1301 Avenue of the Americas New York, New York 10019 Telecopier: (212) 258-4945 Attention: General Counsel or such other addresses as each of the parties hereto or any future Holder may designate to the other parties. Any such notice or communication shall be deemed given (i) when made, if made by hand delivery, (ii) upon transmission, if sent by confirmed telecopier, (iii) one business day after being deposited with a next-day courier, postage prepaid, or (iv) three business days after being sent certified or registered mail, return receipt requested, postage prepaid, in each case addressed as above (or to such other address or to such other telecopier number as such party may designate in writing from time to time). (c) Separability. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforcibility shall not affect the remaining provisions hereof which shall remain in full force and effect. (d) Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, devisees, legatees, legal representatives, successors and assigns. (e) Entire Agreement. This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the parties hereto with respect to the subject matter hereof. (f) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of at least a majority in number of the Registrable Shares then outstanding. (g) Publicity. No public release or announcement concerning the transactions contemplated hereby shall be issued by any party without the prior consent of the other parties, except to the extent that such party is advised by counsel that such release or announcement is necessary or advisable under applicable law or the rules or regulations of any securities exchange, in which case the party required to make the release or announcement shall to the extent practicable provide the other party with an opportunity to review and comment on such release or announcement in advance of its issuance. (h) Expenses. Whether or not the transactions contemplated hereby are consummated, except as otherwise provided herein, all costs and expenses incurred in connection with the execution of this Agreement shall be paid by the party incurring such costs or expenses, except as otherwise set forth herein. (i) Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (j) Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be one and the same agreement, and shall become effective when counterparts have been signed by each of the parties and delivered to each other party. (k) Governing Law. This Agreement shall be construed, interpreted, and governed in accordance with the internal laws of Delaware without giving regard to the principles of conflicts of law. (l) Calculation of Time Periods. Except as otherwise indicated, all periods of time referred to herein shall include all Saturdays, Sundays and holidays; provided, however, that if the date to perform the act or give any notice with respect to this Agreement shall fall on a day other than a Business Day, such act or notice may be timely performed or given if performed or given on the next succeeding Business Day. (m) Consent to Jurisdiction. Subject to the provisions of paragraph (n), each of the Company and the Holder hereby agrees to submit to the exclusive jurisdiction of the U.S. Federal courts in the Southern District of the State of New York, and consents that service of process with respect to all such courts may be made by registered mail to such Person at the address of such Person set forth in Section 10 with respect to any disputes arising out of this Agreement. (n) Release of Siemens Aktiengesellschaft. If the Holder assigns its rights and obligations under this Agreement pursuant to paragraph (d), so long as Siemens Corporation is subject to the jurisdiction of the Federal, state or local courts of the United States with respect to claims or disputes relating to this Agreement or the transactions contemplated hereby the Company for itself and its Affiliates hereby irrevocably and unconditionally waive and release all rights and claims that it or any of them may thereafter have that Holder is or has been at any time subject to the jurisdiction of the Federal, state or local courts of the United States arising out of claims or disputes relating to this Agreement or the transactions contemplated hereby. (0) Waiver of Jury Trial; Trial Costs. Each of the Company, for itself and its Affiliates, and the Holder hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to the actions of the Company and the Holder or its Affiliates pursuant to this Agreement in the negotiation, administration, performance or enforcement thereof. The party in whose favor a final judgment is rendered shall be entitled to reasonable costs and reasonable attorneys' fees. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first written above. BREED TECHNOLOGIES, INC. By: Name: Title: SIEMENS AKTIENGESELLSCHAFT By: Name: Title: By: Name: Title: EX-10.1.3 5 STOCKHOLDERS AGREEMENT Exhibit 10.1.3 STOCKHOLDERS AGREEMENT among BREED TECHNOLOGIES, INC. and CERTAIN OF ITS STOCKHOLDERS dated as of October 30, 1997 STOCKHOLDERS AGREEMENT TABLE OF CONTENTS ARTICLE 1. Definitions Section 1.1. Defined Terms 1 ARTICLE 2. Board of Directors; Management Section 2.1. Composition of Board.............................. 5 Section 2.2. Frequency of Meetings; Quorum...................... 5 Section 2.3. Audit Committee.................................... 5 Section 2.4. Notice of Board Meetings; Attendance Right......... 5 Section 2.5. Actions by the Board.............................. 6 Section 2.6. Special Consent Rights............................. 6 Section 2.7. Litigation......................................... 6 Section 2.8. Stockholders' Authorization........................ 6 Section 2.9. Confidentiality................................... 7 Section 3.1. Legend............................................. 7 Section 3.2. Right of First Refusal on Transfers by Breed Holders or Siemens Holders............................. 9 Section 3.3. Right of First Refusal on Sales by the Company.... 10 Section 3.4. Tag-Along Right................................... 11 Section 3.5. Standstill........................................ 12 Section 3.6. Waiver of Dividend................................ 12 ARTICLE 4. Miscellaneous Section 4.1. Breed Holders' Stock Ownership.................... 13 Section 4.2. Amendment and Modification........................ 13 Section 4.3. Survival of Representations and Warranties........ 13 Section 4.4. Successors and Assigns; Entire Agreement.......... 13 Section 4.5. Separability...................................... 14 Section 4.6. Notices........................................... 14 Section 4.7. Governing Law..................................... 15 Section 4.8. Headings and Counterparts......................... 15 Section 4.9. Further Assurances; Assignment.................... 15 Section 4.10. Termination....................................... 15 Section 4.11. Remedies.......................................... 15 Section 4.12. Pronouns.......................................... 16 Section 4.13. Release of Siemens................................ 16 Section 4.14. Consent to Jurisdiction........................... 16 Section 4.15. Waiver of Jury Trial; Trial Costs................. 16 SCHEDULES Schedule A. Breed Holders Schedule 3.3. Proposed Issuances Schedule 4.1. Nationsbank Arrangements STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of October 30, 1997, is made by and among Breed Technologies, Inc., a Delaware corporation (the "Company"); Allen K. Breed, Johnnie Cordell Breed, A. Breed, L.P., a Texas limited partnership and J. Breed, L.P., a Texas limited partnership (individually, a "Breed Holder" and collectively, the "Breed Holders"); and Siemens Aktiengesellschaft, a company organized under the laws of the Federal Republic of Germany ("Siemens"). WHEREAS, pursuant to a Stock Purchase Agreement, dated as of October 14, 1997, by and between the Company and Siemens (the "Stock Purchase Agreement"), at a closing held on the date of this Agreement, Siemens purchased 4,883,227 shares (the "Series A Preference Shares"), each representing one one-thousandth (1/1,000) of a share of the Company's 1997 Series A Non-Voting Convertible Preferred Stock, par value $.001 per share (the "Preferred Stock"), which are convertible at any time after issuance, at the option of the holder, into shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"); and WHEREAS, the Breed Holders, Siemens and the Company desire to set forth certain agreements regarding their future relationships and their rights and obligations with respect to the shares of the Series A Preference Shares and the Common Stock held by them, now or in the future; NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, and intending to be legally bound, the parties hereto agree as follows: ARTICLE 1 Definitions Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the respective meanings set forth below: "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. "Beneficially Own" shall mean, with respect to any security, having or sharing the power to direct or control the voting or disposition of such security. "Beneficial Owner" shall mean, with respect to any security, a Person who Beneficially Owns such security, and "Beneficial Ownership" has a corresponding meaning. "Board" shall mean the Company's board of directors as duly constituted from time to time. "Business Day" shall mean a day other than a Saturday, Sunday or day on which commercial banks in New York City are permitted or required by law to be closed for the conduct of regular banking business. "By-Laws" shall mean the bylaws of the Company, as in effect as of the date of this Agreement and as subsequently amended in accordance with the provisions of this Agreement. "Charter" shall mean the Certificate of Incorporation of the Company, as in effect as of the date of this Agreement and as subsequently amended in accordance with the provisions of this Agreement. "Controlled Subsidiary" shall mean, as to any Person, any other Person of which the first Person Beneficially Owns (directly or indirectly) securities entitling the holder to cast 50% or more of the votes in the election or removal of directors (or persons holding similar positions) of the second Person. "Corporate Affiliate" shall mean, as to any Person, any other Person (other than a natural person) (i) that directly or indirectly Beneficially Owns all or substantially all of the common equity of the first Person (any such Person, a "Parent"), or (ii) of which all or substantially all of the common equity is directly or indirectly Beneficially Owned by the first Person or by a Parent of the first Person. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exempt Transfer" shall mean any direct or indirect Transfer of Beneficial Ownership of Common Stock made: (i) in any transaction that has been approved by the affirmative vote of (a) directors constituting a majority of the Board and (b) the Siemens Director; (ii) to any Corporate Affiliate of the transferor (or to any Corporate Affiliate of any other Person to whom an Exempt Transfer would be otherwise permitted hereunder); provided, that if on a later date such Corporate Affiliate ceases to be such a Corporate Affiliate of the transferor (or of another Person to whom an Exempt Transfer would otherwise be permitted hereunder), a Transfer (which shall not constitute an Exempt Transfer) of the amount of Common Stock originally transferred to such transferee Person shall be deemed to have occurred on such later date; (iii) to a Person that is a Stockholder immediately prior to the Transfer; (iv) by Transfer of shares of common stock of Siemens or any direct or indirect parent company of Siemens; or (v) pursuant to the Make-Whole Agreement. "GAAP" shall mean U.S. generally accepted accounting principles. "Incentive Arrangement" shall mean any plan, arrangement, agreement or program with or for the benefit of any one or more natural persons who are or are to become employees of the Company or any of its subsidiaries and that is intended to induce one or more such persons to enter into or remain in the employment of the Company or any of its subsidiaries or to incentives or reward any such person, including without limitation stock options, stock grants and restricted stock plans. "Joint Venture" shall mean the joint venture relationship to be established pursuant to the Memorandum of Understanding. "Joint Venture Documents" shall mean the agreement (or series of related agreements) contemplated by the Memorandum of Understanding. "Make-Whole Agreement" shall mean the Make-Whole Agreement, dated the same date as this Agreement, by and between the Company and Siemens. "Memorandum of Understanding" shall mean the memorandum of understanding between the Company and Siemens, dated October 14, 1997, with respect to a joint venture between the parties or their affiliates. "Person" shall mean any individual, partnership, firm, corporation, limited liability company, association, joint venture, trust or other entity, or any government or political subdivision or agency, department or instrumentality thereof. "Registration Rights Agreement" shall mean the Registration Rights Agreement, dated the same date as this Agreement, by and between the Company and Siemens. "Relevant Date" shall mean, as to any transaction or agreement or series of related transactions or agreements, the date the transaction or agreement or series of related transactions or agreements is approved by the Board or, if the transaction or agreement or series of related transactions or agreements is not presented to the Board for approval, the date on which the Company first becomes contractually bound to proceed with the transaction or agreement or series of related transactions or agreements. "Securities Act" shall mean the Securities Act of 1933, as amended. "Siemens Holder" shall mean, as of any date, Siemens and any Corporate Affiliate of Siemens that owns Common Stock on that date. "Stockholder" shall mean any Person who or which is a Siemens Holder or a Breed Holder. "Transfer" shall mean any sale, assignment or other outright transfer of Beneficial Ownership of any securities (including through a direct or indirect holding company) and any pledge, hypothecation or similar deposit. "Transferred" shall have a correlative meaning. In addition, the following terms are defined elsewhere in the Agreement: "Agreement"................................................... Preamble "Breed Holder"................................................ Preamble "Common Stock"................................................ Recitals "Company"..................................................... Preamble "Confidential Information"............................ Section 2.9(a) "First Offer Price"................................... Section 3.2(a) "Issuance"............................................ Section 3.3(a) "Maximum Purchase".................................... Section 3.4(c) "Offered Securities".................................. Section 3.2(a) "Offering Stockholder"................................ Section 3.2(a) "Participating Stockholder"........................... Section 3.4(b) "Participation Notice"................................ Section 3.4(b) "Pre-emption Notice".................................. Section 3.3(a) "Pre-emption Option".................................. Section 3.3(b) "Preferred Stock"............................................. Recitals "Proposed Sale Amounts"............................... Section 3.4(c) "Purchaser"........................................... Section 3.2(a) "Series A Election Right"............................. Section 2.1(a) "Series A Preference Shares".................................. Recitals "Siemens...................................................... Preamble "Siemens Director".................................... Section 2.1(a) "Special Consent Rights".............................. Section 2.6 "Stock Purchase Agreement".................................... Recitals "Tag-Along Notice".................................... Section 3.4(b) "Tag-Along Right"..................................... Section 3.4(a) "Transfer Notice"..................................... Section 3.2(a) ARTICLE 2. Board of Directors; Management Section 2.1. Composition of Board. (a) The holders of the Series A Preference Shares have the right, pursuant to the Certificate of Designations with respect thereto, to elect one director to the Board following the occurrence of certain events (the "Series A Election Right"). At any time the Series A Election Right is not currently exercisable, the Stockholders will vote their shares of Common Stock and take such other corporate action in their respective capacities as stockholders as is necessary and appropriate such that, effective as of the date of this Agreement and thereafter so long as this Agreement remains in effect, the Board will consist of not more than eleven persons, of whom one will be designated by the Siemens Holders. Any director designated by the Siemens Holders pursuant to this Article 2 or elected pursuant to the Series A Election Right is hereinafter referred to as a "Siemens Director." (b) The Stockholders shall vote their shares and take such other corporate action as is necessary and appropriate to ensure that, subject to the provisions of the Certificate of Designations with respect to the Series A Preference Shares, (i) the Siemens Holders shall be able to remove any Siemens Director and, in the event of any such removal or of the death, incapacity or resignation of a Siemens Director, shall have the right to appoint a replacement for that director; (ii) a Siemens Director may be removed (other than for willful misconduct) only with the consent of the Siemens Holders; and (iii) the Siemens Holders shall be exclusively entitled to nominate all successors to Siemens Director. Section 2.2. Frequency of Meetings; Quorum. The Board shall meet at least once each quarter. A quorum for a Board meeting shall be a majority of the Directors, present in person, by telephone or video conference. Section 2.3. Audit Committee. So long as Section 2.1 remains in effect, the Stockholders shall take such action as may be necessary and appropriate to cause their respective Board representatives to appoint and maintain in effect an audit committee of the Board, of which the Siemens Director shall be a member. Through the audit committee, representatives of Siemens will be permitted to consult with appropriate personnel of the Company and with representatives of the Company's independent auditor regarding the scope of the annual audit and the terms of the auditors' engagement. Section 2.4. Notice of Board Meetings; Attendance Right. (a) Written notice of Board meetings must be given to all directors at least two Business Days prior to each meeting, specifying in reasonable detail the business to be conducted. Notice may be given by telecopier, messenger, registered mail or overnight courier service and will be deemed given when received. (b) The Siemens Director shall have the right, with respect to any Board meeting solely that such Director does not attend, to designate a representative to attend the Board meeting in the capacity of an observer only. Section 2.5. Actions by the Board. Except as otherwise provided in this Agreement, the affirmative vote of a majority of the directors present at a meeting at which a quorum is present, or the unanimous written consent, shall be required on all actions required to be taken by the Board. Section 2.6. Special Consent Rights. Notwithstanding the provisions of Section 2.5, the affirmative vote of the Siemens Director shall be necessary to effect any of the following actions by the Company or any of its Controlled Subsidiaries: (a) the conduct or operation (other than (i) through the Joint Venture, (ii) through Hamlin Incorporated or VTI Hamlin OY, except with respect to the design, manufacture and marketing of full electronic crash sensors and (iii) through Artistic Analytical Methods, Inc. in the conduct of its existing business) of any business comprising in whole or in part the development, selling, design, manufacturing or marketing of electronic components in the field of automotive safety restraint systems. (b) discontinuation of any material line of business in which the Company is engaged at the date of this Agreement and which is material to the operations of the Joint Venture; and (c) use of the Siemens and any other trade names, marks or other similar intellectual property rights of Siemens, except only to the extent specifically permitted in the Joint Venture Documents. The parties acknowledge and agree that the provisions of Section 2.6 shall not impose any restrictions of any kind or nature on the business and activities of any stockholder of the Company, including any future parent corporation of the Company, except only for any such business or activity conducted through the Company or its Controlled Subsidiaries. Section 2.7. Litigation. Siemens shall be consulted about any material products liability litigation or regulatory proceeding involving the Company in which Siemens is not a named party. The Company shall provide prompt notice to Siemens regarding all such matters. Section 2.8. Stockholders' Authorization. The Company, the Siemens Holders and the Breed Holders will take all actions legally permitted or required to be taken by them (including without limitation amending the Charter) to ensure that the Company shall at all times have available for issuance the number of shares of Common Stock that may be issuable by the Company under the Make-Whole Agreement. The Breed Holders will vote their shares of Common Stock in favor of any proposal presented to the Company's stockholders for approval, pursuant to the requirements of Delaware Law or the New York Stock Exchange, of any aspect of the transactions contemplated by this Agreement. Section 2.9. Confidentiality. (a) Each Siemens Holder agrees that it will not, except to the extent required by law or legal process, and it will cause each of its Affiliates (regardless of whether such Person is an Affiliate on the date hereof) not to, use or disclose or reveal to any person not authorized to receive the same by the Company any trade secret or other confidential or proprietary information of the Company, including, without limitation, any employee salaries, sales figures, business terms of material contracts, business opportunities, customer lists, cost of product lists or distributor lists (collectively, the "Confidential Information"); provided, however, that information shall only be deemed to be Confidential Information if it is disclosed by Breed only to the designee (or observer) of Siemens to the Board of Directors of Breed as a result of such person's position on or with respect to the Board of Directors; and provided, further, that the parties hereto acknowledge and agree that if established by clear and convincing evidence the following shall not be deemed Confidential Information: (i) Confidential Information which is now in or hereafter enters the public domain without a breach of this Agreement by Siemens; (ii) Confidential Information known to Siemens prior to the time of disclosure by the Breed or independently developed by Siemens personnel who do not have access to the Confidential Information; or (iii) Confidential Information disclosed in good faith to Siemens by a third person legally entitled to disclose the same to Siemens. (b) The foregoing shall not prohibit or restrict (i) disclosures to directors, officers or employees of Siemens or its Affiliates provided they are advised of the confidential nature of such information and are under obligations to protect such information; or (ii) use or disclosure of such Information by Siemens or its Affiliates in enforcing or exercising Siemens' rights under this Agreement, the Stockholders Agreement, the Registration Rights Agreement, and the Make-Whole Agreement or with respect to the Joint Venture. (c) Siemens agrees that in the event of the breach of this Section 2.9 by it, Breed would be irreparably injured and be without an adequate remedy at law. In the event of such a breach, or threatened or attempted breach of any of the provisions hereof, Breed shall be entitled to, in addition to any other remedies which are made available to it at law or in equity, a temporary and/or permanent injunction and a decree for the specific performance of the terms of this Section 2.9 without being required to furnish a bond or other security. The obligations under this Section 2.9 shall survive any termination or expiration of this Agreement. ARTICLE 3 Liquidity; Transfer Restrictions Section 3.1. Legend. (a) Each certificate representing any of the shares of Common Stock held by a party to this Agreement (other than the Company) shall bear the following legend in addition to any other legend required under applicable law: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACTS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES ARE SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH. (b) Prior to any proposed Transfer of any Common Stock by a Person subject to the restrictions contained in this Article 3, the holder thereof (i) shall give written notice to the Company and the other Stockholders describing the manner and circumstances of the proposed Transfer, (ii) unless otherwise agreed by the Company, shall deliver a written opinion of legal counsel, addressed to the Company and the transfer agent, if other than the Company, and in form and substance satisfactory to the Company and the transfer agent, if other than the Company, to the effect that the proposed Transfer of the shares of Common Stock may be effected without registration under the Securities Act and applicable state securities laws and (iii) shall furnish the Company with such evidence as the Company reasonably may request that the proposed Transfer will comply with all applicable requirements of this Article 3. Each certificate evidencing the shares of Common Stock transferred shall bear the legend set forth in Section 3.1(a), except that such certificate shall not bear the first paragraph of such legend if the opinion of counsel referred to above is to the further effect that such legend is not required in order to establish compliance with any provision of the Securities Act or applicable state securities laws. (c) A notation will be made in the appropriate transfer records of the Company with respect to the restrictions on Transfer of the Securities referred to in this Agreement. (d) It shall be a condition precedent to any Transfer of shares of Common Stock (including an Exempt Transfer) made while this Agreement is in effect by a Person party to or otherwise bound by this Agreement to any Person who is not a party to this Agreement that such Person agree in writing to be bound by the obligations of such Person's transferor under this Agreement. If the transferee acquires its shares pursuant to an Exempt Transfer and acquires all the shares Beneficially Owned by the transferor, upon execution and delivery of that agreement the transferee will succeed to the rights of the transferor under this Agreement and, in the case of a Transfer by Siemens, the transferee's rights will apply to all shares of Common Stock held by Siemens Holders. Section 3.2. Right of First Refusal on Transfers by Breed Holders or Siemens Holders. (a) If at any time prior to the third anniversary of the date of this Agreement (i) any one or more Breed Holders, acting individually or as a group or (ii) any one or more Siemens Holders, acting individually or as a group (any such Person or Persons described in the preceding clauses (i) and (ii) are hereinafter referred to as an "Offering Stockholder"), shall desire directly or indirectly to Transfer any of the shares of Common Stock owned by the Offering Stockholder other than in an Exempt Transfer, such Offering Stockholder shall first give written notice thereof (the "Transfer Notice") to (x) the Siemens Holders (if the Offering Stockholder is one or more Breed Holders) or (y) the Breed Holders and the Company (if the Offering Stockholder is one or more Siemens Holders) (any such recipient of a Transfer Notice, a "Purchaser"), which Transfer Notice shall state the Offering Stockholder's desire to make a Transfer, the number of shares of Common Stock proposed to be Transferred (the "Offered Securities"), and the price, which shall be all cash and payable in full at the closing of the sale (the "First Offer Price"), which the Offering Stockholder proposes to be paid for the Offered Securities. (b) Upon receipt of the Transfer Notice, the Purchaser shall have the irrevocable and exclusive option to purchase all, but not less than all, of the Offered Securities at the First Offer Price. The Purchaser's option under this Section shall be exercisable by giving a written notice of exercise (i), if the proposed sale is to be pursuant to Rule 144 under the Securities Act, 10 Business Days after the Transfer Notice is received or (ii), if the proposed sale is not to be pursuant to Rule 144 under the Securities Act, within 30 days after the Transfer Notice is received. (c) If the Purchaser does not exercise its option to purchase the Offered Securities at the First Offer Price after receipt of a Transfer Notice given pursuant to this Section, then the Offering Stockholder who has duly given such Transfer Notice shall be entitled, for a period of 180 days beginning on the earlier of (i) the third day after the last date for the giving of a written notice of exercise by the Purchaser pursuant to paragraph (b) of this Section or (ii) the date the Offering Stockholder shall have received written notice from the Purchaser stating that the Purchaser does not intend to exercise the options granted under this Section, to enter into definitive agreements to sell all (but not less than all) of the Offered Securities, at an all cash price equal to or greater than (x) the First Offer Price or (y) if the sale is pursuant to a registered public offering, 90% of the First Offer Price; subject, however, to the provisions of Section 3.3. (d) If the Purchaser does not exercise its (or their) option to purchase all of the Offered Securities at the First Offer Price and the Offering Stockholder desiring to Transfer shall not have entered into a definitive agreement to Transfer all of the Offered Securities before the expiration of the 180-day period described in paragraph (c) of this Section, then no Transfer subject to this Section (including Transfers of any securities that were previously deemed Offered Securities) by such Offering Stockholder thereafter shall be consummated unless all of the provisions of this Section 3.2 are again complied with. (e) If the Purchaser exercises its or their option to purchase all of the Offered Securities at the First Offer Price, the Offering Stockholder shall convey good and valid title to those shares to the Purchaser, free and clear of all liens, encumbrances, security interests, restrictions and adverse claims whatsoever (other than restrictions imposed pursuant to this Agreement), at a time and place specified by the Purchaser in its exercise notice, not later than 30 days after the date of the exercise notice, by delivering to the Purchaser against payment therefor certificates for those shares, duly endorsed in blank or with stock powers attached. If the Offering Stockholder is one or more Siemens Holders and the Company exercises its option to purchase pursuant to Section 3.2, the Company shall purchase all the Offered Securities regardless of whether any Breed Holder also elects to exercise. If more than one stockholder exercises its option pursuant to Section 3.2, subject to the preceding sentence each such stockholder shall purchase a number of Offered Securities equal to the total of the Offered Securities multiplied by a fraction, the numerator of which is the number of shares of Common Stock owned of record by that stockholder and the denominator of which is the number of shares of Common Stock owned of record by all stockholders who exercised options. If the Purchaser is one or more Siemens Holders, the closing of the purchase shall be delayed until all governmental permits, approvals, notices and waiting periods (including without limitation those required pursuant to applicable antitrust or competition laws) have been obtained or given or have expired. Each of the Company, the Siemens Holders and the Breed Holders shall cooperate, in complying with, and promptly take all actions required pursuant to, such requirements. Section 3.3. Right of First Refusal on Sales by the Company. (a) If the Company shall at any time desire to issue and sell, or to sell from treasury (any such sale or issuance and sale being hereafter refined to as an "Issuance"), at any time prior to the fifth anniversary of the date of this Agreement, shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock, other than an Issuance pursuant to (x) a merger, consolidation, acquisition or business consolidation of or with any other Person; (y) an Incentive Arrangement; or (z) any proposed Issuance set forth or described on Schedule 3.3 hereto, the Company shall first give written notice thereof (the "Pre-emption Notice") to Siemens as early as reasonably practicable prior to the proposed Issuance, which Pre-emption Notice shall state the Company's desire to effect an Issuance, the number and type of securities proposed to be sold in the Issuance and the price at which the Company proposes to effect the Issuance. (b) Upon receipt of the Pre-emption Notice, Siemens shall have the irrevocable and exclusive option for a period of 45 days, exercisable in whole but not in part (the "Pre-emption Option"), to purchase the number of shares of Common Stock specified in the Pre-emption Notice. (c) If Siemens does not exercise its Pre-emption Option within the time period specified in the preceding paragraph, the Company shall be entitled, for a period of 270 days beginning on the last day of that period, to effect the Issuance described in the Pre-emption Notice, at a price per share not less than the price specified in the Pre-emption Notice (or, in the case of an Issuance proposed to be effected through a firm commitment underwriting pursuant to an effective registration statement under the Securities Act, less than 90% of that price). If the Issuance is not completed during that period, no such Issuance may be effected unless all of the provisions of this Section 3.3 are again complied with. (d) If Siemens exercises its Pre-emption Option, the purchase and sale of shares shall be completed at a closing held (x) on the same date as the balance of the Issuance or (y) if the Pre-emption Option is in respect of the entire Issuance, at a time and place specified by the Company by written notice given at least ten days in advance, which shall be not more than 45 days after the date of Siemens' notice of exercise. At the closing, the Company shall deliver to Siemens, against payment of the purchase price, certificates for the shares being purchased, conveying good and valid title to those shares, free and clear of all liens, encumbrances, security interests, restrictions and adverse claims whatsoever (other than restrictions imposed pursuant to this Agreement). Section 3.4. Tag-Along Right. (a) Except in the case of an Exempt Transfer, if any of the Breed Holders, acting individually or as a group, elect to Transfer a number of shares of Common Stock that carries voting power in excess of the voting power carried by the shares of Capital Stock then Beneficially Owned by the Siemens Holders, each Siemens Holder shall have the right (a "Tag-Along Right") to participate in such transaction by including in such sale up to 100% of such Siemens Holder's shares of Stock and the Breed Holders electing to Transfer shares shall comply with the requirements of this Section 3.4. (b) In addition to complying with the requirements of Section 3.2, the Breed Holders must deliver to all Siemens Holders a written notice (a "Tag-Along Notice") of their intention to sell shares in a transaction subject to a Tag- Along Right at least 45 days prior to effecting any such sale transaction. The Tag-Along Notice shall set forth in reasonable detail the specifics of the proposed sale transaction. Any Siemens Holder desiring to participate in such a sale (a "Participating Stockholder") must deliver to the Breed Holders, within 30 days of receiving the Tag-Along Notice, written notice (a "Participation Notice") of such holder's desire to participate in the Breed Holders' sale transaction. The Participation Notice shall specify the number of shares such Siemens Holder wishes to have included in that sale transaction. (c) If the maximum number of shares that the transferee is willing acquire on the terms specified in the Tag- Along Notice (the "Maximum Purchase") is less than the aggregate of (i) the number of shares to be transferred by the Breed Holders as described in the Tag-Along Notice plus (ii) the number of shares that the Siemens Holders wish to include in the transaction, as described in their respective Participation Notices, the number of shares to be sold by each of the selling Breed Holders and each Siemens Holder that duly exercised its Tag-Along Right shall be reduced from the numbers each of them wishes to sell, as specified in the respective Tag-Along Notices and Participation Notices (the "Proposed Sale Amounts"), to an aggregate amount equal to the Maximum Purchase, by reducing each Proposed Sale Amount to an amount equal to the product of (x) such Proposed Sale Amount and (y) a fraction, the numerator of which is the Maximum Purchase and the denominator of which is the aggregate of all Proposed Sale Amounts. (d) The Breed Holders shall provide each Participating Stockholder with such information and instructions as shall be necessary to enable the Participating Stockholder to participate in the sale transaction on the same terms as the Breed Holders, and each Participating Stockholder shall cooperate in such transaction by providing the Breed Holders all materials, such as executed purchase and sale agreements and stock transfer documentation, as the Breed Holders reasonably shall require. (e) The Breed Holders shall take all reasonable steps necessary to ensure that the purchaser is required to deliver any consideration due to any Participating Stockholder on the same date as such consideration is required to be delivered to the Breed Holders. Section 3.5. Standstill. (a) Each Siemens Holder hereby agrees that, until the third anniversary of the date of this Agreement, without the prior consent of the Board, and except as set forth in Section 3.5(b), neither it nor any of its Affiliates (regardless or whether such person or entity is an Affiliate on the date hereof) will acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, any Common Stock or direct or indirect rights or options to acquire any Common Stock. (b) The provisions of Section 3.5(a) shall not apply to acquisitions made (i) at any time (x) after a Person not affiliated with Siemens or a Breed Holder has made a public announcement of an intent to seek to acquire, by a tender or exchange offer, merger or other means, Beneficial Ownership of a number of shares of Common Stock that, together with any Common Stock already Beneficially Owned by such Person, would equal or exceed 50% of the shares of Common Stock then outstanding and (y) prior to the time such Person has made a public announcement of the cancellation of that intent; (ii) at any time that any Person or group of Persons (determined in accordance with Section 13(d)(3) of the Exchange Act), other than the Breed Holders, is the Beneficial Owner of 20% or more of the shares of Common Stock then outstanding; or (iii) pursuant to Article 3. Section 3.6. Waiver of Dividend. Notwithstanding anything to the contrary contained in the Certificate of Designations with respect to the Series A Preference Shares, the Siemens Holders, for themselves and their successors in interest, hereby irrevocably waive any right to receive dividends (i) at any time pursuant to Section 2(a) of such Certificate of Designations, if and to the extent that, on or prior to December 15, 1997, Siemens and the Company shall have executed and delivered definitive documentation with respect to the Joint Venture and (ii) pursuant to Section 2(a) of such Certificate of Designations following the termination of the Make-Whole Agreement. ARTICLE 4. Miscellaneous Section 4.1. Breed Holders' Stock Ownership. The Breed Holders represent and warrant that as of the execution and delivery of this Agreement, each of them is the record and beneficial owner, free and clear of all liens, security interests and similar encumbrances, except in favor of Nationsbank on the terms summarized on Schedule 4.1 hereto of the number of shares of Common Stock set forth opposite such Person's name on Schedule A hereto. Section 4.2. Amendment and Modification. (a) This Agreement may be amended or modified, or any provision hereof may be waived, provided that such amendment, modification or waiver is set forth in writing executed by (i) the Company, (ii) the Siemens Holders, (iii) Breed Holders holding a majority of the outstanding shares of Common Stock then held by all Breed Holders, and (iv) in the case of any amendment which materially and adversely affects any Breed Holder differently from any other Breed Holder, such Breed Holder. No course of dealing or course of conduct between or among any Person having any interest in this Agreement will be deemed effective to modify, amend or waive any part of this Agreement or any rights or obligations of any Person under or by reason of this Agreement. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 4.3. Survival of Representations and Warranties. All representations, warranties, covenants and agreements set forth in this Agreement will survive the execution and delivery of this Agreement and the closing and the consummation of the transactions contemplated hereby. Section 4.4. Successors and Assigns; Entire Agreement. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and, except as provided herein, their respective successors and assigns. This Agreement, the Stock Purchase Agreement and the other agreements referred to herein and therein together set forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. Section 4.5. Separability. In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected. Section 4.6. Notices. (a) All notices provided for or permitted hereunder shall be made in writing by hand-delivery, telecopier or air courier overnight delivery service to the other at the following addresses (or at such other address as shall be specified in a notice given by any party to the others in accordance with this Section): If to the Company to: Breed Technologies, Inc. 5300 Old Tampa Highway Lakeland, Florida 33811 Attention: Charles J. Speranzella, Jr. and General Counsel Telecopier: (941) 668-6016 If to Siemens or any Siemens Holder: Siemens Aktiengesellschaft Legal Department ZFR3 Werner-von-Siemens Strasse 50 D-91052 Erlangen Germany Attention: Counsel for Automotive Systems Group Telecopier: 011-49-9131-729001 with a copy to: Siemens Corporation 1301 Avenue of the Americas New York, New York 10019 Attention: General Counsel Telecopier: (212) 258-4945 If to the Breed Holders, to their addresses as listed from time to time in the books of the Company. (b) All such notices shall be deemed to have been duly given: when delivered by hand, if personally delivered; upon receipt, if received prior to 5:00 p.m. local time on a Business Day (and otherwise on the next succeeding Business Day), if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Section 4.7. Governing Law. The validity, performance, construction and effect of this Agreement is governed by and shall be construed in accordance with the internal laws of the State of Delaware, without giving effect to principles of conflicts of law. Section 4.8. Headings and Counterparts. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect. This Agreement may be executed in two or more counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same instrument. Section 4.9. Further Assurances; Assignment. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. Notwithstanding anything in this Agreement to the contrary, this Agreement is not assignable by a Siemens Holder without the prior written consent of each other party to this Agreement and any attempted assignment in violation of this provision shall be null and void. Notwithstanding the foregoing, any Siemens Holder may assign this Agreement to any of its Corporate Affiliates. Section 4.10. Termination. Unless sooner terminated in accordance with its terms, this Agreement shall terminate upon the earlier to occur of (i) the date on which the Siemens Holders first collectively Beneficially Own less than the number of shares of Common Stock issued or issuable pursuant to the conversion of the shares of Series A Preference Shares acquired by Siemens pursuant to the Stock Purchase Agreement (such number to be ratably adjusted to reflect the impact of recapitalizations, reverse stock splits and similar transactions) or (ii) the delivery of a First Make-Whole Notice (as such term is defined in the Make-Whole Agreement). If a party hereto ceases to own any shares of Common Stock, such party will no longer be deemed to be a Stockholder for purposes of this Agreement and there shall be no liability on the part of any such party, except for liabilities arising from a breach of this Agreement prior to such termination. Following termination of this Agreement, the parties shall have no further obligations or liabilities hereunder except for obligations or liabilities accrued prior to such termination. Section 4.11. Remedies. In the event of a breach by any party to this Agreement of its obligations under this Agreement, any party injured by such breach, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, for breach of such provision will be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. In the event of any breach of this Agreement by any party hereto, each such breaching party agrees to indemnify the persons to whom a representation and warranty is given or an obligation is owed under this Agreement for all damages, costs and expenses (including reasonable attorneys' fees) actually incurred as a result of any such breach. Section 4.12. Pronouns. Whenever the context may require, any pronouns used herein shall be deemed also to include the corresponding neuter, masculine or feminine forms. Section 4.13. Release of Siemens. If Siemens assigns its rights and obligations under this Agreement pursuant to Section 4.9, the Company for itself and its Affiliates, and the Breed Holders so long as Siemens Corporation is subject to the jurisdiction of the Federal, state or local courts of the United States with respect to claims or disputes relating to this Agreement or the transactions contemplated hereby, hereby irrevocably and unconditionally waive and release all rights and claims that any of them may have following the time that Siemens no longer owns of record any capital stock of the Company to the effect that Siemens is or has been at any time subject to the jurisdiction of the Federal, state or local courts of the United States with respect to claims or disputes relating to this Agreement. Section 4.14. Consent to Jurisdiction. Subject to the provisions of Section 4.13, the Company, each Breed Holder and each Siemens Holder hereby agrees to submit to the exclusive jurisdiction of the U.S. Federal courts in the Southern District of the State of New York, and consents that service of process with respect to all such courts may be made by registered mail to such person at the address of such person set forth in Section 4.6 with respect to any disputes arising out of this Agreement. Section 4.15. Waiver of Jury Trial; Trial Costs. The Company, for itself and its Corporate Affiliates, each Breed Holder and each Siemens Holder hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to the actions of the Company, any Breed Holder or any Siemens Holder pursuant to this Agreement in the negotiation, administration, performance or enforcement thereof. The party in whose favor a final judgment is rendered shall be entitled to reasonable costs and reasonable attorneys' fees. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. BREED TECHNOLOGIES, INC. By: Name: Title: BREED HOLDERS: Allen K. Breed Johnnie Cordell Breed A. BREED, L.P. By: General Partner J. BREED, L.P. By: General Partner SIEMENS AKTIENGESELLSCHAFT By: Name: Title: By: Name: Title: Schedule A to Stockholders Agreement STOCK OWNERSHIP OF BREED FAMILY AND AFFILIATES Number of Shares of Record Holder Common Stock Owned J. Breed, L.P. 8,477,750 A. Breed, L.P. 8,477,750 Allen K. Breed and Johnnie C. Breed, jointly 100 16,955,600 EX-10.2 6 CREDIT AGREEMENT Exhibit 10.2 CREDIT AGREEMENT by and among BREED TECHNOLOGIES, INC. AND CERTAIN SUBSIDIARIES as Borrowers, NATIONSBANK, NATIONAL ASSOCIATION, as Agent and as Lender, and THE LENDERS PARTY HERETO FROM TIME TO TIME October 30, 1997 TABLE OF CONTENTS Page ARTICLE I Definitions and Terms 1.1. Definitions. ........................................................ 2 1.2. Rules of Interpretation. ...........................................29 ARTICLE II The Credit Facilities 2.1. Loans................................................................31 2.2. Payment of Interest. ...............................................37 2.3. Payment of Principal. ...............................................37 2.4. Non-Conforming Payments. ...........................................39 2.5. Notes. .............................................................40 2.6. Pro Rata Payments. .................................................40 2.7. Voluntary Commitment Reductions. ...................................40 2.8. Conversions and Elections of Subsequent Interest Periods. ..........40 2.9. Increase and Decrease in Amounts. ..................................41 2.10. Commitment Fee.......................................................41 2.11. Deficiency Advances. ...............................................42 2.12. Use of Proceeds. ...................................................42 2.13. Designation of Borrowing Subsidiaries................................42 ARTICLE III Letters of Credit 3.1. Letters of Credit. ..................................................43 3.2. Reimbursement........................................................43 3.3. Letter of Credit Facility Fees. ....................................47 ARTICLE IV Security 4.1. Guaranty. ..........................................................48 4.2. Stock Pledge. .......................................................48 4.3. Security Interests. ................................................48 4.4. Lease Assignments. .................................................49 4.5. Mortgages. .........................................................49 4.6. Landlord Waivers. ..................................................49 4.7. Intellectual Property................................................49 4.8. Pledge and Subordination of Intercompany Notes. ....................50 4.9. Pledge of Partnership and Joint Venture Interests. ..................50 4.10. Collateral Assignment of Trademark License Agreement.................50 4.11. Further Assurances. ................................................50 ARTICLE V Change in Circumstances 5.1. Increased Cost and Reduced Return. .................................51 5.2. Limitation on Types of Loans. ......................................52 5.3. Illegality. ........................................................52 5.4. Treatment of Affected Loans. .......................................53 5.5. Compensation. ......................................................53 5.6. Taxes. .............................................................54 5.7. Lending Office. ....................................................55 5.8. Syndication Costs. .................................................55 5.9. Replacement Banks. .................................................56 ARTICLE VI Conditions to Making Loans and Issuing Letters of Credit 6.1. Conditions of Term Loan and Initial Advance..........................57 6.2. Conditions of all Loans and Letters of Credit. .....................61 ARTICLE VII Representations and Warranties 7.1. Organization and Authority...........................................63 7.2. Loan Documents. ....................................................63 7.3. Solvency.............................................................64 7.4. Subsidiaries and Stockholders. .....................................64 7.5. Ownership Interests. ...............................................64 7.6. Financial Condition. ................................................64 7.7. Title to Properties. ...............................................65 7.8. Taxes. .............................................................65 7.9. Other Agreements. ..................................................65 7.10. Litigation. ........................................................66 7.11. Margin Stock. ......................................................66 7.12. Investment Company...................................................66 7.13. Patents, Etc. ......................................................66 7.14. No Untrue Statement. ...............................................66 7.15. No Consents, Etc.....................................................67 7.16. Employee Benefit Plans...............................................67 7.17. No Default...........................................................68 7.18. Environmental Matters. .............................................68 7.19. Employment Matters. ................................................68 7.20. RICO. ..............................................................69 7.21. Allied Acquisition Representations. ................................69 7.22. Allied Acquisition. ................................................69 7.23. Perfected Security Instruments.......................................69 ARTICLE VIII Affirmative Covenants 8.1. Financial Reports, Etc. ............................................71 8.2. Maintain Properties. ...............................................72 8.3. Existence, Qualification, Etc. .....................................73 8.4. Regulations and Taxes. .............................................73 8.5. Insurance. .........................................................73 8.6. True Books. ........................................................73 8.7. Right of Inspection. ...............................................73 8.8. Observe all Laws. ..................................................73 8.9. Governmental Licenses. .............................................74 8.10. Covenants Extending to Other Persons. ..............................74 8.11. Officer's Knowledge of Default. ....................................74 8.12. Suits or Other Proceedings. ........................................74 8.13. Notice of Environmental Complaint or Condition. .....................74 8.14. Environmental Compliance. ..........................................74 8.15. Indemnification. ...................................................75 8.16. Further Assurances. ................................................75 8.17. Employee Benefit Plans...............................................75 8.18. Continued Operations. ..............................................76 8.19. Additional Support Documents. ......................................76 8.20. Operating Plan. ....................................................77 8.21. Allied Acquisition Audit. ..........................................77 8.22. Diligent Pursuit of Waiver. ........................................78 8.23. Swap Agreements. ...................................................78 8.24. Subsidiary Support of Permitted Indebtedness. ......................78 ARTICLE IX Negative Covenants 9.1. Financial Covenants..................................................79 9.2. Acquisitions. ......................................................80 9.3. Liens. .............................................................80 9.4. Indebtedness. ......................................................81 9.5. Transfer of Assets. .................................................82 9.6. Investments. .......................................................82 9.7. Merger or Consolidation. ...........................................83 9.8. Restricted Payments. ...............................................83 9.9. Transactions with Affiliates. ......................................83 9.10. Compliance with ERISA, the Code and Foreign Benefit Laws. ..........84 9.11. Accounting Changes. ................................................85 9.12. Dissolution, etc. ..................................................85 9.13. Limitations on Sales and Leasebacks. ...............................85 9.14. Change in Control. .................................................85 9.15. Limitation on Guaranties. ..........................................85 9.16. Negative Pledge Clauses..............................................85 9.17. Prepayments, Etc. of Indebtedness. .................................85 9.18. Restrictive Agreements. ...........................................85 ARTICLE X Events of Default and Acceleration 10.1. Events of Default. ................................................86 10.2. Agent to Act. .....................................................89 10.3. Cumulative Rights. ................................................89 10.4. No Waiver. ........................................................89 10.5. Allocation of Proceeds. ...........................................89 10.6. Judgment Currency. ................................................90 ARTICLE XI The Agent 11.1. Appointment, Powers, and Immunities. ..............................91 11.2. Reliance by Agent. ................................................91 11.3. Defaults. .........................................................92 11.4. Rights as Lender. .................................................92 11.5. Indemnification. ..................................................92 11.6. Non-Reliance on Agent and Other Lenders. ..........................93 11.7. Resignation of Agent. .............................................93 11.8. Fees................................................................93 ARTICLE XII Miscellaneous 12.1. Assignments and Participations. ...................................94 12.2. Notices. ..........................................................95 12.3. Right of Set-off; Adjustments. ....................................96 12.4. Survival. .........................................................97 12.5. Expenses. .........................................................97 12.6. Amendments and Waivers. ...........................................98 12.7. Counterparts. .....................................................98 12.8. Termination. ......................................................98 12.9. Indemnification. ..................................................99 12.10. Severability. .....................................................99 12.11. Entire Agreement. ................................................100 12.12. Agreement Controls. ..............................................100 12.13. Usury Savings Clause. ............................................100 12.14. Governing Law; Waiver of Jury Trial................................100 EXHIBIT A Applicable Commitment Percentages..........................A-1 EXHIBIT B-1 Form of Assignment and Acceptance..........................B-1 EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative...........................................C-1 EXHIBIT D Form of Borrowing Notice.................................D-1-1 EXHIBIT E Form of Collateral Assignment of Trademark License Agreement................................................E-1 EXHIBIT F Form of Collateral Assignment of Partnership Interests.....F-1 EXHIBIT G Form of Guaranty...........................................G-2 EXHIBIT H Form of Intellectual Property Security Agreement...........H-1 EXHIBIT I Form of Intercompany Notes.................................I-1 EXHIBIT J Form of Subordination Agreement............................J-1 EXHIBIT K Form of Interest Rate Selection Notice.....................K-1 EXHIBIT L Form of Landlord Waiver....................................L-1 EXHIBIT M Form of LC Account Agreement...............................M-1 EXHIBIT N Form of Lease Assignment...................................N-1 EXHIBIT O-1 Form of Term Note........................................O-1-1 EXHIBIT O-2 Form of Revolving Note...................................O-2-1 EXHIBIT P-1 Form of Stock Pledge Agreement (Borrower)................P-1-1 EXHIBIT P-2 Form of Stock Pledge Agreement (US Subsidiaries).........P-2-1 EXHIBIT P-3 Form of Stock Pledge Agreement (Breeds)..................P-3-1 EXHIBIT Q Form of Intercompany Note Pledge Agreement.................Q-1 EXHIBIT R Form of Security Agreement.................................R-1 EXHIBIT S-1 Form of Opinion of US Counsel............................S-1-1 EXHIBIT S-2 Form of Opinion of Intellectual Property Counsel.........S-2-1 EXHIBIT S-3 Form of Opinion of Foreign Counsel.......................S-3-1 EXHIBIT T Compliance Certificate.....................................T-1 EXHIBIT U Form of Assumption Letter..................................U-1 Schedule 1.1(a) Borrowing Subsidiaries.....................................S-1 Schedule 1.1(b) Initial Advance Allocation ...............................S-2 Schedule 7.4 Subsidiaries and Investments in Other Persons..............S-3 Schedule 7.6 Indebtedness...............................................S-4 Schedule 7.7 Liens......................................................S-5 Schedule 7.10 Litigation.................................................S-6 Schedule 7.19 Employment Matters.........................................S-7 Schedule 7.23 Financing Statements and Other Filings.....................S-8 Schedule 8.5 Insurance..................................................S-9 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of October 30, 1997 (the "Agreement"), is made by and among BREED TECHNOLOGIES, INC., a Delaware corporation having its principal place of business in Lakeland, Florida ( "BREED"), and certain Subsidiaries of BREED designated as Borrowers herein (BREED and such Subsidiaries individually a "Borrower" and being collectively called the "Borrowers") NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, in its capacity as a Lender ("NationsBank"), and each other financial institution which may hereafter execute and deliver an instrument of assignment with respect to this Agreement pursuant to Section 12.1 (hereinafter such financial institutions may be referred to individually as a "Lender" or collectively as the "Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, in its capacity as agent for the Lenders (in such capacity, and together with any successor agent appointed in accordance with the terms of Section 11.7, the "Agent"); W I T N E S S E T H: WHEREAS, BREED and certain of its wholly-owned Subsidiaries have entered into that certain Asset Purchase Agreement dated August 27, 1997 with AlliedSignal Inc., a Delaware corporation ("AlliedSignal"), and certain of its subsidiaries (the "Asset Purchase Agreement") pursuant to which BREED has agreed to purchase or cause certain of its Subsidiaries to purchase certain assets and liabilities of AlliedSignal and such subsidiaries including the business of designing, manufacturing, and selling automotive restraint products and systems (the "Acquired Business"); WHEREAS, the Borrowers have requested that the Lenders make available to the Borrowers certain credit facilities of up to $900,000,000, which facilities shall consist of a term loan facility to BREED of $600,000,000 and a revolving credit facility to the Borrowers of up to $300,000,000, the latter of which will include a $25,000,000 sublimit for the issuance of standby letters of credit and a $75,000,000 sublimit for multi-currency borrowings, the proceeds of which are to be used as provided in Section 2.12 hereof; and WHEREAS, the Lenders are willing to make such revolving credit and letter of credit facilities available to the Borrowers upon the terms and conditions set forth herein; NOW, THEREFORE, the Borrowers, the Lenders and the Agent hereby agree as follows: ARTICLE I Definitions and Terms 1.1 Definitions. For the purposes of this Agreement, in addition to the definitions set forth above, the following terms shall have the respective meanings set forth below: "Acquisition" means the acquisition of (i) a controlling equity interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the holder thereof), whether by purchase of such equity interest or upon exercise of an option or warrant for, or conversion of securities into, such equity interest, or (ii) assets of another Person which constitute all or substantially all of the assets of such Person or of a line or lines of business conducted by such Person. The term "controlling interest" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of Voting Sock, by contract or otherwise. "Acquisition Documents" means the Asset Purchase Agreement and all other documents required to be delivered by AlliedSignal and its Subsidiaries to BREED and its Subsidiaries pursuant to the Asset Purchase Agreement. "Advance" means a borrowing under the Revolving Credit Facility consisting of a Base Rate Loan or a Eurodollar Rate Loan. "Advance Date Exchange Rate" means, with respect to a specified Advance or Loan in an Alternative Currency, the Spot Rate of Exchange as of the date two Business Days preceding the date such Advance is originally made, provided that, if such Advance or Loan is Continued for a subsequent Interest Period or Converted pursuant to Section 2.8, the Advance Date Exchange Rate with respect to such Loan shall be the Spot Rate of Exchange two Business Days preceding the effective date of the latest Continuation or Conversion of such Advance or Loan, and the Dollar Value of such Advance or Loan shall be adjusted as set forth in Section 2.1(b). "Affiliate" means any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with BREED; or (ii) which beneficially owns or holds 5% or more of any class of the outstanding Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of BREED or 5% or more of any class of the outstanding Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by BREED. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of Voting Stock, by contract or otherwise; provided that Integrated Sensor Solutions, Inc., a California corporation, shall not be deemed an Affiliate of BREED for the purposes of this Agreement. "Allied Acquisition" means the acquisition by BREED and certain of its Subsidiaries of the Acquired Business pursuant to the Asset Purchase Agreement for an aggregate purchase price not to exceed $710,000,000, subject to adjustment as provided in the Asset Purchase Agreement. "Alternative Currency" means Pounds Sterling, French Francs, Italian Lire, Deutsch Marks, Spanish Pesetas, and with the prior written consent of all Lenders and the Agent, any other lawful currency other than Dollars which is readily transferable and convertible into Dollars in the United States currency market; provided, however, that an Alternative Currency (other than those specified above) shall only be available to a Borrower to the extent that each Lender shall have determined (which determination shall be conclusive) that it has access to such Alternative Currency on terms reasonably acceptable to such Lender and that the Alternative Currency is freely transferable and convertible into Dollars. "Alternative Currency Equivalent Amount" means with respect to a specified Alternative Currency and a specified Dollar amount, the amount of such Alternative Currency into which such Dollar amount would be Converted, based on the applicable Advance Date Exchange Rate. "Applicable Commitment Percentage" means, with respect to each Lender that portion of the Total Credit Commitment, Total Revolving Credit Commitment or Total Term Loan Commitment, as the case may be, (including its Participations and its obligations hereunder to the Issuing Bank to acquire Participations) allocable to such Lender (i) with respect to Lenders as of the Closing Date, as set forth in Exhibit A and (ii) with respect to any Person who becomes a Lender hereafter, as reflected in each Assignment and Acceptance to which such Lender is a party Assignee; provided that the Applicable Commitment Percentage of each Lender shall be increased or decreased to reflect any assignments to or by such Lender effected in accordance with Section 12.1. "Applicable Lending Office" means, for each Lender and for each Type of Loan, the Lending Office" of such Lender (or of an affiliate of such Lender) designated for such Type of Loan on the signature pages hereof or such other office of such Lender (or an affiliate of such Lender) as such Lender may from time to time specify to the Agent and BREED by written notice in accordance with the terms hereof as the office by which its Loans of such Type are to be made and maintained. "Applicable Margin" means for each Eurodollar Rate Loan or Base Rate Loan that percent per annum as set forth below, which shall be based upon the length of time the Revolving Credit Facility is in existence as specified below:
Phase Dates Applicable Margin for Applicable Margin for Eurodollar Rate Loans Base Rate Loans I Closing Date through January 27, 1998 3.00% 2.00% II January 28, 1998 through February 26, 3.75% 2.75% 1998 III February 27, 1998 through April 27, 1998 4.50% 3.50% IV April 28, 1998 and thereafter 6.00% 5.00%
"Applications and Agreements for Letters of Credit" means, collectively, the Applications and Agreements for Letters of Credit, or similar documentation, executed by a Borrower from time to time and delivered to the Issuing Bank to support the issuance of Letters of Credit. "Approved Fund" means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Asset Disposition" means any voluntary disposition, whether by sale, lease or transfer of (a) any or all of the assets, excluding cash, cash equivalents and inventory, of BREED or its Subsidiaries, where the Net Proceeds from any such sale, lease or transfer exceed $50,000, and (b) any of the capital stock, or securities and investments interchangeable, exercisable or convertible for or into, or otherwise entitling the holder to receive, any of the capital stock of any Subsidiary (other than a disposition to BREED or a Guarantor in the case of (a) and (b)). "Assigned Interests" has the meaning given to such term in any Collateral Assignment of Partnership and Joint Venture Interests. "Assignment and Acceptance" shall mean an Assignment and Acceptance in the form of Exhibit B (with blanks appropriately filled in) executed and delivered to the Agent by the parties thereto in connection with an assignment of a Lender's interest under this Agreement pursuant to Section 12.1. "Authorized Representative" means any of the Chief Executive Officer, President, any Executive or Senior Vice President or Treasurer of BREED or, with respect to financial matters, the chief financial officer or Treasurer of BREED, or any other Person expressly designated by the Board of Directors of BREED (or the appropriate committee thereof) as an Authorized Representative of BREED, as set forth from time to time in a certificate in the form of Exhibit C. "Base Rate" means the sum of (i) for any day, the rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) or (b) the Prime Rate for such day and (ii) the Applicable Margin. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. "Base Rate Loan" means a Dollar denominated Loan or a Dollar denominated Segment of the Term Loan for which the rate of interest is determined by reference to the Base Rate. "Base Rate Refunding Loan" means a Base Rate Loan made to satisfy Reimbursement Obligations arising from a drawing under a Letter of Credit. "Base Rate Segment" means a Segment bearing interest or to bear interest at the Base Rate. "Board" means the Board of Governors of the Federal Reserve System (or any successor body). "Borrowers' Account" means a demand deposit account number 3750894026 or any successor account with the Agent, which may be maintained at one or more offices of the Agent or an agent of the Agent. "Borrowing Notice" means the notice delivered by an Authorized Representative in connection with an Advance under the Revolving Credit Facility in the form of Exhibit D hereto. "Borrowing Subsidiary" means those Subsidiaries listed on Schedule 1.1(a) as a Borrower under the Revolving Credit Facility and such other Foreign Subsidiaries of BREED that are so designated pursuant to Section 2.13 hereof. "Business Day" means, (i) with respect to any Base Rate Loan, any day which is not a Saturday, Sunday or a day on which banks in the States of New York and North Carolina are authorized or obligated by law, executive order or governmental decree to be closed, and (ii) with respect to any Eurodollar Rate Loan, any day which is a Business Day, as described above, and on which the relevant international financial markets are open for the transaction of business contemplated by this Agreement in London, England, New York, New York and Charlotte, North Carolina. "Capital Expenditures" means, with respect to BREED and its Subsidiaries, for any period the sum of (without duplication) (i) all expenditures (whether paid in cash or accrued as liabilities) by BREED or any Subsidiary during such period for items that would be classified as "property, plant or equipment" or comparable items on the consolidated balance sheet of BREED and its Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized, excluding, however, the amount of any Capital Expenditures paid for with proceeds of casualty insurance as evidenced in writing and submitted to the Agent together with any compliance certificate delivered pursuant to Section 8.1(a) or (b), and (ii) with respect to any Capital Lease entered into by BREED or its Subsidiaries during such period, the present value of the lease payments due under such Capital Lease over the term of such Capital Lease applying a discount rate equal to the interest rate provided in such Capital Lease (or in the absence of a stated interest rate, that rate used in the preparation of the financial statements described in Section 8.1(a)), all the foregoing in accordance with GAAP applied on a Consistent Basis. "Capital Leases" means all leases which have been or should be capitalized in accordance with GAAP as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof. "Certificate and Receipt of Registrar" means, collectively or individually as the context may indicate (i) that certain Certificate and Receipt of Registrar dated as of the Closing Date between certain Subsidiaries and the Agent in the form attached to the Collateral Assignment of Partnership and Joint Venture Interests as Schedule I and (ii) any additional Certificate and Receipt of Registrar delivered to the Agent pursuant to Section 8.19, as any of the foregoing may be hereafter amended, supplemented or restated from time to time. "Change of Control" means, at any time: (i) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than Allen K. Breed, Johnnie C. Breed, Siemens AG, A. Breed, Ltd., a Texas limited partnership, or J. Breed, Ltd., a Texas limited partnership, either (A) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act ), directly or indirectly, of Voting Stock of BREED (or securities convertible into or exchangeable for such Voting Stock) representing 30% or more of the combined voting power of all Voting Stock of BREED (on a fully diluted basis) or (B) otherwise has the ability, directly or indirectly, to elect a majority of the board of directors of BREED; provided, however, that this subsection shall apply only to any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) who is not identified hereunder. (ii) during any period of up to 12 consecutive months, commencing on the Closing Date, individuals who at the beginning of such 12-month period were directors of BREED shall cease for any reason (other than the death, disability or retirement of an officer of BREED that is serving as a director at such time so long as another officer of BREED replaces such Person as a director) to constitute a majority of the board of directors of BREED; or (iii) any Person or two or more Persons (other than those Persons identified in clause (i) above or existing directors) acting in concert shall have acquired by contract, or shall have entered into a contract or agreement and satisfied any conditions to effectiveness, that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, more than 50% of the combined voting power of all Voting Stock of BREED (on a fully diluted basis). "Closing Date" means the date as of which this Agreement is executed by the Borrowers, the Lenders and the Agent and on which the conditions set forth in Section 6.1 have been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. "Collateral" means the collateral described in the Security Instruments. "Collateral Assignment of Trademark License Agreement" means that certain Collateral Assignment of Trademark License Agreement dated as of the Closing Date by BREED in favor of the Agent and consented to by AlliedSignal substantially in the form of Exhibit E hereto and pursuant to which BREED and BREED Automotive Technology, Inc. have collaterally assigned, pledged and granted a Lien in all of its rights and under that certain Trademark License Agreement dated October 30, 1997 between BREED and Allied Signal to the Agent for the benefit of the Lenders, as amended, modified, or restated from time to time. "Collateral Assignment of Partnership Interests" means, (i) the Collateral Assignment of Partnership Interests dated as of the Closing Date between BREED, certain Subsidiaries and the Agent and (ii) each Collateral Assignment of Partnership Interests substantially in the form of Exhibit F delivered to the Agent pursuant to Section 8.19, as any of the foregoing may be hereafter amended, supplemented or restated from time to time. "Commitment Fee" means one half percent (0.50%) per annum. "Consistent Basis" in reference to the application of GAAP means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of BREED referred to in Section 7.6(a). "Consolidated EBITDA" means, with respect to BREED and its Subsidiaries for any period of computation ending on the date of computation thereof, (A) the sum of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income, (iv) amortization and (v) depreciation, minus (B) (a) net gains or losses on the sale, conversion or other disposition of capital assets, (b) net gains or losses on the acquisition, retirement, sale or other disposition of capital stock and other securities of BREED or its Subsidiaries, (c) net gains on the collection of proceeds of the life insurance policies, (d) any write-up of any asset other than as permitted in accordance with Statement No. 16 of the Financial Accounting Standards Board, and (e) any other net gain or loss or credit of an extraordinary nature as determined in accordance with GAAP applied on a Consistent Basis. "Consolidated Interest Expense" means, with respect to any period of computation thereof, the gross interest expense of BREED and its Subsidiaries, including without limitation (i) the current amortized portion of debt discounts to the extent included in gross interest expense, (ii) the current amortized portion of all fees (including fees payable in respect of any Swap Agreement and Letters of Credit) payable in connection with the incurrence of Indebtedness to the extent included in gross interest expense and (iii) the portion of any payments made in connection with Capital Leases allocable to interest expense, in each of the foregoing cases determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Net Income" means, for any period of computation thereof, the gross revenues from operations of BREED and its Subsidiaries (including payments received by BREED and its Subsidiaries of (i) interest income, and (ii) dividends and distributions made in the ordinary course of their businesses by Persons in which investment is permitted pursuant to this Agreement and not related to an extraordinary event), less all operating and non-operating expenses of BREED and its Subsidiaries including taxes on income, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Shareholders' Equity" means, as of any date on which the amount thereof is to be determined, the sum of the following in respect of BREED and its Subsidiaries (determined on a consolidated basis): (i) the amount of issued and outstanding share capital, plus (ii) the amount of additional paid-in capital and retained earnings (or, in the case of a deficit, minus the amount of such deficit), plus (iii) the amount of any foreign currency translation adjustment (if positive, or, if negative, minus the amount of such translation adjustment), minus (iv) the amount of any treasury stock, all as determined in accordance with GAAP applied on a Consistent Basis. "Consolidated Total Assets" means, as of the date on which the amount thereof is to be determined, the net book value of all assets of BREED and its Subsidiaries as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Contingent Obligation" of any Person means all contingent liabilities required (or which, upon the creation or incurring thereof, would be required) to be included in the financial statements (including footnotes but excluding any actual or threatened litigation) of such Person in accordance with GAAP applied on a Consistent Basis, including Statement No. 5 of the Financial Accounting Standards Board, all Rate Hedging Obligations and any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including obligations of such Person however incurred: (1) to purchase such Indebtedness or other obligation or any property or assets constituting security therefor; (2) to advance or supply funds in any manner (i) for the purchase or payment of such Indebtedness or other obligation, or (ii) to maintain a minimum working capital, net worth or other balance sheet condition or any income statement condition of the primary obligor; (3) to grant or convey any lien, security interest, pledge, charge or other encumbrance on any property or assets of such Person to secure payment of such Indebtedness or other obligation of the primary obligor; (4) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner or holder of such Indebtedness or obligation of the ability of the primary obligor to make payment of such Indebtedness or other obligation; or (5) otherwise to assure the owner of the Indebtedness or such obligation of the primary obligor against loss in respect thereof; excluding, however, Contingent Obligations (other than Guaranties) incurred in the ordinary course of business which, in the aggregate, will not have a Material Adverse Effect. "Continue", "Continuation", and "Continued" shall refer to the continuation pursuant to Section 2.8 hereof of a Eurodollar Rate Loan of one Type as a Eurodollar Rate Loan of the same Type from one Interest Period to the next Interest Period. "Convert", "Conversion", and "Converted" shall refer to a conversion pursuant to Section 2.8 or Article IV of one Type of Loan into another Type of Loan. "Convertible Debentures" means the __% Convertible Subordinated Debentures due 2027 in an aggregate principal amount of at least $200,000,000 issued by BREED to BTI Capital Trust in consideration of the issuance of the Convertible Preferred Securities and payment of the net proceeds thereof to BREED. "Convertible Preferred Securities" means at least 4,000,000 ____% Convertible Trust Preferred Securities issued by BTI Capital Trust (the "BTI Trust"), a trust created or to be created solely for the purpose of issuing the Convertible Preferred Securities for so long as such preferred securities are not accounted for under stockholder's equity in the consolidated financial statements of BREED; provided that such Convertible Preferred Securities shall be subject to the following conditions: (i) the BTI Trust, at the direction of BREED, shall be entitled in its discretion to defer payment of distributions on the Convertible Preferred Securities for up to twenty (20) consecutive quarters (the "Deferral Period"); provided that no such deferral may extend beyond the maturity date of the Convertible Preferred Securities; (ii) at least five (5) quarters shall remain in the Deferral Period when the BTI Trust elects to defer payment of distributions; and (iii) the Convertible Preferred Securities shall not be treated as a liability on the Consolidated Financial Statements of BREED in accordance with GAAP; "Convertible Preferred Securities Issuance" means (a) completion of the Offering Memorandum, (b) the consummation of the sale of the Converrtible Preferred Securities contemplated thereby and (c) the issuance of the Convertible Debentures and receipt of net proceeds thereof by BREED; "Credit Commitment" means, with respect to each Lender, the obligation of such Lender to make Loans to the Borrowers up to an aggregate principal amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Credit Commitment. "Credit Parties" means any or all of the Borrowers and the Guarantors, as the case may be. "Debt Offering" means the incurrence of any Indebtedness for Money Borrowed permitted hereunder in connection with a public offering or private placement of debt securities of BREED or any Subsidiary (other than debt securities issued to BREED or a Guarantor) or otherwise. "Default" means any event or condition which, with the giving or receipt of notice or lapse of time or both, would constitute an Event of Default hereunder. "Default Rate" means (i) with respect to each Eurodollar Rate Loan, until the end of the Interest Period applicable thereto, a rate of two percent (2%) above the Eurodollar Rate applicable to such Loan, and thereafter at a rate of interest per annum which shall be two percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans, at a rate of interest per annum which shall be two percent (2%) above the Base Rate, and (iii) in any case, the maximum rate permitted by applicable law, if lower. "Deutsch Marks" means the official currency of Germany. "Direct Foreign Subsidiary" means any Foreign Subsidiary a majority of whose outstanding Voting Stock is owned by BREED or a Domestic Subsidiary. "Dollar Equivalent Amount" means, with respect to a specified Alternative Currency amount, the amount of Dollars into which the Alternative Currency amount would be converted, based on the applicable Advance Date Exchange Rate. "Dollar Value" of an Advance or a Loan in an Alternative Currency means the Dollar Equivalent Amount of the principal amount of such Advance or Loan based on the Advance Date Exchange Rate with respect to such Advance or Loan, as recorded in the Agent's records pursuant to Section 2.1. "Dollars" and the symbol "$" means dollars constituting legal tender for the payment of public and private debts in the United States of America. "Domestic Subsidiary" means any Subsidiary of BREED organized under the laws of the United States of America or a state or territory thereof, except the Excluded Subsidiary. "Eligible Assignee" means (i) a Lender; (ii) an affiliate or Approved Fund of a Lender; and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 11.1, BREED, such approval not to be unreasonably withheld or delayed by BREED, it being agreed that BREED may withhold its approval if as a result of such assignment BREED incurs increased cost under Section 5.6; provided, however, that neither BREED nor an affiliate of BREED shall qualify as an Eligible Assignee. "Eligible Securities" means the following obligations and any other obligations previously approved in writing by the Agent: (a) Government Securities; (b) obligations of any corporation organized under the laws of any state of the United States of America or under the laws of any other nation, payable in the United States of America, expressed to mature not later than 92 days following the date of issuance thereof and rated in an investment grade rating category by S&P and Moody's; (c) interest bearing demand or time deposits issued by any Lender or certificates of deposit maturing within one year from the date of issuance thereof and issued by a bank or trust company organized under the laws of the United States or of any state thereof having capital surplus and undivided profits aggregating at least $400,000,000 and being rated "A-3" or better by S&P or "A" or better by Moody's; (d) Repurchase Agreements; (e) Municipal Obligations; (f) Pre-Refunded Municipal Obligations; (g) shares of mutual funds which invest in obligations described in paragraphs (a) through (f) above, the shares of which mutual funds are at all times rated "AAA" by S&P; (h) tax-exempt or taxable adjustable rate preferred stock issued by a Person having a rating of its long term unsecured debt of "A" or better by S&P or "A-1" or better by Moody's; and (i) asset-backed remarketed certificates of participation representing a fractional undivided interest in the assets of a trust, which certificates are rated at least "A-1" by S&P and "P-1" by Moody's. "Employee Benefit Plan" means (i) any employee benefit plan, including any Pension Plan, within the meaning of Section 3(3) of ERISA which (A) is maintained for employees of BREED, any of its ERISA Affiliates, or any Subsidiary or is assumed by BREED, any of its ERISA Affiliates, or any Subsidiary in connection with any Acquisition or (B) has at any time been maintained for the employees of BREED, any current or former ERISA Affiliate, or any Subsidiary and (ii) any plan, arrangement, understanding or scheme maintained by BREED or any Subsidiary that provides retirement, deferred compensation, employee or retiree medical or life insurance, severance benefits or any other benefit covering any employee or former employee and which is administered under any Foreign Benefit Law or regulated by any Governmental Authority other than the United States of America. "Environmental Laws" means any federal, state, local or foreign statute, law, ordinance, code, rule, regulation, order, decree, permit or license regulating, relating to, or imposing liability or standards of conduct concerning, any environmental matters or conditions, environmental protection or conservation, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; the Superfund Amendments and Reauthorization Act of 1986, as amended; the Resource Conservation and Recovery Act, as amended; the Toxic Substances Control Act, as amended; the Clean Air Act, as amended; the Clean Water Act, as amended; together with all regulations promulgated thereunder, and any other "Superfund" or "Superlien" law." "Equity Offering" means a public or private offering of equity securities (including, without limitation, any security or investment exchangeable, exercisable or convertible for or into, or otherwise entitling the holder to receive, equity securities) of BREED or any Subsidiary (other than securities issued to BREED or another Subsidiary); provided, however, that the term "Equity Offering" shall not include (i) any issuance of equity securities in connection with the exercise of stock options granted to, or purchase of restricted stock by, eligible participants under the Stock Option Plans, (ii) the issuance of any stock issued as dividends or distributions to Siemens, AG (or its Subsidiary) in accordance with the Siemens Stock Purchase Agreement, (iii) the issuance of the Convertible Preferred Securities, (iv) the issuance of the Convertible Debentures or any equity securities upon the conversion of any Convertible Debentures, or (v) the issuance of the Series B Preference Shares. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "ERISA Affiliate", as applied to BREED, means any Person or trade or business which is a member of a group which is under common control with BREED, who together with BREED, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Rate Loan" means a Loan or Segment of the Term Loan for which the rate of interest is determined by reference to the Eurodollar Rate. "Eurodollar Rate" means the interest rate per annum calculated according to the following formula: Eurodollar = Interbank Offered Rate + Applicable Rate 1 - Reserve Requirement Margin "Eurodollar Rate Segment" means a Segment bearing interest or to bear interest at the Eurodollar Rate. "Event of Default" means any of the occurrences set forth as such in Section 10.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. "Excluded Subsidiary" means, collectively, BREED International, Inc., a U.S. Virgin Islands corporation and BTI Trust, a Delaware _______ trust. "Facility Termination Date" means the date on which both the Revolving Credit Termination Date and the Term Loan Termination Date shall have occurred, no Letters of Credit shall remain outstanding or all the Letters of Credit shall have been cash collateralized, all Swap Agreements shall have been terminated or cash collateralized and the Borrowers shall have fully paid and satisfied in full all Obligations. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York (Statistical Release H-15) on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Agent (in its individual capacity) on such day on such transactions as determined by the Agent. "Fiscal Year" means the twelve month fiscal period of BREED commencing on the July 1 of each calendar year and ending on June 30 of the following calendar year. "Foreign Benefit Law" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning, any Employee Benefit Plan. "Foreign Subsidiary" means any Subsidiary of BREED that is not a Domestic Subsidiary. "Four-Quarter Period" means a period of four full consecutive fiscal quarters of BREED and its Subsidiaries, taken together as one accounting period. "French Francs" means the official currency of France. "Funding Bank" means any banking institution approved by the Agent located within a country which country's currency has been approved by the Lenders as an Alternative Currency. "GAAP" or "Generally Accepted Accounting Principles" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report. "Government Securities" means direct obligations of, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by, the United States of America. "Governmental Authority" shall mean any Federal, state, municipal, national or other governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government including, but not limited to, the governments of Italy, Germany, France, Spain, Mexico, the United Kingdom, Ireland, Finland and Hungary. "Guaranties" means all obligations of BREED or any Subsidiary directly or indirectly guaranteeing, or in effect guaranteeing, any Indebtedness or other obligation of any other Person. "Guarantors" means, at any date, the Domestic Subsidiaries. "Guarantors' Obligations" has the meaning ascribed to such term in the Guaranty. "Guaranty" means each Guaranty Agreement between one or more Guarantors and the Agent for the benefit of the Lenders, delivered as of the Closing Date and otherwise pursuant to Section 8.19 substantially in the form of Exhibit G hereto as the same may be amended, supplemented or restated. "Hazardous Material" means and includes any pollutant, contaminant, or hazardous, toxic or dangerous waste, substance or material (including without limitation petroleum products, asbestos-containing materials and lead), the generation, handling, storage, transportation, disposal, treatment, release, discharge or emission of which is subject to any Environmental Law. "Indebtedness" means with respect to any Person, without duplication, all Indebtedness for Money Borrowed, all indebtedness of such Person for the acquisition of property or arising under Rate Hedging Obligations, all indebtedness secured by any Lien on the property of such Person whether or not such indebtedness is assumed, all liability of such Person by way of endorsements (other than for collection or deposit in the ordinary course of business), all Contingent Obligations, including letters of credit and other items which in accordance with GAAP is required to be classified as a liability on a balance sheet; but excluding all accounts payable and accruals in the ordinary course of business so long as payment therefor is due within one year; provided that in no event shall the term Indebtedness include surplus and retained earnings, lease obligations (other than pursuant to Capital Leases), reserves for deferred income taxes and investment credits, other deferred credits or reserves and, so long as there is no Indenture Event of Default, both the Convertible Preferred Securities and the Convertible Debentures (so long as the Convertible Debentures are held by the BTI Trust). "Indebtedness for Money Borrowed" means with respect to any Person, without duplication, all indebtedness in respect of money borrowed, including without limitation all Capital Leases and the deferred purchase price of any property or asset, evidenced by a promissory note, bond, debenture or similar written obligation for the payment of money (including conditional sales or similar title retention agreements), other than trade payables and short-term accounts payable incurred in the ordinary course of business. "Indenture Event of Default" means the occurrence of an Event of Default as defined in the Indenture between the Borrower and a Trustee for the holder of the Convertible Debentures pursuant to which Indenture the Convertible Debentures shall be issued. "Intellectual Property Assignments" means those certain Assignments of Patents, Trademarks, Copyrights and Licenses in the form attached to the Intellectual Property Security Agreement as Exhibit A, to be filed upon acceleration of the Obligations hereunder, as from time to time amended, supplemented or restated. "Intellectual Property Security Agreement" means collectively each Intellectual Property Security Agreement executed by BREED and Breed Automotive Technology, Inc. (whether of even date herewith or delivered after the Closing Date pursuant to Section 8.19 hereof and whether executed individually or jointly and severally with other Subsidiaries) in favor of the Agent to collaterally secure payment and performance of its respective obligations hereunder and under the Guaranty, as applicable, substantially in the form of Exhibit H attached hereto and incorporated herein by reference as from time to time amended, supplemented or restated. "Interbank Offered Rate" means, for any Eurodollar Rate Loan or Eurodollar Rate Segment for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). "Intercompany Advance" means a loan or advance heretofore or hereafter made by an Intercompany Note Holder to a Borrower or a Domestic Subsidiary which is evidenced by an Intercompany Note in which the Agent has a valid, duly perfected, first priority Lien under the Collateral Assignment of Intercompany Notes, and the repayment of which is subordinated to the rights of the Agent and the Lenders under the Loan Documents in accordance to the provisions set forth in the Intercompany Notes or in the Intercompany Note Subordination Agreement. "Intercompany Notes" means, collectively, the promissory notes heretofore issued and described on Schedule A to the Intercompany Note Pledge Agreement and promissory notes hereafter issued in the form attached as Exhibit I hereto (with appropriate insertions) outstanding from time to time evidencing the Intercompany Advances. "Intercompany Note Holder" means, at any date, any Borrower and any Domestic Subsidiary who has extended any Intercompany Advance that remains outstanding at such date. "Intercompany Note Pledge Agreement" means, collectively (i) each Intercompany Note Pledge Agreement of even date herewith between a Borrower and the Agent and (ii) each Intercompany Note Pledge Agreement between each Intercompany Note Holder other than a Borrower and the Agent, substantially in the form of Exhibit Q, pursuant to which the Agent is granted a Lien in the Intercompany Notes held by such Intercompany Note Holder, in each case as the same may be amended, supplemented or restated from time to time. "Intercompany Note Subordination Agreement" means that certain Subordination Agreement dated as of the Closing Date between the Intercompany Note Holders and the Agent substantially in the form of Exhibit J hereto, as amended, supplemented, or restated from time to time. "Interest Period" means, for each Eurodollar Rate Loan or Eurodollar Rate Segment, a period commencing on the date such Eurodollar Rate Loan or Eurodollar Rate Segment is made or Converted and ending, at the Borrower's option, on the date one, two, or three months thereafter as notified to the Agent by the Authorized Representative three (3) Business Days prior to the beginning of such Interest Period; provided, that, (i) if the Authorized Representative fails to notify the Agent of the length of an Interest Period three (3) Business Days prior to the first day of such Interest Period, the Loan or Segment for which such Interest Period was to be determined shall be deemed to be a Base Rate Loan or Base Rate Segment as of the first day thereof; (ii) if an Interest Period for a Eurodollar Rate Loan or Eurodollar Rate Segment would end on a day which is not a Business Day, such Interest Period shall be extended to the next Business Day (unless such extension would cause the applicable Interest Period to end in the succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); (iii) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (iv) no Interest Period shall extend past the Stated Termination Date; and (v) there shall not be more than ten (10) Interest Periods in effect on any day. "Interest Rate Selection Notice" means the written notice delivered by an Authorized Representative in connection with the election of a subsequent Interest Period for any Eurodollar Rate Loan or Eurodollar Rate Segment or the Conversion of any Eurodollar Rate Loan or Eurodollar Rate Segment into a Base Rate Loan or Base Rate Segment or the Conversion of any Base Rate Loan or Base Rate Segment into a Eurodollar Rate Loan or Eurodollar Rate Segment, in the form of Exhibit K. "Initial Advance Allocation" means the allocation set forth on Schedule 1.1(b) of the initial Advance made hereunder among the Borrowers. "Issuing Bank" means initially NationsBank and thereafter any Lender which is successor to NationsBank as issuer of Letters of Credit under Article III. "Italian Lire" means the official currency of Italy. "Landlord Waivers" means, collectively, each of the Landlord Waivers required by the Agent to be delivered by the landlord of each facility leased by BREED or any Domestic Subsidiary or arising after the Closing Date and delivered by BREED or a Domestic Subsidiary, as applicable, pursuant to Article IV or Section 8.19 hereof, substantially in the form of Exhibit L hereto, as amended supplemented or restated from time to time. "LC Account Agreement" means the LC Account Agreement dated as of the date hereof among the Borrowers and the Agent substantially in the form of Exhibit M hereto, as amended, supplemented or restated from time to time. "Lease Assignments" means, collectively, Assignment of Lessee's Interest in Leases assigning to the Agent each facility lease of BREED and any Domestic Subsidiary heretofore entered into or entered into after the Closing Date and delivered by BREED or a Domestic Subsidiary pursuant to Article IV or Section 8.19 hereof to collaterally secure the Borrowers' Obligations and the Guarantors' Obligations under the Guaranty, substantially in the form of Exhibit N hereto, as amended, supplemented or restated from time to time. "Letter of Credit" means a standby letter of credit issued by the Issuing Bank for the account of a Borrower in favor of a Person advancing credit or securing an obligation on behalf of a Borrower. "Letter of Credit Commitment" means, with respect to each Lender, the obligation of such Lender to acquire Participations in respect of Letters of Credit and Reimbursement Obligations up to an aggregate amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Letter of Credit Commitment as the same may be increased or decreased from time to time pursuant to this Agreement. "Letter of Credit Facility" means the facility described in Article III hereof providing for the issuance by the Issuing Bank for the account of one or more of the Borrowers of Letters of Credit in an aggregate stated amount at any time outstanding not exceeding the Total Letter of Credit Commitment. "Letter of Credit Outstandings" means, as of any date of determination, the aggregate amount remaining undrawn under all Letters of Credit plus Reimbursement Obligations then outstanding. "Lien" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, BREED and any Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes. "Loan" means any of the Revolving Loans or the Term Loan made under the Revolving Credit Facility or the Term Loan Facility, respectively. "Loan Documents" means this Agreement, the Notes, the Guaranties, the Security Instruments, the Applications and Agreements for Letter of Credit, and all other instruments and documents heretofore or hereafter executed or delivered to or in favor of any Lender or the Agent in connection with the Loans made and transactions contemplated under this Agreement, as the same may be amended, supplemented or restated from time to time. "Loan Parties" means the Borrowers, the Guarantors and any other Person (other than the Lenders) party to any of the Loan Documents. "Managers" means collectively (or individually as the context may indicate), Charles J. Speranzella, Jr., Fred J. Musone, and Robert M. Rapone. "Material Adverse Effect" means a material adverse effect on (i) the business, properties, operations or condition, financial or otherwise, of BREED and its Subsidiaries, taken as a whole, (ii) the ability of the Loan Parties taken as a whole to pay or perform the obligations, liabilities and indebtedness under the Loan Documents as such payment or performance becomes due in accordance with the terms thereof, or (iii) the rights, powers and remedies of the Agent or any Lender under any Loan Document or the validity, legality or enforceability thereof. "Material Contract" means any contract or agreement, written or oral, of any Borrower or any of its Subsidiaries the failure to comply with which could reasonably be expected to have a Material Adverse Effect. "Moody's" means Moody's Investors Service, Inc. "Mortgaged Property" means, collectively (or individually as the context may indicate) the real property and improvements thereon described in the Mortgages. "Mortgages" means, collectively (or individually as the context may indicate), each Credit-Line Deed of Trust, Mortgage, Open-End Mortgage, Deed of Trust, Deed to Secure Debt, Leasehold Mortgage, Open-End Leasehold Mortgage, Leasehold Deed of Trust, Leasehold Deed to Secure Debt, Security Agreement, Fixture Financing Statement, Assignment of Leases and Rents and Financing Statement or similar mortgage instrument of BREED and its Subsidiaries now or hereafter entered into in connection with this Agreement to secure the Obligations or the Guarantors' Obligations, such term to include the Collateral Assignment of Rents and Leases executed by a Subsidiary of BREED, BTI Michigan, Inc., to secure its obligations under its Guaranty, and as from time to time amended, supplemented or restated. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which BREED or any ERISA Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) Fiscal Years. "Municipal Obligations" means general obligations issued by, and supported by the full taxing authority of, any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated in the highest investment rating category by both S&P and Moody's. "NationsBank" means NationsBank, National Association and its successors. "NMSI" means NationsBanc Montgomery Securities, Inc. and its successors. "Net Proceeds" means (a) from any Equity Offering or Debt Offering cash payments received by BREED or any Subsidiary therefrom as and when received, net of all legal, accounting, banking and underwriting fees and expenses, commissions, discounts and other issuance expenses incurred in connection therewith and all taxes required to be paid or accrued as a consequence of such issuance and (b) from any Asset Disposition cash payments received by BREED or any Subsidiary therefrom (including any cash payments received pursuant to any note or other debt security received in connection with any Asset Disposition) as and when received, net of (i) all legal fees and expenses and other fees and expenses paid to third parties and incurred in connection therewith, (ii) all taxes required to be paid or accrued as a consequence of such sale, (iii) amounts applied to repayment of Indebtedness (other than the Obligations) secured by a Lien on the asset or property disposed, and (iv) any other necessary costs incurred in connection with the sale. "Notes" means, collectively, the Term Notes and the Revolving Notes executed and delivered to the Lenders substantially in the form of Exhibit O-1 and O-2, respectively. "Obligations" means the obligations, liabilities and Indebtedness of the Borrowers or any of them with respect to (i) the principal and interest on the Loans as evidenced by the Notes, (ii) the Reimbursement Obligations and otherwise in respect of the Letters of Credit, (iii) all liabilities of the Borrowers or any of them to any Lender which arise under a Swap Agreement, and (iii) the payment and performance of all other obligations, liabilities and Indebtedness of the Borrowers or any of them to the Lenders, the Agent or NMSI hereunder, under any one or more of the other Loan Documents or with respect to the Loans. "Offering Memorandum" means the offering memorandum prepared in connection with the issuance of the Convertible Preferred Securities. "Operating Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership, or other legally authorized incorporated or unincorporated entity, the bylaws, operating agreement, partnership agreement, limited partnership agreement or other applicable documents relating to the operation, governance or management of such entity. "Operating Plan" means the five (5) year consolidated business plan of BREED and its Subsidiaries prepared by the management of BREED, giving effect to the Allied Acquisition, which plan (a) is to include (i) proforma projected balance sheets, statements of income and statements of cash flow (to include separate forecasts for Consolidated Capital Expenditures and Consolidated EBITDA by each major line of business) on a quarterly basis for the forthcoming Fiscal Year and on an annual basis for the next succeeding four Fiscal Years, (ii) detailed descriptions of all underlying assumptions, projected cost savings, expense reductions, and synergies realized from the Allied Acquisition, (iii) detailed descriptions of the long range plan for each major Subsidiary and for operations which have been or will be discontinued and (iv) such other calculations and descriptions as the Agent shall reasonably request, and (b) shall otherwise be reasonably acceptable to the Agent; provided, that the portion of the Operating Plan related to discontinued operations and restructuring charges shall have been reviewed by Ernst & Young, LLP and the five (5) year statements referred to in item (a)(i) above shall have been prepared by the Borrower in accordance with procedures agreed upon with Ernst & Young, LLP the compliance with and accuracy of which shall have tested for conformity with such procedures by Ernst & Young, LLP. "Organizational Action" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, any corporate, organizational, partnership action (including any required stakeholder, member or partner action) or other similar official action, as applicable, taken by such entity. "Organizational Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the articles of incorporation, certificate of incorporation, articles of organization, certificate of limited partnership or other applicable organizational or charter documents relating to the creation of such entity. "Outstandings" means, collectively, at any date, the Letter of Credit Outstandings, the Revolving Credit Outstandings, and the Term Loan Outstandings on such date. "Participation" means, with respect to any Lender (other than the Issuing Bank) and a Letter of Credit, the extension of credit represented by the participation of such Lender hereunder in the liability of the Issuing Bank in respect of a Letter of Credit and any Reimbursement Obligation arising with respect thereto issued by the Issuing Bank in accordance with the terms hereof. "PBGC" means the Pension Benefit Guaranty Corporation and any successor thereto. "Pension Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (i) is maintained for employees of BREED or any of its ERISA Affiliates or is assumed by BREED or any of its ERISA Affiliates in connection with any Acquisition or (ii) has at any time been maintained for the employees of BREED or any current or former ERISA Affiliate. "Permitted Indebtedness" has the meaning assigned to such term in Section 9.4 hereof. "Permitted Liens" has the meaning assigned to such term in Section 9.3 hereof. "Person" means an individual, partnership, corporation, trust, limited liability company, unincorporated organization, association, joint venture or a government or agency or political subdivision thereof. "Pledge Agreement" means , collectively or individually as the context may indicate (i) that certain Stock Pledge Agreement dated as of the Closing Date between BREED and the Agent substantially in the form of Exhibit P-1 hereto, (ii) that certain Stock Pledge Agreement dated as of the Closing Date between certain Domestic Subsidiaries and the Agent substantially in the form of Exhibit P-2 hereto, (iii) that certain Stock Pledge Agreement dated as of the Closing Date among Allen K. Breed, Johnnie C. Breed, A. Breed, Ltd., a Texas limited partnership, J. Breed, Ltd., a Texas limited partnership and the Agent substantially in the form of Exhibit P-3 hereto, (iv) any Pledge Agreement, Share Charge, Debenture or similar instrument whereby a Borrower or Domestic Subsidiary creates a security interest in favor of the Agent of not less than 65% of the outstanding capital stock of a Direct Foreign Subsidiary, and (v) any additional Pledge Agreement delivered to the Agent pursuant to Section 8.19, as any of the foregoing may be hereafter amended, supplemented or restated from time to time. "Pledged Stock" has the meaning given to such term in any Pledge Agreement. "Pounds Sterling" means the official currency of the United Kingdom. "Pre-Refunded Municipal Obligations" means obligations of any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated, based on the escrow, in the highest investment rating category by both S&P and Moody's and which have been irrevocably called for redemption and advance refunded through the deposit in escrow of Government Securities or other debt securities which are (i) not callable at the option of the issuer thereof prior to maturity, (ii) irrevocably pledged solely to the payment of all principal and interest on such obligations as the same becomes due, and (iii) in a principal amount and bear such rate or rates of interest as shall be sufficient to pay in full all principal of, interest, and premium, if any, on such obligations as the same becomes due as verified by a nationally recognized firm of certified public accountants. "Prime Rate" means the per annum rate of interest established from time to time by NationsBank as its prime rate, which rate may not be the lowest rate of interest charged by NationsBank to its customers. "Principal Office" means the principal office of NationsBank, presently located at, Independence Center, 15th Floor, NC1 001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services. "Prudential" means Prudential Securities Credit Corp. "Prudential Stock Purchase" means the purchase by Prudential of the Series B Preference Shares pursuant to the Prudential Stock Purchase Agreement. "Prudential Stock Purchase Agreement" means that certain Preferred Stock Purchase Agreement dated as of October 30, 1997 between Prudential and BREED, pursuant to which Prudential has agreed to purchase 4,000,000 shares of Series B Preference Shares of BREED for an aggregate purchase price of $200,000,000. "Prudential Stock Purchase Documents" means the Prudential Stock Purchase Agreement, the Certificate of Designation (as defined in the Prudential Stock Purchase Agreement) and all registration rights agreements, opinions and other material principal documents entered into in connection with the transaction contemplated thereby. "Rate Hedging Obligations" means any and all obligations of BREED or any Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, Dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants and those commonly known as interest rate "swap" agreements; and (ii) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing. "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time. "Reimbursement Obligation" shall mean at any time, the obligation of one or more of the Borrowers with respect to any Letter of Credit to reimburse the Issuing Bank and the Lenders to the extent of their respective Participations (including by the receipt by the Issuing Bank of proceeds of Loans pursuant to Section 3.2) for amounts theretofore paid by the Issuing Bank pursuant to a drawing under such Letter of Credit. "Repurchase Agreement" means a repurchase agreement entered into with any financial institution whose debt obligations or commercial paper are rated "A" by either of S&P or Moody's or "A-1" by S&P or "P- 1" by Moody's. "Required Lenders" means, as of any date, Lenders on such date having Credit Exposures (as defined below) aggregating in excess of 50% of the aggregate Credit Exposures of all Lenders on such date; provided, however, that to the extent NationsBank has more than fifty percent (50%) of the aggregate Credit Exposures, Required Lenders means Lenders on such date having Credit Exposures of 66 2/3% of the aggregate Credit Exposures of all Lenders. For purposes of the preceding sentence, the amount of the "Credit Exposure" of each Lender shall be equal to the aggregate principal amount of the Revolving Loans owing to such Lender plus the aggregate unutilized amounts of such Lender's Revolving Credit Commitment plus the amount of such Lender's Applicable Commitment Percentage of Letter of Credit Outstandings plus the amount of such Lender's Applicable Commitment Percentage of the Term Loan Outstandings; provided that, (i) if any Lender with a Revolving Credit Commitment shall have failed to pay to the Issuing Bank its Applicable Commitment Percentage of any drawing under any Letter of Credit resulting in an outstanding Reimbursement Obligation, such Lender's Credit Exposure attributable to Letters of Credit and Reimbursement Obligations shall be deemed to be held by the Issuing Bank for purposes of this definition. "Reserve Requirement" means, at any time, the maximum rate at which reserves (including, without limitation, any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against in the case of Eurodollar Rate Loans, "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the Eurodollar Rate is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Requirement. "Restricted Payment" means (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock or equity securities of BREED (including the Convertible Debentures) or any of its Subsidiaries (other than those payable or distributable solely to BREED or by a Subsidiary to its parent) now or hereafter outstanding, except a dividend payable solely in shares of a class of stock to the holders of that class; (b) any redemption, conversion, exchange, retirement or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of BREED or any of its Subsidiaries or other equity securities of BREED (other than those payable or distributable solely to BREED) now or hereafter outstanding; (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of BREED or any of its Subsidiaries or other equity securities of BREED now or hereafter outstanding; and (d) any issuance and sale of capital stock of any Subsidiary of BREED (or any option, warrant or right to acquire such stock or other equity securities of BREED) other than to BREED or a Domestic Subsidiary or Guarantor. "Revolving Credit Commitment" means, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrowers up to an aggregate principal amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Revolving Credit Commitment. "Revolving Credit Facility" means the facility described in Section 2.1(a) hereof providing for Loans to the Borrowers by the Lenders in the aggregate principal amount of the Total Revolving Credit Commitment. "Revolving Credit Outstandings" means, as of any date of determination, the aggregate principal amount of all Revolving Loans then outstanding and all interest accrued thereon. "Revolving Credit Termination Date" means (i) the Stated Termination Date or (ii) such earlier date of termination of Lenders' obligations pursuant to Section 10.1 upon the occurrence of an Event of Default, or (iii) such date as the Borrowers may voluntarily and permanently terminate the Revolving Credit Facility by payment in full of all Revolving Credit Outstandings and Letter of Credit Outstandings, termination of the Revolving Credit Commitment and the Letter of Credit Commitment and cancellation (or, pursuant to the terms of the LC Account Agreement, the cash collateralization) of all Letters of Credit. "Revolving Loan" means any borrowing pursuant to an Advance under the Revolving Credit Facility. "Revolving Notes" means, collectively, the promissory notes of the Borrowers evidencing Revolving Loans executed and delivered to the Lenders as provided in Section 2.5(b) substantially in the form of Exhibit O-1, with appropriate insertions as to amounts, dates, and names of Lenders. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. "Security Agreement" means, collectively (or individually as the context may indicate), (i) the Security Agreement dated as of the date hereof among Borrowers, the Guarantors and the Agent, and (ii) any additional Security Agreement delivered to the Agent pursuant to Section 8.19(a) hereof, in each case, substantially in the form attached hereto as Exhibit R, as such Security Agreement may be amended, supplemented or restated from time to time. "Security Instruments" means the Security Agreement, the Intellectual Property Security Agreement, the Pledge Agreement, the Collateral Assignment of Partnership Interests, the Collateral Assignment of Trademark License Agreement, the Mortgages, the Intercompany Note Pledge Agreement, the Lease Assignments, the Landlord Waivers, the Intellectual Property Assignment, the Intercompany Note Subordination Agreement, the LC Account Agreement and all other documents and agreements executed and delivered in connection herewith granting to the Lenders Liens on any assets of the Borrowers, any Guarantor, or any other Person collaterally to secure payment and performance of the Obligations and the Guarantors' Obligations under the Guaranty. "Segment" means a portion of the Term Loan (or all thereof) with respect to which a particular interest rate is (or is proposed to be) applicable. "Series A Preference Shares" means BREED's 1997 Series A Convertible Non-Voting Preferred Shares, par value $.001 per share. "Series B Preference Shares" means BREED's 1997 Series B Convertible Preferred Stock, par value $.001 per share. "Siemens" means Siemens Aktiengesell-Schaft, a German company. "Siemens Stock Purchase" means the purchase by Siemens of the Series A Preference Shares pursuant to the Siemens Stock Purchase Agreement. "Siemens Stock Purchase Agreement" means that certain Stock Purchase Agreement dated as of October 14, 1997 between Siemens and BREED, pursuant to which Siemens has agreed to purchase 4,883,227 shares of Series A Preference Shares of BREED for an aggregate purchase price of $115,000,000. "Siemens Stock Purchase Documents" means the Siemens Stock Purchase Agreement and all shareholder agreements, make-whole agreements, registration rights agreements, opinions and other material principal documents entered into in connection with the transaction contemplated thereby. "Single Employer Plan" means any employee pension benefit plan covered by Title IV of ERISA in respect of which BREED or any Subsidiary is an "employer" as described in Section 4001(b) of ERISA and which is not a Multiemployer Plan. "Solvent" means, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including Contingent Obligations; and (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "Spanish Pesetas" means the official currency of Spain. "Spot Rate of Exchange" means (i) in determining the Dollar Equivalent Amount of a specified Alternative Currency amount as of any date, the spot exchange rate determined by the Agent in accordance with its usual procedures for the purchase by the Agent of Dollars with such Alternative Currency at approximately 10:00 A.M. on the Business Day that is two (2) Business Days prior to such date, and (ii) in determining the Alternative Currency Equivalent Amount of a specified Dollar amount on any date, the spot exchange rate determined by the Agent in accordance with its usual procedures for the purchase by the Agent of such Alternative Currency with Dollars at approximately 10:00 A.M. on the Business Day that is two (2) Business Days prior to such date. "Stated Termination Date" means October 31, 1998. "Stock Option Plans" means, collectively, the BREED Technologies, Inc. 1992 Stock Option Plan, the BREED Technologies, Inc 1992 Director Stock Option Plan, the BREED Technologies, Inc 1992 Employee Stock Purchase Plan and the BREED Technologies, Inc 1994 Stock Incentive Plan. "Subordinated Indebtedness" means all Indebtedness that is subordinated to the Revolving Credit Facility under its own terms or under any separate agreement of subordination, in each case upon terms satisfactory to the Agent. "Subsidiary" means any corporation or other entity in which 50% or more of its outstanding voting stock or 50% or more of all equity interests is owned directly or indirectly by BREED and/or by one or more of BREED's Subsidiaries or is otherwise required under GAAP to have its financial statements consolidated with those of BREED and its Subsidiaries. "Swap Agreement" means one or more agreements between the Borrowers and any Lender with respect to Indebtedness evidenced by any or all of the Notes, on terms mutually acceptable to Borrowers and such Lender, which agreements create Rate Hedging Obligations. "Term Loan" means the loan made pursuant to the Term Loan Facility. "Term Loan Commitment" means, with respect to each Lender, the obligation of such Lender to make the Term Loan to BREED in a principal amount equal to such Lender's Applicable Commitment Percentage of the Total Term Loan Commitment. "Term Loan Facility" means the facility described in Section 2.1(b) providing for a Term Loan to BREED by the Lenders in the original principal amount of the Total Term Loan Commitment. "Term Loan Outstandings" means, as of any date of determination, the aggregate principal amount of the Term Loan then outstanding and all interest accrued thereon. "Term Loan Termination Date" means (i) the Stated Termination Date or (ii) such earlier date of termination of Lenders' obligations pursuant to Section 10.1 upon the occurrence of an Event of Default, or (iii) such date as BREED may voluntarily and permanently terminate the Term Loan Facility by payment in full of all Obligations incurred in connection with the Term Loan. "Term Notes" means, collectively, the promissory notes of BREED evidencing Term Loans executed and delivered to the Lenders as provided in Section 2.5(a) substantially in the form of Exhibit O-2, with appropriate insertions as to amounts, dates and names of Lenders. "Termination Event" means: (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (unless the notice requirement has been waived by applicable regulation); or (ii) the withdrawal of BREED or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA; or (iii) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA; or (iv) the institution of proceedings to terminate a Pension Plan by the PBGC; or (v) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the partial or complete withdrawal of BREED or any ERISA Affiliate from a Multiemployer Plan; or (vii) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or (ix) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA; or (x) any event or condition with respect to any Employee Benefit Plan which is regulated by any Foreign Benefit Law that results in such Employee Benefit Plan's termination or the revocation of the Employee Benefit Plan's authority to operate under the applicable Foreign Benefit Law. "Total Alternative Currency Sublimit" means $75,000,000. "Total Credit Commitment" means a principal amount equal to the Total Revolving Credit Commitment plus the Total Term Loan Commitment. "Total Letter of Credit Commitment" means an amount not to exceed $25,000,000. "Total Revolving Credit Commitment" means a principal amount equal to $300,000,000, as reduced from time to time in accordance with Section 2.7. "Total Term Loan Commitment" means a principal amount equal to $600,000,000. "Type" shall mean any type of Loan (i.e., a Base Rate Loan or a Eurodollar Rate Loan). "Voting Stock" means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. 1.2. Rules of Interpretation. (a) All accounting terms not specifically defined herein shall have the meanings assigned to such terms and shall be interpreted in accordance with GAAP applied on a Consistent Basis. (b) Each term defined in Article 1 or 9 of the Florida Uniform Commercial Code shall have the meaning given therein unless otherwise defined herein, except to the extent that the Uniform Commercial Code of another jurisdiction is controlling, in which case such terms shall have the meaning given in the Uniform Commercial Code of the applicable jurisdiction. (c) The headings, subheadings and table of contents used herein or in any other Loan Document are solely for convenience of reference and shall not constitute a part of any such document or affect the meaning, construction or effect of any provision thereof. (d) Except as otherwise expressly provided, references herein to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are references to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules in or to this Agreement. (e) All definitions set forth herein or in any other Loan Document shall apply to the singular as well as the plural form of such defined term, and all references to the masculine gender shall include reference to the feminine or neuter gender, and vice versa, as the context may require. (f) When used herein or in any other Loan Document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (g) References to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. (h) All dates and times of day specified herein shall refer to such dates and times at Charlotte, North Carolina. (i) Each of the parties to the Loan Documents and their counsel have reviewed and revised, or requested (or had the opportunity to request) revisions to, the Loan Documents, and any rule of construction that ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Loan Documents and all exhibits, schedules and appendices thereto. (j) Any reference to an officer of BREED or any other Person by reference to the title of such officer shall be deemed to refer to each other officer of such Person, however titled, exercising the same or substantially similar functions. (k) All references to any agreement or document as amended, modified or supplemented, or words of similar effect, shall mean such document or agreement, as the case may be, as amended, modified or supplemented from time to time only as and to the extent permitted therein and in the Loan Documents. ARTICLE II The Credit Facilities 2.1. Loans. (a) Revolving Loan. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Advances in Dollars or an Alternative Currency (as specified in the respective Borrowing Notice) to the applicable Borrower or Borrowers under the Revolving Credit Facility from time to time from the Closing Date until the Revolving Credit Termination Date on a pro rata basis as to the total borrowing requested by the applicable Borrower or Borrowers on any day determined by such Lender's Applicable Commitment Percentage up to but not exceeding a Dollar Value equal to the Revolving Credit Commitment of such Lender, provided, however, that the Lenders will not be required and shall have no obligation to make any such Advance (i) so long as a Default or an Event of Default has occurred and is continuing or (ii) if the Agent has accelerated the maturity of any of the Notes as a result of an Event of Default; provided further, however, that immediately after giving effect to each such Advance, (u) the Dollar Value of the principal amount of Revolving Credit Outstandings plus Letter of Credit Outstandings shall not exceed the Total Revolving Credit Commitment and (v) the Dollar Value of the principal amount of Loans in an Alternative Currency shall not exceed the Total Alternative Currency Sublimit. Within such limits, the Borrowers may borrow, repay and reborrow under the Revolving Credit Facility on a Business Day from the Closing Date until, but (as to borrowings and reborrowings) not including, the Revolving Credit Termination Date; provided, however, that (w) no Eurodollar Rate Loan shall be made which has an Interest Period that extends beyond the Stated Termination Date and (x) each Eurodollar Rate Loan may, subject to the provisions of Section 2.7, be repaid only on the last day of the Interest Period with respect thereto unless such payment is accompanied by the additional payment, if any, required by Section 5.5. The Borrowers agree that (y) if at any time the Dollar Value of Revolving Credit Outstandings plus the Dollar Value of Letter of Credit Outstandings shall exceed the Total Revolving Credit Commitment, the Borrowers shall immediately reduce the outstanding principal amount of the Revolving Loans such that, as a result of such reduction, the Dollar Value of Revolving Credit Outstandings plus the Dollar Value of Letter of Credit Outstandings shall not exceed the Total Revolving Credit Commitment and (z) if at any time the Dollar Value of Loans in an Alternative Currency exceed the Total Alternative Currency Sublimit by 105%, the Borrowers shall immediately make a Rate Adjustment Payment as set forth below in Section 2.1(c). (b) Term Loan. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make an Advance of the Term Loan in Dollars (as specified in the Borrowing Notice) to BREED under the Term Loan Facility on the Closing Date on a pro rata basis determined by its Applicable Commitment Percentage up to the Term Loan Commitment of such Lender. The Term Loan shall be available in a single draw on the Closing Date and shall be due and payable on the Stated Termination Date. The principal amount of each Segment of the Term Loan outstanding hereunder from time to time shall bear interest, at BREED's election, at an interest rate per annum equal to the Base Rate or the Eurodollar Rate; provided, that (x) no Eurodollar Rate Segment shall have an Interest Period that extends beyond the Stated Termination Date, and (y) each Eurodollar Rate Segment may, subject to the provisions of Section 2.7, be repaid only on the last day of the Interest Period with respect thereto unless such payment is accompanied by the additional payment, if any, required by Section 5.5. BREED agrees that if at any time the Term Loan Outstandings shall exceed the Total Term Loan Commitment, the Borrowers shall immediately reduce the outstanding principal amount of the Term Loans such that, as a result of such reduction, the Term Loan Outstandings shall not exceed the Total Term Loan Commitment. (c) Amounts. (i) Each request for an Advance in an Alternative Currency under a Borrowing Notice shall constitute the applicable Borrower's or Borrowers' request for a Loan of the Dollar Value of the amount of the Alternative Currency specified in such Borrowing Notice and for such Loan to be made available by the Lenders to the applicable Borrower or Borrowers in the Alternative Currency Equivalent Amount of such Dollar Value (determined based on the Advance Date Exchange Rate applicable to such Advance). The principal amount outstanding on any Loan shall be recorded in the Agent's records in Dollars (in the case of an Advance in an Alternative Currency as if the Loan had initially been made in Dollars), based on the amount of any Loan in Dollars and on the Dollar Value of the initial Advance in an Alternative Currency, as reduced from time to time by the Dollar Equivalent Amount (based on the Advance Date Exchange Rate applicable to such Advance) of any principal payments with respect to such Advance. Loans in an Alternative Currency shall be limited to Revolving Loans which are Eurodollar Rate Loans. The Term Loan shall at all times be in Dollars. In the event a Eurodollar Rate Loan of an Alternative Currency is Continued, such election to Continue the Eurodollar Rate Loan shall be treated as an Advance and the Agent shall notify the applicable Borrower or Borrowers and the Lenders of the Advance Date Exchange Rate, Interest Period and the Eurodollar Rate for such Continued Eurodollar Rate Loan. In such event, the Lenders shall each be deemed to have made an Advance to the applicable Borrower or Borrowers of its Applicable Commitment Percentage of such Loan of an Alternative Currency and the Agent shall apply the Advance Date Exchange Rate for such new Interest Period to such Continued Alternative Currency Equivalent Amount to determine the new Dollar Value of such Eurodollar Rate Loan and shall adjust its books and the Outstandings. In the event that such adjustment with respect to a Continued Loan would cause the total Dollar Value of Revolving Credit Outstandings plus the Dollar Value of Letter of Credit Outstandings to exceed the Total Revolving Credit Commitment or the total Dollar Value of all Loans in an Alternative Currency to exceed the Total Alternative Currency Sublimit by 105%, the Borrowers shall, immediately on the effective date of such Continuation, repay (a "Rate Adjustment Payment") the portion of such Continued Loan (applying the new Advance Date Exchange Rate) necessary to ensure that the total Dollar Value of all Revolving Credit Outstandings plus the Dollar Value of Letter of Credit Outstandings does not exceed the Total Revolving Credit Commitment and the total Dollar Value of Loans in an Alternative Currency does not exceed the Total Alternative Currency Sublimit by 105%. Such Rate Adjustment Payments shall be accompanied by payment of all amounts due pursuant to Section 5.5 hereof as a result of such Rate Adjustment Payment. For the purposes of determining the maximum amount of Revolving Credit Outstandings and Letter of Credit Outstandings and compliance with the Total Alternative Currency Sublimit hereunder, it is intended by the parties that all Loans shall be the functional equivalent of Loans made and repaid (based on the applicable Advance Date Exchange Rate for each Advance) in Dollars. It is recognized that one or more Lenders may elect to record Loans in Alternative Currencies. The Agent shall maintain records sufficient to identify at any time, (A) the Advance Date Exchange Rate with respect to each Advance and (B) the portion of the Revolving Credit Outstandings attributable to each Advance. (ii) The aggregate unpaid principal amount (including with respect to Loans of Alternative Currencies the total Dollar Value) of (A) the Revolving Credit Outstandings plus Letter of Credit Outstandings shall not exceed at any time the Total Revolving Credit Commitment, (B) the Term Loan Outstandings shall not exceed at any time the Total Term Loan Commitment, and (C) Loans in an Alternative Currencies shall not exceed the Total Alternative Currency Sublimit by 105%, and, in the event there shall be outstanding any such excess in any of the foregoing instances, the Borrowers shall immediately make such payments and prepayments as shall be necessary to comply with this restriction. Each Loan hereunder, other than Base Rate Refunding Loans, and each Conversion under Section 2.8, shall be (A) in the case of Loans made in Dollars, in an amount of at least $5,000,000, and, if greater than $5,000,000, an integral multiple of $1,000,000, and (B) in the case of Loans made in an Alternative Currency, in an amount of at least $5,000,000 (or the Alternative Currency Equivalent Amount thereof), and, if greater than $5,000,000, an integral multiple of $1,000,000 (or the Alternative Currency Equivalent Amount thereof). (d) Advances and Rate Selection. (i) An Authorized Representative shall give the Agent (A) at least three (3) Business Days' irrevocable written notice by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection Notice (as applicable) with appropriate insertions, effective upon receipt, of each Eurodollar Rate Loan (whether representing an additional borrowing hereunder or the Conversion of a borrowing hereunder) prior to 11:00 A.M. and (B) irrevocable written notice by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection Notice (as applicable) with appropriate insertions, effective upon receipt, of each Loan (other than Base Rate Refunding Loans to the extent the same are effected without notice pursuant to Section 2.1(d)(iv)) that is a Base Rate Loan (whether representing an additional borrowing hereunder or the Conversion of borrowing hereunder) prior to 11:00 A.M. on the day of such proposed Base Rate Loan. Each such notice shall specify the amount of the borrowing, whether Dollar or Alternative Currency (in the case of a Revolving Loan), the Type of Loan (Base Rate or Eurodollar Rate), the date of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be used in the computation of interest. Notice of receipt of such Borrowing Notice or Interest Rate Selection Notice, as the case may be, together with the amount of each Lender's portion of an Advance or Segment requested, Continued, or Converted thereunder, shall be promptly provided by the Agent to each Lender by telefacsimile transmission, but (provided the Agent shall have received such notice by 11:00 A.M.) not later than 1:00 P.M. on the same day as the Agent's receipt of such notice. At approximately 10:00 A.M. two (2) Business Days preceding the date specified for an Advance, Continuation or Conversion of an Alternative Currency, the Agent shall determine the Advance Date Exchange Rate and the applicable Eurodollar Rate. Not later than 10:45 A.M. two (2) Business Days preceding the date specified for each Advance, Continuation or Conversion of an Alternative Currency, the Agent shall provide the applicable Borrower or Borrowers and each Lender notice by telefacsimile transmission of the Advance Date Exchange Rate applicable to such Advance, Continuation or Conversion and the applicable Alternative Currency Equivalent Amount of the Revolving Loan or Loans required to be made by each Lender on such date, and the Dollar Value of such Revolving Loan or Loans and the applicable Eurodollar Rate. (ii) (A) In the case of Advances in Dollars, not later than 2:00 P.M. on the date specified for each borrowing under this Section 2.1, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Advance or Advances to be made by it on such day available by wire transfer to the Agent in the amount of its pro rata share, determined according to such Lender's Applicable Commitment Percentage of the Loan or Loans to be made on such day. Such wire transfer shall be directed to the Agent at the Principal Office and shall be in the form of Dollars constituting immediately available funds. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the applicable Borrower or Borrowers by delivery of the proceeds thereof to the Borrowers' Account or otherwise as shall be directed in the applicable Borrowing Notice by the Authorized Representative and reasonably acceptable to the Agent. (B) In the case of Advances of an Alternative Currency, not later than 10:00 A.M. on the date specified for each Advance, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Revolving Loan or Loans to be made by it on such day available to the applicable Borrower or Borrowers at the Funding Bank, to the account of the Agent with the Funding Bank. The amount so received by the Funding Bank shall, subject to the terms and conditions of the Loan Documents and upon instruction from the Agent to the Funding Bank on the same day or immediately preceding day but no later than 10:00 A.M., be made available to the applicable Borrower or Borrowers by delivery of the Alternative Currency Equivalent Amount to the Borrowers' account with the Funding Bank. (iii) The Borrowers shall have the option to elect the duration of the initial and any subsequent Interest Periods and to Continue or Convert the Loans in accordance with Section 2.8. Eurodollar Rate Loans and Base Rate Loans may be outstanding at the same time, provided, however, there shall not be outstanding at any one time Eurodollar Rate Loans having more than ten (10) different Interest Periods. If the Agent does not receive a Borrowing Notice or an Interest Rate Selection Notice giving notice of election of the duration of an Interest Period or of Conversion of any Loan to or Continuation of a Loan as a Eurodollar Rate Loan by the time prescribed by Section 2.1(d) or 2.8, the applicable Borrower or Borrowers shall be deemed to have elected to Convert such Loans to (or continue such Loan as) a Base Rate Loan until the applicable Borrower or Borrowers notifies the Agent in accordance with Section 2.8. (iv) Notwithstanding the foregoing, if a drawing is made under any Letter of Credit, such drawing is honored by the Issuing Bank prior to the Stated Termination Date, and the applicable Borrower or Borrowers shall not immediately fully reimburse the Issuing Bank in respect of such drawing, (A) provided that the conditions to making a Revolving Loan as herein provided shall then be satisfied, the Reimbursement Obligation arising from such drawing shall be paid to the Issuing Bank by the Agent without the requirement of notice to or from the applicable Borrower or Borrowers from immediately available funds which shall be advanced as a Base Rate Refunding Loan by each Lender under the Revolving Credit Facility in an amount equal to such Lender's Applicable Commitment Percentage of such Reimbursement Obligation, and (B) if the conditions to making a Revolving Loan as herein provided shall not then be satisfied, each of the Lenders shall fund by payment to the Agent (for the benefit of the Issuing Bank) in immediately available funds the purchase from the Issuing Bank of their respective Participations in the related Reimbursement Obligation based on their respective Applicable Commitment Percentages of the Total Letter of Credit Commitment. If a drawing is presented under any Letter of Credit in accordance with the terms thereof and the Borrowers shall not immediately reimburse the Issuing Bank in respect thereof, then notice of such drawing or payment shall be provided promptly by the Issuing Bank to the Agent and the Agent shall promptly provide notice to each Lender by telephone or telefacsimile transmission. If notice to the Lenders of a drawing under any Letter of Credit is given by the Agent at or before 1:00 any Business Day, each Lender shall, pursuant to the conditions specified in this Section 2.1(d)(iv), either make a Base Rate Refunding Loan or fund the purchase of its Participation in the amount of such Lender's Applicable Commitment Percentage of such drawing or payment and shall pay such amount to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds before 2:00 P.M. on the same Business Day. If notice to the Lenders of a drawing under a Letter of Credit is given by the Agent after 1:00 on any Business Day, each Lender shall, pursuant to the conditions specified in this Section 2.1(d)(iv), either make a Base Rate Refunding Loan or fund the purchase of its Participation in the amount of such Lender's Applicable Commitment Percentage of such drawing or payment and shall pay such amount to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds before 12:00 noon on the next following Business Day. Any such Base Rate Refunding Loan shall be advanced as, and shall continue as, a Base Rate Loan unless and until the applicable Borrower or Borrowers Converts such Base Rate Loan in accordance with the terms of Section 2.8. (e) Notwithstanding any other provision of this Agreement, except as hereinafter provided, each Borrower shall be jointly and severally liable as primary obligor and not merely as surety for repayment of all Obligations arising under the Loan Documents. Such joint and several liability shall apply to each Borrower regardless of whether (i) any Loan was only requested by or made to another Borrower or the proceeds of any Loan were used only by another Borrower, (ii) any Letter of Credit was issued on the application of another Borrower, (iii) any interest rate election was made only by another Borrower, or (iv) any indemnification obligation or any other obligation arose only as a result of the actions of another Borrower; provided the liability of each of the Borrowers other than BREED under this Agreement, the Notes and the other Loan Documents shall be limited to the maximum amount of the Obligations under the Revolving Credit Facility for which such other Borrower may be liable without violating any applicable fraudulent conveyance, fraudulent transfer or comparable laws. Each Borrower shall retain any right of contribution arising under applicable law against the other Borrowers as the result of the satisfaction of any Obligations; provided, no Borrower shall assert such right of contribution against any other Borrower until the Obligations shall have been paid in full. Notwithstanding anything herein to the contrary, a Borrowing Subsidiary which is a Foreign Subsidiary shall be liable hereunder only for Advances, Loans and Reimbursement Obligations made by it or on its behalf hereunder together with interest relating thereto and fees and expenses arising hereunder. Without limiting the foregoing provisions of this Section 2.1(e), each of the Borrowers, other than a Borrowing Subsidiary which is a Foreign Subsidiary, hereby irrevocably, absolutely and unconditionally guarantees the full and punctual payment or performance when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of each other Borrower whether owing to the Agent or any Lender. This guarantee constitutes a guaranty of payment and not of collection. The liability of each of the Borrowers other than BREED and a Borrowing Subsidiary which is a Foreign Subsidiary under the immediately preceding two sentences shall be limited to the maximum amount for which such Borrower may be liable without violating any applicable fraudulent conveyance, fraudulent transfer or comparable laws. It is the intention of the parties that with respect to each Borrower its obligations hereunder and under the other Loan Documents shall be absolute, unconditional and irrevocable irrespective of: (i) any lack of validity, legality or enforceability of this Agreement, any Note, any other Loan Document as to any other Borrowers; (ii) the failure of the Agent or any Lender: (A) to enforce any right or remedy against any other Borrower or any other Person under the provisions of this Agreement, any Note, any other Loan Document or otherwise, or (B) to exercise any right or remedy against any guarantor of, or collateral securing, any Obligations; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other extension, compromise or renewal of any Obligations with respect to any other Borrower; (iv) any reduction, limitation, impairment or termination of any Obligations with respect to any other Borrower or any other Person for any reason including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Borrower hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise or unenforceability of, or any other event or occurrence affecting, any Obligations with respect to any other Borrower; (v) any addition, exchange, release, surrender or nonperfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from , any guaranty, held by the Agent, any Lender or any holder of any Note securing any of the Obligations; or (vi) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any other Borrower, any surety or any guarantor. Each Borrower (except Borrowing Subsidiaries which are Foreign Subsidiaries) agrees that its joint and several liability hereunder shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must be restored by the Agent, any Lender or any holder of any Note, upon the insolvency, bankruptcy or reorganization of any other Borrower as though such payment had not been made. Each Borrower hereby expressly waives: (a) notice of the Lenders' acceptance of this Agreement; (b) notice of the existence or creation or non-payment of all or any of the Obligations; (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever other than notices expressly provided for in this Agreement or by applicable law and (d) all diligence in collection or protection of or realization upon the Obligations or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing. No delay on any of the Lenders' or the Agent's part in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by any of the Lenders or the Agent of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of the Agent or any of the Lenders permitted hereunder shall in any way affect or impair any of their rights or any of their obligations to any of the Borrowers under this Agreement (except as otherwise waived, modified, or amended). 2.2. Payment of Interest. (a) The applicable Borrower or Borrowers shall pay interest to the Agent for the account of each Lender on the outstanding and unpaid principal amount of each Loan made by such Lender for the period commencing on the date of such Loan until such Loan shall be due (i) in the case of Loans made in Dollars, at the then applicable Base Rate for Base Rate Loans or applicable Eurodollar Rate for Eurodollar Rate Loans, as designated by the Authorized Representative pursuant to Section 2.1, such payments to be made in Dollars, and (ii) in the case of Loans made in Alternative Currencies, at the applicable Eurodollar Rate, such payments to be made in the appropriate Alternative Currency; provided, however, that if any amount shall not be paid when due (at maturity, by acceleration or otherwise), all amounts outstanding hereunder shall bear interest thereafter at the Default Rate. (b) Interest on each Loan shall be computed on the basis of a year of 360 days and calculated in each case for the actual number of days elapsed. Interest on each Loan shall be paid (i) quarterly in arrears on the last Business Day of each March, June, September and December, commencing December 31, 1997 for each Base Rate Loan, (ii) on the last day of the applicable Interest Period for each Eurodollar Rate Loan and (iii) upon payment in full of the principal amount of such Loan. 2.3. Payment of Principal. (a) Manner of Payment. The principal amount of the Revolving Credit Outstandings shall be due and payable to the Agent for the benefit of each Lender in full on the Revolving Credit Termination Date, or earlier as specifically provided herein. The principal amount of the Term Loan Outstandings shall be due and payable to the Agent for the benefit of each Lender in full on the Stated Termination Date, or earlier as specifically provided herein. The principal amount of all Outstandings shall be recorded in Dollars as set forth in Section 2.1. The repayment of such principal amount shall be made in the appropriate Alternative Currency as follows: the portion of the Outstandings attributable to each specified Advance (or the Continuation or Conversion thereof) (as determined from the Agent's records) shall be repaid in the same Alternative Currency as such Advance. The principal amount of any Base Rate Loan may be prepaid in Dollars in whole or in part at any time. Other than prepayments made pursuant to Section 2.3(b), the principal amount of any Eurodollar Rate Loan may be prepaid only at the end of the applicable Interest Period unless the applicable Borrower or Borrowers shall pay to the Agent for the account of the Lenders the additional amount, if any, required under Section 5.5. All prepayments of Loans made by the Borrowers shall be in the amount of $1,000,000 (or the Alternative Currency Equivalent Amount thereof) or such greater amount which is an integral multiple of $1,000,000 (or the Alternative Currency Equivalent Amount thereof), or the amount equal to all Outstandings, or such other amount as necessary to comply with Section 2.1(c) or Section 2.8. (b) Mandatory Prepayments. The Borrowers shall make the following required prepayments, each such payment to be made to the Agent for the benefit of the Lenders within the time period specified below and with respect to any Loan in an Alternative Currency, in the Alternative Currency Equivalent Amount of the amount due: (i) Equity Offerings. BREED shall make, or shall cause each applicable Subsidiary to make, a prepayment from the Net Proceeds of any Equity Offering in an amount equal to one hundred percent (100%) of such Net Proceeds. Each such prepayment shall be made within five (5) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business' Days written notice to the Agent, and shall include within one (1) Business Day of repayment a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of the Net Proceeds. (ii) Debt Offerings. BREED shall make, or shall cause each applicable Subsidiary to make, a prepayment from the Net Proceeds of any Debt Offering in an amount equal to one hundred percent (100%) of such Net Proceeds. Each such prepayment shall be made within five (5) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business' Days written notice to the Agent, and shall include within one (1) Business Day of repayment a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of the Net Proceeds. (iii) Asset Dispositions. BREED shall make, or shall cause each applicable Subsidiary to make, a prepayment from the Net Proceeds of any Asset Disposition in an amount equal to one hundred percent (100%) of such Net Proceeds. Each such prepayment shall be made within five (5) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business' Days written notice to the Agent, which notice shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of the Net Proceeds. Notwithstanding the foregoing, however, an aggregate amount of up to $10,000,000 of the Net Proceeds from the sale of nonproductive foreign assets may be excluded from the payment required under this Section 2.3(b)(iii) to the extent that such amount is used for severance payments to former employees of such foreign assets who were released from employment in connection with such sale; provided, that upon receipt of the Operating Plan, the Agent may, but in no event shall be required to, in its sole discretion, increase the aggregate amount so excluded as appropriate; provided, further, that any amount so excluded shall be included in the calculations required by the preceding sentence. (iv) Operating Plan. From and after the date of approval of the Operating Plan, BREED shall be entitled to retain an aggregate of $20,000,000 of Net Proceeds resulting from Asset Dispositions received by it or its Subsidiaries subsequent to such date of approval. All mandatory prepayments made pursuant to this Section 2.3(b) shall be applied first to repay all Term Loans until the Term Loan Outstandings have been paid in full and then to permanently reduce the Total Revolving Credit Commitment. Any prepayment of an Eurodollar Rate Loan pursuant to this Section 2.3(b) other than on the last day of an Interest Period shall be accompanied by the additional payment, if any, required by Section 5.5 hereof. 2.4. Non-Conforming Payments. (a) Each payment of principal (including any prepayment) and payment of interest and fees, and any other amount required to be paid to the Lenders with respect to the Loans, shall be made to the Agent at the Principal Office, for the account of each Lender, in Dollars in the case of Loans made in Dollars and in the same Alternative Currency in the case of Loans made in Alternative Currencies, in immediately available funds before 12:30 P.M. on the date such payment is due. The applicable Borrower or Borrowers shall give the Agent one (1) Business Days' prior written notice of any payment of principal, such notice to be given prior to 11:00 A.M. and to specify (i) the date the payment will be made and (ii) the Loan to which payment relates. The Agent may, at the election of the applicable Borrower or Borrowers, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the Borrowers with the Agent. (b) The Agent shall deem any payment made by or on behalf of the Borrowers hereunder that is not made both (i) in Dollars in the case of Loans made in Dollars and in the required Alternative Currency in the case of Loans made in Alternative Currencies in immediately available funds and (ii) prior to 12:30 P.M. on the date payment is due to be a non-conforming payment. Any such payment shall not be deemed to be received by the Agent until the later of (i)the time such funds become available funds and (ii)the next Business Day. Any non-conforming payment may constitute or become a Default or Event of Default at the determination of the Agent. The Agent shall give prompt telephonic or telefacsimile notice to the applicable Borrower or Borrowers if a non-conforming payment constitutes a Default or an Event of Default. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until the later of (x) the date such funds become available funds or (y) the next Business Day at the Default Rate from the date such amount was due and payable. (c) In the event that any payment hereunder or under the Notes becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless provided otherwise under clause (ii) of the definition of "Interest Period"; provided that interest shall continue to accrue during the period of any such extension and provided further, that in no event shall any such due date be extended beyond the Stated Termination Date. 2.5. Notes. (a) Term Loans made by each Lender shall be evidenced by a Note in substantially the form set forth as Exhibit O-1 payable to the order of such Lender in the respective amount of its Applicable Commitment Percentage of the Total Term Loan Commitment, which Note shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by BREED. (b) Revolving Loans made by each Lender shall be evidenced by a Note in substantially the form of Exhibit O-2 payable to the order of such Lender in the respective amount of its Applicable Commitment Percentage of the Total Revolving Credit Commitment, which Note shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrowers. 2.6. Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Loans and the fees described in Section 2.10 shall be made to the Agent for the account of the Lenders pro rata based on their Applicable Commitment Percentages, (b) all payments to be made by the Borrowers for the account of each of the Lenders on account of principal, interest and fees, shall be made without diminution, setoff, recoupment or counterclaim, and (c) the Agent will promptly distribute to the Lenders in immediately available funds payments received in fully collected, immediately available funds from the Borrowers. 2.7. Voluntary Commitment Reductions. The Borrowers shall, by notice from an Authorized Representative, have the right from time to time but not more frequently than once each calendar month, upon not less than three (3) Business Days' written notice to the Agent, effective upon receipt, to repay Term Loans or reduce the Total Revolving Credit Commitment. The Agent shall give each Lender, within one (1) Business Day of receipt of such notice, telefacsimile notice, or telephonic notice (confirmed in writing), of such reduction. Each such reduction shall be in the aggregate amount of $5,000,000 (or the Alternative Currency Equivalent Amount thereof in the case of a Revolving Loan) or such greater amount which is in an integral multiple of $5,000,000 (or the Alternative Currency Equivalent Amount thereof in the case of a Revolving Loan), or the entire remaining Total Revolving Credit Commitment, and shall permanently reduce the Total Revolving Credit Commitment. Each reduction of the Total Revolving Credit Commitment shall be accompanied by payment of the Loans to the extent that the principal amount of Revolving Credit Outstandings plus Letter of Credit Outstandings exceeds the Total Revolving Credit Commitment after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. No such repayment or reduction shall result in the payment of any Eurodollar Rate Loan other than on the last day of the Interest Period of such Eurodollar Rate Loan unless such prepayment is accompanied by amounts due, if any, under Section 5.5. 2.8. Conversions and Elections of Subsequent Interest Periods. Subject to the limitations set forth below and in Article V, the applicable Borrower or Borrowers may: (a) upon delivery, effective upon receipt, of a properly completed Interest Rate Selection Notice to the Agent on or before 11:00 A.M. on any Business Day, Convert all or a part of Eurodollar Rate Loans to Base Rate Loans on the last day of the Interest Period for such Eurodollar Rate Loans; and (b) provided that no Default or Event of Default shall have occurred and be continuing, upon delivery, effective upon receipt, of a properly completed Interest Rate Selection Notice to the Agent on or before 11:00 A.M. three (3) Business Days' prior to the date of such election or Conversion: (i) elect a subsequent Interest Period for all or a portion of Eurodollar Rate Loans to begin on the last day of the then current Interest Period for such Eurodollar Rate Loans; and (ii) Convert Base Rate Loans to Eurodollar Rate Loans on any Business Day; (iii) elect that any Eurodollar Rate Loan be converted from an Alternative Currency into another Alternative Currency on the last day of the Interest Period for any Eurodollar Rate Loan. Each election and Conversion pursuant to this Section 2.8 shall be subject to the limitations on Eurodollar Rate Loans set forth in the definition of "Interest Period" herein and in Sections 2.1, 2.3 and Article V. The Agent shall give written notice to each Lender of such notice of election or Conversion prior to 3:00 P.M. on the day such notice of election or Conversion is received. All such Continuations or Conversions of Loans shall be effected pro rata based on the Applicable Commitment Percentages of the Lenders. 2.9. Increase and Decrease in Amounts. The amount of the Total Revolving Credit Commitment which shall be available to the Borrowers as Advances shall be reduced by the aggregate amount of Letters of Credit Outstandings. 2.10. Commitment Fee. For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, the Borrowers agree to pay to the Agent, for the prorata benefit of the Lenders based on their Applicable Commitment Percentages, an unused fee equal to the Commitment Fee multiplied by the average daily amount by which the Total Revolving Credit Commitment exceeds the sum of (i) Revolving Credit Outstandings plus (ii) Letter of Credit Outstandings. Such fees shall be due in arrears on the last Business Day of each March,June, September and December commencing December 31,1997 to the Revolving Credit Termination Date (but excluding such day for the purpose of computing such fee). Notwithstanding the foregoing, so long as any Lender fails to make available any portion of its Revolving Credit Commitment when requested, such Lender shall not be entitled to receive payment of its pro rata share of such fee until such Lender shall make available such portion. Such fee shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. 2.11. Deficiency Advances. No Lender shall be responsible for any default of any other Lender in respect to such other Lender's obligation to make any Loan or fund its purchase of any Participation hereunder nor shall the Revolving Credit Commitment or Term Loan Commitment of any Lender hereunder be increased as a result of such default of any other Lender. Without limiting the generality of the foregoing, in the event any Lender shall fail to advance funds to the applicable Borrower or Borrowers as herein provided, the Agent may in its discretion, but shall not be obligated to, advance under the Note in its favor as a Lender all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such other Lender would have been entitled had it made such advance under its Note; provided that, upon payment to the Agent from such other Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the Agent by the applicable Borrower or Borrowers on each Loan comprising the deficiency advance at the interest rate per annum for overnight borrowing by the Agent from the Federal Reserve Bank, then such payment shall be credited against the applicable Note of the Agent in full payment of such deficiency advance and the applicable Borrower or Borrowers shall be deemed to have borrowed the amount of such deficiency advance from such other Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by the applicable Borrower or Borrowers thereon. 2.12. Use of Proceeds. The proceeds of the Loans made pursuant to the Revolving Credit Facility hereunder shall be used by the Borrowers (i) to purchase the Acquired Business pursuant to the Asset Purchase Agreement, (ii) to refinance existing Indebtedness and the fees and expenses related to such refinancing, and (iii) for general working capital needs and other corporate purposes. 2.13. Designation of Borrowing Subsidiaries. With the consent of the Agent, BREED may from time to time designate any Foreign Subsidiary of BREED which has not joined in the execution of this Agreement as a "Borrowing Subsidiary" hereunder under the Revolving Credit Facility by causing such Foreign Subsidiary to execute and deliver a duly completed Assumption Letter in the form attached hereto as Exhibit U to the Agent, with the written consent of BREED and the Agent at the foot thereof. Upon such execution, delivery and consent such Foreign Subsidiary shall for all purposes be a party hereto as a Borrowing Subsidiary as fully as if it had executed and delivered this Agreement. So long as all Obligations of any Borrowing Subsidiary under this Agreement shall have been paid in full, such Borrowing Subsidiary may, by not less than five (5) Business Days' prior notice to the Agent (which shall promptly notify the Lenders thereof), terminate its status as a "Borrowing Subsidiary" hereunder. ARTICLE III Letters of Credit 3.1. Letters of Credit. (a) The Issuing Bank agrees, subject to the terms and conditions of this Agreement, upon request of a Borrower or Borrowers to issue from time to time for the account of the Borrower or Borrowers Letters of Credit upon delivery to the Issuing Bank of an Application and Agreement for Letter of Credit relating thereto in form and content acceptable to the Issuing Bank; provided, that (i) the Letter of Credit Outstandings shall not exceed the Total Letter of Credit Commitment and (ii) no Letter of Credit shall be issued if, after giving effect thereto, Letter of Credit Outstandings plus the Revolving Credit Outstandings shall exceed the Total Revolving Credit Commitment. No Letter of Credit shall have an expiry date (including all rights of a Borrower or any beneficiary named in such Letter of Credit to require renewal) or payment date occurring later than the earlier to occur of one year after the date of its issuance or the fifth Business Day prior to the Stated Termination Date. (b) Upon completion of a proper Application and Agreement for Letter of Credit, NationsBank may issue upon request and for the account of an applicable Borrower or Borrowers Letters of Credit payable in an Alternative Currency. For purposes of determining Outstanding Letters of Credit, any Letter of Credit issued in an Alternative Currency shall be recorded in the Agent's account in Dollars based on the Alternative Currency Equivalent Amount on the date of issuance of such Letter of Credit; provided, however, that the Agent shall determine the Dollar Equivalent Amount of any Letter of Credit issued in an Alternative Currency on the date of any Advance or Conversion for the purpose of determining the amount of Revolving Credit Outstandings and compliance with the Total Alternative Currency Sublimit. Any draw on a Letter of Credit issued in an Alternative Currency shall be repaid in the same Alternative Currency Equivalent Amount (determined based on the Spot Rate of Exchange on the date of drawing under the Letter of Credit). In the event that the Agent shall determine at any time that (i) the Dollar Value of outstanding Loans and Outstanding Letters of Credit, in each case determined on the date of each Advance or issuance of a Letter of Credit, made or issued in Alternative Currencies exceeds the Total Alternative Currency Sublimit or (ii) that the sum of the Dollar Value described in subclause (i) plus outstanding Revolving Loans and Outstanding Letters of Credit made or issued in Dollars exceeds the Total Revolving Credit Commitment, then the Borrowers shall immediately repay Revolving Loans so that after giving effect to such payment the outstanding Revolving Loans plus Outstanding Letters of Credit do not exceed the Total Revolving Credit Commitment and the Loans advanced in an Alternative Currency plus Outstanding Letters of Credit issued in and Alternative Currency do not exceed the Total Alternative Currency Sublimit. 3.2. Reimbursement. (a) The applicable Borrower or Borrowers hereby unconditionally agrees to pay to the Issuing Bank immediately on demand at the Principal Office all amounts required to pay all drafts drawn or purporting to be drawn under the Letters of Credit and all reasonable expenses incurred by the Issuing Bank in connection with the Letters of Credit, and in any event and without demand to place in possession of the Issuing Bank (which shall include Advances under the Revolving Credit Facility if permitted by Section 2.1(a)) sufficient funds to pay all debts and liabilities arising under any Letter of Credit. The Issuing Bank agrees to give the applicable Borrower or Borrowers prompt notice of any request for a draw under a Letter of Credit. The Issuing Bank may, at the request of the applicable Borrower or Borrowers, charge any account the applicable Borrower or Borrowers may have with it for any and all amounts the Issuing Bank pays under a Letter of Credit, plus charges and reasonable expenses as from time to time agreed to by the Issuing Bank and the applicable Borrower or Borrowers; provided that to the extent permitted by Section 2.1(d)(iv), amounts shall be paid pursuant to Advances under the Revolving Credit Facility. The Borrowers agree to pay the Issuing Bank interest on any Reimbursement Obligations not paid when due hereunder at the Base Rate plus two percent (2.0%), or the maximum rate permitted by applicable law, if lower, such rate to be calculated on the basis of a year of 360 days for actual days elapsed. (b) In accordance with the provisions of Section 2.1(d), the Issuing Bank shall notify the Agent of any drawing under any Letter of Credit promptly following the receipt by the Issuing Bank of such drawing. (c) Each Lender (other than the Issuing Bank) shall automatically acquire on the date of issuance thereof, a Participation in the liability of the Issuing Bank in respect of each Letter of Credit in an amount equal to such Lender's Applicable Commitment Percentage (determined based on the Spot Rate of Exchange on the date of drawing under the Letter of Credit) of such liability, and to the extent that the applicable Borrower or Borrowers are obligated to pay the Issuing Bank under Section 3.2(a), each Lender (other than the Issuing Bank) thereby shall absolutely, unconditionally and irrevocably assume, and shall be unconditionally obligated to pay to the Issuing Bank as hereinafter described, its Applicable Commitment Percentage of the liability of the Issuing Bank under such Letter of Credit. (i) Each Lender (including the Issuing Bank in its capacity as a Lender) shall, subject to the terms and conditions of Article II, pay to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds, an amount equal to its Applicable Commitment Percentage of any drawing under a Letter of Credit, such funds to be provided in the manner described in Section 2.1(d)(iv). (ii) Simultaneously with the making of each payment by a Lender to the Issuing Bank pursuant to Section 2.1(d)(iv)(B), such Lender shall, automatically and without any further action on the part of the Issuing Bank or such Lender, acquire a Participation in an amount equal to such payment (excluding the portion thereof constituting interest accrued prior to the date the Lender made its payment) in the related Reimbursement Obligation of the applicable Borrower or Borrowers. The Reimbursement Obligations of the Borrowers shall be immediately due and payable whether by Advances made in accordance with Section 2.1(d)(iv), or otherwise. (iii) Each Lender's obligation to make payment to the Agent for the account of the Issuing Bank pursuant to Section 2.1(d)(iv) and this Section 3.2(c), and the right of the Issuing Bank to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and shall be made without any offset, abatement, withholding or reduction whatsoever. If any Lender is obligated to pay but does not pay amounts to the Agent for the account of the Issuing Bank in full upon such request as required by Section 2.1(d)(iv) or this Section 3.2(c), such Lender shall, on demand, pay to the Agent for the account of the Issuing Bank interest on the unpaid amount for each day during the period commencing on the date of notice given to such Lender pursuant to Section 2.1(d) until such Lender pays such amount to the Agent for the account of the Issuing Bank in full at the interest rate per annum for overnight borrowing by the Agent from the Federal Reserve Bank. (iv) In the event the Lenders have purchased Participations in any Reimbursement Obligation as set forth in clause (ii) above, then at any time payment (in fully collected, immediately available funds) of such Reimbursement Obligation, in whole or in part, is received by the Issuing Bank from the applicable Borrower or Borrowers, the Issuing Bank shall promptly pay to each Lender an amount equal to its Applicable Commitment Percentage of such payment from the applicable Borrower or Borrowers. (d) Promptly following the end of each calendar quarter, the Issuing Bank shall deliver to the Agent a notice describing the aggregate undrawn amount of all Letters of Credit at the end of such quarter. Upon the request of any Lender from time to time, the Issuing Bank shall deliver to the Agent, and the Agent shall deliver to such Lender, any other information reasonably requested by such Lender with respect to each outstanding Letter of Credit. (e) The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Article VI, be subject to the conditions that such Letter of Credit be in such form and contain such terms as shall be reasonably satisfactory to the Issuing Bank consistent with the then current practices and procedures of the Issuing Bank with respect to similar letters of credit, and the applicable Borrower or Borrowers shall have executed and delivered such other instruments and agreements relating to such Letters of Credit as the Issuing Bank shall have reasonably requested consistent with such practices and procedures and shall not be in conflict with any of the express terms herein contained. All Letters of Credit shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500 and all subsequent amendments and revisions thereto. (f) The Borrowers agree that the Issuing Bank may, in its sole discretion, accept or pay, as complying with the terms of any Letter of Credit, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Letter of Credit to draw or issue any drafts or other documents. (g) Without limiting the generality of the provisions of Section 12.9, the Borrowers hereby agree to indemnify and hold harmless the Issuing Bank, each other Lender and the Agent from and against any and all claims and damages, losses, liabilities, reasonable costs and expenses which the Issuing Bank, such other Lender or the Agent may incur (or which may be claimed against the Issuing Bank, such other Lender or the Agent) by any Person by reason of or in connection with the issuance or transfer of or payment or failure to pay under any Letter of Credit; provided that the Borrowers shall not be required to indemnify the Issuing Bank, any other Lender or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, (i) caused by the willful misconduct or gross negligence of the party to be indemnified or (ii) caused by the failure of the Issuing Bank to pay under any Letter of Credit after the presentation to it of a request for payment strictly complying with the terms and conditions of such Letter of Credit, unless such payment is prohibited by any law, regulation, court order or decree. The indemnification and hold harmless provisions of this Section 3.2(g) shall survive repayment of the Obligations, occurrence of the Revolving Credit Termination Date and expiration or termination of this Agreement. (h) Without limiting the Borrowers' rights as set forth in Section 3.2(g), the obligation of the Borrowers to immediately reimburse the Issuing Bank for drawings made under Letters of Credit and the Issuing Bank's right to receive such payment shall be absolute, unconditional and irrevocable, and such obligations of the Borrowers shall be performed strictly in accordance with the terms of this Agreement (as waived, modified or amended) and such Letters of Credit and the related Applications and Agreement for any Letter of Credit, under all circumstances whatsoever, including the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, the obligation supported by the Letter of Credit or any other agreement or instrument relating thereto (collectively, the "Related LC Documents"); (ii) any amendment or waiver of or any consent to or departure from all or any of the Related LC Documents; (iii) the existence of any claim, setoff, defense (other than the defense of payment in accordance with the terms of this Agreement) or other rights which the Borrowers may have at any time against any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom any such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other Person, whether in connection with the Loan Documents, the Related LC Documents or any unrelated transaction; (iv) any breach of contract or other dispute between the Borrowers and any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other Person; (v) any draft, statement or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (iv) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by the Agent, with or without notice to or approval by the Borrowers in respect of any of the Borrowers' Obligations under this Agreement. Nothing contained in this clause (h) shall relieve the Issuing Bank of liability for its gross negligence or willful misconduct or breach of contract. 3.3. Letter of Credit Facility Fees. The Borrowers shall pay to the Agent, (i) for the pro rata benefit of the Lenders based on their Applicable Commitment Percentages, a fee on the aggregate amount available to be drawn on each outstanding Letter of Credit at a rate equal to the Applicable Margin for Eurodollar Rate Loans, and (ii) for the Issuing Bank, when there is more than one Lender, 0.125% based on the aggregate amount available to be drawn on each outstanding Letter of Credit. Such fees shall be due with respect to each Letter of Credit quarterly in arrears on the last day of each March, June, September and December, the first such payment to be made on the date of issuance of a Letter of Credit. The fees described in this Section 3.3 shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. ARTICLE IV Security 4.1. Guaranty. To guarantee the full and timely payment and performance of all Obligations now existing or hereafter arising, the Borrowers shall cause the Guaranty to be delivered by each Domestic Subsidiary that is not a Borrowing Subsidiary in the form and substance reasonably acceptable to the Agent, on or before the Closing Date. The Borrowers hereby agree to cause a Guaranty to be delivered by any hereafter acquired or created Domestic Subsidiary pursuant to the terms of Section 8.19 hereof. Notwithstanding the foregoing, a Domestic Subsidiary formed to issue Convertible Preferred Securities (and whose only asset is the Convertible Debentures or amounts received thereon) shall not be required to become a Guarantor. 4.2. Stock Pledge. (a) As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) if applicable, its obligations as a Guarantor under the Guaranty Agreement, the Borrowers and each Person owning any Pledged Stock shall on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, a Pledge Agreement together with certificates representing such Pledged Stock with stock powers duly executed in blank which Pledge Agreements shall pledge to the Agent for the benefit of the Lenders (w) 100% of the capital stock and related interests and rights of any Domestic Subsidiary and any Subsidiary of a Borrowing Subsidiary and (x) not less than 65% of the Voting Stock and 100% of the non-voting common stock and related interests and rights of any Direct Foreign Subsidiary in accordance with the terms hereof and thereof. (b) BREED and each Subsidiary hereby agree to pledge to the Agent for the benefit of the Lenders (y) 100% of the capital stock and related interests and rights of any Domestic Subsidiary and any Subsidiary of a Borrowing Subsidiary hereafter acquired or created and owned directly or indirectly by BREED and (z) not less than 65% of the Voting Stock and 100% of the non-voting common stock and related interests and rights of any Direct Foreign Subsidiary hereafter acquired or created and, in each case, to deliver to the Agent a Pledge Agreement substantially in the form of Exhibit P-1 or P-2, as applicable within thirty (30) days after the acquisition or creation of such Domestic Subsidiary or Direct Foreign Subsidiary, as the case may be, pursuant to the terms of Section 8.19, hereof; provided, however, in the event the laws or practices of any foreign jurisdiction preclude or prevent the completion or delivery of the Pledge Agreement as provided herein, the Direct Foreign Subsidiary shall have an additional forty-five (45) days to deliver such Pledge Agreement. 4.3. Security Interests. As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) if applicable, its obligations as a Guarantor under the Guaranty Agreement, BREED shall, and shall cause each Domestic Subsidiary to, on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Security Agreement, the Uniform Commercial Code financing statements, and each other Security Instrument sufficient to grant to the Agent a valid, duly perfected security interest in the Collateral described therein, subject to no prior Liens other than Permitted Liens, and with respect to the Mortgages, no prior Liens other than the Permitted Encumbrances as defined therein, and do all things necessary in the opinion of the Agent and its counsel to grant to the Agent for the benefit of the Lenders a first priority security interest, duly perfected with respect to Collateral governed by the UCC, in all Collateral subject to no prior Lien or other encumbrance or restriction on transfer (other than restrictions on transfer imposed by applicable securities laws and Permitted Liens). BREED hereby agrees to cause the Security Instruments to be delivered by any hereafter acquired or created Domestic Subsidiary or, to the extent applicable under foreign law or practice, Direct Foreign Subsidiary pursuant to the terms of Section 8.19 hereof. 4.4. Lease Assignments. As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) if applicable, the Guarantors' Obligations under the Guaranty Agreement, BREED shall, and shall cause each Domestic Subsidiary to, on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Lease Assignments. The Lease Assignments shall be delivered on or before the Closing Date and thereafter as any new or additional facility is leased by BREED or any existing or hereafter acquired or created Domestic Subsidiary. 4.5. Mortgages. As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) if applicable, the Guarantors' Obligations under the Guaranty Agreement, BREED shall, and shall cause each Domestic Subsidiary to, on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Mortgages. The Mortgages shall be delivered on or before the Closing Date and thereafter as any new or additional real property is acquired by BREED or any existing or hereafter acquired or created Domestic Subsidiary. 4.6. Landlord Waivers. As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) if applicable, the Guarantors' Obligations under the Guaranty Agreement, BREED shall, and shall cause each Domestic Subsidiary to, on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, to the extent available, the Landlord Waivers. The Landlord Waivers shall be delivered on or before the Closing Date and thereafter as new or additional facility is leased by BREED or any existing or hereafter acquired or created Domestic Subsidiary. 4.7. Intellectual Property. As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) certain of the Guarantors' Obligations under the Guaranty Agreement, BREED shall, and shall cause each Domestic Subsidiary to, on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Intellectual Property Security Agreement and the Intellectual Property Assignment. BREED hereby agrees to pledge, or cause to be pledged, all intellectual property interests and licenses hereafter acquired or created and owned by BREED and any Domestic Subsidiary within thirty (30) days of the acquisition or creation of such intellectual property or license, pursuant to the terms of Section 8.19; provided, however, that should any Intellectual Property Agreement require the consent of any third party, BREED and its Domestic Subsidiaries shall use its best efforts to supply such Assignment; provided further that in the event the execution of an Assignment or the assignment of the Intellectual Property shall result in a forfeiture of such Intellectual Property this provision shall not apply to such Intellectual Property. 4.8. Pledge and Subordination of Intercompany Notes. As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) certain of the Guarantors' Obligations under the Guaranty Agreement, BREED shall cause the Intercompany Note Holders to deliver the Intercompany Note Pledge Agreement to the Agent for the benefit of the Lenders. BREED hereby agrees to cause the Intercompany Note Holders now existing or hereafter acquired or created to pledge, grant a Lien and collaterally assign to the Agent for the benefit of the Lenders all Intercompany Notes now existing or hereafter arising. 4.9. Pledge of Partnership Interests. (a) As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) if applicable, the Guarantors' Obligations under the Guaranty Agreement, BREED and each Person owning any Assigned Interests shall on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, a Collateral Assignment of Partnership Interests together with a Receipt and Certificate of Registrar as may be required by the Agent, which Collateral Assignment of Partnership Interests shall pledge to the Agent for the benefit of the Lenders 100% of the ownership interests and rights in limited partnerships in accordance with the terms hereof and thereof and, to the extent hereafter required by the Agent, any joint venture interests. (b) BREED and each Subsidiary hereby agree to collaterally assign to the Agent for the benefit of the Lenders 100% of the ownership interests and rights in limited partnership and joint ventures hereafter acquired or created, other than the joint venture described in Section 9.6(h), and to deliver to the Agent a Collateral Assignment of Partnership Interests substantially in the form and content acceptable to the Agent within thirty (30) days of the acquisition or creation of such Subsidiary pursuant to the terms of Section 8.19. 4.10. Collateral Assignment of Trademark License Agreement. As security for the full and timely payment and performance of (i) all Obligations now existing or hereafter arising and (ii) if applicable, the Guarantors' Obligations under the Guaranty Agreement, BREED shall cause the Collateral Assignment of Trademark License Agreement to be delivered to the Agent for the benefit of the Lenders on or before the Closing Date. 4.11. Further Assurances. At the request of the Agent, BREED will, and will cause each Subsidiary to, execute by its duly authorized officers, alone or with the Agent, any certificate, instrument, statement or document and will procure any such certificate, instrument, statement or document (and pay all connected costs) which the Agent reasonably deems necessary to create or preserve the Liens (and the perfection and priority thereof) of the Agent for the benefit of the Lenders contemplated hereby and by the other Loan Documents. ARTICLE V Change in Circumstances 5.1. Increased Cost and Reduced Return. (a) If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such governmental authority, central bank, or comparable agency: (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Eurodollar Rate Loans, its Note, or its obligation to make Eurodollar Rate Loans, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Agreement or its Note in respect of any Eurodollar Rate Loans (other than taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office and franchise taxes); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Reserve Requirement utilized in the determination of the Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Total Credit Commitment of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or the London interbank market any other condition affecting this Agreement or its Note or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining any Eurodollar Rate Loans or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or its Note with respect to any Eurodollar Rate Loans, then the Borrowers shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. If any Lender requests compensation by the Borrowers under this Section 5.1(a), the Borrowers may, by notice to such Lender (with a copy to the Agent), suspend the obligation of such Lender to make or Continue Loans of the Type with respect to which such compensation is requested, or to Convert Loans of any other Type into Loans of such Type, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 5.4 shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. (b) If, after the date hereof, any Lender shall have determined that the adoption of any applicable law, rule, or regulation regarding capital adequacy or any change therein or in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) Each Lender shall promptly notify the Borrowers and the Agent of any event of which it has actual knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section shall furnish to the Borrowers and the Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 5.2. Limitation on Types of Loans. If on or prior to the first day of any Interest Period for any Eurodollar Rate Loan: (a) the Agent determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or (b) the Required Lenders determine (which determination shall be conclusive) and notify the Agent that the Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders of funding Eurodollar Rate Loans for such Interest Period; then the Agent shall give the Borrowers prompt notice thereof specifying the relevant Type of Loans and the relevant amounts or periods, and so long as such condition remains in effect, the Lenders shall be under no obligation to make additional Loans of such Type, Continue Loans of such Type, or to Convert Loans of any other Type into Loans of such Type and the applicable Borrower or Borrowers shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected Type, either prepay such Loans or Convert such Loans into another Type of Loan in accordance with the terms of this Agreement. 5.3. Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such Lender shall promptly notify the applicable Borrower or Borrowers thereof and such Lender's obligation to make or Continue Eurodollar Rate Loans and to Convert other Types of Loans into Eurodollar Rate Loans shall be suspended until such time as such Lender may again make, maintain, and fund Eurodollar Rate Loans (in which case the provisions of Section 5.4 shall be applicable). 5.4. Treatment of Affected Loans. If the obligation of any Lender to make a particular Type of Eurodollar Rate Loan or to Continue, or to Convert Loans of any other Type into, Loans of a particular Type shall be suspended pursuant to Section 5.1 or 5.3 hereof (Loans of such Type being herein called "Affected Loans" and such Type being herein called the "Affected Type"), such Lender's Affected Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required by Section 5.3 hereof, on such earlier date as such Lender may specify to the Borrowers with a copy to the Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 5.1 or 5.3 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Affected Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Loans of the Affected Type shall be made or Continued instead as Base Rate Loans, and all Loans of such Lender that would otherwise be Converted into Loans of the Affected Type shall be Converted instead into (or shall remain as) Base Rate Loans. If such Lender gives notice to the applicable Borrower or Borrowers (with a copy to the Agent) that the circumstances specified in Section 5.1 or 5.3 hereof that gave rise to the Conversion of such Lender's Affected Loans pursuant to this Section 5.4 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Loans of the Affected Type and by such Lender are held pro rata (as to principal amounts, Types, and Interest Periods) in accordance with their respective Revolving Credit Commitments and Term Loan Commitments. 5.5. Compensation. Upon the request of any Lender, the Borrowers shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of: (a) any payment, prepayment, or Conversion of a Eurodollar Rate Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 9.1) on a date other than the last day of the Interest Period for such Loan; or (b) any failure by the Borrowers for any reason (including, without limitation, the failure of any condition precedent specified in Article VI to be satisfied) to borrow (other than by reason of the failure of a Lender or Lenders to make funds available without cause), Convert, Continue, or prepay a Eurodollar Rate Loan on the date for such borrowing, Conversion, Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Agreement. Any Lender claiming compensation under this Section 5.5 shall furnish the Borrowers and the Agent a statement setting forth in reasonable detail the amounts to be paid to it hereunder and the determination thereof shall be conclusive absent manifest error. 5.6. Taxes. (a) Any and all payments by the Borrowers to or for the account of any Lender or the Agent hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or the Agent (as the case may be) is organized or any political subdivision thereof, except withholding taxes applicable to a Lender, (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If the Borrowers or the Lender shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Lender or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.6) such Lender or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions, (iii) the Borrowers shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) the Borrowers shall furnish to the Agent, at its address referred to in Section 11.2, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrowers agree to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) The Borrowers agree to indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 5.6) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. (d) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrowers or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrowers and the Agent with (a) if such Lender is a "bank" within the meaning of Section 881(c)(3)(A) of the Code (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the other Loan Documents or, (b) if such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and which intends to claim exemption from U.S. Federal withholding tax under Section 871(h) of 881(c) of the Code with respect to payments of "portfolio interest", a form W-8, or any subsequent versions thereof or successors thereto (and, if such Lender delivers a Form W-8, a certificate representing that such Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code of any of the Borrowers and is not a controlled foreign corporation related to any of the Borrowers (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Lender claiming complete exemption from, or a reduced rate of, U.S. Federal withholding tax on payments of interest by the Borrower under this Agreement and the other Loan Documents. (e) For any period with respect to which a Lender has failed to provide the Borrowers and the Agent with the appropriate form pursuant to Section 5.6(d) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 5.6(a) or 5.6(b) with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrowers shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes at such Lender's expense. (f) If the Borrowers are required to pay additional amounts to or for the account of any Lender pursuant to this Section 5.6, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Within thirty (30) days after the date of any payment of Taxes, the Borrowers shall furnish to the Agent evidence of such payment and the Agent shall provide a copy of such evidence to the applicable Lender. (h) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 5.6 shall survive the termination of the Revolving Credit Commitments and Term Loan Commitments and the payment in full of the Notes. 5.7. Lending Office. Without affecting its rights under this Article V or any other provision of this Agreement, each Lender agrees that if there is any increase in cost to or reduction in an amount receivable by such Lender with respect to which the Borrowers would be obligated to compensate such Lender pursuant to this Article V, such Lender shall use reasonable efforts to elect an alternative lending office (to the extent such Lender has available to it such an office) which would not result in any such increase in any cost to or reduction in any amount receivable by such Lender; provided, however, that no Lender shall be obligated to select an alternative lending office if such Lender determines, in its sole discretion, that (i) as a result of such selection such Lender would be in violation of any applicable law, regulation, treaty, or guideline, or would incur additional costs or expenses or (ii) such selection would be inadvisable for regulatory reasons or would impose an unreasonable burden or additional costs on such Lender. 5.8. Syndication Costs. If during Phase I, II, or III (as set forth in the definition of Applicable Margin), the Agent incurs any breakage costs, charges or fees incurred with respect to Eurodollar Rate Loans on account of the syndication of the Revolving Credit Facility and Term Loan Facility, the Borrowers shall immediately reimburse the Agent for any such costs, charges or fees. Such right of reimbursement is in addition to, and not in limitation of, the other provisions of this Article V. In addition, the Borrowers agree that the incurrence of such costs and expenses shall not be the basis for the Borrowers withholding its consent or approval of any Person as an Eligible Assignee. 5.9. Replacement Banks. BREED may, on ten (10) Business Days' prior written notice to the Agent and a Lender, cause a Lender who has incurred increased costs or is unable to make Eurodollar Rate Loans to (and such Lender shall) assign, pursuant to Section 12.1, all of its rights and obligations under this Agreement to an Eligible Assignee designated by BREED which is willing to become a Lender for a purchase price equal to the outstanding principal amount of the Loans payable to such Lender plus any accrued but unpaid interest on such Loans, any accrued but unpaid fees with respect to such Lender's Revolving Credit Commitment and any other amount payable to such Lender under this Agreement; provided, however, that any expenses or other amounts which would be owing to such Lender pursuant to any indemnification provision hereof (including, if applicable, Section 5.5) shall be payable by BREED as if BREED had prepaid the Loans of such Lender rather than such Lender having assigned its interest hereunder. BREED or the assignee shall pay the applicable processing fee under Section 12.1. ARTICLE VI Conditions to Making Loans and Issuing Letters of Credit 6.1. Conditions of Term Loan and Initial Advance. The obligation of the Lenders to make the Term Loan and the initial Advance under the Revolving Credit Facility, and of the Issuing Bank to issue any Letter of Credit, is subject to the conditions precedent that: (a) the Agent shall have received on the Closing Date, in form and substance satisfactory to the Agent and Lenders, the following: (i) executed originals of each of this Agreement, the Notes, the initial Guaranties, the Security Instruments, the LC Account Agreement, and the other Loan Documents, together with all schedules and exhibits thereto; (ii) the favorable written opinion or opinions with respect to the Loan Documents and the transactions contemplated thereby of special counsel to the Loan Parties dated the Closing Date (including opinions of local U.S. counsel, local counsel to Direct Foreign Subsidiaries, special U.S. intellectual property counsel as to issues relating to Collateral, and special tax counsel as to the deductibility of interest payments on the Convertible Preferred Securities), addressed to the Agent and the Lenders and satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel to the Agent, substantially in the forms of Exhibit S-1, S-2, and S-3 hereto; (iii) resolutions of the boards of directors or other appropriate governing body (or of the appropriate committee thereof) of each of the Loan Parties certified by its secretary or assistant secretary as of the Closing Date, approving and adopting the Loan Documents to be executed by such Person, and authorizing the execution and delivery thereof; (iv) specimen signatures of officers of each of the Loan Parties executing the Loan Documents on behalf of such Person, certified by the secretary or assistant secretary of such Person; (v) the Organizational Documents of each of the Loan Parties certified as of a recent date by the Secretary of State of its state of organization; (vi) the Operating Documents of each of the Loan Parties certified as of the Closing Date as true and correct by its secretary or assistant secretary; (vii) certificates issued as of a recent date by the Secretaries of State of the respective jurisdictions of formation of each of the Credit Parties as to the due existence and good standing of such Person or the equivalent, if any, in foreign jurisdictions; (viii) appropriate certificates of qualification to do business, good standing and, where appropriate, authority to conduct business under assumed name, issued in respect of each of the Credit Parties as of a recent date by the Secretary of State or comparable official of each jurisdiction, if any, in which the failure to be qualified to do business or authorized so to conduct business could have a Material Adverse Effect; (ix) stock certificates representing all of the shares of Pledged Stock with undated stock powers executed in blank for each certificate; (x) copies of all partnership and joint venture agreements certified as true and complete by the Secretary or Assistant Secretary of the Loan Party party thereto; (xi) Certificate and Receipt of Registrar of all of the Assigned Interests; (xii) Intercompany Notes existing as of the Closing Date together with endorsements or instruments of assignment executed in blank and attached thereto; (xiii) consent by makers of Intercompany Notes to pledge under Intercompany Note Assignment; (xiv) copies of the Organizational Documents and Operating Documents for A. Breed, Ltd. and J. Breed, Ltd. (xv) commitments for policies insuring title to the Mortgaged Properties acceptable in form and substance to the Agent; (xvi) copies of title exceptions with respect to the Mortgaged Properties, acceptable in form and substance to the Agent; (xvii) to the extent they currently exist, surveys for the owned real property of BREED and its Subsidiareis; (xviii) insurance report for certain owned and leased real property of BREED and its Subsidiaries as reasonably required by the Agent; (xix) flood certificates and evidence of flood insurance for any Mortgaged Property in a federally designated flood zone; (xx) owner's affidavit for each of the Mortgaged Properties; (xxi) to the extent available to BREED, the environmental audit with respect to the owned and leased real property of BREED and its Subsidiaries and other environmental information as reasonably requested by the Agent and with results satisfactory to the Agent; (xxii) to the extent consented to by the respective landlords, Landlord Waivers and Lease Assignments for each of BREED's or any Domestic Subsidiary's leased facilities; (xxiii) to the extent available, consents to the Lease Assignments from each landlord for the leased real property of BREED and its Domestic Subsidiaries; (xxiv) an executed copy of the sublease from AlliedSignal to BREED of the Greenville, Alabama property; and a copy of the opinion required under the lease between AlliedSignal and the Industrial Development Board of the City of Greenville dated May 1, 1992 as a condition to AlliedSignal subleasing such property to BREED; and consents from The Bank of New York, the Indenture Trustee and the Industrial Development Board of the City of Greenville, in form and substance satisfactory to the Agent, consenting to the assignment of the sublease to the Agent; (xxv) certified copy of the Trademark License Agreement; (xxvi) UCC-1 Financing Statements, including without limitation fixture filings, duly executed by the Borrowers and each of the Guarantors and in proper form for filing, for all locations required by applicable law to perfect the lien of the Agent and the Lenders under the Security Agreement as a first priority Lien as to items of Collateral in which a security interest may be perfected by the filing of financing statements; (xxvii) a copy of BREED's employment agreement with each of the Managers, certified as true and complete by the Secretary or Assistant Secretary of BREED; (xxviii)receipt and satisfactory review of (A) audited consolidated financial statements of BREED and its Subsidiaries as of June 30, 1997, (B) consolidated interim financial statements of BREED and its Subsidiaries as of July 31, 1997, and (C) operating statements of the Acquired Business as of August 31, 1997; (xxix) receipt and satisfactory review of a pro forma consolidated balance sheet, income statement and statement of cash flows of BREED as of June 30, 1997, adjusted to give effect to the Allied Acquisition and the financings contemplated in this Agreement reviewed by certified public accountants acceptable to the Agent; (xxx) notice of appointment of the initial Authorized Representative(s); (xxxi) all schedules to the Credit Agreement and the other Loan Documents which shall be reviewed by and satisfactory to the Agent; (xxxii) evidence of the insurance program to be maintained by BREED and its Subsidiaries after the Allied Acquisition, which such program shall be reasonably satisfactory to the Agent; (xxxiii)executed copies, certified as true and correct by the Secretary of BREED, of the Siemens Stock Purchase Documents and the Prudential Stock Purchase Documents together with evidence of receipt of at least $300,000,000 in the aggregate from the Siemens Stock Purchase and the Prudential Stock Purchase; (xxxiv)certificate of the President or Chief Financial Officer of BREED that (A) all conditions precedent to the consummation of the Siemens Stock Purchase and the Prudential Stock Purchase have been satisfied, (B) all conditions precedent to the consummation of the Allied Acquisition as set forth in the Asset Purchase Agreement and other Acquisition Documents have been satisfied and not waived without the approval of the Agent including all required consents set forth on Schedule 9.3 of the Asset Purchase Agreement and all Required Consents (as defined in the Asset Purchase Agreement) of third parties, (C) upon the tendering of the cash proceeds from the Revolving Credit Facility and Term Loan Facility, the Allied Acquisition shall be effective, and (D) no event has occurred or condition exists that could reasonably be expected to have a material adverse effect on the ability of BREED or any other party thereto to consummate the Convertible Preferred Securities Issuance; (xxxv) evidence satisfactory to the Agent that after payment of the purchase price for the Allied Acquisition, repayment of existing Indebtedness and all related fees and expenses, and after deducting all Letter of Credit Outstandings, there shall be available to the Borrowers for working capital at least $75,000,000; (xxxvi)a schedule of the corporate and capital ownership structure of BREED and its Subsidiaries immediately after giving effect to the Allied Acquisition which shall be reviewed by and be satisfactory to the Agent; (xxxvii)evidence that all fees payable by BREED to the Agent, NMSI and the Lenders have been paid in full; (xxxviii)an initial Borrowing Notice, if any; (xxxix)payoff letters from the holders of existing Indebtedness to be refinanced with the Revolving Credit Facility; (xl) such other documents, instruments, certificates and opinions as the Agent or any Lender may reasonably request in connection with the consummation of the transactions contemplated hereby, including the due perfection of a first priority security interest in all Collateral. (b) In the good faith judgment of the Agent and the Lenders: (i) there shall not have occurred or become known to the Agent or the Lenders any event, condition, situation or status since the date of the information contained in the financial and business projections, budgets, pro forma data and forecasts concerning BREED and its Subsidiaries delivered to the Agent prior to the making of the initial Loan that has had or could reasonably be expected to result in a Material Adverse Effect; (ii) no litigation, action, suit, investigation or other arbitral, administrative or judicial proceeding shall be pending or threatened that purports to affect BREED or its Subsidiaries, or the Acquired Business or that could have a material adverse effect on BREED or its Subsidiaries, the Acquired Business, the Allied Acquisition or any other transaction contemplated hereby or on the ability of BREED and the other Loan Parties to perform their obligations under the Loan Documents and the early termination or expiration of any applicable waiting period imposed by law or regulation with respect the Allied Acquisition without notice of intent to challenge or a request for additional information, and no injunction shall have been issued enjoining BREED from purchasing the Acquired Business; (iii) the Loan Parties shall have received all approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be required to consummate the Allied Acquisition and the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any Governmental Authority or arbitral authority or (B) any agreement, document or instrument to which any of the Loan Parties is a party or by which any of them or their properties is bound; (iv) BREED and its Subsidiaries shall be in compliance with all existing material financial obligations; (v) there shall not have been any material amendment, modification or waiver of any of the terms or conditions of the Asset Purchase Agreement without consent of the Agent; and (vi) immediately after giving effect to the Allied Acquisition, there shall be not less than $75,000,000 under the terms of the Revolving Credit Facility available for working capital purposes, excluding Letters of Credit issued pursuant to Article III. 6.2. Conditions of all Loans and Letters of Credit. The obligations of the Lenders to make any Loans, and the Issuing Bank to issue Letters of Credit, hereunder on or subsequent to the Closing Date are subject to the satisfaction of the following conditions: (a) the Agent shall have received a Borrowing Notice if required by Article II; (b) the representations and warranties of the Loan Parties set forth in Article VII and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of such Advance or Letter of Credit issuance or renewal, with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the financial statements referred to in Section 7.6(a) shall be deemed to be those financial statements most recently delivered to the Agent and the Lenders pursuant to Section 8.1 and except as otherwise permitted hereunder from the date financial statements are delivered to the Agent and the Lenders in accordance with such Section; (c) in the case of the issuance of a Letter of Credit, the applicable Borrower or Borrowers shall have executed and delivered to the Issuing Bank an Application and Agreement for Letter of Credit in form and content acceptable to the Issuing Bank together with such other instruments and documents as it shall request; (d) at the time of (and after giving effect to) each Advance or the issuance of a Letter of Credit, no Default or Event of Default specified in Article X shall have occurred and be continuing; and (e) immediately after giving effect to: (i) a Loan, the aggregate principal balance of all outstanding Loans, Participations and Reimbursement Obligations for each Lender shall not exceed such Lender's Revolving Credit Commitment; (ii) a Letter of Credit or renewal thereof, the aggregate principal balance of all outstanding Participations in Letters of Credit and Reimbursement Obligations (or in the case of the Issuing Bank, its remaining interest after deduction of all Participations in Letters of Credit and Reimbursement Obligations of other Lenders) for each Lender and in the aggregate shall not exceed, respectively, (X) such Lender's Letter of Credit Commitment or (Y) the Total Letter of Credit Commitment; (iii) a Loan or Letter of Credit issued in an Alternative Currency, the Dollar Value of Loans in Alternative Currencies shall not exceed the Total Alternative Currency Sublimit; and (iv) a Loan or a Letter of Credit or renewal thereof, the sum of Letter of Credit Outstandings plus Revolving Credit Outstandings shall not exceed the Total Revolving Credit Commitment. ARTICLE VII Representations and Warranties Each Borrower represents and warrants with respect to itself and to its Subsidiaries (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans and the issuing of Letters of Credit), that: 7.1. Organization and Authority. (a) BREED and each Subsidiary is a corporation or partnership duly organized and validly existing under the laws of the jurisdiction of its formation; (b) BREED and each Subsidiary (x) has the requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, and (y) is qualified to do business in every jurisdiction in which the conduct of its business or ownership of its assets requires it to be so qualified; (c) BREED has the power and authority to execute, deliver and perform this Agreement and the Notes, and to borrow hereunder, and to execute, deliver and perform each of the other Loan Documents to which it is a party; (d) Each Guarantor has the power and authority to execute, deliver and perform the Guaranty and each of the other Loan Documents to which it is a party; and (e) When executed and delivered, each of the Loan Documents to which any Loan Party is a party will be the legal, valid and binding obligation or agreement of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity (whether considered in a proceeding at law or in equity); 7.2. Loan Documents. The execution, delivery and performance by each Loan Party of each of the Loan Documents to which it is a party: (a) have been duly authorized by all requisite Organizational Action (including any required shareholder or partner approval) of such Loan Party required for the lawful execution, delivery and performance thereof; (b) do not violate any provisions of (i) applicable law, rule or regulation, (ii) any judgment, writ, order, determination, decree or arbitral award of any Governmental Authority or arbitral authority binding on such Loan Party or its properties, or (iii) the Organizational Documents or Operating Documents of such Loan Party; (c) does not and will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time or both, would constitute an event of default, under any contract, indenture, agreement or other instrument or document to which such Loan Party is a party, or by which the properties or assets of such Loan Party are bound; and (d) except as provided in the Security Instruments, does not and will not result in the creation or imposition of any Lien upon any of the properties or assets of such Loan Party or any Subsidiary; 7.3. Solvency. Each Loan Party is Solvent after giving effect to the transactions contemplated by the Loan Documents; 7.4. Subsidiaries and Stockholders. BREED has no Subsidiaries other than those Persons listed as Subsidiaries in Schedule 7.4 and additional Subsidiaries created or acquired after the Closing Date in compliance with Section 8.19; Schedule 7.4 states as of the date hereof the organizational form of each entity, the authorized and issued capitalization of each Subsidiary listed thereon, the number of shares or other equity interests of each class of capital stock or interest issued and outstanding of each such Subsidiary and the number and/or percentage of outstanding shares or other equity interest (including options, warrants and other rights to acquire any interest) of each such class of capital stock or other equity interest owned by BREED or by any such Subsidiary; the outstanding shares or other equity interests of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable; and BREED and each such Subsidiary owns beneficially and of record all the shares and other interests it is listed as owning in Schedule 7.4, free and clear of any Lien; 7.5. Ownership Interests. BREED owns no interest in any Person other than the Persons listed in Schedule 7.4, Integrated Sensor Solutions, Inc. and the joint ventures described in the agreements provided to the Agent pursuant to Section 6.1(a)(x), equity investments in Persons not constituting Subsidiaries permitted under Section 9.6 and additional Subsidiaries created or acquired after the Closing Date in compliance with Section 8.19; 7.6. Financial Condition. (a) BREED has heretofore furnished to each Lender (i) an audited consolidated balance sheet of BREED and its Subsidiaries as at June 30, 1997 and the notes thereto and the related consolidated statements of income, stockholders' equity and cash flows for the Fiscal Year then ended as examined and certified by Ernst & Young, LLP and (ii) an unaudited consolidated interim statement of income of BREED and its Subsidiaries as of July 31, 1997. Except as set forth therein, such financial statements (including the notes thereto in the case of the audited statements) present fairly the financial condition of BREED and its Subsidiaries as of the end of such Fiscal Year and one month period and results of their operations for the Fiscal Year and interim period then ended and the changes in its stockholders' equity for the Fiscal Year then ended, all in conformity with GAAP applied on a Consistent Basis, subject however, in the case of unaudited interim statements to year end audit adjustments; (b) since June 30, 1997 there has been no material adverse change in the condition, financial or otherwise, of BREED or any of its Subsidiaries or in the businesses, properties, performance, prospects or operations of BREED or its Subsidiaries, nor have such businesses or properties been materially adversely affected as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo or act of God; and (c) except as set forth in the financial statements referred to in Section 7.6(a) or in Schedule 7.6 or permitted by Section 9.4, neither BREED nor any Subsidiary has incurred, other than in the ordinary course of business, any Indebtedness, or other commitment or liability which remains outstanding or unsatisfied; 7.7. Title to Properties. BREED and each of its Subsidiaries has title to all its real and personal properties, subject to no transfer restrictions or Liens of any kind, except with respect to the real property subject to the Mortgages, the Permitted Encumbrances as defined in each of the Mortgages, and with respect to the other real and personal properties, the transfer restrictions and Liens described in Schedule 7.7 and Liens permitted by Section 9.3; 7.8. Taxes. BREED and each of its Subsidiaries has filed or caused to be filed all federal, state and local tax returns which are required to be filed by it and, except for taxes and assessments being contested in good faith by appropriate proceedings diligently conducted and against which reserves reflected in the financial statements described in Section 7.6(a) and satisfactory to BREED's independent certified public accountants have been established, have paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due and the failure of which would reasonably be expected to have a Material Adverse Effect; 7.9. Other Agreements. No Loan Party nor any Subsidiary is (a) a party to or subject to any judgment, order, decree, agreement, lease or instrument, or subject to other restrictions, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument (including the Asset Purchase Agreement) to which BREED or any Subsidiary is a party, which default has, or if not remedied within any applicable grace period could reasonably be likely to have, a Material Adverse Effect; or (c) a party to or bound by any agreement with any other Person (other than the Agent and the Lenders pursuant to this Agreement or any other Loan Document) which prohibits, limits or restricts the ability of any Subsidiary to make any payments, directly or indirectly, to BREED by way of dividends, advances, repayments of loans or advances, or other returns on investments, or by any other agreement or arrangement which restricts the ability of any Subsidiary to make any payment, directly or indirectly, to BREED. 7.10. Litigation. Except as set forth in Schedule 7.10, there is no action, suit, investigation or proceeding at law or in equity or by or before any governmental instrumentality or agency or arbitral body pending, or, to the best knowledge of the Borrowers, threatened by or against BREED or any Subsidiary or affecting BREED or any Subsidiary or any properties or rights of BREED or any Subsidiary, which could reasonably be expected to have a Material Adverse Effect; 7.11. Margin Stock. The proceeds of the borrowings made hereunder will be used by the Borrowers only for the purposes expressly authorized herein. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute any of the Loans under this Agreement a "purpose credit" within the meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrowers nor any agent acting in their behalf has taken or will take any action which might cause this Agreement or any of the documents or instruments delivered pursuant hereto to violate any regulation of the Board or to violate the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or any state securities laws, in each case as in effect on the date hereof; 7.12. Investment Company. No Loan Party is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The application of the proceeds of the Loans and repayment thereof by the Borrowers and the performance by the Loan Parties of the transactions contemplated by the Loan Documents will not violate any provision of said Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder, in each case as in effect on the date hereof; 7.13. Patents, Etc. BREED and each Subsidiary owns or has the right to use, under valid license agreements or otherwise, all material patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights, trade secrets and copyrights necessary to or used in the conduct of its businesses as now conducted and as contemplated by the Loan Documents, in all cases without known conflict with any patent, license, franchise, trademark, trade secret, trade name, copyright, other proprietary right of any other Person, which conflict is reasonably likely to have a Material Adverse Effect; 7.14. No Untrue Statement. Neither (a) this Agreement nor any other Loan Document or certificate or document executed and delivered by or on behalf of BREED or any Subsidiary in accordance with or pursuant to any Loan Document nor (b) any statement, representation, or warranty provided to the Agent in connection with the negotiation or preparation of the Loan Documents contains any misrepresentation or untrue statement of material fact or omits to state a material fact necessary, in light of the circumstance under which it was made, in order to make any such warranty, representation or statement contained therein not misleading; 7.15. No Consents, Etc. Neither the respective businesses or properties of the Loan Parties or any Subsidiary, nor any relationship among the Loan Parties or any Subsidiary and any other Person, nor any circumstance in connection with the execution, delivery and performance of the Loan Documents and the transactions contemplated thereby, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person on the part of any Loan Party or any Subsidiary as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by the Loan Documents, including, without limitation, the Allied Acquisition (other than the consents identified in the Asset Purchase Agreement), or if so, such consent (and in the case of the Allied Acquisition the Required Consents, as defined in the Asset Purchase Agreement), approval, authorization, filing, registration or qualification has been duly obtained or effected, or shall have been obtained or effected prior to the Closing Date, as the case may be; 7.16. Employee Benefit Plans. (a) BREED, each ERISA Affiliate and each Subsidiary is in compliance with all applicable provisions of ERISA, the Code and the regulations and published interpretations thereunder and in compliance with all Foreign Benefit Laws and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans, except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined or BREED or its Subsidiaries is in the process of obtaining a determination by the Internal Revenue Service to be so qualified, each trust related to such plan has been determined to be exempt under Section 501(a) of the Code, and each Employee Benefit Plan subject to any Foreign Benefit Law has received the required approvals by any Governmental Authority regulating such Employee Benefit Plan. No material liability has been incurred by BREED or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (b) Neither BREED, any ERISA Affiliate nor any Subsidiary has (i) engaged in a nonexempt prohibited transaction described in Section 4975 of the Code or Section 406 of ERISA affecting any of the Employee Benefit Plans or the trusts created thereunder which could subject any such Employee Benefit Plan or trust to a material tax or penalty on prohibited transactions imposed under Internal Revenue Code Section 4975 or ERISA, (ii) incurred any accumulated funding deficiency with respect to any Employee Benefit Plan, whether or not waived, or any other material liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (iii) failed to make a required contribution or payment to a Multiemployer Plan, (iv) failed to make a required installment or other required payment under Section 412 of the Code, Section 302 of ERISA or the terms of such Employee Benefit Plan, or (v) failed to make a required contribution or payment, or otherwise failed to operate in compliance with any Foreign Benefit Law regulating any Employee Benefit Plan; (c) No Termination Event has occurred or is reasonably expected to occur with respect to any Employee Benefit Plan except for the hourly represented retirement plans of BREED's Grabill, Indiana and Niles, Michigan facilities, and neither BREED nor any ERISA Affiliate has incurred any unpaid withdrawal liability with respect to any Multiemployer Plan; (d) The present value of all vested accrued benefits under each Employee Benefit Plan which is subject to Title IV of ERISA or whose funding is regulated by any Foreign Benefit Law, did not, as of the most recent valuation date for each such plan, exceed the then current value of the assets of such Employee Benefit Plan allocable to such benefits; (e) To the best of BREED's knowledge, each Employee Benefit Plan subject to Title IV of ERISA or the funding of which is regulated by any Foreign Benefit Law, maintained by BREED, any ERISA Affiliate or any Subsidiary, has been administered in accordance with its terms in all material respects and is in compliance in all material respects with all applicable requirements of ERISA, all Foreign Benefit Laws, and other applicable laws, regulations and rules; (f) The consummation of the Loans and the issuance of the Letters of Credit provided for herein will not involve any prohibited transaction under ERISA which is not subject to a statutory or administrative exemption; and (g) No material proceeding, claim, lawsuit and/or investigation exists or, to the best knowledge of BREED after due inquiry, is threatened concerning or involving any Employee Benefit Plan; 7.17. No Default. As of the date hereof, there does not exist any Default or Event of Default hereunder; 7.18. Environmental Matters. BREED and each Subsidiary is in compliance with all applicable Environmental Laws in all material respects and has been issued and currently maintains or is pursuing all required federal, state, local and foreign permits, licenses, certificates and approvals. Neither BREED nor any Subsidiary has been notified of any pending or threatened action, suit, proceeding or investigation which, and neither BREED nor any Subsidiary is aware of any facts which, (i) calls into question, or could reasonably be expected to call into question, compliance by BREED or any Subsidiary with any Environmental Laws, (ii) which seeks, or could reasonably be expected to form the basis of a meritorious proceeding, to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Material or the operation of BREED's or any Subsidiary's business or facility, or (iii) seeks to cause, or could reasonably be expected to form the basis of a meritorious proceeding to cause, any property of BREED or any Subsidiary to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Law, which in any of the foregoing instances would reasonably be expected to have a Material Adverse Effect; 7.19. Employment Matters. (a) Except as set forth in Schedule 7.19, none of the employees of BREED or any Subsidiary is subject to any collective bargaining agreement and there are no strikes, work stoppages, election or decertification petitions or proceedings, unfair labor charges, equal opportunity proceedings, or other material labor/employee related controversies or proceedings pending or, to the best knowledge of BREED, threatened against BREED or any Subsidiary or between BREED or any Subsidiary and any of its employees, other than (in each of the foregoing cases) employee grievances arising in the ordinary course of business which could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; (b) Except to the extent a failure to maintain compliance would not have a Material Adverse Effect, BREED and each Subsidiary is in compliance in all material respects with all applicable laws, rules and regulations pertaining to labor or employment matters, including without limitation those pertaining to wages, hours, occupational safety and taxation and there is neither pending or, to the knowledge of BREED, threatened any litigation, administrative proceeding nor, to the knowledge of BREED, any investigation, in respect of such matters which, if decided adversely, could reasonably be likely, individually or in the aggregate, to have a Material Adverse Effect; 7.20. RICO. Neither BREED nor any Subsidiary is engaged in or has engaged in any course of conduct that could subject any of their respective properties to any Lien, seizure or other forfeiture under any criminal law, racketeer influenced and corrupt organizations law, civil or criminal, or other similar laws; 7.21. Allied Acquisition Representations. On the Closing Date, each of the representations and warranties contained in Article 6 of the Asset Purchase Agreement, including all Exhibits and Schedules referenced therein and all definitions of defined terms referenced therein and all disclosures of Allied contained therein, are incorporated herein by reference and given by BREED as of the Closing Date; 7.22. Allied Acquisition. All conditions precedent to the consummation of the Allied Acquisition as set forth in the Asset Purchase Agreement and other Acquisition Documents have been satisfied and not waived without the approval of the Agent (which approval shall not be unreasonably withheld) including all Required Consents (as defined in the Asset Purchase Agreement) and approvals of third parties and upon the tendering of the cash proceeds from the Revolving Credit Facility, the Allied Acquisition shall be effective; 7.23. Perfected Security Instruments. (a) At all times after execution and delivery of each Pledge Agreement by the Pledgor thereunder and satisfaction of the conditions set forth in Section 6.1, the security interests created in favor of the Agent for the benefit of the Lenders under the Pledge Agreements will constitute valid, perfected security interests in the Pledged Stock and Assigned Interests, subject to no other Liens; (b) At all times after execution and delivery of each Security Instrument (other than the Pledge Agreements) by the parties thereto and completion of the filings and recordings listed on Schedule 7.23 hereto, the security interests created in favor of the Agent for the benefit of the Lenders under the Security Instruments (other than the Pledge Agreements) will constitute valid, perfected security interests in the Collateral described therein, subject to no other Liens whatsoever, except for Permitted Liens, and with respect to the Mortgages, subject to no other Liens whatsoever, except for the Permitted Encumbrances as defined in each of the Mortgages. ARTICLE VIII Affirmative Covenants Until the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, BREED will, and where applicable will cause each Subsidiary to: 8.1. Financial Reports, Etc. (a) As soon as practical and in any event within 90 days after the end of each Fiscal Year of BREED, deliver or cause to be delivered to the Agent, together with sufficient copies for each Lender (i) consolidated and consolidating (by major lines of business) balance sheets of BREED and its Subsidiaries as at the end of such Fiscal Year, and the notes thereto, and the related consolidated and consolidating statements of income, stockholders' equity and cash flows, and the respective notes thereto, for such Fiscal Year, setting forth comparative financial statements for the preceding Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis and containing opinions (in the case of the consolidated statements) of Ernst & Young LLP, or other such independent certified public accountants selected by BREED and approved by the Agent, which are unqualified as to the scope of the audit performed and as to the "going concern" status of BREED and its Subsidiaries and without any exception not acceptable to the Required Lenders, and (ii) a certificate of an Authorized Representative demonstrating compliance with Sections 9.1(a) through 9.1(c), which certificate shall be in the form of Exhibit T; (b) as soon as practical and in any event within 45 days after the end of each fiscal quarter (except the last fiscal quarter of the Fiscal Year), deliver to the Agent together with sufficient copies for each Lender, (i) consolidated and consolidating (by major line of business) balance sheets of BREED and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated and consolidating statements of income and cash flows for such fiscal quarter and for the period from the beginning of the then current Fiscal Year through the end of such reporting period, and accompanied by a certificate of an Authorized Representative to the effect that such financial statements present fairly the financial position of BREED and its Subsidiaries as of the end of such fiscal period and the results of their operations and the changes in their financial position for such fiscal period, in conformity with the standards set forth in Section 7.6(a) with respect to interim financial statements, and (ii) a certificate of an Authorized Representative containing computations for such quarter comparable to that required pursuant to Section 8.1(a)(ii); (c) as soon as practical and in any event within 30 days after the end of each calendar month (except the last month of a fiscal quarter or Fiscal Year), deliver to the Agent consolidated and consolidating (by major line of business) balance sheets of BREED and its Subsidiaries as at the end of such calendar month, and the related consolidated and consolidating statements of income and cash flows for such calendar month and for the period from the beginning of the then current Fiscal Year through the end of such month, and accompanied by a certificate of an Authorized Representative to the effect that such financial statements present fairly the results of operations of BREED and its Subsidiaries as of the end of such calendar month and for such calendar month, respectively, and the changes in their financial position for such period, in conformity with the standards set forth in Section 7.6(a) with respect to interim financial statements; (d) together with each delivery of the financial statements required by Section 8.1(a)(i), deliver to the Agent and each Lender a letter from BREED's accountants specified in Section 8.1(a)(i) stating that in performing the audit necessary to render an opinion on the financial statements delivered under Section 8.1(a)(i), they obtained no knowledge of any Default or Event of Default by the Borrowers in the fulfillment of the terms and provisions of this Agreement insofar as they relate to financial matters (which at the date of such statement remains uncured); or if the accountants have obtained knowledge of such Default or Event of Default, a statement specifying the nature and period of existence thereof; (e) promptly upon their becoming available to BREED, BREED shall deliver to the Agent, together with sufficient copies for each Lender, a copy of (i) all regular or special reports or effective registration statements which BREED or any Subsidiary shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) any proxy statement distributed by BREED or any Subsidiary to its shareholders, bondholders or the financial community in general, and (iii) any management letter or other report submitted to BREED or any Subsidiary by independent accountants in connection with any annual, interim or special audit of BREED or any Subsidiary; (f) promptly deliver or cause to be delivered to the Agent, written notice of any event which constitutes or which with the passage of time or giving of notice or both would constitute a default or event of default under any Material Contract to which BREED or any of its Subsidiaries is a party or by which BREED or any Subsidiary thereof or any of their respective properties may be bound; (g) promptly, from time to time, deliver or cause to be delivered to the Agent such other information regarding BREED's and any Subsidiary's operations, business affairs and financial condition as the Agent may reasonably request; Subject to Section 12.1(f), the Agent and the Lenders are hereby authorized to deliver a copy of any such financial or other information delivered hereunder to the Lenders (or any affiliate of any Lender) or to the Agent, to any Governmental Authority having jurisdiction over the Agent or any of the Lenders pursuant to any written request therefor or in the ordinary course of examination of loan files, or to any other Person who shall acquire or consider the assignment of, or acquisition of any participation interest in, any Obligation permitted by this Agreement provided that notice is given to BREED if such information is delivered to a Person not enumerated herein; 8.2. Maintain Properties. Maintain all properties necessary to its operations in good working order and condition, ordinary wear and tear excepted, make all needed repairs, replacements and renewals to such properties, and maintain free from Liens all trademarks, trade names, patents, copyrights, trade secrets, know- how, and other intellectual property and proprietary information (or adequate licenses thereto), in each case as are necessary to conduct its business as currently conducted or as contemplated hereby, all in accordance with customary and prudent business practices; 8.3. Existence, Qualification, Etc. Except as otherwise expressly permitted under Section 9.7, do or cause to be done all things necessary to preserve and keep in full force and effect its existence and all material rights and franchises, and, except to the extent conveyed in connection with a transaction permitted under Section 9.5 hereof, maintain its license or qualification to do business as a foreign corporation and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary; 8.4. Regulations and Taxes. Comply in all material respects with or contest in good faith all statutes and governmental regulations and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, would become a Lien against any of its properties except liabilities being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves acceptable to BREED's independent certified public accountants have been established unless and until any Lien resulting therefrom attaches to any of its property and becomes enforceable against the Lenders; 8.5. Insurance. (a) Keep all of its insurable properties adequately insured at all times with responsible insurance carriers against loss or damage by fire and other hazards, including containing provisions required by the Security Instruments, (b) maintain general public liability insurance at all times with responsible insurance carriers against liability on account of damage to persons and property and (c) maintain insurance under all applicable workers' compensation laws (or in the alternative, maintain required reserves if self-insured for workers' compensation purposes) and against loss by reason of business interruption such policies of insurance to have such limits, deductibles, exclusions, co-insurance and other provisions providing no less coverages than that specified in Schedule 8.5. Each of the policies of insurance described in this Section 8.5 shall comply in all respects with the terms of the Security Instruments; 8.6. True Books. Keep true books of record and account in which full, true and correct entries will be made of all of its dealings and transactions, and set up on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business in general, and include such reserves in interim as well as year-end financial statements; 8.7. Right of Inspection. Permit any representative designated by the Agent or any Lender, to visit and inspect any of the properties, corporate books and financial reports of BREED or any Subsidiary and to discuss its affairs, finances and accounts with its principal officers and independent certified public accountants, all at reasonable times, at reasonable intervals and with reasonable prior notice and permit any Lender to discuss BREED's affairs, finances and accounts with its principal officers and its independent accountants all at reasonable times, at reasonable intervals and with reasonable prior notice; 8.8. Observe all Laws. Conform to and duly observe in all material respects all laws, rules and regulations and all other valid requirements of any Governmental Authority with respect to the conduct of its business; 8.9. Governmental Licenses. Obtain and maintain all licenses, permits, certifications and approvals of all applicable Governmental Authorities as are required for the conduct of its business as currently conducted and as contemplated by the Loan Documents; 8.10. Covenants Extending to Other Persons. Cause each of its Subsidiaries to do with respect to itself, its business and its assets, each of the things required of BREED in Sections 8.2 through 8.9, and 8.18 inclusive; 8.11. Officer's Knowledge of Default. Upon any Authorized Representative or the General Counsel of BREED obtaining knowledge of any Default or Event of Default hereunder or under any other obligation of BREED or any Subsidiary to any Lender, or any event, development or occurrence which could reasonably be expected to have a Material Adverse Effect, cause such officer or an Authorized Representative to promptly notify the Agent of the nature thereof, the period of existence thereof, and what action BREED or such Subsidiary proposes to take with respect thereto; 8.12. Suits or Other Proceedings. Upon any Authorized Representative or the General Counsel of BREED obtaining knowledge of any litigation or other proceedings being instituted against BREED or any Subsidiary or any attachment, levy, execution or other process being instituted against any assets of BREED or any Subsidiary making a claim or claims which is likely to result in damages in an aggregate amount greater than $10,000,000 not otherwise covered by insurance, or could reasonably be expected to have a Material Adverse Effect, promptly deliver to the Agent written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution or other process; 8.13. Notice of Environmental Complaint or Condition. Promptly provide to the Agent true, accurate and complete copies of any and all notices, complaints, orders, directives, claims, or citations received by BREED or any Subsidiary relating to any (a) violation or alleged violation by BREED or any Subsidiary of any applicable Environmental Law; (b) release or threatened release by BREED or any Subsidiary, or at any facility or property owned or leased or operated by BREED or any Subsidiary or by any Person handling, transporting, or disposing of any Hazardous Material on behalf of BREED or any Subsidiary, of any Hazardous Material, except where occurring legally; or (c) liability or alleged liability of BREED or any Subsidiary for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, which in any of the foregoing instances would reasonably be expected to have a Material Adverse Effect; 8.14. Environmental Compliance. If BREED or any Subsidiary shall receive any letter, notice, complaint, order, directive, claim or citation alleging that BREED or and Subsidiary has violated any Environmental Law, has released any Hazardous Material or is liable for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, which in any of the foregoing instances would reasonably be expected to have a Material Adverse Effect, BREED shall, within the time period permitted by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, either (i) remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or satisfy such liability or (ii) contest in good faith such violation so long as no remedial action shall be required to be taken during the period of such contest; 8.15. Indemnification. Without limiting the generality or application of Section 12.9, BREED hereby agrees to indemnify and hold the Agent, the Lenders and NMSI, and their respective officers, directors, employees and agents, harmless from and against any and all claims, losses, penalties, liabilities, damages and expenses (including assessment and cleanup costs and reasonable attorneys' fees and disbursements) arising directly or indirectly from, out of or by reason of (a) the violation of any Environmental Law by BREED or any Subsidiary or with respect to any property owned, operated or leased by BREED or any Subsidiary or (b) the handling, storage, treatment, emission or disposal of any Hazardous Materials by or on behalf of BREED or any Subsidiary or on or with respect to property owned or leased or operated by BREED or any Subsidiary. The provisions of this Section 8.15 shall survive the Facility Termination Date and expiration or termination of this Agreement; 8.16. Further Assurances. At the Borrowers' cost and expense, upon request of the Agent, duly execute and deliver or cause to be duly executed and delivered, to the Agent such further instruments, documents, certificates, financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Agent to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents; 8.17 Employee Benefit Plans. (a) With reasonable promptness, and in any event within thirty (30) days thereof, give notice to the Agent of (a) the establishment of any new Employee Benefit Plan (which notice shall include a summary of such plan), (b) the commencement of contributions to any Employee Benefit Plan to which BREED, any of its ERISA Affiliates or any of its Subsidiaries was not previously contributing, (c) any material increase in the benefits of any existing Employee Benefit Plan, (d) each funding waiver request filed with respect to any Employee Benefit Plan and all communications received or sent by BREED, any ERISA Affiliate or any Subsidiary with respect to such request and (e) the failure of BREED or any ERISA Affiliate or any Subsidiary to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code (in the case of Employee Benefit Plans regulated by the Code or ERISA) or any Foreign Benefit Law (in the case of any Employee Benefit Plan regulated by any Foreign Benefit Law) by the due date; (b) Promptly and in any event within fifteen (15) days of becoming aware of the occurrence or forthcoming occurrence of any (a) Termination Event or (b) nonexempt "prohibited transaction," as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Pension Plan or any trust created thereunder, deliver to the Agent a notice specifying the nature thereof, what action BREED, any ERISA Affiliate or any Subsidiary has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor, the PBGC or any other Governmental Authority with respect thereto; and (c) With reasonable promptness but in any event within fifteen (15) days for purposes of clauses (a), (b) and (c), deliver to the Agent copies of (a) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code, (b) all notices received by BREED or any ERISA Affiliate or any Subsidiary of the PBGC's or any Governmental Authority's intent to terminate any Employee Benefit Plan or to have a trustee appointed to administer any Pension Plan, (c) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by BREED or any ERISA Affiliate with the Internal Revenue Service with respect to each Employee Benefit Plan and (d) all notices received by BREED or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA. BREED will notify the Agent in writing within five (5) Business Days of BREED or any ERISA Affiliate obtaining knowledge or reason to know that BREED or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA; 8.18. Continued Operations. Except as permitted under Section 9.12, continue at all times to conduct its business and engage principally in the same or complementary line or lines of business substantially as heretofore conducted; 8.19 Additional Support Documents. Within thirty (30) days (or such additional amount of time as is reasonably necessary in the case of a Foreign Subsidiary but in no event more than ninety (90) days) of the acquisition or creation of any Domestic Subsidiary or Direct Foreign Subsidiary or any Subsidiary of a Borrowing Subsidiary cause to be delivered to the Agent for the benefit of the Lenders each of the following: (a) in the case of a Domestic Subsidiary, (i) a Guaranty executed by such Domestic Subsidiary substantially in the form of Exhibit G hereto; (ii) a Security Agreement executed by such Domestic Subsidiary substantially in the form of Exhibit R hereto; (iii) if applicable, to the extent consented to by any necessary third party, Landlord Waivers (in the form of Exhibit L), Lease Assignments (in the form of Exhibit N), Mortgages, an Intellectual Property Security Agreement (in the form of Exhibit H), and an Intercompany Note Pledge Agreement (in the form of Exhibit Q); (b) (i) in the case that such Subsidiary is directly owned by BREED or a Domestic Subsidiary or a Borrowing Subsidiary which has previously delivered a Pledge Agreement, Exhibit A and a revised Schedule I to the Pledge Agreement dated the date hereof together with (x) stock certificates or other appropriate evidence of ownership representing 100% of the capital stock and related interests and rights of a Domestic Subsidiary and a Subsidiary of a Borrowing Subsidiary or (y) not less than 65% of the Voting Stock and 100% of the non-voting common stock and related interests and rights of any Direct Foreign Subsidiary and (z) duly executed stock powers or powers of assignment in blank affixed thereto; (ii) in the case that such Subsidiary is directly owned by a Domestic Subsidiary which has not previously delivered a Pledge Agreement, a Pledge Agreement substantially similar in form and content to that executed and delivered by certain Domestic Subsidiaries on the Closing Date, with appropriate revisions as to the identity of the pledgor and as required by applicable law, if such Subsidiary is a Foreign Subsidiary, and securing Obligations of such Pledgor under its Guaranty, together with (x) stock certificates or other appropriate evidence of ownership representing 100% of the capital stock and related interests and rights of a Domestic Subsidiary or (y) not less than 65% of the Voting Stock and 100% of the non-voting common stock and related interests and rights of any Direct Foreign Subsidiary (z) duly executed stock powers or powers of assignment in blank affixed thereto or a Certificate and Receipt of Registrar; or (c) in the case that such Subsidiary is a partnership that has not issued certificates evidencing ownership of such partnership or joint venture, the Collateral Assignment of Partnership Interests and Certificate and Receipt of Registrar of such partnership or such joint venture with respect to the registration of the Lien on Assigned Interests so long as such assignment is not prohibited by the Governing Documents of such partnership or joint venture; (d) an opinion of counsel to the Subsidiary dated as of the date of delivery of the Guaranty and other Loan Documents provided for in this Section 8.19and addressed to the Agent and the Lenders, in form and substance substantially identical to the opinion of counsel delivered pursuant to Section 6.1(a)(ii) hereof on the Closing Date with respect to each Loan Party which is party to any Loan Document which such newly acquired or created Subsidiary is required to deliver or cause to be delivered pursuant to subparagraphs (a), (b), or (c) above. (e) current copies of the Organizational Documents and Operating Documents of such Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, partners, or appropriate committees thereof (and, if required by such Organizational Documents or Operating Documents, of the shareholders) of such Subsidiary authorizing the actions and the execution and delivery of documents described in this Section 8.19. 8.20. Operating Plan. As soon as practical and in any event within 90 days after the Closing Date, BREED shall deliver to the Agent a copy of the Operating Plan; provided, however, that if at any time before the Facility Termination Date, management of BREED determines that the forecasts of the Operating Plan no longer accurately reflect the current projected financial results of BREED and its Subsidiaries, as promptly as practicable after such determination date and in any event within 30 days of the end of the fiscal quarter for which such determination was made, BREED shall deliver to the Agent a revised Operating Plan; 8.21. Allied Acquisition Audit. As soon as practical and in any event within 45 days after the Closing Date, BREED shall deliver to the Agent a copy of an audit of the Acquired Business for the three (3) years ending December 31, 1996 conducted by Price Waterhouse, LLP and unaudited financial statements as of September 30, 1997; and within 95 days after the initial Advance, unaudited financial statements as of the date of the initial Advance. Notwithstanding the foregoing, AlliedSignal's failure to provide such statements, without fault of BREED, shall not constitute an Event of Default; 8.22. Diligent Pursuit of Waiver. BREED shall use its best efforts to obtain a waiver of the limitations set forth in the letter dated August 26, 1996 to BREED from the Securities and Exchange Commission; 8.23. Swap Agreements. Not later than thirty (30) days following the Closing Date, the Borrowers shall enter into interest rate protection agreements containing terms and conditions acceptable to BREED and the Agent providing Rate Hedging Obligations which limit the risk of interest rate fluctuations in a notional amount of not less than (i) $300,000,000 or (ii) in the event that Outstandings are less than $300,000,000, fifty percent (50%) of all Outstandings; 8.24. Subsidiary Support of Permitted Indebtedness. So long as not prohibited by law, BREED and each Subsidiary shall cause each of their Subsidiaries to make cash payments, directly or indirectly, to the Borrowers by way of dividends, advances, repayments of loans or advances, or other returns on investments, or by way of any other arrangement such that the Borrowers shall have the ability to satisfy all interest and principal payments required under the terms of this Agreement or any other Loan Document and under the terms of any other Permitted Indebtedness. 8.25. Convertible Debentures. (a) The Convertible Preferred Securities Issuance shall have occurred within 180 days of the Closing Date. (b) In the event any distribution with respect to the Convertible Debentures would give rise to an Event of Default, promptly give the BTI Trust notice of the election by BREED to defer such distribution until payment in full of the Obligations. 8.26 Management. Cause the Person occupying the office of (i) Vice Chairman of the Board of Directors, (ii) President and Chief Operating Officer, and (iii) Executive Vice President of Operations Worldwide to remain in such office, except for reason of death or disability. ARTICLE IX Negative Covenants Until the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, BREED will not, nor will it permit any Subsidiary to: 9.1. Financial Covenants. (a) Consolidated Shareholder's Equity. Permit Consolidated Shareholder's Equity to be less than the following: (i) ninety percent (90%) of the pro-forma Consolidated Shareholders' Equity of BREED and its Subsidiaries and the Acquired Business as set forth in the Form 8-K filed with the Securities and Exchange Commission as a result of the completion of the Allied Acquisition, less (ii) the sum of: (A) All after tax charges related to the restructure plan announced in the second quarter of Fiscal Year 1998, as approved by the Agent, plus (B) All after tax charges for disruption costs directly related to the aforementioned restructure plan, as approved by the Agent, plus (C) All after tax fees and expenses, including financing fees, that are related to the Allied Acquisition, as approved by the Agent, plus (D) After tax charges for the write off of in process R&D of the Acquired Business, as approved by the Agent, plus (E) Cash Dividends on either the Convertible Preferred Securities or the Series B Preference Shares so long as the Convertible Preferred Securities have not been issued, plus (F) Cash dividends paid to common stockholders on or about November 4, 1997; plus (iii) the sum of: (A) Ninety percent (90%) of Consolidated Net Income (with no reduction for losses), plus (B) One hundred percent (100%) of the Net Proceeds of any Equity Offering. (iv) The foregoing calculation, (i) - (ii) + (iii) shall be exclusive of the effects of any foreign currency translation amounts after September 30, 1997. (b) Consolidated EBITDA. Permit at any time during the respective periods set forth below Consolidated EBITDA (less those items described in Section 9.1 (a)(ii)(A)(B) and (D)) to be less than that set forth opposite each such period: Period Amount Three months ending December 31, 1997 $25,000,000 Six months ending March 31, 1997 $64,000,000 Nine months ending June 30, 1998 $107,000,000 (c) Limitation on Capital Expenditures. Make Capital Expenditures which exceed during the respective periods set forth below (on a cumulative basis) the amount set forth opposite each such period: Period Amount Three months ending December 31, 1997 $17,000,000 Six months ending March 31, 1998 $37,000,000 Nine months ending June 30, 1998 $57,000,000 9.2. Acquisitions. Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition. 9.3. Liens. Incur, create or permit to exist any Lien, charge or other encumbrance of any nature whatsoever with respect to any property or assets now owned or hereafter acquired by BREED or any Subsidiary, other than Liens created in favor of the Agent and the Lenders under the Loan Documents and the following (collectively, the "Permitted Liens"): (a) Liens existing as of the date hereof and as set forth in Schedule 7.7; (b) Liens imposed by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP. (c) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law or created in the ordinary course of business and in existence less than 90 days from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (d) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (e) purchase money Liens to secure Indebtedness permitted under Section 9.4(e) and incurred to purchase fixed assets, provided such Indebtedness represents not less than 75% and not more than 100% of the purchase price of such assets as of the date of purchase thereof and no property other than the assets so purchased secured such Indebtedness; (f) Liens arising in connection with Capital Leases permitted under Section 9.4(f) provided that no such Lien shall extend to any Collateral or to any other property other than the assets subject to such Capital Leases; (g) easements (including reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded), which do not interfere materially with the ordinary conduct of the business of BREED or any Subsidiary and which do not materially detract from the value of the property to which they attach or materially impair the use thereof to BREED or any Subsidiary; 9.4. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, howsoever evidenced, except the following (collectively the "Permitted Indebtedness"): (a) Indebtedness existing as of the Closing Date as set forth in Schedule 7.6; provided the outstanding amount of such Indebtedness shall not at any time exceed $100,000,000 in the aggregate; provided, further, none of the instruments and agreements evidencing or governing such Indebtedness shall be amended, modified or supplemented after the Closing Date to change any terms of subordination, repayment or rights of conversion, put, exchange or other rights from such terms and rights as in effect on the Closing Date; (b) Indebtedness owing to the Agent or any Lender in connection with this Agreement, any Note or other Loan Document; (c) Indebtedness required under Section 8.23; (d) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (e) purchase money Indebtedness in an aggregate amount not to exceed $10,000,000 at any time; (f) Capital Leases (i) with respect to the construction and equipping of the VT1 FAB2 Facility in Finland in an aggregate amount not to exceed $10,000,000 at any time and (ii) other than described in clause (i) above in an aggregate principal amount not to exceed $10,000,000 at any time; (g) Intercompany Advances; and (h) Guaranties of Indebtedness permitted hereunder of Guarantors and Direct Foreign Subsidiaries., and the limited guaranty of the Convertible Preferred Securities. 9.5. Transfer of Assets. Sell, lease, transfer or otherwise dispose of any assets of BREED or any Subsidiary other than: (a) dispositions of assets in the ordinary course of business; (b) dispositions of property that is substantially worn, damaged, obsolete or, in the judgment of BREED, no longer best used or useful in its business (including Gallino Plasturgia S.r.l.) or that of any Subsidiary; (c) transfers of assets necessary to give effect to investment or merger or consolidation transactions permitted by Sections 9.6 and 9.7. (d) after the Agent has approved the Operating Plan, dispositions described therein. 9.6. Investments. Purchase, own, invest in or otherwise acquire, directly or indirectly, any stock or other securities, or make or permit to exist any interest whatsoever in any other Person or permit to exist any loans or advances to any Person, except that BREED and its Subsidiaries may maintain investments or invest in: (a) any Person acquired in an Acquisition permitted hereunder; (b) Eligible Securities; (c) investments, including joint ventures, existing as of the date hereof and as set forth in Schedule 7.4 and the Siemens joint venture referred to in Section 9.6(h); (d) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof in connection with accounts of financially troubled Persons to the extent reasonably necessary in order to prevent or limit loss; (e) Intercompany Advances; (f) investments in Guarantors formed for the purpose of an Equity Offering or a Debt Offering; (g) loans and advances to employees in the ordinary course of business in an aggregate amount not to exceed $4,000,000; (h) non-cash investments in a joint venture with Siemens AG or a subsidiary thereof not to exceed in the aggregate $20,000,000; (i) other investments in joint ventures, the BTI Trust and minority interest investments in an aggregate amount not to exceed $1,000,000; (j) advances to Foreign Subsidiaries who are not Borrowing Subsidiaries nor Direct Foreign Subsidiaries in an aggregate amount not to exceed $1,000,000; and (k) investments in BTI Trust of up to 3% of the principal amount of the Convertible Preferred Securities. 9.7. Merger or Consolidation. (a) Consolidate with or merge into any other Person, or (b) permit any other Person to merge into it; provided, however, (i) any Subsidiary of BREED may merge or transfer all or substantially all of its assets into or consolidate with its parent, a Guarantor, a Borrowing Subsidiary, or BREED, and (ii) any other Person may merge into or consolidate with BREED or any wholly-owned Subsidiary and any Subsidiary may merge into or consolidate with any other Person in order to consummate an Acquisition permitted by Section 9.2, provided further, that any resulting or surviving entity shall execute and deliver such agreements and other documents, including a Guaranty, and take such other action as the Agent may require to evidence or confirm its express assumption of the obligations and liabilities of its predecessor entities under the Loan Documents; 9.8 Restricted Payments. Make any Restricted Payment or apply or set apart any of their assets therefor or agree to do any of the foregoing except (a) a one time cash dividend of approximately $2,200,000 payable to the holders of BREED common stock on or before November4, 1997, (b) BREED may make Restricted Payments (i) prior to the issuance of the Convertible Preferred Securities on the Series B Preference Shares required pursuant to the Prudential Stock Purchase Documents and (ii) after the issuance of the Convertible Preferred Securities to the BTI Trust on the Convertible Debentures (and the BTI Trust may make distributions on the Convertible Preferred Securities) so long as both before and after giving effect thereto, no Default or Event of Default exists, and (c) the redemption of the Series B Preference Shares with Net Proceeds received from the sale of the Convertible Preferred Securities or such other equity or equity linked securities as approved by the Required Lenders. 9.9. Transactions with Affiliates. Other than transactions permitted under Sections 9.5, 9.6, 9.7 and 9.8, and transactions with the BTI Trust (to the extent necessary for BREED to perform its obligations with respect to the Convertible Preferred Securities), Guarantors, Borrowing Subsidiaries or Direct Foreign Subsidiaries, enter into any transaction after the Closing Date, including, without limitation, the purchase, sale, lease or exchange of property, real or personal, or the rendering of any service, with any Affiliate of BREED, except (a)that such Persons may render services to BREED or its Subsidiaries for compensation at the same rates generally paid by Persons engaged in the same or similar businesses for the same or similar services, (b)that BREED or any Subsidiary may render services to such Persons for compensation at the same rates generally charged by BREED or such Subsidiary and (c) in either case in the ordinary course of business and pursuant to the reasonable requirements of BREED's (or any Subsidiary's) business consistent with past practice of BREED and its Subsidiaries and upon fair and reasonable terms no less favorable to BREED (or any Subsidiary) than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate; 9.10. Compliance with ERISA, the Code and Foreign Benefit Laws. With respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan: (a) permit the occurrence of any Termination Event which would result in a liability on the part of BREED, any ERISA Affiliate, or any Subsidiary to the PBGC or any Governmental Authority; or (b) permit the present value of all benefit liabilities under all Employee Benefit Plans to exceed the current value of the assets of such Employee Benefit Plans allocable to such benefit liabilities; or (c) permit any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; or (d) fail to make any contribution or payment to any Multiemployer Plan which BREED or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; or (e) engage, or permit BREED or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code for which a civil penalty pursuant to Section 502(I) of ERISA or a tax pursuant to Section 4975 of the Code may be imposed; or (f) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits or establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to BREED or any ERISA Affiliate or any Subsidiary or increase the obligation of BREED or any ERISA Affiliate or any Subsidiary to a Multiemployer Plan other than those to be established for certain employees acquired as part of the Allied Acquisition; or (g) fail, or permit BREED or any ERISA Affiliate or any Subsidiary to fail to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code, all applicable Foreign Benefit Laws and all other applicable laws and the regulations and interpretations thereof; 9.11. Accounting Changes. Change its Fiscal Year or make any change in its accounting treatment and reporting practices except as required by GAAP; 9.12. Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking any such winding up, liquidation or dissolution, except for the dissolution of Gallino Plasturgia S.r.l. and Akebono Vaitec and in connection with a merger or consolidation permitted pursuant to Section 9.7 or as provided in the Operating Plan; 9.13. Limitations on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by BREED or any Subsidiary of real or personal property, whether now owned or hereafter acquired in a related transaction or series of related transactions, which has been or is to be sold or transferred by BREED or any Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of BREED or any Subsidiary; 9.14. Change in Control. Cause, suffer or permit to exist or occur any Change of Control; 9.15. Limitation on Guaranties. Enter into or cause, suffer or permit to exist any Guaranties except as permitted in Section 9.4. 9.16. Negative Pledge Clauses. Enter into or cause, suffer or permit to exist any agreement with any Person other than the Agent and the Lenders pursuant to this Agreement or any other Loan Documents which prohibits or limits the ability of any of BREED or any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, in favor of the Agent and the Lenders under the Loan Documents; provided that BREED and any Subsidiary may enter into such an agreement in connection with, and limited solely to, property acquired with the proceeds of purchase money Indebtedness permitted hereunder; 9.17. Prepayments, Etc. of Indebtedness. (a) Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness; or (b) amend, modify or change in any manner any term or condition of any Indebtedness described in Section 9.4(a) or any lease so that the terms and conditions thereof are less favorable to the Agent and the Lenders than the terms of such Indebtedness or leases as of the Closing Date; 9.18. Restrictive Agreements. Enter into or cause, suffer or permit to exist any agreement with any other Person (other than the Agent and the Lenders pursuant to this Agreement or any other Loan Document) which prohibits, limits or restricts the ability of any Subsidiary to make any payments, directly or indirectly, to BREED by way of dividends, advances, repayments of loans or advances, or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to BREED. ARTICLE X Events of Default and Acceleration 10.1. Events of Default. If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority), that is to say: (a) if default shall be made in the due and punctual payment of the principal of any Loan, Reimbursement Obligation or other Obligation, when and as the same shall be due and payable whether pursuant to any provision of Article II or Article III, at maturity, by acceleration or otherwise and; or (b) if default shall be made in the due and punctual payment of any amount of interest on any Loan, Reimbursement Obligation or other Obligation or of any fees or other amounts payable to any of the Lenders or the Agent on the date on which the same shall be due and payable; or (c) if default shall be made in the performance or observance of any covenant set forth in Section 2.3(b), 2.12, 8.7, 8.11, 8.12, 8.19, 8.20, 8.25(a) or 8.26 (and such Default in the case of Section 8.26 shall continue for 15 days) or Article IX; (d) if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in this Agreement or the Notes (other than as described in clauses (a), (b) or (c) above) and such default shall continue for thirty (30) or more days after the earlier of receipt of notice of such default by the Authorized Representative from the Agent or an Authorized Representative of BREED becomes aware of such default, or if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in any of the other Loan Documents (beyond any applicable grace period, if any, contained therein) ( including without limitation failure of any Guarantor to pay the Agent all of the Guaranteed Obligations in accordance with, and as defined in, the Guaranty on the Business Day on which the Agent has demanded such payment in accordance with the terms of the Guaranty ) or in any instrument or document evidencing or creating any obligation, guaranty, or Lien in favor of the Agent or any of the Lenders or delivered to the Agent or any of the Lenders in connection with or pursuant to this Agreement or any of the Obligations, or if any Loan Document ceases to be in full force and effect (other than by reason of any action by the Agent or any Lender), or if without the written consent of the Lenders, this Agreement or any other Loan Document shall be disaffirmed or shall terminate, be terminable or be terminated or become void or unenforceable for any reason whatsoever (other than in accordance with its terms in the absence of default or by reason of any action by the Lenders or the Agent); or (e) if there shall occur (i) a default, which is not waived, in the payment of any principal, interest, premium or other amount with respect to any Indebtedness or Rate Hedging Obligation (other than the Loans and other Obligations) of BREED or any Subsidiary in an amount not less than $2,000,000 in the aggregate outstanding, or (ii) a default, which is not waived, in the performance, observance or fulfillment of any term or covenant contained in any agreement or instrument under or pursuant to which any such Indebtedness or Rate Hedging Obligation referred to in clause (i) may have been issued, created, assumed, guaranteed or secured by BREED or any Subsidiary, or (iii) any other event of default as specified in any agreement or instrument under or pursuant to which any such Indebtedness or Rate Hedging Obligation may have been issued, created, assumed, guaranteed or secured by BREED or any Subsidiary, and any such default or event of default specified in clauses (i), (ii) or (iii) shall continue for more than the period of grace, if any, therein specified, or such default or event of default shall permit the holder of any such Indebtedness or Rate Hedging Obligation (or any agent or trustee acting on behalf of one or more holders) to accelerate the maturity thereof; or (f) if any representation, warranty or other statement of fact contained in any Loan Document or in any writing, certificate, report or statement at any time furnished to the Agent or any Lender by or on behalf of the Borrowers pursuant to or in connection with any Loan Document, or otherwise, shall be false or misleading in any material respect when given; or (g) if BREED or any Subsidiary shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency statute; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute; or (h) if a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of BREED or any Subsidiary or of the whole or any substantial part of its properties and such order, judgment or decree continues unstayed and in effect for a period of sixty (60) days, or approve a petition filed against BREED or any Subsidiary seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state, which petition is not dismissed within sixty (60) days; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of BREED or any Subsidiary or of the whole or any substantial part of its properties, which control is not relinquished within sixty (60) days; or if there is commenced against BREED or any Subsidiary any proceeding or petition seeking reorganization, arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state which proceeding or petition remains undismissed for a period of sixty (60) days; or if BREED or any Subsidiary takes any action to indicate its consent to or approval of any such proceeding or petition; or (i) if (i) one or more judgments or orders where the amount not covered by insurance (or the amount as to which the insurer is found not to be liable for) is in excess of $1,000,000 is rendered against BREED or any Subsidiary, or (ii) there is any attachment, injunction or execution against any of BREED's or Subsidiaries' properties for any amount in excess of $1,000,000 in the aggregate; and such judgment, attachment, injunction or execution remains unpaid, unstayed, undischarged, unbonded or undismissed for a period of thirty (30) days; or (j) if BREED or any Subsidiary shall, other than in the ordinary course of business (as determined by past practices or as set forth in the Operating Plan), suspend all or any part of its operations material to the conduct of the business of BREED or such Subsidiary for a period of more than sixty (60) days; or (k) any material uninsured damage to or loss, theft or destruction of any of the Collateral shall occur; (l) any actual or asserted invalidity (other than by the Agent or Lenders) of the Loan Documents; or (m) if there shall occur any Termination Event; or (n) there shall occur any Change in Control; or (o) the occurrence of any Indenture Event of Default or the failure to register securities of the Borrower or BTI Trust as required by any agreement or instrument to which either of them is a party; then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall have not been waived, (A) either or both of the following actions may be taken: (i) the Agent, with the consent of the Required Lenders, may, and at the direction of the Required Lenders shall, declare any obligation of the Lenders and the Issuing Bank to make further Loans or to issue additional Letters of Credit terminated, whereupon the obligation of each Lender to make further Loans and of the Issuing Bank to issue additional Letters of Credit, hereunder shall terminate immediately, and (ii) the Agent shall at the direction of the Required Lenders, at their option, declare by notice to the Borrowers any or all of the Obligations to be immediately due and payable, and the same, including all interest accrued thereon and all other obligations of the Borrowers to the Agent and the Lenders, shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived, anything contained herein or in any instrument evidencing the Obligations to the contrary notwithstanding; provided, however, that notwithstanding the above, if there shall occur an Event of Default under clause (g) or (h) above, then the obligation of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall automatically terminate and any and all of the Obligations shall be immediately due and payable without the necessity of any action by the Agent or the Required Lenders or notice by or to the Agent or the Lenders; (B) The Borrowers shall, upon demand of the Agent or the Required Lenders, deposit cash with the Agent in an amount equal to the amount of any Letter of Credit Outstandings, as collateral security for the repayment of any future drawings or payments under such Letters of Credit, and such amounts shall be held by the Agent pursuant to the terms of the LC Account Agreement; and (C) the Agent and each of the Lenders shall have all of the rights and remedies available under the Loan Documents or under any applicable law. 10.2. Agent to Act. In case any one or more Events of Default shall occur and not have been waived or cured, the Agent may, and at the direction of the Required Lenders shall, proceed to protect and enforce their rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein or in any other Loan Document, or to enforce the payment of the Obligations or any other legal or equitable right or remedy. 10.3. Cumulative Rights. No right or remedy herein conferred upon the Lenders or the Agent is intended to be exclusive of any other rights or remedies contained herein or in any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. 10.4. No Waiver. No course of dealing between the Borrowers and any Lender or the Agent or any failure or delay on the part of any Lender or the Agent in exercising any rights or remedies under any Loan Document or otherwise available to it shall operate as a waiver of any rights or remedies and no single or partial exercise of any rights or remedies shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or of the same right or remedy on a future occasion. 10.5. Allocation of Proceeds. If an Event of Default has occurred and not been waived, and the maturity of the Notes has been accelerated pursuant to Article X hereof, all payments received by the Agent hereunder, in respect of any principal of or interest on the Obligations or any other amounts payable by the Borrowers hereunder, shall be applied by the Agent in the following order: (a) amounts due to the Lenders pursuant to Sections 2.10, 3.3 and 12.5; (b) payments of interest on Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders; (c) payments of principal of Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders; (d) payments of cash amounts to the Agent in respect of outstanding Letters of Credit pursuant to Section 10.1(B); (e) amounts due to the Lenders pursuant to Sections 3.2(g), 8.15 and 12.9; (f) payments of all other amounts due under any of the Loan Documents, if any, to be applied for the ratable benefit of the Lenders; (g) amounts due to any of the Lenders in respect of Obligations consisting of liabilities under any Swap Agreement with any of the Lenders on a pro rata basis according to the amounts owed; and (h) any surplus remaining after application as provided for herein, to the Borrowers or otherwise as may be required by applicable law. 10.6. Judgment Currency. The Borrowers, the Agent and each Lender hereby agree that if, in the event that a judgment is given in relation to any sum due to the Agent or any Lender hereunder, such judgment is given in a currency (the "Judgment Currency") other than that in which such sum was originally denominated (the "Original Currency"), the Borrowers agree to indemnify the agent or such Lender, as the case may be, to the extent that the amount of the Original Currency which could have been purchased by the Agent in accordance with normal banking procedures on the Business Day following receipt of such sum is less than the sum which could have been so purchased by the Agent had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding the giving of such judgment, and if the amount so purchased exceeds the amount which could have been so purchased by the Agent had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding such judgment, the Agent or the applicable Lenders agrees to remit such excess to the Borrowers. The agreements in this Section shall survive payment of all Obligations. ARTICLE XI The Agent 11.1. Appointment, Powers, and Immunities. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent (which term as used in this sentence and in Section 11.5 and the first sentence of Section 11.6 hereof shall include its affiliates and its own and its affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by any Loan Party or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Loan Party or the satisfaction of any condition or to inspect the property (including the books and records) of any Loan Party or any of its Subsidiaries or affiliates; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and (e) shall not be responsible to any Lender for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in- fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Each Lender hereby irrevocably designates and appoints NationsBank as the Agent for the Lenders under this Agreement, and each of the Lenders hereby irrevocably authorizes NationsBank as the Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers as are expressly delegated to the Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any of the Lenders, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 11.2. Reliance by Agent. The Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telefacsimile) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Loan Party), independent accountants, and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until the Agent receives and accepts an Assignment and Acceptance executed in accordance with Section 12.1 hereof. As to any matters not expressly provided for by this Agreement, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding on all of the Lenders; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to any Loan Document or applicable law or unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. 11.3. Defaults. The Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless the Agent has received written notice from a Lender or the Borrowers specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agent shall (subject to Section 11.2 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders. 11.4. Rights as Lender. With respect to its Revolving Credit Commitment and Term Loan Commitment and the Loans made by it, NationsBank (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. NationsBank (and any successor acting as Agent) and its affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Loan Party or any of its Subsidiaries or affiliates as if it were not acting as Agent, and NationsBank (and any successor acting as Agent) and its affiliates may accept fees and other consideration from any Loan Party or any of its Subsidiaries or affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. 11.5 Indemnification. The Lenders agree to indemnify the Agent (to the extent not reimbursed under Section 12.9 hereof, but without limiting the obligations of the Borrowers under such Section) ratably in accordance with their respective Total Credit Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including by any Lender) in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or any action taken or omitted by the Agent under any Loan Document; provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs or expenses payable by the Borrowers under Section 12.5, to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Borrowers. The agreements contained in this Section shall survive payment in full of the Loans and all other amounts payable under this Agreement. 11.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Loan Parties and their Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Loan Party or any of its Subsidiaries or affiliates that may come into the possession of the Agent or any of its affiliates. 11.7. Resignation of Agent. The Agent may resign at any time by giving notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent meeting the requirements set forth herein. The Borrowers shall have the right to approve such Agent so long as no Default or Event of Default exist. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a commercial bank organized under the laws of the United States of America having combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article XI shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 11.8. Fees. When and if there shall be more than one Lender under this Agreement, the Borrowers agree to pay to the Agent, for its individual account, an Agent's fee as from time to time agreed to by the Borrowers and Agent in writing. ARTICLE XII Miscellaneous 12.1. Assignments and Participations. (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Notes, its Revolving Credit Commitment, and its Term Loan Commitment); provided, however, that (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Agreement, any such partial assignment made prior to November 5, 1997 shall be in an amount at least equal to $1,000,000 or an integral multiple of $1,000,000 and after November 4, 1997 shall be in an amount at least equal to $5,000,000 or an integral multiple of $5,000,000 (or if less, the entire remaining amount of such Lender's Revolving Credit Commitment or Term Loan Commitment) in excess thereof; (iii) each such assignment by a Lender with respect to the Revolving Credit Facility shall be of a constant, and not varying, percentage of all of its rights and obligations under the Revolving Credit Facility and Letter of Credit Facility and the Revolving Note; (iv) each such assignment by a Lender with respect to the Term Loan Facility shall be of a constant, and not varying, percentage of all of its rights and obligations under the Term Loan Facility and the Term Note; and (v) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance in the form of Exhibit B hereto, together with any Note subject to such assignment and a processing fee of $3,500; provided, that in the case of contemporaneous assignments by a Lender to more than one fund managed by or advised by the same investment advisor (which funds are not then Lenders hereunder), only a single $3,500 fee shall be payable for all such contemporaneous assignments. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the consummation of any assignment pursuant to this Section, the assignor, the Agent and the Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrowers and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 5.6. (b) The Agent shall maintain at its address referred to in Section 12.2 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitment and Term Loan Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (c) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (d) Each Lender may sell participations at its expense to one or more Persons in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and its Loans); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrowers shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrowers relating to its Loans and its Note and to approve any amendment, modification, or waiver of any provision of this Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Note, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Note, or extending its Revolving Credit Commitment) and (iv) the sale of any such participation which requires BREED to file a registration statement with federal or state regulatory authorities shall not be permitted. (e) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (f) Any Lender may furnish any information concerning BREED or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) so long as such Lender shall require in writing (which writing names the Borrowers as a third party beneficiary thereof) any such assignee or participant or perspective assignee or participant to maintain the confidentiality of any information delivered to it which is not publicly available. (g) The Borrowers may not assign, nor shall they cause, suffer or permit any Guarantor to assign any rights, powers, duties or obligations under this Agreement of the other Loan Documents without the prior written consent of all the Lenders. 12.2. Notices. Any notice shall be conclusively deemed to have been received by any party hereto and be effective (i) on the day on which delivered (including hand delivery by commercial courier service) to such party (against receipt therefor), (ii) on the date of receipt at such address, telefacsimile number or telex number as may from time to time be specified by such party in written notice to the other parties hereto or otherwise received), in the case of notice by telegram or telefacsimile, respectively (where the receipt of such message is verified by return), or (iii) on the fifth Business Day after the day on which mailed, if sent prepaid by certified or registered mail, return receipt requested, in each case delivered, transmitted or mailed, as the case may be, to the address or telefacsimile number, as appropriate, set forth below or such other address or number as such party shall specify by notice hereunder: (a) if to the Borrowers: BREED Technologies, Inc. 5300 Old Tampa Highway Lakeland, Florida 33811 Attention: Telephone: Telefacsimile: (b) if to the Agent: NationsBank, National Association Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telephone: (704) 388-2374 Telefacsimile: (704) 386-9923 with a copy to: NationsBank, National Association 400 N. Ashley Drive, 2nd Floor Tampa, Florida 33602 Attention: Global Finance Telephone: (813) 224-5194 Telefacsimile: (813) 224-5948 (c) if to the Lenders: At the addresses set forth on the signature pages hereof and on the signature page of each Assignment and Acceptance; (d) if to any Guarantor, at the address set forth on the signature page of the Guaranty or other Loan Document executed by such Guarantor, as the case may be. 12.3. Right of Set-off; Adjustments. (a) Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its affiliates) to or for the credit or the account of the Borrowers against any and all of the obligations of the Borrowers now or hereafter existing under this Agreement and the Note held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note and although the payment of such obligations may not have been accelerated. Each Lender agrees promptly to notify the Borrowers after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. (b) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of the Loans owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrowers agree that any Lender so purchasing a participation from a Lender pursuant to this Section 12.3 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Person were the direct creditor of the Borrowers in the amount of such participation. 12.4. Survival. All covenants, agreements, representations and warranties made herein shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit and the execution and delivery to the Lenders of this Agreement and the Notes and shall continue in full force and effect so long as any of Obligations remain outstanding or any Lender has any commitment hereunder or the Borrowers have continuing obligations hereunder unless otherwise provided herein. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrowers which are contained in the Loan Documents shall inure to the benefit of the successors and permitted assigns of the Lenders or any of them. 12.5. Expenses. The Borrowers agree to pay on demand all reasonable costs and expenses of the Agent in connection with the syndication, preparation, execution, and delivery of this Agreement, the other Loan Documents, and the other documents to be delivered hereunder, including, without limitation, the reasonable fees (not to exceed $500,000) and expenses of Smith Helms Mulliss & Moore, L.L.P., counsel for the Agent, with respect thereto and with respect to advising the Agent as to its rights and responsibilities under the Loan Documents. The Borrowers further agree to pay on demand all reasonable costs and expenses of the Agent, including, without limitation, the reasonable fees and expenses of counsel for the Agent, in connection with any future modification or amendment of this Agreement, the other Loan Documents, and the other documents delivered hereunder. The Borrowers further agree to pay on demand all reasonable costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable attorneys' fees and expenses and the cost of internal counsel), in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of the Loan Documents and the other documents to be delivered hereunder. 12.6. Amendments and Waivers. Any provision of this Agreement or any other Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrowers and the Required Lenders (and, if Article XI or the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase the Revolving Credit Commitments or Term Loan Commitments of the Lenders, (ii) reduce the principal of or rate of interest on any Loan or any fees or other amounts payable hereunder, (iii) postpone any date fixed for the payment of any scheduled installment of principal of or interest on any Loan or any fees or other amounts payable hereunder or for termination of any Revolving Credit Commitment or Term Loan Commitment, (iv) change the percentage of the Revolving Credit Commitments or Term Loan Commitments or of the unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement or (v) release any Guarantor or Pledged Stock or a material portion of the other Collateral except pursuant to any sale, merger or consolidation permitted hereunder; and provided, further, that no such amendment or waiver which affects the rights, privileges, or obligations of NationsBank as issuer of Letters of Credit, shall be effective unless signed in writing by NationsBank. Notwithstanding any provision of the other Loan Documents to the contrary, as between the Agent and the Lenders, execution by the Agent shall not be deemed conclusive evidence that the Agent has obtained the written consent of the Required Lenders. No notice to or demand on the Borrowers in any case shall entitle the Borrowers to any other or further notice or demand in similar or other circumstances, except as otherwise expressly provided herein. No delay or omission on any Lender's or the Agent's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default. 12.7. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such fully-executed counterpart. 12.8. Termination. The termination of this Agreement shall not affect any rights of the Borrowers, the Lenders or the Agent or any obligation of the Borrowers, the Lenders or the Agent, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into or rights created or obligations incurred prior to such termination have been fully disposed of, concluded or liquidated and the Obligations arising prior to or after such termination have been irrevocably paid in full. The rights granted to the Agent for the benefit of the Lenders under the Loan Documents shall continue in full force and effect, notwithstanding the termination of this Agreement, until all of the Obligations have been paid in full after the termination hereof (other than Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable, which shall continue) or the Borrowers have furnished the Lenders and the Agent with an indemnification satisfactory to the Agent and each Lender with respect thereto. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until payment in full of the Obligations unless otherwise provided herein. Notwithstanding the foregoing, if after receipt of any payment of all or any part of the Obligations, any Lender is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, a diversion of trust funds or for any other reason, this Agreement shall continue in full force and the Borrowers shall be liable to, and shall indemnify and hold the Agent or such Lender harmless for, the amount of such payment surrendered until the Agent or such Lender shall have been finally and irrevocably paid in full. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent or the Lenders in reliance upon such payment, and any such contrary action so taken shall be without prejudice to the Agent or the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. 12.9. Indemnification. (a) The Borrowers agree to indemnify and hold harmless the Agent and each Lender and each of their affiliates and their respective officers, directors and employees (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith) the Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans, except to the extent such claim, damage, loss, liability, cost, or expense is finally judicially determined to have directly and primarily resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 12.9(a) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrowers, their directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. (b) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 12.9 shall survive the payment in full of the Loans and all other amounts payable under this Agreement and the Notes. 12.10. Severability. If any provision of this Agreement or the other Loan Documents shall be determined to be illegal or invalid as to one or more of the parties hereto, then such provision shall remain in effect with respect to all parties, if any, as to whom such provision is neither illegal nor invalid, and in any event all other provisions hereof shall remain effective and binding on the parties hereto. 12.11. Entire Agreement. This Agreement, together with the other Loan Documents, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments and other communications between or among the parties, both oral and written, with respect thereto. 12.12. Agreement Controls. In the event that any term of any of the Loan Documents other than this Agreement conflicts with any express term of this Agreement, the terms and provisions of this Agreement shall control to the extent of such conflict. 12.13 Usury Savings Clause. Notwithstanding any other provision herein, the aggregate interest rate charged under any of the Notes, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate (as such term is defined below). If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as defined below), the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Borrowers shall pay to the Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of the Lenders and the Borrowers to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Borrowers. As used in this paragraph, the term "Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. 12.14. Governing Law; Waiver of Jury Trial. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN CERTAIN PLEDGE AGREEMENTS COVERING SHARES OF DIRECT FOREIGN SUBSIDIARIES) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY OUTSIDE SUCH STATE. (b) THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY AGREE AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF HILLSBOROUGH, STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWERS EXPRESSLY WAIVE ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWERS HEREBY IRREVOCABLY SUBMIT GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) THE BORROWERS AGREE THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWERS PROVIDED IN SECTION 12.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA. (d) NOTHING CONTAINED IN SUBSECTIONS (a) OR (b) HEREOF SHALL PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE THE BORROWERS OR ANY OF THE BORROWERS' PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVE, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER THEM AND THEIR PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWERS, THE AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. 12.15. Recovery Under Florida Mortgage. The recovery of the Agent under the Mortgage executed by BREED Automotive of Florida, Inc. to secure the Obligations as defined therein encumbering approximately 430 acres of real property as described therein and to be recorded in the Clerk of Circuit Court of Polk County, Florida (the "Florida Mortgage") shall be limited to the principal amount of $50,000,000 together with accrued interest on such amount and other costs and fees as provided in such Florida Mortgage. The Florida Mortgage secures the first amounts advanced and the last amounts repaid to the Lenders. [Signatures on following pages] IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written. BREED TECHNOLOGIES, INC. WITNESS: /s/ R. Malloy McKeithen By:/s/ Lizanne Guptill Name: Lizanne Guptill /s/ Joseph J. Troy Title: Secretary BREED AUTOMOTIVE SAFETY SYSTEMS SL WITNESS: /s/ R. Malloy McKeithen By: /s/ Lizanne Guptill Name: Lizanne Guptill /s/ Joseph J. Troy Title: BREED ITALIAN HOLDINGS, SRL WITNESS: /s/ R. Malloy McKeithen By:/s/ Lizanne Guptill Name: Lizanne Guptill /s/ Joseph J. Troy Title: BREED UK LIMITED WITNESS: /s/ R. Malloy McKeithen By:/s/ Lizanne Guptill Name:Lizanne Guptill /s/ Joseph J. Troy Title: ICSRD R.F., GMBH WITNESS: /s/ R. Malloy McKeithen By:/s/ Lizanne Guptill Name: Lizanne Guptill /s/ Joseph J. Troy Title: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By:/s/ Miles C. Dearden III Name: Miles C. Dearden III Title:Senior Vice President NATIONSBANK, NATIONAL ASSOCIATION By:/s/ Miles C. Dearden III Name:Miles C. Dearden III Title:Senior Vice President Domestic Lending Office: NationsBank, National Association Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Jamie McCotter Telephone: (704) 388-2374 Telefacsimile: (704) 386-9923 Wire Transfer Instructions: NationsBank, National Association ABA# _________ Account No.: Reference: BREED Technologies, Inc. Attention: Agency Services BHF-BANK AKRIENGESELLSCHAFT By:/s/ Linda Pace Anthony Heyman Name:Linda Pace Anthony Heyman Title: V.P. A.T. Domestic Lending Office: BHF-BANK 590 Madison Avenue New York, New York 10022 Attention: John Sykes Telephone: (212) 756-5939 Telefacsimile: (212) 756-5536 Wire Transfer Instructions: Bank of New York New York, New York ABA No.: 021000018 Account No.: 8023014646 Reference: BHF-BANK/Breed THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By:/s/ Satoru Otsubo Name:Satoru Otsubo Title: Joint General Manager Domestic Lending Office: The Long-Term Credit Bank of Japan, Limited 165 Broadway New York, New York 10006 Wire Transfer Instructions: The Chase Manhattan Bank ABA No.: 021 000 021 Account No.: 544-7-75066 Reference: The Long-Term Credit Bank of Japan, New York Branch THE BANK OF NOVA SCOTIA By:/s/ W.J. Brown Name: W.J. Brown Title:Vice President Domestic Lending Office: The Bank of Nova Scotia 600 Peachtree Street, N.E., Suite 2700 Atlanta, Georgia 30308 Attention: Frank Sandler Telephone: (404) 877-1505 Telefacsimile: (704) 888-8998 Wire Transfer Instructions: The Bank of Nova Scotia New York, New York ABA No.: 026002532 Credit: ScotiaBanc Inc. Account No.: 0735639 Reference: BREED Technologies, Inc. Attention: Phyllis Walker VAN KAMPEN AMERICAN CAPITAL By:/s/ Jeffrey W. Maillet Name:Jeffrey W. Maillet Title: Senior Vice President and Director Domestic Lending Office: Van Kampen American Capital One Parkview Plaza - 5th Floor Oakbrook Terrace, Illinois 60181 Wire Transfer Instructions: State Street Bank & Trust ABA#011000028 Account No.: 99001265 Reference: VKAC PRIT (Breed Technologies) Attention: Mr. Sean Emerson Telecopier No.: 617-664-5366 Telephone No.: 617-664-5481 EXHIBIT A Applicable Commitment Percentages I. Revolving Credit Facility Lender Revolving Applicable Credit Commitment Commitment Percentage NationsBank, National Association $ 225,000,000 75.000000000% The Long-Term Credit Bank of Japan, Limited $ 25,000,000 8.333333333% BHF-Bank Akriengesellschaft $ 25,000,000 8.333333333% The Bank of Nova Scotia $ 25,000,000 8.333333333% $ 300,000,000 100% II. Term Loan Facility Lender Term Applicable Loan Commitment Commitment Percentage NationsBank, National Association $ 375,000,000 62.500000000% The Long-Term Credit Bank of Japan, Limited $ 50,000,000 8.333333333% BHF-Bank Akriengesellschaft $ 50,000,000 8.333333333% The Bank of Nova Scotia $ 50,000,000 8.333333333% Van Kampen American Capital $ 75,000,000 12.500000000% $ 600,000,000 100% EXHIBIT B-1 Form of Assignment and Acceptance DATED , Reference is made to the Credit Agreement dated as of October 30, 1997 (the "Agreement") among BREED TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association , as Agent for the Lenders ("Agent"). Unless otherwise defined herein, terms defined in the Agreement are used herein with the same meanings. The "Assignor" and the "Assignee" referred to on Schedule 1 agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, WITHOUT RECOURSE and without representation or warranty except as expressly set forth herein, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement and the other Loan Documents as of the date hereof equal to the percentage interest in either the Revolving Credit Commitment or the Term Loan Commitment, or both, specified on Schedule 1. After giving effect to such sale and assignment, the Assignee's Revolving Credit Commitment and Term Loan Commitment and the amount of the Loans owing to the Assignee will be as set forth on Schedule 1. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note or Notes held by the Assignor and requests that the Agent exchange such Note or Notes for new Notes payable to the order of the Assignee in an amount equal to the Revolving Credit Commitment or Term Loan Commitment, or both, assumed by the Assignee pursuant hereto and to the Assignor in an amount equal to the Revolving Credit Commitment or Term Loan Commitment, or both, retained by the Assignor, if any, as specified on Schedule 1. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 8.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service or other forms required under Section 5.6. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Agent, unless otherwise specified on Schedule 1. 5. Upon such acceptance and recording by the Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Florida. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telefacsimile shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE Percentage interest assigned: ________% (a) Revolving Credit Commitment ________% (b) Term Loan Commitment ________% Assignee's Revolving Credit Commitment: $_______ Aggregate outstanding principal amount of Revolving Loans assigned: $_______ Principal amount of Revolving Note payable to Assignee: $_______ Principal amount of Revolving Note payable to Assignor: $_______ Assignee's Term Loan Commitment: $_______ Aggregate outstanding principal amount of Term Loans assigned: $_______ Principal amount of Term Note payable to Assignee: $_______ Principal amount of Term Note payable to Assignor: $_______ Effective Date (if other than date of acceptance by Agent): _______, 19__ [NAME OF ASSIGNOR], as Assignor By: Title: Dated: , 19 _ [NAME OF ASSIGNEE], as Assignee By: Title: Lending Office: Accepted [and Approved] * this ___ day of ___________, 19 _ NATIONSBANK NATIONAL ASSOCIATION By: Title: [Approved this ____ day of ____________, 19__ BREED TECHNOLOGIES, INC. By: ]* Title: * Required if the Assignee is an Eligible Assignee solely by reason of clause (iii) of the definition of "Eligible Assignee". EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative Reference is hereby made to the Credit Agreement dated as of October 30, 1997 (the "Agreement") among BREED TECHNOLOGIES, INC., a Delaware corporation ("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein (BREED and such Subsidiaries being collectively called the "Borrowers"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower hereby nominates, constitutes and appoints each individual named below as an Authorized Representative under the Loan Documents, and hereby represents and warrants that (i) set forth opposite each such individual's name is a true and correct statement of such individual's office (to which such individual has been duly elected or appointed), a genuine specimen signature of such individual and an address for the giving of notice, and (ii) each such individual has been duly authorized by the Borrower to act as Authorized Representative under the Loan Documents: Name and Address Office Specimen Signature Borrower hereby revokes (effective upon receipt hereof by the Agent) the prior appointment of ________________ as an Authorized Representative. This the ___ day of __________________, 19__. BREED TECHNOLOGIES, INC. By: Name: Title: EXHIBIT D Form of Borrowing Notice To: NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704)386-9923 Reference is hereby made to the Credit Agreement dated as of October 30, 1997 (the "Agreement") among BREED TECHNOLOGIES, INC., a Delaware corporation ("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein (BREED and such Subsidiaries being collectively called the "Borrowers"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to the Agent that Loans of the type and amount set forth below be made on the date indicated: Type of Loan Interest Aggregate (check one) Period(1) Amount(2) Date of Loan(3) Revolving Loan Base Rate Loan ______ _________ ____________ Eurodollar Rate Loan ______ _________ ____________ Alternative Currency(4) ______ _________ ____________ Term Loan Segment Base Rate Loan ______ _________ ____________ Eurodollar Rate Loan ______ _________ ____________ Alternative Currency(4) ______ _________ ____________ - -------------------------------------------------- (1) For any Eurodollar Rate Loan, one, two, or three months. (2) Must be $5,000,000 or if greater an integral multiple of $1,000,000, unless a Base Rate Refunding Loan. (3) At least three (3) Business Days later if a Eurodollar Rate Loan; (4) Specify Pounds Sterling, Italian Lire, French Francs, Deutsch Marks, or Spanish Pesetas. The Borrower hereby requests that the proceeds of Loans described in this Borrowing Notice be made available to the Borrower as follows: [insert transmittal instructions] . The undersigned hereby certifies that: 1. No Default or Event of Defaultexists either now or after giving effect to the borrowing described herein; and 2. All the representations and warranties set forth in Article VII of the Agreement and in the Loan Documents (other than those expressly stated to refer to a particular date) are true and correct in all material respects as of the date hereof except that the reference to the financial statements in Section 7.6(a) of the Agreement are to those financial statements most recently delivered to you pursuant to Section 8.1 of the Agreement (it being understood that any financial statements delivered pursuant to Section 8.1(b) or (c) have not been certified by independent public accountants) and attached hereto are any changes to the Schedules referred to in connection with such representations and warranties. 3. All conditions contained in the Agreement to the making of any Loan requested hereby have been met or satisfied in full . BREED TECHNOLOGIES, INC. BY: Authorized Representative DATE: EXHIBIT E Form of Collateral Assignment of Trademark License Agreement [See Attached] EXHIBIT F Form of Collateral Assignment of Partnership Interests [See Attached] EXHIBIT G Form of Guaranty [See Attached] EXHIBIT H Form of Intellectual Property Security Agreement [See Attached] EXHIBIT I Form of Intercompany Notes ASSIGNMENT KNOW ALL MEN by these presents that the undersigned is the owner and holder of that certain promissory note dated ________ payable by ________________ to the undersigned in the original principal amount of $________ the ("Promissory Note") and has sold, assigned, transferred, endorsed and set over, and by this assignment does sell, assign, transfer, endorse and set over to ______________________________________________ all of its right title and interest in the Promissory Note, and the obligations described therein and the monies due and to become due thereunder. TO HAVE AND TO HOLD the same unto ______________________________, its successors and assigns forever. IN WITNESS WHEREOF, the undersigned has caused this Assignment to be executed on the __ day of __________, _____. --------------------------------- By:______________________________ Name:___________________________ Title:____________________________ Certificate No. 1 INTERCOMPANY NOTE Dated: [Insert Date] FOR VALUE RECEIVED, the undersigned, [Insert name of Intercompany Note Maker], a ______ corporation (the "Payor"), hereby promises to pay to the order of [Insert name of Intercompany Note Holder], a __________ corporation (the "Payee"), UPON DEMAND, at [Insert address of Intercompany Note Holder], in lawful money of the United States of America and in immediately available funds, the aggregate amount of all loans and advances by the Payee to the Payor remaining outstanding at such time, such loans and advances constituting Intercompany Advances in accordance with Section 9.4(g) of the Credit Agreement dated as of October 30, 1997 (as amended, supplemented or restated from time to time, the "Credit Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined) among BREED Technologies, Inc. ("BREED") and certain Subsidiaries of BREED designated as Borrowers therein, as Borrowers, NationsBank, National Association in its capacity as a Lender ("NationsBank") and each other financial institution executing and delivering a signature page to the Credit Agreement and each other financial institution which may hereafter execute and deliver an instrument of assignment with respect to the Credit Agreement (hereunder such financial institutions may be referred to individually as a "Lender" or collectively as the "Lenders"), and NationsBank in its capacity as the Agent for the Lenders (the "Agent"), provided that any and all amounts advanced by the Payor to the Payee at any time when amounts are outstanding hereunder shall be applied to the prepayment of such outstanding amounts, including any interest which constitutes part of such outstanding amounts. Interest shall be payable under this Intercompany Note on any and all principal amounts from time to time outstanding hereunder from and including the date of the initial advance by the Payee and the Payor until such principal amounts are paid in full, at a rate per annum equal to [___________________________________________________________]. Accrued interest shall be payable upon demand, or if no demand is made therefor, quarterly on the last day of each calendar quarter. This Intercompany Note may, at the option of the Payor, be prepaid at any time in whole or in part, without penalty or premium The Payee agrees that the accounts of the Payor shall be prima facie evidence of the amounts advanced by the Payee to the Payor and the amounts repaid by the Payor to the Payee. All advances made by the Payee to the Payor hereunder, and all payments made on account of principal hereof, shall be recorded by the Payor and, prior to any transfer hereof, endorsed on the grid attached hereto that is part of this Intercompany Note; provided that the failure to record any such advance or payment shall not affect the obligations of the Payor and the Payee with respect thereto. The indebtedness evidenced by this Intercompany Note (the "Subordinated Indebtedness") is and shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter set forth, to the prior payment in full of all obligations of the Payor now or hereafter existing under or in respect of (a) the Loan Documents, whether for principal, interest (including, without limitation, interest accruing after the filing of a petition initiating any Proceeding (as defined below), whether or not such interest accrues after the filing of such petition for purposes of Chapter 11 of Title 11 of the United States Code or is an allowed claim in such Proceeding), fees, commissions, expenses or otherwise; and (b) any and all amendments, modifications, extensions, refinancing, renewals and refunding of the obligations referred to in clause (a) of this paragraph that are made in accordance with the applicable terms thereof (all such obligations under clauses (a) and (b) of this paragraph being, collectively, the "Senior Indebtedness"). For the purposes of the provisions hereof, the Senior Indebtedness shall not be deemed to have been paid in full until the Facility Termination Date; provided, however, that on such date neither the Agent nor any other Lender shall have made any claim against the Payee or any other Loan Party under any provision of any of the Loan Documents that has not been cash collateralized by an amount sufficient in the reasonable judgment of the Agent, to secure such claim. So long as the Senior Indebtedness shall not have been paid in full, the Payee shall not (a) ask, demand, sue for, take or receive from the Payor (except, so long as no Default or Event of Default shall have occurred and be continuing, in the ordinary course of business of the Payor and the Payee, directly or indirectly, in cash or other property or by setoff or in any manner (including, without limitation, from or by way of Collateral), payment of all or any of the Subordinated Indebtedness or (b) commence, or join with any creditor other than the Agent or any Lender in commencing, or directly or indirectly cause the Payor to commence, or assist the Payor in commencing, any Proceeding. Upon the occurrence and during the continuance of a Default or an Event of Default, no payment or distribution of any assets of the Payor of any kind or character (including, without limitation, any payment that may be payable by reason of any other Indebtedness of the Payor being subordinated to payment of the Subordinated Indebtedness) shall be made by or on behalf of the Payor for or on account of any Subordinated Indebtedness, and the Payee shall not ask, demand, sue for, take or receive from the Payor, directly or indirectly, in cash or other property or by setoff or in any other manner (including, without limitation, from or by way of Collateral), payment of all or any of the Subordinated Indebtedness, unless and until such Default or Event of Default shall have been cured or waived in writing or such Senior Indebtedness shall have been paid in full, after which the Payor may resume making any and all required payments in respect of the Subordinated Indebtedness (including any missed payments). In the event of any dissolution, winding up, liquidation, arrangement, reorganization, adjustment, protection, relief or composition of the Payor or its debts, whether voluntary or involuntary, in any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or other similar case or proceeding under any federal or state bankruptcy or similar law or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Payor or otherwise (each, a "Proceeding"), the Agent, for its benefit and for the ratable benefit of the Lenders, shall be entitled to receive payment in full of all of the Senior Indebtedness before the Payee is entitled to receive any payment or distribution of any kind or character on account of all or any of the Subordinated Indebtedness, and, to that end, any payment or distribution of any kind (whether in cash, property or securities) that otherwise would be payable or deliverable upon or with respect to the Subordinated Indebtedness in any such Proceeding (including, without limitation, any payment that may be payable by reason of any other Indebtedness of the Payor being subordinated to payment of the Subordinated Indebtedness) shall be paid or delivered directly to the Agent, for its benefit and for the ratable benefit of the Lenders for application (in the case of cash) to, or as collateral (in the case of noncash property or securities) for, the payment or prepayment of the Senior Indebtedness until all of the Senior Indebtedness shall have been paid in full. In the event that any Subordinated Indebtedness is declared due and payable before its stated maturity, if any, the Agent, for its benefit and for the ratable benefit of the Lenders, shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all of the Senior Indebtedness before the Payee is entitled to receive any payment (including, without limitation, any payment that may be payable by reason of the payment of any other Indebtedness of the Payor being subordinated to the payment of the Subordinated Indebtedness) by the Payor on account of the Subordinated Indebtedness. Until such time as the Senior Indebtedness has been paid in full, if any Proceeding is commenced by or against the Payor, (a) the Agent is hereby irrevocably authorized and empowered (in its own name or in the name of the Payee or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to above and give acquittance therefor, and to file claims and proofs of claim and take such other action (including, without limitation, voting the Subordinated Indebtedness or enforcing any security interest or other lien securing payment of the Subordinated Indebtedness) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interest of the Agent and the Lenders hereunder; and (b) the Payee shall duly and promptly take such action as the Agent may request (i) to collect the Subordinated Indebtedness for the account of the Agent, for its benefit and for the ratable benefit of the Lenders, and to file appropriate claims or proofs of claim in respect of the Subordinated Indebtedness, (ii) to execute and deliver to the Agent such powers of attorney, assignments or other instruments as the Agent may request in order to enable to Agent to enforce any and all claims with respect to, and any security interests and other liens securing payment of, the Subordinated Indebtedness, and (iii) to collect and receive any and all payments or distributions that may be payable or deliverable upon or with respect to the Subordinated Indebtedness. All payments or distributions upon or with respect to the Subordinated Indebtedness that are received by the Payee contrary to the provisions of this Agreement shall be received in trust for the benefit of the Agent, for its benefit and for the ratable benefit of the Lenders, shall be segregated from other property or funds held by the Payee and shall be forthwith paid over or delivered directly to the Agent, for its benefit and for the ratable benefit of the Lenders, in the same form as so received (with any necessary endorsement) to be applied (in the case of cash) to, or held as collateral (in the case of noncash property or securities) for, the payment or prepayment of the Senior Indebtedness in accordance with the terms of the Loan Documents. The Agent is hereby authorized to demand specific performance of these provisions, whether or not the Payor shall have complied with any of the provisions hereof applicable to it, at any time when the Payee shall have failed to comply with any of these provisions. The Payee hereby irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance. The Payee will not: (a) (i) Cancel or otherwise discharge any of the Subordinated Indebtedness (except upon payment in full of the Senior Indebtedness); (ii) convert or exchange any of the Subordinated Indebtedness into or for any other Indebtedness or equity interest; or (iii) subordinate any of the Subordinated Indebtedness to any Indebtedness of the Payor other than the Senior Indebtedness; (b) Sell, assign, pledge, encumber or otherwise dispose of any of the Subordinated Indebtedness other than the pledge of the instruments evidencing the Subordinated Indebtedness to the Agent, on behalf of the Lenders, under the applicable Security Instruments; or (c) Permit the terms of any of the Subordinated Indebtedness to be changed in such a manner as to have an adverse effect upon the rights or interests of the Secured Parties hereunder. No payment or distribution to the Agent or any Lender pursuant to the provisions hereof shall entitle the Payee to exercise any rights of subrogation in respect thereof until the Facility Termination Date. The holders of the Senior Indebtedness may, at any time and from time to time, without any consent of or notice to the Payee or any other holder of the Subordinated Indebtedness and without impairing or releasing the obligations of the Payee hereunder: (a) change the manner, place or terms of payment, or change or extend the time of payment of, or renew payment or change or extend the time or payment of, or renew or alter, the Senior Indebtedness (including any change in the rate of interest thereon), or amend in any manner any agreement under which any of the Senior Indebtedness is outstanding; (b) sell, exchange, release, not perfect and otherwise deal with any property at any time pledged, assigned or mortgaged to secure the Senior Indebtedness; (c) release anyone liable in any manner under or in respect of the Senior Indebtedness; (d) exercise or refrain from exercising any rights against the Payor, any other Loan Party or any other Person; and (e) apply to the Senior Indebtedness any sums from time to time received. The foregoing provisions regarding subordination are and are intended solely for the purpose of defining the relative rights of the holders of the Senior Indebtedness on the one hand and the holders of the Subordinated Indebtedness on the other hand. Such provisions are for the benefit of the holders of the Senior Indebtedness and shall inure to the benefit of, and shall be enforceable by, the Agent, on behalf of itself and the Lenders, directly against the holders of the Subordinated Indebtedness, and no holder of the Senior Indebtedness shall be prejudiced in its right to enforce subordination of any of the Subordinated Indebtedness by any act or failure to act by the Payor or anyone in custody of its property or assets. Nothing contained in the foregoing provisions is intended to or shall impair, as between the Payor and the holders of the Subordinated Indebtedness, the obligations of the Payor to such holders. The Payor agrees to pay on demand all costs and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Agent or any Lender in enforcing the provisions hereof The Payor hereby waives presentment for payment, demands, notice of dishonor and protest of this Intercompany Note and further agrees that none of the terms or provisions hereof may be waived, altered, modified or amended, except as the Payee may consent in a writing duly signed for and on its behalf. No amendment, waiver or modification of this Intercompany Note (including, without limitation, the subordination provisions hereof), and no consent to any departure here from, shall adversely affect the Agent or any other Lender in any manner unless the same shall be in writing and signed by the Agent and/or such Lender, and then such waiver, modification or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure or delay on the part of the Payee in exercising any of its rights, powers or privileges hereunder shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The remedies provided herein are cumulative and are not exclusive of any remedies provided by law. This Intercompany Note shall be governed by and construed in accordance with the laws of the State of Florida. By: Title: ADVANCES AND PAYMENTS OF PRINCIPAL Amount of Amount of Principal Paid Unpaid Principal Notation Date Advance or Prepaid Balance Made By ENDORSEMENT PAY TO THE ORDER OF Dated: _____________________________________________ By: Title: EXHIBIT J Form of Subordination Agreement [See Attached] EXHIBIT K Form of Interest Rate Selection Notice To: NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-9923 Reference is hereby made to the Credit Agreement dated as of October 30, 1997 (the "Agreement") among BREED TECHNOLOGIES, INC. , a Delaware corporation ("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein (BREED and such Subsidiaries being collectively called the "Borrowers"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to the Agent of the following selection of a type of Loan and Interest Period: Type of Loan Interest Aggregate (check one) Period(1) Amount(2) Date of Loan(3) Revolving Loan Base Rate Loan ______ _________ ____________ Eurodollar Rate Loan ______ _________ ____________ Alternative Currency(4) ______ _________ ____________ Term Loan Segment Base Rate Loan ______ _________ ____________ Eurodollar Rate Loan ______ _________ ____________ Alternative Currency(4) ______ _________ ____________ - -------------------------------------------------- (1) For any Eurodollar Rate Loan, one, two, or three months. (2) Must be $5,000,000 or if greater an integral multiple of $1,000,000, unless a Base Rate Refunding Loan. (3) At least three (3) Business Days later if a Eurodollar Rate Loan; (4) Specify Pounds Sterling, Italian Lire, French Francs, Deutsch Marks, or Spanish Pesetas. BREED TECHNOLOGIES, INC. BY:___________________________________ Authorized Representative DATE:_________________________________ EXHIBIT L Form of Landlord Waiver [See Attached] EXHIBIT M Form of LC Account Agreement [See Attached] EXHIBIT N Form of Lease Assignment [See Attached] EXHIBIT O-1 Form of Term Note Promissory Note (Term Loan) $600,000,000 Charlotte, North Carolina October 30, 1997 FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having its principal place of business located in Lakeland, Florida (the "Borrower"), hereby promises to pay to the order of NATIONSBANK, NATIONAL ASSOCIATION (the "Lender"), in its individual capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent"), located at One Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the Agent may designate in writing) at the times set forth in the Credit Agreement dated as of ____________, 1997 among the Borrowers, the financial institutions party thereto (collectively, the "Lenders") and the Agent (as amended, supplemented or restated and in effect from time to time, the "Agreement"; all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement), in lawful money of the United States of America or in the applicable Alternative Currency, as the case may be, in immediately available funds, the principal amount of SIX HUNDRED MILLION DOLLARS ($600,000,000) or, if less than such principal amount, the aggregate unpaid principal amount of the Term Loan made by the Lender to the Borrower pursuant to the Agreement on the Term Loan Termination Date or such earlier date as may be required pursuant to the terms of the Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates provided in Article II of the Agreement. All or any portion of the principal amount of Term Loans may be prepaid as provided in the Agreement. If payment of all sums due hereunder is accelerated under the terms of the Agreement or under the terms of the other Loan Documents executed in connection with the Agreement, the then remaining principal amount and accrued but unpaid interest shall bear interest which shall be payable on demand at the rates per annum set forth in the proviso to Section 2.2(a) of the Agreement or the maximum rate permitted under applicable law, if lower, until such principal and interest have been paid in full. Further, in the event of such acceleration, this Term Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Term Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees and disbursements, and interest due hereunder thereon at the rates set forth above. Interest hereunder shall be computed as provided in the Agreement. This Term Note is one of the Term Notes referred to in the Agreement and is issued pursuant to and entitled to the benefits and security of the Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Term Loans evidenced hereby were or are made and are to be repaid. This Term Note is subject to certain restrictions on transfer or assignment as provided in the Agreement. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issues against any other of them and returned satisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, and also their right, if any, to require the holder hereof to hold as security for this Term Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, dishonor, demand or any other formality are hereby waived by all parties bound hereon. IN WITNESS WHEREOF, the Borrower has caused this Term Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. BREED TECHNOLOGIES, INC. WITNESS: By: Name: Title: EXHIBIT O-2 Form of Revolving Note Promissory Note (Revolving Loan) $300,000,000 Charlotte, North Carolina October 30, 1997 FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having its principal place of business located in Lakeland, Florida ("BREED"), BREED AUTOMOTIVE SAFETY SYSTEMS, S.L., BREED ITALIAN HOLDINGS, S.R.L., BREED UK LIMITED, and ICSRD R.F., GMBH (each a "Borrower" and collectively with BREED the "Borrowers"), hereby promise to pay to the order of NATIONSBANK, NATIONAL ASSOCIATION (the "Lender"), in its individual capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent"), located at One Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the Agent may designate in writing) at the times set forth in the Credit Agreement dated as of October 30, 1997 among the Borrowers, the financial institutions party thereto (collectively, the "Lenders") and the Agent (as amended, supplemented or restated and in effect from time to time, the "Agreement"; all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement), in lawful money of the United States of America or in the applicable Alternative Currency, as the case may be, in immediately available funds, the principal amount of THREE HUNDRED MILLION DOLLARS ($300,000,000) or, if less than such principal amount, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrowers pursuant to the Agreement on the Revolving Credit Termination Date or such earlier date as may be required pursuant to the terms of the Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates provided in Article II of the Agreement. All or any portion of the principal amount of Revolving Loans may be prepaid or required to be prepaid as provided in the Agreement. Each Borrower shall be jointly and severally liable as a primary obligor; provided that a Borrower which is a Foreign Subsidiary shall be liable hereunder only for Obligations made by or on its behalf together with interest, fees and expenses relating thereto as provided in Section 2.1(e) of the Agreement. If payment of all sums due hereunder is accelerated under the terms of the Agreement or under the terms of the other Loan Documents executed in connection with the Agreement, the then remaining principal amount and accrued but unpaid interest shall bear interest which shall be payable on demand at the rates per annum set forth in the proviso to Section 2.2(a) of the Agreement or the maximum rate permitted under applicable law, if lower, until such principal and interest have been paid in full. Further, in the event of such acceleration, this Revolving Note, and all other indebtedness of the Borrowers to the Lender shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrowers. In the event this Revolving Note is not paid when due at any stated or accelerated maturity, the Borrowers agree to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees and disbursements, and interest due hereunder thereon at the rates set forth above. Interest hereunder shall be computed as provided in the Agreement. This Revolving Note is one of the Revolving Notes referred to in the Agreement and is issued pursuant to and entitled to the benefits and security of the Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Revolving Loans evidenced hereby were or are made and are to be repaid. This Revolving Note is subject to certain restrictions on transfer or assignment as provided in the Agreement. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issues against any other of them and returned satisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, also their right, if any, to require the holder hereof to hold as security for this Revolving Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, dishonor, demand or any other formality are hereby waived by all parties bound hereon. IN WITNESS WHEREOF, the Borrowers have caused this Revolving Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. BREED TECHNOLOGIES, INC. WITNESS: By: Name: Title: BREED AUTOMOTIVE SAFETY SYSTEMS SL WITNESS: By: Name: Title: BREED ITALIAN HOLDINGS, S.R.L. WITNESS: By: Name: Title: BREED UK LIMITED WITNESS: By: Name: Title: ICSRD R.F. GMBH WITNESS: By: Name: Title: EXHIBIT P-1 Form of Stock Pledge Agreement (Borrower) [See Attached] EXHIBIT P-2 Form of Stock Pledge Agreement (US Subsidiaries) [See Attached] EXHIBIT P-3 Form of Stock Pledge Agreement (Breeds) [See Attached] EXHIBIT Q Form of Intercompany Note Pledge Agreement [See Attached] EXHIBIT R Form of Security Agreement [See Attached] EXHIBIT S-1 Form of Opinion of US Counsel October 30, 1997 NationsBank, National Association, as Agent, and each of the Lenders Party to the Credit Agreement Referenced Below NationsBank Corporate Center Charlotte, North Carolina 28255-0065 Re: $500,000,000 Term Loan Facility and $400,000,000 Revolving Credit and Letter of Credit Facility among NationsBank, National Association, as Agent, the Lenders party thereto, BREED Technologies, Inc. and certain Subsidiaries designated as Borrowers therein Ladies and Gentlemen: We have acted as counsel to BREED Technologies, Inc., a Delaware corporation ("BREED") and the Guarantors in connection with the term loan facility of $500,000,000 (the "Term Loan") and the revolving credit facility of up to $400,000,000 (the "Revolving Loan"), including the $25,000,000 sublimit for the Letter of Credit Facility constituting part of the Revolving Credit Facility (the "LC Facility") and the $75,000,000 sublimit for multi-currency borrowings, each being made available to BREED and certain Subsidiaries designated as Borrowers ("Borrowing Subsidiaries" and referred to collectively with BREED as the "Borrowers") on this date pursuant to the Credit Agreement of even date herewith among you, the Lenders, BREED and the Borrowing Subsidiaries (the "Credit Agreement"), and the other transactions contemplated under the Credit Agreement. This opinion is being delivered in accordance with the conditions set forth in Section 6.1 of the Credit Agreement. All capitalized terms not otherwise defined herein shall have the meanings provided therefor in the Credit Agreement. As such counsel, we have reviewed the following documents: 1. the Credit Agreement; 2. the Note; 3. the Guaranty; 4. the Security Instruments; 5. the Financing Statements (as defined herein). The documents described in items 1 through 5 immediately above are referred to herein as the "Loan Documents". For purposes of the opinions expressed below, we have assumed that all natural persons executing the Loan Documents have legal capacity to do so; that all signatures (other than those of representatives of BREED and the Guarantors on the Loan Documents) on all documents submitted to us are genuine; that all documents submitted to us as originals (other than the Loan Documents) are authentic; and that all documents submitted to us as certified copies or photocopies conform to the originals of such documents, which themselves are authentic. In addition, for purposes of giving this opinion, we have examined such corporate records of BREED and the Guarantors, certificates of public officials, certificates of appropriate officials of BREED and the Guarantors, and such other documents, and have made such inquiries as we have deemed appropriate. Based upon and subject to the foregoing, it is our opinion that: 1. BREED is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and is duly qualified to transact business as a foreign corporation and is in good standing in all jurisdictions in which the nature of its business requires such qualification. BREED has full corporate power and authority to own its assets and conduct the businesses in which it is now engaged and as are expressly contemplated by the Loan Documents, and has full corporate power and authority to enter into each of the Loan Documents to which it is a party and to perform its obligations thereunder. 2. Each of the Loan Documents to which BREED is a party has been duly authorized by the Board of Directors of BREED (and by any required shareholder action), has been duly executed and delivered by BREED, and constitutes the legal, valid and binding obligation, agreement, instrument or conveyance, as the case may be, of BREED, enforceable against BREED in accordance with its respective terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and other similar laws relating to or affecting creditors' rights generally and by the application of general equitable principles (whether considered in proceedings at law or in equity). 3. Each Guarantor is a corporation or partnership, as the case may be duly organized, validly existing and in good standing under the laws of its respective state of its formation and is duly qualified to transact business as a foreign entity and is in good standing in all jurisdictions in which the nature of its business requires such qualification and in which the failure to be so qualified would reasonably be likely to result in a Material Adverse Effect. Each Guarantor has full corporate power and authority to own its assets and conduct the businesses in which it is now engaged and as expressly contemplated in the Loan Documents, and has full corporate power and authority to enter into each of the Loan Documents to which it is a party and to perform its obligations thereunder. 4. Each of the Loan Documents to which each Guarantor is a party has been duly authorized by the Board of Directors or required partners of such Guarantor (and by any required shareholder or partnership action), has been duly executed and delivered by such Guarantor, and constitutes the legal, valid and binding obligation, agreement or instrument, as the case may be, of such Guarantor, enforceable against such Guarantor in accordance with its respective terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and other similar laws relating to or affecting creditors' rights generally and by the application of general equitable principles (whether considered in proceedings at law or in equity). 5. Neither the execution or delivery of, nor performance by BREED or any Guarantor of its obligations under, the Loan Documents (a) does or will conflict with, violate or constitute a breach of (i) the Organizational Documents or Operating Documents of BREED or any Guarantor, (ii) any laws, rules or regulations applicable to BREED or any other Guarantor, or (iii) any contract, agreement, indenture, lease, instrument, other document, judgment, writ, determination, order, decree or arbitral award to which BREED or any Guarantor is a party or by which BREED or any Guarantor or any of their properties is bound, (b) requires the prior consent of, notice to, license from or filing with any Governmental Authority which has not been duly obtained or made on or prior to the date hereof, or (c) does or will result in the creation or imposition of any lien, pledge, charge or encumbrance of any nature upon or with respect to any of the properties of BREED or any Guarantor, except for the Liens in your favor expressly created pursuant to the Loan Documents. 6. There is no pending or, to the best of our knowledge, threatened, action, suit, investigation or proceeding (including, without limitation, any action, suit, investigation, or proceeding under any environmental or labor law), nor is there any basis therefor, before or by any court, or governmental department, commission, board, bureau, instrumentality, agency or arbitral authority, (i) which calls into question the validity or enforceability of any of the Loan Documents, or the titles to their respective offices or authority of any officers of BREED or any Guarantor or (ii) an adverse result in which would reasonably be likely to have a Material Adverse Effect. 7. To the best of our knowledge after due inquiry, neither BREED nor any Guarantor (i) is in default (which default has not been waived) under any agreement, document or instrument to which it is a party or by which it or any of its assets is bound or (ii) is in violation of any law, rule, regulation, judgment, writ, determination, order, decree or arbitral award to which BREED or any Guarantor is a party or by which BREED or any Guarantor or any of their respective properties is bound, which default or violation, as the case may be, would constitute a Default or Event of Default under the Credit Agreement or otherwise could reasonably be likely to have a Material Adverse Effect. 8. None of the transactions contemplated by the Credit Agreement, including, without limitation, the use of the proceeds of the Loans provided for in the Loan Documents, will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, any regulations issued pursuant thereto, or regulations G, T, U or X of the Board of Governors of the Federal Reserve System. 9. None of the provisions of the Loan Documents violate any laws of the State of Florida relating to interest or usury. 10. Once value has been given to BREED by the Lenders and assuming the Agent, for the benefit of the Lenders, has taken possession of the certificates representing all of the Pledged Stock, as more fully described in Schedule A hereto, and the stock powers related thereto, for value in good faith and without notice of an adverse claim, so long as the Agent, for the benefit of the Lenders, maintains continuous and uninterrupted possession of the certificates representing the Pledged Stock, the Pledge Agreement will create a valid and perfected security interest in favor of the Agent, for the benefit of the Lenders, in the Pledged Stock subject to no other security interest, lien, encumbrance or adverse claim (other than restrictions on transfer imposed by applicable securities laws) and no filings or recordation are necessary to perfect the security interests created by the Pledge Agreement in the Pledged Stock. Such security interest will have priority over any other consensual security interests in the Pledged Stock. 11. All of the shares of Pledged Stock which are shares of the capital stock of any Domestic Subsidiary ("Pledged Domestic Subsidiary Stock") are duly authorized, validly issued, fully paid and nonassessable, and free of any preemptive rights. The Certificates listed on Schedule A hereto are now the sole evidence of the shares of Pledged Domestic Subsidiary Stock and all shares of Pledged Domestic Subsidiary Stock have been duly delivered to you with an appropriate stock power assignment sufficient to permit the sale or transfer of the shares of Pledged Domestic Subsidiary Stock by you in accordance with the terms of the Pledge Agreement, subject to applicable federal and state securities law. The delivery of physical possession of the Pledged Domestic Subsidiary Stock to the Agent and the execution and delivery of the stock powers with respect to the Pledged Domestic Subsidiary Stock have been duly authorized by the owner of such Pledged Domestic Subsidiary Stock. 12. All of the shares of Pledged Stock which are shares of the capital stock of BREED ("Pledged BREED Stock") are duly authorized, validly issued, fully paid and nonassessable, and free of any preemptive rights. The Certificates listed on Schedule A hereto are now the sole evidence of the Pledged BREED Stock and all shares of Pledged BREED Stock have been delivered to you with an appropriate stock power assignment sufficient to permit the sale or transfer of the shares of Pledged BREED Stock by you in accordance with the terms of the Pledge Agreement, subject to applicable federal and state securities law. The delivery of physical possession of the Pledged BREED Stock to the Agent and the execution and delivery of the stock powers with respect to the Pledged BREED Stock have been duly authorized by Johnnie C. Breed, Allen K. Breed, A. BREED Ltd, a Texas limited partnership, J. BREED Ltd, a Texas limited partnership, BREED Charitable Foundation, and [five trusts of which Ms. Breed is trustee with shared voting and investment power]. 13. Once value has been given to BREED by the Lenders and the Receipt and Certificate of Registrar is executed, the Collateral Assignment of Partnership Interests will create a valid and perfected security interest in favor of the Agent, for the benefit of the Lenders, in the Assigned Interests subject to no other security interest, lien, encumbrance or adverse claim and no filings or recordations are necessary to perfect the security interests created by the Collateral Assignment of Partnership Interests in the Assigned Interests. Such security interest will have priority over any other consensual security interests in the Assigned Interests. All required consents to the assignment of the Assigned Interests have been obtained. All of the Assigned Interests are duly authorized, validly issued, fully paid and nonassessable, and free of any preemptive rights. 14. The Security Agreement and the Collateral Assignment of Trademark License Agreement are effective to create a valid security interest in favor of the Agent for the benefit of the Lenders in the Collateral described therein. The Uniform Commercial Code Financing Statements on Form UCC-1 described on Schedule 7.23 of the Credit Agreement (collectively, the "Financing Statements") have been duly executed and delivered to the Agent and are in form, number and content sufficient (together with the tender of necessary filing fees) for filing with the respective filing offices described on Schedule 7.23 with the effect that, upon such filing, the Agent shall have a duly perfected security interest in the Collateral described in the Security Agreement and the Collateral Assignment of Trademark License Agreement to the extent that a security interest in such Collateral can be perfected by the filing of financing statements under the Uniform Commercial Code as in effect in the appropriate jurisdictions. No further filings or recordation are necessary to perfect the security interests created by the Security Agreement and the Collateral Assignment of Trademark License Agreement. Our opinions contained herein are rendered solely in connection with the transactions contemplated under the Loan Documents and may not be relied upon in any manner by any Person other than the addressees hereof, any successor or assignee of any addressee (including successive assignees) and any Person who shall acquire a participation interest in the interest of any Lender (collectively, the "Reliance Parties"), or by any Reliance Party for any other purpose. Our opinions herein shall not be quoted or otherwise included, summarized or referred to in any publication or document, in whole or in part, for any purposes whatsoever, or furnished to any Person other than a Reliance Party (or a Person considering whether to become a Reliance Party), except as may be required of any Reliance Party by applicable law or regulation or in accordance with any auditing or oversight function or request of regulatory agencies to which a Reliance Party is subject. Very truly yours, Schedule A to Legal Opinion Pledged Stock EXHIBIT S-2 Form of Opinion of Intellectual Property Counsel October 30, 1997 NationsBank, National Association, as Agent and Each of the Lenders Party to the Credit Agreement Referenced Below NationsBank Corporate Center Charlotte, North Carolina 28255-0065 Re: $500,000,000 Term Loan Facility and $400,000,000 Revolving Credit and Letter of Credit Facility among NationsBank, National Association, as Agent, the Lenders party thereto, BREED Technologies, Inc. and certain Subsidiaries designated as Borrowers therein Ladies and Gentlemen: We have acted as special intellectual property counsel to BREED Technologies, Inc., a Delaware corporation ("BREED") and the Guarantors in connection with the term loan facility of $500,000,000 (the "Term Loan") and the revolving credit facility of up to $400,000,000 (the "Revolving Loan"), including the $25,000,000 sublimit for the Letter of Credit Facility constituting part of the Revolving Credit Facility (the "LC Facility") and the $75,000,000 sublimit for multi-currency borrowings, each being made available to BREED and certain Subsidiaries designated as Borrowers ("Borrowing Subsidiaries" and referred to collectively with BREED as the "Borrowers") on this date pursuant to the Credit Agreement of even date herewith among you, the Lenders, BREED and the Borrowing Subsidiaries (the "Credit Agreement"), and the other transactions contemplated under the Credit Agreement. This opinion is being delivered in accordance with the conditions set forth in Section 6.1 of the Credit Agreement. All capitalized terms not otherwise defined herein shall have the meanings provided therefor in the Credit Agreement. As such counsel, we have reviewed the following documents: 1. the Credit Agreement; 2. the Guaranty; 3. the Intellectual Property Security Agreement; and 4. the Assignment of Patents, Trademarks, Copyrights and Licenses. The documents described in items 1 through 4 immediately above are referred to herein as the "Loan Documents". For purposes of the opinions expressed below, we have assumed that all natural persons executing the Loan Documents have legal capacity to do so; that all signatures (other than those of representatives of BREED and the Guarantors on the Loan Documents) on all documents submitted to us are genuine; that all documents submitted to us as originals (other than the Loan Documents) are authentic; and that all documents submitted to us as certified copies or photocopies conform to the originals of such documents, which themselves are authentic. In addition, for purposes of giving this opinion, we have examined such corporate records of BREED and the Guarantors, certificates of public officials, certificates of appropriate officials of BREED and the Guarantors, and such other documents, and have made such inquiries as we have deemed appropriate. Based upon and subject to the foregoing, it is our opinion that: 1. The Intellectual Property Security Agreement is effective to create a valid security interest in the right, title, and interest of BREED and each Guarantor which is a signatory thereto in the Patents, Trademarks, Copyrights and Licenses (as defined in the Agreement) with respect to which a security interest can be created under Chapter 9 of the Uniform Commercial Code and any applicable federal law. 2. If the Intellectual Property Security Agreement is recorded (i) in the case of patents and trademarks with the United States Patent and Trademark Office and there is attached to such recorded document (A) with respect to trademarks claimed as collateral a listing naming the correct grantor as owner and giving the correct name of the trademark and federal registration or application number of each trademark owned by such grantor, and (B) with respect to patents claimed as collateral a listing naming the correct grantor as owner and giving the title of the invention, together with its associated patent number or patent application number of each patent owned by such grantor, and (ii) in the case of copyrights with the United States Copyright Office and there is attached to such recorded document with respect to copyrights claimed as collateral a listing specifying the title of the work, the registration number, and the registration date, and a Financing Statement in the form reviewed is properly filed with the [__________], the security interest of the Secured Party in such trademarks, patents, and copyrights will be perfected if perfection is determined by [________________] law or any applicable Federal Law. Our opinions contained herein are rendered solely in connection with the transactions contemplated under the Loan Documents and may not be relied upon in any manner by any Person other than the addressees hereof, any successor or assignee of any addressee (including successive assignees) and any Person who shall acquire a participation interest in the interest of any Lender (collectively, the "Reliance Parties"), or by any Reliance Party for any other purpose. Our opinions herein shall not be quoted or otherwise included, summarized or referred to in any publication or document, in whole or in part, for any purposes whatsoever, or furnished to any Person other than a Reliance Party (or a Person considering whether to become a Reliance Party), except as may be required of any Reliance Party by applicable law or regulation or in accordance with any auditing or oversight function or request of regulatory agencies to which a Reliance Party is subject. Very truly yours, EXHIBIT S-3 Form of Opinion of Foreign Counsel [See Attached] EXHIBIT T Compliance Certificate NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-9923 Reference is hereby made to the Credit Agreement dated as of October 30, 1997 (the "Agreement") among BREED Technologies, Inc., a Delaware corporation ("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein (BREED and such Subsidiaries being collectively referred to as the "Borrowers") the Lenders (as defined in the Agreement) and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not otherwise defined herein shall have the respective meanings therefor set forth in the Agreement. The undersigned, a duly authorized and acting Authorized Representative, hereby certifies to you as of __________ (the "Determination Date") as follows: 1. Calculations: A. Compliance with Section 9.1(a): Consolidated Net Worth 1. Required Consolidated Net Worth at the last day of the most recent fiscal quarter $______________ 2. Consolidated Net Income x 0.9 $______________ 3. 100% of the Net Proceeds from any Equity Offering $______________ 3. Sum of A.1 + A.2 + A.3 $______________ 4. Actual Consolidated Net Worth $______________ Required: A.4 must not be less than A.3 B. Compliance with Section 9.1(b): Consolidated EBITDA 1. Consolidated Net Income $______________ 2. Consolidated Interest Expense $______________ 3. Taxes on income $______________ 4. Depreciation $______________ 5. Amortization $______________ 6. Consolidated EBITDA $______________ (B.1 + B.2 + B.3 +B.4 +B.5) Required: B.1 must not be less than $25,000,000 for the two months ending 12/31/97, $64,000,000 for the five months ending 3/31/98, or $107,000,000 for the eight months ending 6/30/98 C. Compliance with Section 9.1(c): Capital Expenditures 1. Capital Expenditures $______________ Required: C.1 must not exceed $17,000,000 in for the two months ending 12/31/97, $37,000,000 for the five months ending 3/31/98, or $57,000,000 for the eight months ending 6/30/98 2. No Default A. Since __________ (the date of the last similar certification), (a) BREED has not defaulted in the keeping, observance, performance or fulfillment of its obligations pursuant to any of the Loan Documents; and (b) no Default or Event of Default specified in Article X of the Agreement has occurred and is continuing. B. If a Default or Event of Default has occurred since __________ (the date of the last similar certification), BREED proposes to take the following action with respect to such Default or Event of Default: . (Note, if no Default or Event of Default has occurred, insert "Not Applicable"). The Determination Date is the date of the last required financial statements submitted to the Lenders in accordance with Section 8.1 of the Agreement. IN WITNESS WHEREOF, I have executed this Certificate this _____ day of __________, 19___. By: Authorized Representative Name: Title: EXHIBIT U Form of Assumption Letter [Date] To NationsBank, National Association, as Agent and the Lenders party to the Credit Agreement referred to below Ladies and Gentlemen: Reference is hereby made to the Credit Agreement dated as of October 30, 1997 (as the same may be amended, supplemented or restated from time to time, the "Credit Agreement") among BREED Technologies, Inc., a Delaware corporation ("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein (BREED and such Subsidiaries being collectively referred to as the "Borrowers") the Lenders (as defined in the Agreement) and NationsBank, National Association, as Agent for the Lenders ("Agent"). Terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. 1. Borrowing Subsidiary. (i) The undersigned, _________________ (the "Subsidiary") a ______________ corporation and a Subsidiary of BREED, proposes to become a "Borrowing Subsidiary" under the Credit Agreement, and accordingly hereby agrees that from the date hereof until the payment in full of the principal of and interest on all Loans made to it or on its behalf under the Credit Agreement and performance of all of its other obligations thereunder, and termination of its status as a "Borrowing Subsidiary" as provided below, it shall perform, comply with and be bound by each of the provisions of the Credit Agreement which are stated to apply to a "Borrowing Subsidiary" or a "Borrower". In addition, the Subsidiary hereby represents and warrants that: (i) each of the representations and warranties set forth in Article VII of the Credit Agreement is true and correct with respect to the Subsidiary as of the date hereof and (ii) it has heretofore received a true and correct copy of the Credit Agreement (including any amendments thereto, modifications thereof or waivers thereunder) as in effect on the date hereof. (ii) So long as the principal of and interest on all Loans made to the Subsidiary or on its behalf under the Credit Agreement shall have been paid in full and all other obligations of the Subsidiary under the Credit Agreement shall have been fully performed, the Subsidiary may, by not less than five Business Days' prior notice to the Agent, terminate its status as a "Borrowing Subsidiary." 2. Conditions Precedent. No Lender shall make any Loan to or on behalf of the Subsidiary unless the Subsidiary has furnished to the Agent, with sufficient copies for all the Lenders, the following items: (i) Copies of the Organizational Documents of the Subsidiary, together with all amendments, and a certificate of good standing (if available), both certified by the appropriate governmental officer in its jurisdiction of incorporation. (ii) Copies, certified by an appropriate officer or director of the Subsidiary, of its Operating Documents and of its Board of Directors resolutions (and other Organizational Action, if any are deemed necessary by counsel for the Agent) authorizing the execution of this Assumption Letter and all other Loan Documents to which the Subsidiary is a party. (iii) An incumbency certificate, executed by an appropriate officer or director of the Subsidiary, which shall identify by name and title and bear the signature of the officers or directors of the Subsidiary authorized to sign this Assumption Letter and the other Loan Documents to which it is a party and to request Loans thereunder, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Subsidiary. (iv) A favorable written opinion of counsel to the Subsidiary, addressed to the Lenders, in form and substance satisfactory to the Agent. (v) Notes issued by the Subsidiary to the order of each of the Lenders. (vi) Written money transfer instructions, in substantially the form of Exhibit "A" attached hereto addressed to the Agent on behalf of the Subsidiary and signed by duly authorized officer, together with such other related money transfer authorizations as the Agent may have reasonably requested. (vii) Stock Pledge Agreement pledging 100% of the capital stock and related interests and rights of any Subsidiary of the Borrowing Subsidiary and any other document required under Article IV of the Credit Agreement. (viii) Such other documents as the Agent or its counsel may reasonably request. 3. Representations. The Subsidiary further represents and warrants to the Lenders as follows: (i) Existence and Power. The Subsidiary and each of its Subsidiaries: (a) is a corporation, partnership or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has the power and authority and governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under this Assumption Letter and the Loan Documents; (c) is duly qualified and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and (d) is in compliance in all material respects with all laws, rules and regulations and all other valid requirements of any Governmental Authority. (ii) Authorization; No Contravention. The execution, delivery and performance by the Subsidiary and its Subsidiaries of this Assumption Letter and each other Loan Document to which such Subsidiary is party have been duly authorized by all necessary action and do not and will not: (a) contravene the terms of any such Subsidiary's Organizational Documents or Operating Documents; or (b) conflict with or result in a material breach or contravention of, or the creation of any Lien under, any Material Contract or any document evidencing any material contractual obligation to which such Subsidiary is a party or any order, injunction, writ or decree of any Governmental Authority to which such Subsidiary or its property is subject. (iii) Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Subsidiary or any of its Subsidiaries of this Assumption Letter or any other Loan Document. (iv) Binding Effect. This Assumption Letter and each other Loan Document to which the Subsidiary or any of its Subsidiaries is a party constitute the legal, valid and binding obligations of the Subsidiary and any of its Subsidiaries to the extent it is a party thereto, enforceable against such Person in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability). (v) Filing. To ensure the enforceability or admissibility in evidence of this Assumption Letter, the Notes issued by the Subsidiary or any of the other Loan Documents in the Subsidiary's country of organization or incorporation and country which is its principal place of business (each, a "Subject Country"), it is not necessary that this Assumption Letter or such Notes or any other documents be filed or recorded with any court or other authority in any Subject Country or that any stamp or similar tax be paid in respect of this Assumption Letter or such Notes or any other documents. The qualification by any Lender or the Agent for admission to do business under the laws of any Subject Country does not constitute a condition to, and the failure to so qualify does not affect, the exercise by any Lender or the Agent of any right, privilege, or remedy afforded to any Lender or the Agent in connection with the Loan Documents or the enforcement of any such right, privilege, or remedy. The performance by any Lender or the Agent of any action required or permitted under the Loan Documents will not violate any law or regulation of any Subject Country or any political subdivision thereof or result in any tax liability or other unfavorable consequence to such party pursuant to the laws of any such Subject Country or political subdivision or taxing authority thereof or any rule or regulation of any federation or organization or similar entity of which such Subject Country is a member. (vi) No Immunity. Neither the Subsidiary nor any of its assets is entitled to immunity from suit, execution, attachment or other legal process. The Subsidiary's execution and delivery of this Assumption Letter and the other Loan Documents to which it is a party constitute, and the exercise of its rights and performance of and compliance with its obligations under such Loan Documents will constitute, private and commercial acts done and performed for private and commercial purposes. (vii) Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of those assets of the Subsidiary and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. 4. BREED Guaranty of Subsidiary Obligations. BREED expressly agrees as follows: (i) Direct Obligations. BREED hereby unconditionally and irrevocably affirms to the Lenders its direct liability for, and guarantees to the Lenders, the due and punctual payment of all obligations and liabilities of the Subsidiary to the Lenders, whether arising under this Assumption Letter, the Credit Agreement, the other Loan Documents or any other documents related thereto (collectively, the "Borrowing Subsidiary Obligations") including, but not limited to, the due and punctual payment of principal of and interest on the Notes issued by the Subsidiary, and punctual payment of all other sums now or hereafter owed by the Subsidiary under this Assumption Letter, the Credit Agreement, the Loan Documents, any Note issued by the Subsidiary and any other document related thereto as and when the same shall become due (whether by acceleration or otherwise) and according to the terms hereof and thereof. In case of failure by the Subsidiary punctually to pay any Borrowing Subsidiary Obligation, BREED hereby unconditionally agrees to cause such payment to be made punctually as and when the same shall become due and payable, whether at maturity or by declaration or otherwise, and as if such payment were made by the Subsidiary. (ii) Obligations Unconditional. The obligations of BREED under this Assumption Letter shall be irrevocable, unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Subsidiary (or any other Borrowing Subsidiary) or under any Note or other agreement issued or entered into by any Subsidiary (or any other Borrowing Subsidiary), by operation of law or otherwise; (b) any modification or amendment of or supplement to this Assumption Letter or any Loan Document; (c) any compromise, settlement, modification, amendment, waiver, release, non-perfection or invalidity of or to any direct or indirect security, guarantee or other liability of any third party with respect to any Borrowing Subsidiary Obligation; (d) any change in the corporate existence, structure, or ownership of, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting, the Subsidiary (or any other Borrowing Subsidiary) or their assets or any resulting release or discharge of any Borrowing Subsidiary Obligation; (e) the existence of any claim, set-off or other right which BREED may have at any time against the Subsidiary (or any other Borrowing Subsidiary), the Agent, any Lender or any other Person, whether or not arising in connection with this Assumption Letter or any other Loan Document; provided, however, that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (f) any invalidity or unenforceability relating to or against the Subsidiary (or any other Borrowing Subsidiary) for any reason of this Assumption Letter or any Loan Document, or any provision of applicable law or regulation purporting to prohibit the payment by the Subsidiary (or any other Borrowing Subsidiary) of the principal of or interest on any Note issued by the Subsidiary (or any other Borrowing Subsidiary) or any other amount payable by the Subsidiary (or any other Borrowing Subsidiary) under this Assumption Letter, the Credit Agreement or any Loan Document; or (g) any other act or omission to act or delay of any kind by the Subsidiary (or any other Borrowing Subsidiary), the Agent, any Lender or any other Person or any other circumstance whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the obligations of BREED under this Assumption Letter, the Credit Agreement or any Loan Document. (iii) Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances. BREED's obligations hereunder shall remain in full force and effect until each Revolving Credit Commitment and Term Loan Commitment has expired or is terminated and the principal of and interest on the Notes and all other Obligations payable under this Assumption Letter and the Loan Documents shall have been paid in full. If at any time any payment of the principal of or interest on any Note issued by the Subsidiary or any other amount payable by the Subsidiary under this Assumption Letter or any Loan Document is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Subsidiary or otherwise, BREED's obligations under this Assumption Letter with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time. This provision shall survive the termination of this Assumption Letter and the payment in full of the Obligations. (iv) Waiver. BREED irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Subsidiary or any other Person. BREED waives any benefit of the collateral, if any, which may from time to time secure the Obligations or any part thereof and authorizes the Agent or the Lenders to take any action, or exercise any remedy with respect thereto, which the Agent or the Lenders in its or their sole discretion shall determine, without notice to BREED. In the event the Lenders in their sole discretion elect to give notice of any action with respect to the collateral, if any, securing the Obligations or any part thereof, ten days' written notice mailed to BREED by certified mail at the address set forth in the Credit Agreement shall be deemed reasonable notice of any matter contained in such notice. (v) Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Subsidiary under this Assumption Letter or any of the Loan Documents is stayed upon the insolvency, bankruptcy or reorganization of the Subsidiary or any other Person, all such amounts otherwise subject to acceleration under the terms of this Assumption Letter or any Loan Document shall nonetheless be payable by BREED hereunder forthwith on demand by the Agent. (vi) Payments. All payments to be made by BREED pursuant to this Assumption Letter shall be made at the times and in the manner and in the currency prescribed for payments in the Credit Agreement. (vii) Delay of Subrogation. Until BREED's obligations under this Assumption Letter have been paid in full and terminated, BREED shall not exercise any right of subrogation with respect to payments made by BREED pursuant to this Assumption Letter. 5. Notice. Any notice to be given to the Subsidiary may be given to BREED (and shall conclusively be deemed to have been received by the Subsidiary when received, or deemed received, by BREED) in the manner set forth in the Credit Agreement. The Subsidiary agrees that BREED may give notice under this Assumption Letter and the Loan Documents on behalf of the Subsidiary, and that any such notice given by BREED on behalf of the Subsidiary shall be binding upon the Subsidiary. 6. Jurisdiction and Governing Law. (i) Without limiting the provisions of Section 12.14 of the Credit Agreement, the Subsidiary and BREED each irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the United States federal court and any Florida state court sitting in the county of Hillsborough, State of Florida, United States of America, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Assumption Letter, the Credit Agreement or any other Loan Document or for recognition or enforcement of any judgment relating thereto, and the Subsidiary and BREED each irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such court. The Subsidiary and BREED each agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Assumption Letter shall affect any right that any Lender or the Agent may otherwise have to bring any action or proceeding relating to this Assumption Letter, the Credit Agreement or any other Loan Document in the courts of any jurisdiction. (ii) This Assumption Letter shall be governed by, and construed in accordance with, the internal laws (and not the law of conflicts) of the State of Florida; provided that the Agent and the Lenders shall retain all rights arising under federal law. [signatures follow] IN WITNESS WHEREOF, the Subsidiary has duly executed and delivered this Assumption Letter as of the date and year first above written. [NAME OF BORROWING SUBSIDIARY] By Name: Title: Agreed and Consented to: BREED TECHNOLOGIES, INC. By: Name: Title: NATIONSBANK, NATIONAL ASSOCIATION, as Agent By: Name: Title: EXHIBIT "A" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION To NationsBank, National Association as Agent (the "Agent") under the Credit Agreement Described Below RE: Credit Agreement dated as of October 30, 1997 (as the same may be amended, supplemented or restated, the "Credit Agreement"), among BREED Technologies, Inc., a Delaware corporation ("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein (BREED and such Subsidiaries being collectively referred to as the "Borrowers") the Lenders (as defined in the Agreement) and NationsBank, National Association, as Agent for the Lenders ("Agent"). Terms used herein and not otherwise defined shall have the meanings assigned thereto in the Credit Agreement. The Agent is specifically authorized and directed to act upon the following standing money transfer instructions with respect to the proceeds of Loans or other extensions of credit from time to time until receipt by the Agent of a specific written revocation of such instructions by [Name of Borrowing Subsidiary] (the "Borrowing Entity"), provided, however, that the Agent may otherwise transfer funds as hereafter directed in writing by the Borrowing Entity in accordance with Section 12.2 of the Credit Agreement or based on any telephonic notice made in accordance with any other applicable provision of the Credit Agreement. Facility Identification Number(s)_______________________________________________ Customer/Account Name___________________________________________________________ Transfer Funds to_______________________________________________________________ - ------------------------------------------------------------------------ For Account No._________________________________________________________________ Reference/Attention To__________________________________________________________ Authorized Officer (Customer Representative) Date_______________________ - ------------------------- ----------------------------------- (Please Print) (Signature) Bank Officer Name Date_______________________ - ------------------------- ----------------------------------- (Please Print) (Signature) (Deliver Completed Form to Credit Support Staff For Immediate Processing) Schedule 1.1(a) Borrowing Subsidiaries Name of Subsidiary Jurisdiction BREED Automotive Safety Systems SL Spain BREED Italian Holdings, Srl Italy BREEDUK Limited United Kingdom ICSRD R.F., GmbH Germany Schedule 1.1(b) Initial Advance Allocation Borrower Initial Advance BREED Technologies, Inc. $ 718,000,000 BREED Automotive Safety Systems SL $ 15,000,000 BREED Italian Holdings, Srl $ 49,000,000 BREED UK Limited $ 17,000,000 BREED R.F., GmbH $ 1,000,000 $ 800,000,000 Schedule 7.4 Subsidiaries and Investments in Other Persons Schedule 7.6 Indebtedness Schedule 7.7 Liens Schedule 7.10 Litigation Schedule 7.19 Employment Matters Schedule 7.23 Financing Statements and Other Filings Schedule 8.5 Insurance EX-10.3 7 WARRANT AGREEMENTS Exhibit 10.3 WARRANT AGREEMENT BETWEEN NATIONSBANK, N.A. AND BREED TECHNOLOGIES, INC. October 30, 1997 TABLE OF CONTENTS ARTICLE 1 CERTAIN DEFINITIONS..........................................1 ARTICLE 2 ORIGINAL ISSUE OF WARRANTS...................................3 2.1 Form of Warrant Certificates.................................3 2.2 Legend.......................................................3 2.3 Delivery of the Warrants.....................................4 ARTICLE 3 EXERCISE OF WARRANTS.........................................4 3.1 Exercise of Warrants; Increase in Warrants...................4 3.2 Exercise Price...............................................5 3.3 Restrictions on Exercise; Expiration.........................5 3.4 Method of Exercise; Payment of Exercise Price................5 3.5 Dividends and Distributions..................................6 ARTICLE 4 ADJUSTMENTS..................................................6 4.1 Adjustments..................................................6 4.2 Below Market Price Issuances.................................8 4.3 Notice of Adjustment........................................10 4.4 Statements in the Warrants..................................10 4.5 Notice of Consolidation, Merger or Sale of Assets...........10 4.6 Fractional Interests........................................11 4.7 No Dilution or Impairment...................................11 ARTICLE 5 RESERVATION AND AUTHORIZATION OF COMMON SHARES, ETC.........................................................11 5.1 Reservation and Authorization...............................11 5.2 Covenant Regarding Securities...............................11 5.3 Registration................................................12 5.4 S-3 Eligibility.............................................12 ARTICLE 6 WARRANT TRANSFER BOOKS: RESTRICTIONS ON TRANSFER............12 6.1 Transfer and Exchange.......................................12 6.2 Special Transfer Provisions.................................13 6.3 Surrender of a Warrant Certificate..........................13 ARTICLE 7 OPTIONS.....................................................13 7.1 Option to Redeem Warrants...................................13 ARTICLE 8 REGISTRATION RIGHTS.........................................14 8.1 Registration by the Corporation.............................14 8.2 Registration Procedures and Expenses........................14 8.3 Indemnification.............................................15 8.4 Conflicting Rights..........................................17 8.5 Termination.................................................17 8.6 Registration on Form S-3....................................17 ARTICLE 9 MISCELLANEOUS...............................................17 9.1 Loss or Mutilation..........................................17 9.2 Payment of Taxes............................................18 9.3 No Merger, Consolidation or Sale of Assets or the Corporation.18 9.4 Notices.....................................................18 9.5 Governing Law...............................................19 9.6 Assignment; Successors......................................19 9.7 Counterparts................................................19 9.8 Amendments..................................................19 9.9 Headings....................................................20 9.10 Third Party Beneficiaries...................................20 9.11 Severability................................................20 9.12 No Inconsistent Agreements..................................20 EXHIBIT A WARRANT CERTIFICATE.........................................22 WARRANT AGREEMENT WARRANT AGREEMENT, dated as of October 30, 1997 (this "Agreement"), between BREED TECHNOLOGIES, INC. a Delaware corporation (the "Corporation"), and NATIONSBANK, N.A. ("NationsBank"). Pursuant to the terms of a Credit Agreement dated October 30, 1997, NationsBank, N.A. as agent (the "Agent") and as a Lender has agreed to make available to the Corporation loans of up to $900,000,000 (the "Loans") which Loans are to be evidenced by Notes of the Corporation in favor of the Lenders (the "Notes"). In order to induce NationsBank to agree to make the Loans, the Corporation agreed to issue to NationsBank warrants (the "Warrants") exercisable for Common Stock, $.01 par value per share of the Corporation (the "Common Stock"). Initially, the Corporation is authorizing the issuance to NationsBank of 3,000,000 Warrants to purchase a total of 3,000,000 shares of Common Stock (the "Warrant Shares") of the Corporation under the terms and conditions hereof, which amount is subject to increase as provided herein. Each Warrant shall entitle the holder thereof to purchase one share of Common Stock, subject to adjustment as provided herein. In consideration of the foregoing and of the agreements contained in the Credit Agreement, and for the purpose of defining the terms and provisions of the Warrants and Warrant Shares and the respective rights and obligations thereunder of the Corporation and the Holder(s) (as defined herein), the Corporation and NationsBank hereby agree as follows: ARTICLE 1 CERTAIN DEFINITIONS For all purposes of this Agreement, except as otherwise expressly provided: (a) the terms defined in this Article 1 have the meanings assigned to them in this Article, and include the plural as well as the singular; and (b) the words "herein," "hereof" and "hereunder," and other words of similar import, refer to this Agreement as a whole and not to any particular article, section or other subdivision. "Additional Warrants" has the meaning set forth in Section 3.1 hereof. "Affiliate" means, as to any person, any other person which directly or indirectly controls, or is under common control with, or is controlled by, such person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "under common control with" and "controlled by"), and as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person, whether through the ownership of voting stock, by agreement or otherwise; provided, however, that beneficial ownership of 5% or more of the voting stock of a person shall be deemed to be control. "Appraised Market Value" shall mean the market value of the Common Stock as agreed by the Corporation and the affected Holder(s) of the Warrants, or if the Corporation and such Holder(s) cannot agree, as determined by a valuation by an investment banking company suitable to the Corporation and such Holder(s). In the event the parties cannot agree on an investment banking company to perform the valuation described above, the Corporation and such Holder(s) shall each select an investment banking company and the two investment banking companies so selected shall select a third investment banking company which shall determine the Appraised Market Value. In determining the Appraised Market Value of the Common Stock, no discount shall be applied because the shares of Common Stock held by the holders thereof (a) have not been registered under the Securities Act, or (b) represent a minority interest in the Corporation. The fees and expenses of the investment banking company or companies shall be borne by the Corporation. "Board of Directors" means the board of directors of the Corporation. "Board Resolution" means a copy of a resolution certified by the Secretary or any Assistant Secretary of the Corporation to have been duly adopted by the Board of Directors. "Business Day" means any day which is not a Saturday, Sunday or a day on which banking institutions in the States of New York and Florida are not authorized or obligated by law, executive order, regulation or governmental decree to close. "Commission" means the Securities and Exchange Commission. "Common Stock" has the meaning set forth in the preamble hereto. "Corporation" has the meaning set forth in the preamble hereto. "Credit Agreement" has the meaning set forth in the preamble hereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exercise Price" has the meaning set forth in Section 3.2 hereof. "Expiration Date" means October 30, 2000. "Holders" means the holders from time to time of the Warrants or Warrant Shares issued upon exercise of the Warrants. "Issue Date" means the date of the original issuance of the Warrants. "Market Price" means the closing price of a share of Common Stock on the principal national securities exchange (including the Nasdaq National Market) on which the shares of Common Stock are listed or admitted to trading as reported in The Wall Street Journal or, if not listed or admitted to trading on any national securities exchange (including the Nasdaq National Market), the average of the bid and asked prices in the over-the-counter market as furnished by Nasdaq, or, if the shares of Common Stock are not publicly traded, the Appraised Market Value. "NationsBank" has the meaning set forth in the preamble hereto. "Notes" has the meaning set forth in the preamble hereof. "Private Placement Legend" means the legend in the form set forth in Section 2.2 hereof. "Registration Expenses" has the meaning set forth in Section 8.2 hereof. "Registrable Securities" shall mean the Warrant Shares. "Rights" means rights, options or warrants for the purchase of, or securities convertible into or exchangeable for, Common Stock. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Warrants" have the meaning set forth in the preamble hereto. "Warrant Certificates" have the meaning set forth in Section 2.1 hereof. "Warrant Shares" have the meaning set forth in the preamble hereto. ARTICLE 2 ORIGINAL ISSUE OF WARRANTS 2.1 Form of Warrant Certificates. Any certificate representing the Warrants (a "Warrant Certificate"), the form of which is attached hereto as Exhibit A, shall be detachable from this Agreement, the Credit Agreement and any Notes and shall be dated the date on which it is signed by a duly authorized officer of the Corporation and shall have such insertions as are appropriate or required or permitted by this Agreement and may have such letters, numbers or other marks of identification as the Corporation may deem appropriate and as are not inconsistent with the provisions of this Agreement. 2.2 Legend. Each Warrant Certificate and, until registered or an exemption from registration is available, each certificate representing securities acquired upon exercise of the Warrants shall bear the following legend on the face thereof: THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT. 2.3 Delivery of the Warrants. This Agreement authorizes the initial issuance of 3,000,000 Warrants which amount is subject to increase as provided in Section 3.1. On the Closing Date (as defined in the Credit Agreement), the Corporation shall issue to NationsBank in connection therewith (but detachable therefrom) a Warrant Certificate for 3,000,000 Warrants. If Additional Warrants become authorized under Section 3.1, the Corporation shall promptly issue and deliver to NationsBank a Warrant Certificate for the Additional Warrants. ARTICLE 3 EXERCISE OF WARRANTS 3.1 Exercise of Warrants; Increase in Warrants. (a) Subject to the limitations and adjustments as provided herein, on or before the Expiration Date, the Warrants may be exercised on any Business Day as to all or any portion of the Warrant Shares for which the Warrants are then exercisable as follows: (a) as of the date of this Agreement and the issuance of the Warrant Certificate, the number of Warrants which may be exercised pursuant to this Agreement, and the number of Warrant Shares issuable upon exercise of such Warrants, shall be 250,000; (b) in the event the Corporation shall not have paid in full its Obligations (as defined in the Credit Agreement) on or prior to January 27, 1998, the number of Warrants which may be exercised pursuant to this Agreement, and the number of Warrant Shares issuable upon exercise of such Warrants, shall be automatically increased to 1,000,000 effective as of January 27, 1998 unless the Corporation (i) shall have furnished NationsBank a Plan (as defined in the Credit Agreement) and (ii) shall be in receipt of not less than $300,000,000 of permanent capital [excluding indebtedness] (over September 24, 1997 levels) on terms reasonably acceptable to NationsBank; (c) in the event the Corporation shall not have paid in full its Obligations (as defined in the Credit Agreement) (or if a binding commitment to refinance and/or repay the obligations arising under the Credit Agreement does not exist) on or prior to April 27, 1998, the number of Warrants which may be exercised pursuant to this Agreement, and the number of Warrant Shares issuable upon exercise of such Warrants, shall be automatically increased to 2,000,000 effective as of April 27, 1998; and (d) in the event the Corporation shall not have paid in full its Obligations (as defined in the Credit Agreement) on or prior to July 26, 1998, (or if a binding commitment to refinance and/or repay the obligations arising under the Credit Agreement does not exist), the number of Warrants which may be exercised pursuant to this Agreement, and the number of Warrant Shares issuable upon exercise of such Warrants, will be automatically increased to 3,000,000 effective as of July 26, 1998. (b) If the Corporation shall not have paid in full its Obligations (as defined in the Credit Agreement) on or prior to July 31, 1998, the number of Warrants granted hereunder shall increase and the Holders shall be entitled to immediately exercise and purchase under the terms of this Agreement an amount of Warrant Shares equal to (x) 7.7% of all shares of Common Stock outstanding or deemed outstanding on a fully diluted basis on July 31, 1998 less (y) 3,000,000 (the "Additional Warrants"). For purposes of calculating the number of shares of Common Stock outstanding on July 31, 1998, the number of shares of Common Stock issuable in connection with the exercise of conversion rights of the holders of (i) the Corporation's Series A Preference shares (the "Series A Preference Shares") and (ii) the Breed Capital Trust ____% Convertible Trust Preferred Securities (the "Trust Preferred Securities") or if the Trust Preferred Securities have not been issued then 4,000,000 shares of Common Stock issuable upon conversion of the Corporation's Series B Preference Shares (the "Series B Preference Shares") shall be deemed to be outstanding, whether or not such conversion rights are then exercisable or have been exercised. 3.2 Exercise Price. Initially, the Warrant Certificates shall entitle the Holders thereof, subject to the provisions of this Agreement, to purchase an aggregate of 3,000,000 Warrant Shares at a per share purchase price (the "Exercise Price") determined as follows, subject to adjustment as provided in Article 4 hereof: The Exercise Price for the 250,000 Warrant Shares exercisable as of the date of this Agreement shall be $23.125. The Exercise Price for the remaining Warrant Shares shall be the Market Price of the Common Stock on the day the Warrants for such Warrant Shares become exercisable under the provisions of Section 3.1. The Exercise Price for any additional Warrant Shares to be subject to the Additional Warrants shall be the Market Price of the Common Stock on July 31, 1998. Once established for a number of Warrant Shares, the Exercise Price for those shares shall not be adjusted by reason of any later increase in the total number of Warrants which may be exercised by the Holders. 3.3 Restrictions on Exercise; Expiration. On or before the Expiration Date, the Warrants may be exercised on any Business Day as to all or any portion of the Warrant Shares. If any of the Warrants are not exercised by 5:00 p.m., New York City time, on the Expiration Date, this Agreement and unexercised Warrants shall expire and all rights of the Holders hereunder and thereunder shall terminate unless otherwise provided herein or therein. 3.4 Method of Exercise; Payment of Exercise Price. (a) In order to exercise all or any of the Warrants, the Holder thereof must provide written notice to the Corporation at its address set forth in Section 9.4 hereof specifying the number of Warrants being exercised. Such notice shall be accompanied by one or more Warrant Certificates representing not less than the number of Warrants being exercised, together with payment in full of the per share Exercise Price multiplied by the number of Warrant Shares to be purchased pursuant to the exercise. The Exercise Price shall be payable, at the option of the Holder, (i) by wire transfer, certified check, official bank check or bank cashier's check payable to the order of the Corporation, or (ii) by the surrender of Warrants exercisable for a number of shares having an aggregate Market Price as of the date of surrender equal to the aggregate Exercise Price of all Warrants covered thereby. If the number of Warrants being exercised is less than the number of Warrants represented by the Warrant Certificate(s) tendered in connection with the exercise, the Corporation shall issue new Warrant Certificate(s) for the unexercised Warrants in accordance with instructions contained in the notice of exercise and this Agreement. (b) Upon exercise of any Warrant in conformity with the foregoing provisions, the Corporation shall (i) transfer promptly to, or upon the written order of the Holder of such Warrant, appropriate evidence of ownership of any Warrant Shares or other securities or property (including money) to which it is entitled, registered or otherwise placed in such name or names as may be directed in writing by the Holder thereof, (ii) deliver such evidence of ownership and any other securities or property (including money) to the person or persons entitled to receive the same, and (iii) reissue, as the case may be, a Warrant Certificate for any unexercised Warrants. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of the surrender for exercise of the Warrant Certificate representing such Warrant being exercised and, for all purposes of this Agreement, the person entitled to receive any Warrant Shares or other securities or property deliverable upon such exercise shall, as between such person and the Corporation, be deemed to be the Holder of such Warrant Shares or other securities or property of record as of the close of business on such date and shall be entitled to receive any Warrant Shares or other securities or property (including money) to which such person would have been entitled had such person been the record holder of such Warrant Shares or other securities or property on such date. 3.5 Dividends and Distributions. For so long as any of the Warrants remain outstanding and unexercised, the Corporation will, upon the declaration of a cash dividend upon its Common Stock or other distribution to the holders of its Common Stock (other than a dividend payable in shares of the Corporation's Common Stock) and at least 20 days prior to the record date, notify the Holders of such declaration, which notice will contain, at a minimum, the following information: (i) the date of the declaration of the dividend or distribution, (ii) the amount of such dividend or distribution, (iii) the record date of such dividend or distribution, (iv) the payment date or distribution date of such dividend or distribution, and (v) the Corporation's best estimate of the frequency and amount of cash dividends or other distributions (other than a dividend payable in shares of the Corporation's Common Stock) to be paid or made in each of the succeeding three years. ARTICLE 4 ADJUSTMENTS 4.1 Adjustments. The Exercise Price and the number of Warrant Shares issuable upon exercise of each Warrant shall be subject to adjustment from time to time as follows: (a) Adjustments for Change in Common Stock. If the Corporation at any time after the date hereof (i) declares a dividend payable in shares of the Corporation's Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, the number and kind of Warrant Shares issuable upon exercise of each Warrant, at the time of the record date for such dividend or of the effective date of such subdivision or combination shall be proportionately adjusted so that the Holder of any Warrant exercised after such time shall be entitled to receive the aggregate number and kind of shares of Common Stock which, if such Warrant had been exercised immediately prior to such date, such Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision or combination. An adjustment made pursuant to this Section 4.1(a) shall become effective immediately after the effective date of such subdivision or combination. Such adjustment shall be made successively whenever any such event shall occur. If at any time, as a result of an adjustment made pursuant to this Section 4.1(a), the Holder of any Warrant thereafter exercised becomes entitled to receive any securities other than shares of Common Stock, the number of such other securities so receivable upon exercise of such Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Section 4.1, and the provisions of this Agreement with respect to the Warrant Shares shall apply on like terms to any such other securities. (b) De Minimis Adjustments. No adjustment in the Exercise Price or number of Warrant Shares purchasable upon exercise of any Warrant pursuant to this Section 4.1 or Section 4.2 below shall be required unless such adjustment would require an increase or decrease of at least one-tenth of one percent in the Exercise Price or number of Warrant Shares purchasable upon the exercise of each Warrant, as the case may be; provided, however, that any adjustments which by reason of this Section 4.1(b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. (c) Adjustment of Exercise Price. Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant is adjusted, as herein provided, the Exercise Price per Warrant Share payable upon exercise of each Warrant shall be adjusted (calculated to the nearest $.0001) so that it shall equal the price determined by multiplying such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares purchasable upon the exercise of each Warrant immediately prior to such adjustment, and the denominator of which shall be the number of shares so purchasable immediately thereafter. (d) Consolidation, Merger or Sale of Assets; Liquidation. (i) Subject to the provisions of Section 4.1(d)(ii) below, in the event that, at any time after the date of this Agreement, the Corporation consolidates with, merges with or into, or sells, transfers or otherwise disposes of all or substantially all of its property and assets to, any person, and in connection therewith consideration is payable to holders of shares of Common Stock, the Warrants shall remain subject to the terms and conditions set forth in this Agreement and each Warrant shall, after such consolidation, merger or sale, entitle the Holder thereof to receive, upon exercise, the number of shares of capital stock or other securities or property (including cash) of the Corporation, or of such person resulting from such consolidation or surviving such merger or to which such sale shall be made, that would have been distributable or payable on account of the shares of Common Stock (or other securities or property purchasable upon exercise of the Warrants) if the Warrants had been exercised immediately prior to such merger, consolidation or sale (or, if applicable, any record date therefor); and, in any such case, the provisions of this Agreement with respect to the rights and interests thereafter of the Holders shall be appropriately adjusted by the Board of Directors, in good faith, as evidenced by a Board Resolution, so as to be applicable, as nearly as reasonably possible, to any shares of stock or other securities or any property thereafter deliverable on the exercise of the Warrants. (ii) Notwithstanding the provisions of Section 4.1(d)(i) above, (A) if the Corporation consolidates with, merges with or into, or sells all or substantially all of its property and assets to, any person, and consideration is payable to holders of shares of Common Stock in exchange for their shares of Common Stock in connection with such merger, consolidation or sale which consists solely of cash, or (B) in the event of the dissolution, liquidation or winding-up of the Corporation, then the Holders shall receive per share distributions at the same time and on an equal basis with holders of shares of Common Stock (or other securities or property purchasable upon exercise of the Warrants) as if the Warrants had been exercised immediately prior to such event (or, if applicable, any record date therefor), less the per share Exercise Price. Upon receipt of such payment, with respect to the Warrants in respect of which such payment was received, the rights of the Holders shall terminate except as expressly provided herein or in the Warrant Certificate and such Warrants shall expire. The Holders shall promptly deliver such Warrant Certificates to the Corporation for cancellation. In the case of any such merger, consolidation or sale of assets, the surviving or acquiring person or, in the event of any dissolution, liquidation or winding up of the Corporation, the Corporation, shall deposit promptly on behalf of the Holders the funds, if any, necessary to pay the Holders pursuant to this Section 4.1(d)(ii). (e) Adjustments by Board. In addition to the foregoing adjustments, the Board of Directors may make any other adjustment to increase the number of Warrant Shares purchasable upon exercise of Warrants or to decrease the Exercise Price as it may, in good faith, deem desirable to protect the rights and benefits of the Holders hereunder. (f) Further Adjustments. If a state of facts shall occur which, without being specifically controlled by the provisions of this Section 4.1, would not fairly protect the exercise rights of the Holders in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Corporation shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such exercise rights. 4.2 Below Market Price Issuances. (a) Subject to the provisions of Section 4.2(g) below, if the Corporation shall issue (other than as provided in Section 4.1) or sell any shares of Common Stock for a consideration per share less than the Market Price, then at the time of such issuance or sale the Exercise Price shall be appropriately adjusted to the number determined by multiplying the Exercise Price in effect immediately prior to such issuance or sale by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding, whether issued or issuable upon conversion or exercise, immediately prior to the issuance or sale of such shares of Common Stock plus the number of such shares of Common Stock which the aggregate consideration for such additional shares of Common Stock so issued or sold would purchase at a consideration per share equal to the Market Price, and the denominator of which shall be the number of shares of Common Stock outstanding, whether issued or issuable upon conversion or exercise, immediately prior to the issuance or sale of such shares of Common Stock plus the number of shares of Common Stock so issued or sold. (b) If the Corporation shall issue (other than as provided in Section 4.1) or sell any Rights, and the consideration per share for which shares of Common Stock may at any time thereafter be issuable pursuant to such Rights (when added to the consideration per share of Common Stock, if any, received for such Rights) shall be less than the Market Price, then the Exercise Price shall be appropriately adjusted by the number determined by multiplying the Exercise Price in effect immediately prior to such issuance or sale by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding, whether issued or issuable upon conversion or exercise, immediately prior to the issuance or sale of such Rights plus the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (when added to the consideration per share of Common Stock, if any, received for such Rights) would purchase at the Market Price, and the denominator of which shall be the number of shares of Common Stock outstanding, whether issued or issuable upon conversion or exercise, immediately prior to the issuance or sale of such Rights plus the number of additional shares of Common Stock issuable upon exercise of such Rights. (c) For the purposes of this Section 4.2, the date as of which the Market Price shall be computed shall be the date of the issuance or sale of such shares of Common Stock or Rights. (d) No adjustment of the Exercise Price shall be made under this Section 4.2 upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any Rights, if such adjustment shall previously have been made upon the issuance of such Rights pursuant to this Section 4.2. (e) If Rights (or any portion thereof) which shall have given rise to an adjustment pursuant to this Section 4.2 shall have expired or terminated without the exercise thereof, or if by reason of the terms of such Rights there shall have been an increase or increases, with the passage of time or otherwise, in the exercise or conversion price thereof, then the Exercise Price hereunder shall be readjusted (but to no greater extent than originally adjusted) on the basis of (i) eliminating from the computation of any shares of Common Stock attributable to such Rights as shall have expired or terminated, and (ii) treating the shares of Common Stock, if any, actually issued pursuant to the previous exercise of such Rights as having been issued for the consideration actually received and receivable therefor. (f) (i) In any such case covered by this Section 4.2, in determining the amount of consideration received by the Corporation for the Common Stock or Rights if the consideration is in whole or in part consideration other than cash, the amount of the consideration shall be deemed to be the fair value of such consideration as reasonably determined by the Board of Directors of the Corporation. If shares of Common Stock shall be issued as part of a unit with Rights, then the amount of consideration for the Rights shall be deemed to be the amount reasonably determined by the Board of Directors of the Corporation; and (ii) in case any shares of Common Stock or Rights shall be issued in connection with any merger or consolidation in which the Corporation is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value, as reasonably determined by the Board of Directors of the Corporation, of such portion of the assets and business of the nonsurviving corporation or corporations as the Board shall determine to be attributable to such shares of Common Stock or Rights. (g) Notwithstanding the foregoing provisions of this Section 4.2, the provisions of this Section 4.2 shall not apply to (i) any issuance or sale of Common Stock or Rights to any employee or other person providing services to the Corporation as an element of such individual's compensation, (ii) any issuance or sale of Common Stock in connection with any merger or consolidation or the acquisition of the assets (other than cash or cash equivalents) of a person or entity, (iii) the issuance or sale of Common Stock based upon the average closing price of a share of Common Stock over a period not to exceed 30 trading days and the average price so obtained is less than the Market Price on the date of the issuance or sale of such shares of Common Stock, or (iv) any issuance or sale of any Common Stock issuable upon the exercise of the Warrants or the warrants issued pursuant to this Warrant Agreement. (h) For purposes of this Section 4.2, that number of shares of Common Stock issuable to (i) holders of Series A Preference Shares in excess of 4,883,227 shares, (ii) holders of Trust Preferred Securities in excess of the number of shares of Common Stock initially issuable to such holders as at the date such Trust Preferred Securities are issued and (iii) Series B Preference Shares in excess of 4,000,000 shares shall be deemed to be shares issuable pursuant to Rights for a consideration less than the Market Price. 4.3 Notice of Adjustment. Whenever the number of Warrant Shares or other securities or property purchasable upon the exercise of each Warrant or the Exercise Price is adjusted, as herein provided, the Corporation shall promptly mail to the Holders a notice of such adjustment or adjustments, and shall deliver to the Holders a certificate of a firm of independent public accountants selected by the Board of Directors (who may be the regular accountants employed by the Corporation) setting forth (i) the number of Warrant Shares or other securities or property purchasable upon the exercise of each Warrant and the Exercise Price after such adjustment, (ii) a brief statement of the facts requiring such adjustment, and (iii) the computation by which such adjustment was made. 4.4 Statements in the Warrants. Notwithstanding any adjustment in the Exercise Price or the number or kind of Warrant Shares purchasable upon the exercise of the Warrants, the Warrant Certificates theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrant Certificate initially issued pursuant to this Agreement. 4.5 Notice of Consolidation, Merger or Sale of Assets. In the event that, at any time after the date of this Agreement, and prior to 5:00 p.m., New York City time, on the Expiration Date, there shall be any (a) consolidation or merger involving the Corporation, or sale, transfer or other disposition of all or substantially all of the Corporation's property and assets (except a merger or other reorganization in which the Corporation shall be the surviving corporation and holders of shares of Common Stock (or other securities or property purchasable upon exercise of the Warrants) receive no consideration in respect of their shares or property) or (b) any other transaction contemplated by Section 4.1(d)(ii) above, then in any such case, the Corporation shall cause to be mailed to the Holders, at the earliest practicable time (and, in any event, not later than the later of (i) the date the proxy materials (if any) are first distributed (or other notice is first given) to the Corporation's shareholders regarding the proposed transaction, or (ii) 20 days before the effective date (or record date, if earlier) of such proposed transaction), notice of the date on which such reorganization, sale, consolidation, merger, dissolution, liquidation or winding up or other such transaction shall take place, as the case may be. Such notice shall also set forth such facts as shall indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Exercise Price and the kind and amount of securities and property purchasable upon exercise of the Warrants. Such notice shall also specify the date as of which the holders of record of the shares of Common Stock or other securities or property purchasable upon exercise of the Warrants shall be entitled to exchange their shares or other securities or property for securities, money or other property deliverable upon such reorganization, sale, consolidation, merger, dissolution, liquidation or winding up or other such transaction, as the case may be. 4.6 Fractional Interests. In computing adjustments under this Article 4, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. No fractional shares of Common Stock or scrip representing fractional shares of Common Stock shall be issued upon any exercise of the Warrants, but, in lieu thereof, there shall be paid an amount in cash equal to the same fraction of the Market Price of a whole share of Common Stock on the business day preceding the day of exercise. 4.7 No Dilution or Impairment. The Corporation shall not amend its Certificate of Incorporation or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times, in good faith, assist in carrying out all such actions as may be reasonably necessary or appropriate in order to protect the rights of the holders of the Warrants against dilution or other impairment. ARTICLE 5 RESERVATION AND AUTHORIZATION OF COMMON SHARES, ETC. 5.1 Reservation and Authorization. The Corporation hereby represents and warrants that it has reserved, and shall at all times hereafter reserve and keep available, for issuance upon exercise of the Warrants such number of its duly authorized but unissued shares of Common Stock or other securities of the Corporation purchasable upon exercise of the Warrants as will be sufficient to permit the exercise in full of all outstanding Warrants and will cause appropriate evidence of ownership of such shares of Common Stock or other securities to be delivered to the Holders of the Warrants upon their request for delivery of such, and shall take such action as shall be necessary so that all such shares of Common Stock or other securities shall, at all times, be duly approved for listing, subject to official notice of issuance, on each securities exchange, if any, on which such shares of Common Stock or other securities are then listed. 5.2 Covenant Regarding Securities. The Corporation covenants that all shares of Common Stock or other securities of the Corporation that may be issued upon the exercise of the Warrants will, upon issuance, be (a) duly authorized, validly issued, fully paid and nonassessable, (b) free from preemptive and any other similar rights and (c) free from any taxes, liens, charges or security interest with respect thereto. 5.3 Registration. If the Warrant Shares or any securities of the Corporation issuable upon the exercise of the Warrants require registration with, or approval of, any governmental authority (in addition to such as the Corporation is required to obtain pursuant to Article 8 hereof), or the taking of any other action (in addition to such as the Corporation is required to obtain pursuant to Article 8 hereof), under the laws of the United States of America or any state or political subdivision thereof, before such securities may be validly offered or sold in compliance with such laws, then the Corporation covenants that at its expense it will, in good faith and as expeditiously as practicable, endeavor to secure and maintain such registration or approval or to take such other action, as the case may be; provided, however, that the Corporation will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. 5.4 S-3 Eligibility. The Corporation has represented to NationsBank that it is currently eligible to register its securities for resale on Form S-3 under the provisions of the Securities Act and hereby covenants that it will take all action appropriate to maintain such eligibility at all times during the term of this Agreement. ARTICLE 6 WARRANT TRANSFER BOOKS: RESTRICTIONS ON TRANSFER 6.1 Transfer and Exchange. (a) The Corporation shall keep and maintain at its office a register in which, subject to such reasonable regulations as it may prescribe, the Corporation shall provide for the registration of the Warrant Certificates on the Corporation's records and transfers or exchanges of the Warrant Certificates as herein provided. (b) The Holders may transfer a Warrant Certificate by written notice to the Corporation stating the name of the proposed transferee and otherwise complying with the terms of this Agreement. (c) Subject to Section 6.2(a) hereof, when a Warrant Certificate is presented to the Corporation with a request to register the transfer of such Warrant Certificate, the Corporation shall register the transfer or make the exchange as requested if its requirements for such transactions and any applicable requirements hereunder are satisfied. To permit registrations of transfers and exchanges, the Corporation shall execute and deliver such Warrant Certificate in accordance with the provisions hereof. No service charge shall be made for any registration of transfer or exchange of the Warrants. (d) Any Warrant Certificate when duly endorsed in blank shall be deemed negotiable. The Holder of a Warrant Certificate duly endorsed in blank may be treated by the Corporation and all other persons dealing therewith as the absolute owner thereof for any purpose and as the person entitled to exercise the rights represented thereby, any notice to the contrary notwithstanding; but until such transfer on such register, the Corporation may treat the registered Holder thereof as the owner for all purposes. 6.2 Special Transfer Provisions. (a) By its acceptance of the Warrants represented by a Warrant Certificate bearing the Private Placement Legend, each Holder of the Warrants acknowledges the restrictions on transfer of the Warrants and Warrant Shares and agrees that it will transfer the Warrants and Warrant Shares only in accordance with those restrictions. (b) Upon the transfer, exchange or replacement of a Warrant Certificate or certificate representing Warrant Shares not bearing the Private Placement Legend, the Corporation shall deliver a Warrant Certificate or stock certificate that does not bear the Private Placement Legend. Upon the transfer, exchange or replacement of a Warrant Certificate or certificate representing Warrant Shares bearing the Private Placement Legend, the Corporation shall deliver such Warrant Certificate or stock certificate bearing the Private Placement Legend, unless such legend may be removed from a Warrant Certificate or stock certificate as provided in the next sentence. The Private Placement Legend may be removed from a Warrant Certificate or stock certificate if there is delivered to the Corporation evidence satisfactory to the Corporation to confirm that neither such legend nor the restrictions on transfer set forth therein are required to ensure that transfers of such security will not violate the registration and prospectus delivery requirements of the Securities Act or applicable law; provided, however, that the Corporation shall not be required to determine the sufficiency of any such evidence. 6.3 Surrender of a Warrant Certificate. Any Warrant Certificate surrendered for registration of transfer, exchange or exercise of the Warrants represented thereby shall be promptly canceled by the Corporation and shall not be reissued by the Corporation and, except in case of mutilation or partial exercise of the Warrants represented by such Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof. ARTICLE 7 OPTIONS 7.1 Option to Redeem Warrants. The Corporation shall have the right to redeem for cash all, but not less than all, outstanding exercisable Warrants and Warrant Shares held by the Holders by the delivery of a notice of purchase not less than 20 nor more than 45 days prior to the specified purchase date. The purchase price per Warrant or Warrant Share shall be an amount equal to the greater of (a) 135% of the Exercise Price (net of the respective Exercise Price) or (b) the higher of the Market Price on the date of giving of notice and the Business Day immediately preceding the specified closing date for such purchase. ARTICLE 8 REGISTRATION RIGHTS 8.1 Registration by the Corporation. If at any time the Corporation proposes to register any of its Common Stock under the Securities Act, whether or not for sale for its own account (except with respect to registration statements filed on Form S-4 or Form S-8 or any successor forms thereto), it will give written notice to each Holder, at such Holder's address as it shall appear upon the Warrant register, of its intention so to do. Upon the written request of the Holders of not less than 50% of the Warrant Shares, given within 20 days after receipt of the Corporation's notice, the Corporation will use its best efforts to cause all or a part of the Registrable Securities (in accordance with the request of the Holders) to be included in the securities to be covered by the registration statement proposed to be filed by the Corporation. The Corporation shall not be required to include any Registrable Securities in such registration statement unless the Holder thereof accepts the terms of the underwriting as agreed upon between the Corporation (or other persons who have the right to agree upon the underwriting terms relating to the offering) and the underwriter(s) selected by the Corporation (or other persons who have the right to select such underwriter). Notwithstanding any other provision of this Article 8, if the underwriter of such registration advises the Corporation in writing with a copy to the Holders that marketing factors require a limitation of the number of shares of Registrable Securities to be underwritten, the Corporation shall so advise all Holders, and the number of securities including Registrable Securities that may be included in such registration shall be apportioned pro rata based on the number of shares requested to be included in such registration by the Holders and by all other holders of securities participating in such registration, including the holders of the Preference Shares and the Trust Preferred Securities and the Common Stock related thereto (other than the Corporation). The Corporation may, in its sole discretion and without the consent of the Holders, withdraw any such registration statement and abandon the proposed offering in which the Holders shall have requested to participate pursuant to this Section 8.1. 8.2 Registration Procedures and Expenses. (a) In connection with any registration of Registrable Securities under this Article 8, the Holders of said Registrable Securities will furnish in writing such information as is reasonably requested by the Corporation or its underwriter or underwriters for inclusion in the registration statement relating to such offering and such other information and documentation as the Corporation or its underwriter or underwriters may reasonably request and the Holders hereby agree to comply with all requirements of the Securities Act or other laws applicable to them in connection with the offer, sale, underwriting and distribution of its respective Registrable Securities. The Holders participating in such registration shall not be required to make any representations or warranties to or agreement with the Corporation or the underwriters other than those relating to the Holder, its Registrable Securities and information provided by it in writing for use in the registration statement. In connection with the registration, the Corporation will, as expeditiously as possible: (i) take all actions, supply information and use its best efforts to obtain all legal opinions, auditors' consents and comfort letters and experts' computations that may be necessary or desirable to complete the registration process; (ii) furnish, at the request of the Holders, on the date that all or any part of such Registrable Securities is delivered to the underwriters for sale pursuant to such registration, an opinion dated such date of independent counsel representing the Corporation for the purposes of such registration, addressed to the Holders making such request, with respect to such legal matters relating to the registration in connection with which such opinion is being given in the same form mutatis, mutandis, as the opinion of such counsel given to underwriters; and (iii) notify the Holders of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (b) All expenses incurred by the Corporation in complying with this Article 8, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Corporation, auditors' fees and blue sky fees and expenses ("Registration Expenses"), except for all underwriting discounts and selling commissions applicable to the sales of the Holders' Registrable Securities being included in the subject offering and all fees and disbursements of counsel for the Holders of Registrable Securities (including counsel designated by any such seller for a "due diligence" investigation of the Corporation) shall be borne by the Corporation. 8.3 Indemnification. (a) In the event of a registration of any of the Registrable Securities under the Securities Act or under any state securities laws pursuant to this Article 8, the Corporation will indemnify and hold harmless the sellers of such Registrable Securities, each underwriter of such Registrable Securities, the Holders and the transferors of the Registrable Securities or any portion thereof to underwriters, and each other person, if any, who controls such seller, transferor or underwriter within the meaning of Section 15 of the Securities Act (each, an "Indemnified Party"), against any and all losses, claims, damages or liabilities, joint or several, to which such seller, underwriter, Holder, transferor or controlling person may become subject under the Securities Act and under any state securities laws (or any successor law) or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities shall have been registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Corporation will reimburse such Indemnified Party for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Corporation will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, said preliminary prospectus or said prospectus or said amendment or supplement in reliance upon and in conformity with written information furnished to the Corporation through an instrument executed by such Indemnified Party specifically for inclusion in such registration statement, preliminary prospectus, final prospectus, amendment or supplement thereto. Notwithstanding the foregoing, the liability of any such Holder shall not exceed an amount equal to the proceeds realized by each such Holder of Registrable Securities sold as contemplated herein. (b) In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Article 8, each seller of such Registrable Securities (other than any underwriter or dealer purchasing Warrant Shares), and the holder of the Warrants, as transferors of Registrable Securities, jointly and severally, will indemnify and hold harmless the Corporation, each person, if any, who controls the Corporation within the meaning of Section 15 of the Securities Act, each officer of the Corporation who signs the registration statement and each director of the Corporation against any and all such losses, claims, damages, or liabilities arising out of or based upon any untrue statement or alleged untrue statement in or omission or alleged omission from any such registration statement, prospectus, amendment or supplement, if the untrue statement or omission or alleged untrue statement or omission in respect of which such loss, claim, damage or liability is asserted was made in reliance upon and in conformity with information furnished in writing to the Corporation by or on behalf of such seller or transferor specifically for inclusion in such registration statement, preliminary prospectus, final prospectus, amendment or supplement thereto; and such seller or transferor will reimburse the Corporation or such indemnified party for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that, if any losses, claims, damages or liabilities arise out of or are based upon an untrue statement, alleged untrue statement, omission or alleged omission contained in any preliminary prospectus which did not appear in the final prospectus, such seller or transferor shall not have any such liability with respect thereto to the Corporation, any person who controls the Corporation within the meaning of Section 15 of the Securities Act, any officer of the Corporation who signed the registration statement or any director of the Corporation if the Corporation or any person on their behalf delivered a copy of the preliminary prospectus to the person alleging such losses, claims, damages or liabilities and failed to deliver a copy of the final prospectus, as amended or supplemented if it has been amended or supplemented, to such person at or prior to the written confirmation of the sale to such person. (c) Payments in respect of indemnifications required by this Section 8.3 shall be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred. Any party which proposes to assert the right to be indemnified under this Section 8.3 will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim is to be made against an indemnifying party under this Section 8.3, notify each such indemnifying party of the commencement of such action, suit or proceeding, enclosing a copy of all papers served, but the omission so to notify such indemnifying party of any such action, suit or proceeding shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 8.3. In case any such action, suit or proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party, and after notice from such indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof except as provided in the next sentence. The indemnified party shall have the right to employ its own counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such indemnified party, when and as incurred, unless (i) the employment of counsel by such indemnified party has been authorized by the indemnifying party, (ii) the indemnified party shall have received a written opinion from independent counsel that there may be a conflict of interest between the indemnifying party and the indemnified party in the conduct of the defense of such action (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party) or (iii) the indemnifying party shall not in fact have employed counsel to assume the defense of such action. An indemnifying party shall not be liable for any settlement of any action or claim effected without its consent. In no event shall an indemnifying party be required to pay for more than one counsel for an indemnified party, exclusive of local counsel. 8.4 Conflicting Rights. The Corporation shall not, without the prior written consent of the Holders of not less than 50% of the Warrant or Warrant Shares (assuming exercise of all Warrants), grant any rights to any persons to register any shares of capital stock or other securities of the Corporation if such right is senior to the rights of the Holders hereunder. 8.5 Termination. The registration rights granted under this Article 8 shall terminate with respect to any Holder on the date on which the Holder may sell the Warrants or Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the Securities Act. 8.6 Registration on Form S-3. At any time prior to two years after the Expiration Date, the Holder shall have the unlimited right (but no more frequently than once each six months) to require the Corporation to promptly register the Warrant Shares on Form S-3. The Corporation will include in the Form S-3 Registration Statement such information as any underwriters may reasonably request for marketing reasons. If at the time of sale, only Warrant Shares are being offered, any underwriters selected in connection with such sale shall be acceptable to the Selling Holders. The Corporation shall keep the Holder advised of the initiation of such registration and its effectiveness and shall take all steps appropriate to maintain such effectiveness for a period of 24 months. ARTICLE 9 MISCELLANEOUS 9.1 Loss or Mutilation. Upon receipt by the Corporation of (a) evidence satisfactory to it of the ownership, and the loss, theft, destruction or mutilation, of any Warrant Certificate and (b) of indemnity satisfactory to it or, in the case of mutilation, upon surrender and cancellation of the mutilated Warrant Certificate, then, the Corporation shall execute and deliver to the registered Holder of the lost, stolen, destroyed or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of the same tenor and for a like aggregate number of Warrant Shares. Upon the issuance of any new Warrant Certificate under this Section 9.1, the Corporation may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses in connection therewith. Every new Warrant Certificate executed and delivered pursuant to this Section in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a contractual obligation of the Corporation, whether or not the allegedly lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement. The provisions of this Section 9.1 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of the mutilated, lost, stolen, or destroyed Warrant Certificate. 9.2 Payment of Taxes. The Corporation shall pay any taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of the issue or delivery of Warrant Shares or of other securities or property deliverable upon exercise of the Warrants (other than income taxes imposed on the Holders). The Corporation shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for Warrant Shares or other securities or property issuable upon the exercise of the Warrants or payment of cash to any person other than the Holder of a Warrant Certificate surrendered upon exercise of the Warrants and in case of such transfer or payment, the Corporation shall not be required to issue any stock certificate or pay any cash until such tax or charge has been paid or it has been established to the Corporation's satisfaction that no such tax or charge is due. 9.3 No Merger, Consolidation or Sale of Assets or the Corporation. Except as otherwise provided herein, the Corporation will not merge into or consolidate with any other person, or sell or otherwise transfer its property, assets and business substantially as an entirety to a successor of the Corporation, unless the person resulting from such merger or consolidation, or such successor of the Corporation, shall expressly assume, by supplemental agreement satisfactory in form to the Holders and executed and delivered to the Holders, the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Corporation. 9.4 Notices. Any notice, demand or delivery authorized by this Agreement shall be in writing and shall be delivered by hand or overnight courier service, mailed or set by facsimile as follows: To the Corporation: BREED Technologies, Inc. 5300 Old Tampa Highway Lakeland, Florida 33811 Attention: General Counsel Telephone No. 941-668-6000 To NationsBank: NationsBank, N.A. 400 N. Ashley Drive, 2nd Floor Tampa, Florida 33602 Attention: Global Finance Telecopy: (813) 224-5948 Attention: Joseph J. Troy With a copy to: NationsBank, N.A. Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telecopy: (704) 386-9923 or such other address or telecopy number as shall have been furnished to the party giving or making such notice, demand or delivery. Any notice that is sent in a manner provided herein shall have been duly given when sent. 9.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES THEREOF. 9.6 Assignment; Successors. Subject to Section 6.2(a) hereof, this Agreement may be assigned by NationsBank to any Affiliate at any time upon written notice. This Agreement shall be binding upon and inure to the benefit of the Corporation and the Holders and their respective successors and assigns, and the Holders from time to time of the Warrants. Nothing in this Agreement is intended or shall be construed to confer upon any person, other than the Corporation, and the Holders, any right, remedy or claim under or by reason of this Agreement or any part hereof. 9.7 Counterparts. This Agreement may be executed manually or by facsimile in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.8 Amendments. Any provision of this Agreement or the Warrant Certificate may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Corporation and the Holders of a majority in interest of the issued or issuable Warrant Shares; provided, however, if any amendment adversely affects the Exercise Price or the number of Warrant Shares issued upon exercise of any Warrant, then the Holders of all the issued or issuable Warrant Shares must sign the amendment. 9.9 Headings. The descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 9.10 Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Corporation, on the one hand, and NationsBank, on the other hand, and the Holders shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of the Holder hereunder. 9.11 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 9.12 No Inconsistent Agreements. Except as provided in Section 8.4, the Corporation has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement that is inconsistent with the rights granted to the Holders herein or that otherwise conflicts with the provisions hereof. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, as of the date first above written BREED TECHNOLOGIES, INC. By: Name: Title: NATIONSBANK, N.A. By: Name: Miles C. Dearden III Title:Senior Vice President EXHIBIT A WARRANT CERTIFICATE THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE"SECURITIES ACT"). THE WARRANTS MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE WARRANTS UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. No. 1 Warrants to purchase an aggregate of __________shares of Common Stock WARRANT TO PURCHASE COMMON STOCK This certifies that _______________________ (the "Holder") or its assigns, is the owner of ___________________ Warrants to purchase shares of Common Stock ("Common Stock") of BREED Technologies, Inc. (the "Corporation"). Each Warrant initially entitles the holder thereof (the "Holder") to purchase from the Corporation one share of Common Stock at the purchase price (the "Exercise Price") set forth in the Agreement (as defined below), subject to the terms and conditions hereof and of the Agreement. In order to exercise the Warrants represented by this Warrant Certificate, the registered Holder hereof must surrender this Warrant Certificate at the office of Corporation as set forth in the Agreement or to its successor. This Warrant Certificate is issued under and in accordance with a Warrant Agreement dated October __, 1997 by and between NationsBank, N.A. and the Corporation (the "Agreement"), and is subject to the terms and provisions contained therein, to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance hereof. The Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Agreement for a full description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Corporation and the Holder of the Warrants. The summary or the terms of the Agreement contained in this Warrant Certificate is qualified in its entirety by express reference to the Agreement. All terms used in this Warrant Certificate that are defined in the Agreement shall have the meanings assigned to them in the Agreement. Copies of the Agreement are on file at the office of the Corporation and may be obtained by writing to the Corporation requesting the same. The number of shares of Common Stock purchasable upon the exercise of the Warrants and the Exercise Price are subject to adjustment as provided in the Agreement. In the event the Corporation merges or consolidates with, or sells all or substantially all of its assets to, another person, the Holder of the Warrants will, upon exercise, be entitled to receive the number of shares of stock or other securities or the amount of money or other property to be received by holders on Common Stock on an equal basis with holders of Common Stock, as if the Warrants had been exercised immediately prior to such transaction. All shares of Common Stock issuable by the Corporation upon the exercise of the Warrants shall be validly issued, fully paid and nonassessable. The Corporation shall pay any taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of the issue or delivery of the Warrant Shares or of other securities or property deliverable upon exercise of the Warrants (other than income taxes imposed on the Holder). The Corporation shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for Warrant Shares or other securities or property issuable upon the exercise of the Warrants or payment of cash to any person other than the Holder of a Warrant Certificate surrendered upon exercise of a Warrant and, in case of such transfer or payment, the Corporation shall not be required to issue any stock certificate or pay any cash until such tax or charge has been paid or it has been established to the Corporation's satisfaction that no such tax or charge is due. Subject to the requirements set forth in the Agreement and the restrictions on transfer set forth above, this Warrant Certificate and all rights hereunder shall be transferable by the registered Holder hereof on the register of the Corporation maintained by the Corporation for such purpose at its office upon surrender of this Warrant Certificate duly endorsed, or accompanied by a written instrument of transfer in form satisfactory to the Corporation duly executed, by the registered Holder hereof or such Holder's attorney duly authorized in writing and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. Upon any partial transfer the Corporation will issue and deliver to such Holder a new Warrant Certificate with respect to any portion not so transferred. This Warrant Certificate shall be void and all exercise rights evidenced hereby shall cease on October __, 200_. This Warrant Certificate and the Agreement are subject to amendment as provided in the Agreement. Dated:_______________, 1997. BREED TECHNOLOGIES, INC. By: Name: Title: EX-10.4 8 JOINT VENTURE AGREEMENT Exhibit 10.4 Joint Venture Agreement between Siemens Aktiengesellschaft and Breed Technologies, Inc. concerning the establishment and operation of the joint venture company BST Restraint Systems International GmbH & Co. KG TABLE OF CONTENTS Preamble 1. Definitions I. ESTABLISHMENT OF THE COMPANY 2. The COMPANY 3. Contributions 4. CHANGE OF CONTROL 5. Disposal of CAPITAL INTERESTS II. ORGANIZATION OF THE COMPANY 6. Bodies of the COMPANY 7. PARTNERSHIP MEETING 8. PARTNERS= BOARD 9. MANAGEMENT 10. Staff, Non-Solicitation of Employees 11. Organizational Structure III. OPERATION OF THE COMPANY 12. Initial Business Plan, Budget 13. Profit and Loss, Financing, Corporate Opportunities 14. Books and Records, FISCAL YEAR, Financial Statements 15. Guidelines for the Operation of the COMPANY 16. Contracts IV. TERM OF AGREEMENT, DISSOLUTION 17. Term of Agreement 18. Dissolution V. OTHER PROVISIONS 19. Premerger Control 20. Applicable Law 21. DISPUTE Settlement 22. Confidentiality 23. Miscellaneous 24. Notices This Agreement is made between (1) Siemens Aktiengesellschaft, a corporation organized and existing under the laws of Germany and having its registered seats at Nonnendammallee 101, D-13599 Berlin and at Wittelsbacher Platz 2, D-80333 Munich, Germany, hereinafter referred to as "SIEMENS" (2) Breed Technologies, Inc. a corporation organized and existing under the laws of Delaware, USA and having its registered seat and head office at 5300 Old Tampa Highway, Lakeland, Florida 33807-3050, USA hereinafter referred to as "BREED" Preamble Passive Restraint Systems for cars are presently regarded to be stand-alone components and subsystems such as seatbelt, steering wheel, airbag sensors, ECU's etc. and they are mainly developed as applications for specific cars. The airbag successfully achieved high penetration rates (>50% worldwide, >75% in Europe) and now there are many airbags in the field. It is recognized, that the airbag saved many people from death or serious injury in accidents. In certain, but rare occasions, it caused damages to passengers unintentionally. While all safety components need to be further developed and improved technically, it is imperative to begin incorporating the components into integrated, smart systems that detect, monitor and control all related functions and actions. The critical objectives in offering maximum benefit to the occupants are adaptive reactions and to avoid malfunctions and misuse of the system. The most likely customer and legislative requirements for adaptive future protection systems shall be to improve e.g. passenger size sensing, passenger position sensing, adaptive air bag inflation adaptive seat belt pre-tensioning. To facilitate development of advanced systems which incorporate the appropriate technologies a joint venture between the PARTIES shall be formed to utilize the respective capabilities of each company, to meet the evolving technical market demands and to increase passenger safety as fast as possible. Through the joint venture it is ensured that all components of a motor vehicle occupant safety restraint system are indentified, designed and manufactured in accordance with the automotive safety standards with the objective to increase the overall quality level of all subcomponents. This AGREEMENT is being entered into under the following circumstances: WHEREAS SIEMENS, through its Automotive Systems Group, and its affiliated companies, are involved in the development, manufacturing and sale of mainly electronic components for motor vehicle occupant safety restraint systems; WHEREAS, BREED and its affiliated companies are involved in the development, manufacturing and sale of mainly mechanical components for motor vehicle occupant safety restraint systems; WHEREAS, SIEMENS and BREED are determined to cooperate on a worldwide basis with respect to the worldwide research, development, engineering and marketing of motor vehicle occupant safety restraint systems as defined herein; WHEREAS, SIEMENS and BREED are determined to appoint the joint venture as their reseller in order to market and sell components of motor vehicle occupant safety restraint systems; WHEREAS, the PARTIES, have concluded a Non Binding Memorandum of Understanding on July, 27 1997 and a Memorandum of Understanding on October, 14 1997; WHEREAS the PARTIES have decided to carry out such a cooperation through a joint venture company to be incorporated and organized under German law; and WHEREAS the PARTIES desire to set forth herein their rights, duties and responsibilities with respect to the joint venture company; NOW, THEREFORE, in consideration of these premises and of the mutual promises, obligations and agreements contained herein, the PARTIES hereto, intending to be legally bound, subject to any necessary governmental or corporate approvals, do hereby agree as follows: 1. Definitions Wherever the following terms are used in this AGREEMENT in capital letters in the singular or plural form, or in any of its ANNEXES, they shall be understood as defined below. "ACCOUNTING FIRM" means: the international independent certified accounting firm KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprhfungsgesellschaft, located in Frankfurt/ Main, Germany, if the PARTIES fail to agree on KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprhfungsgesellschaft in special cases the accounting firm shall be appointed by the president of the Chamber of Commerce of Munich, Germany; "AUDITOR" means: the auditor of the COMPANY and of the VERWALTUNGS-GMBH designated by unanimous vote of the PARTNERSHIP MEETING according to SECTION 7.2 (F) and unanimous resolution of the SHAREHOLDERS'= MEETING; "AFFILIATE" means: related companies within the meaning of Secs. 15 et seq. of the German Stock Corporation Act ("Aktiengesetz"), in which either of the PARTIES has more than 50 % of all voting rights, directly or indirectly owned; "AGREEMENT" means: this Agreement and its ANNEXES; "ANNEX" means: an annex to this AGREEMENT; "ARTICLES OF LIMITED PARTNERSHIP" means: the articles of organization of the COMPANY as a limited partnership; BREED-FAMILY means: Allen K. Breed and Johnnie Cordell Breed including their heirs and legal sucessors; "CAPITAL INTEREST" means: the capital interest in the COMPANY and/or the VERWALTUNGS-GMBH as the case may be; "CEO" means: Chief Executive Officer ("Vorsitzender der Gesch@ftsfhhrung") of the COMPANY; "CFO" means: Chief Financial Officer ("Kaufm@nnischer Gesch@ftsfhhrer") of the COMPANY; 2 "CHANGE OF CONTROL" means: (A) for SIEMENS that any person or entity other than SIEMENS or its AFFILIATES acquires directly or indirectly fifty percent (50%) or more of shareholders' voting rights in the SIEMENS Automotive Systems Group; (B) (i) for BREED that (i) any person or entity other than the BREED-FAMILIY acquires beneficial ownership (as defined in Rule 13d-3 under the US Security Exchange Act of 1934) of fifty percent (50%) or more of the outstanding common stock of BREED; or (ii) any company which is a competitor of SIEMENS in the automotive field or a competitor of the COMPANY or its SUBSIDIARIES either: (a) becomes the largest single shareholder in BREED; or (b) makes a tender offer resulting in the ownership of fifty percent (50 %) or more of the shares of outstanding common stock of BREED "CLOSING" means: the consummation of all transactions which have to occur under this AGREEMENT after the EFFECTIVE DATE including all governmental authorizations and approvals of any nature necessary for the effectiveness of this transactions; "CLOSING DATE" means: the earliest date on which the CLOSING will occur, provided that such date may not be later than June, 6.1998 unless otherwise agreed by the PARTIES; "COMPANY" means: the joint-venture company under the laws of Germany in the legal form of a limited partnership ("Kommanditgesellschaft") with the VERWALTUNGS-GMBH as general partner and with SIEMENS and BREED or an AFFILIATE of SIEMENS or an AFFILIATE of BREED each as limited partners ("GmbH & Co. KG"), to be established in accordance with this AGREEMENT; "COMPONENTS"A means: components of SRS-SYSTEMS as listed in ANNEX 1; "CONTRIBUTION AGREEMENT" means: the contribution agreement regarding the contribution of shares in PARS to be contributed by SIEMENS or an AFFILIATE of SIEMENS to the COMPANY and the contribution agreement regarding the contribution of interests in the US-PARTNERSHIP to be contributed by BREED or an AFFILIATE of BREED to the COMPANY and to the VERWALTUNGS-GMBH; "DEADLOCK"" means: a situation of impasse where a decision which is required for the continuing operations of the COMPANY as a going-business concern cannot be taken because of a failure to agree upon a common course of action among the MANAGEMENT, the PARTNERS' BOARD, the PARTNERSHIP MEETING or the SHAREHOLDERS MEETING or the PARTIES; "DISPUTE" means: any claims, differences or disputes, arising out of or in connection with this AGREEMENT, including any question regarding its existence, validity, termination or its performance, or in connection with arrangements regarding the perfor mance of this AGREEMENT; "EFFECTIVE DATE" means: the date on which this AGREEMENT becomes effective according to SECTION 19. hereof; "FISCAL YEAR" means: the fiscal year of the COMPANY and of the VERWALTUNGS-GMBH, as provided for in this AGREEMENT. "MANAGEMENT" means: the management of the VERWALTUNGS-GMBH and/or the COMPANY as the case may be, consisting of a CEO and a CFO, as provided for in this AGREEMENT; "OFFER" means: the offer to be made under the procedure described in the case of disposal of CAPITAL INTEREST as per SECTION 5 hereof; "OFFEREE" means: the offeree in the procedure described in the case of disposal of CAPITAL INTEREST as per SECTION 5 hereof; "OFFEROR" means: the offeror under the procedure described in the case of disposal of CAPITAL INTEREST as per SECTION 5 hereof; "PARS" means: PARS Passive Rhckhaltesysteme GmbH, a limited liability corporation organized and existing under the laws of Germany and having its registered seats at Carl-Zeiss-Strasse 9, D-63755 Alzenau, Germany, of which the shares are to be contributed to the COMPANY by SIEMENS or an AFFILIATE of SIEMENS according to this AGREEMENT; "PARTNER" means: a limited partner ("Kommanditist") in the COMPANY, i.e. SIEMENS or BREED or an AFFILIATE of SIEMENS or BREED, as the case may be; "PARTNERSHIP MEETING" means: the partnership meeting for the COMPANY as provided for in this AGREEMENT; "PARTY" means: SIEMENS or BREED; "PARTNERS' BOARD" means: the partners' board for the COMPANY as provided for in this AGREEMENT; "SECTION" means: a section of this AGREEMENT; "SHAREHOLDERS' MEETING" means: the shareholders' meeting for the VERWALTUNGS-GMBH as provided for in this AGREEMENT; "SIGNATURE A means: the date on which the AGREEMENT is signed by both PARTIES; "SRS-BACKGROUND-TECHNOLOGY" means: the technology with respect to SRS-SYSTEMS and COMPONENTS available on the CLOSING DATE, whether in written or oral form and whether under statutory protection such as patent applications, patents, utility models, or not, at SIEMENS in its Automotive Systems Group subdivision safety and chassis systems location Regensburg, Germany and available at BREED, and which technology o is needed by the COMPANY and its SUBSIDIARIES for the development, integration and application of SRS-SYSTEMS, and o either PARTY is legally entitled to license to the other PARTY and/or the COMPANY and its SUBSIDIARIES; "SRS-FOREGROUND-TECHNOLOGY" means: the technology with respect to SRS-SYSTEMS and COMPONENTS available after the CLOSING DATE, whether in written or oral form and whether under statutory protection such as patent applications, patents, utility models, or not, o at SIEMENS in its Automotive Systems Group subdivision sayety and chaissis systems location Regensburg, Germany and at BREED, and which technology is needed by the COMPANY and its SUBSIDIARIES for the development, integration and application of SRS-SYSTEMS, or o at the COMPANY and/or at its SUBSIDIARIES and which technology either PARTY or the COMPANY or its SUBSIDIARIES, respectively, is legally entitled to license as laid down in this AGREEMENT. "SRS-SYSTEM" means: a motor vehicle occupant safety restraint system as described in ANNEX 1. "STATUTES" means: the articles of organization of the VERWALTUNGS-GMBH as provided for in this AGREEMENT; "SUBSECTION" means: a subsection of this AGREEMENT; "SUBSIDIARY A means: any legal entity, in which the COMPANY or the VERWALTUNGS-GMBH, as the case may be, has more than 50 % of all voting rights, directly or indirectly owned, such as but not limited to the US-PARTNERSHIP and the PARS; "US-PARTNERSHIP" means: the legal entity in the form of a limited partnership organized and existing under the laws of the State of Delaware, USA, which is to be founded by BREED and an AFFILIATE of BREED and of which the interests are to be contributed to the COMPANY and the VERWALTUNGS-GMBH by BREED and an AFFILIATE of BREED under this AGREEMENT; "VERWALTUNGS-GMBH" means: a legal entity in the form of a limited liability company (GmbH) under the laws of Germany which assumes personal liability and the management of the COMPANY as general partner, to be established in accordance with this AGREEMENT; I. ESTABLISHMENT OF THE COMPANY 2. The COMPANY 2.1 The PARTIES or AFFILIATES designated by the respective PARTY shall establish the COMPANY with ARTICLES OF LIMITED PARTNERSHIP set forth in ANNEX 2.1 A and the VERWALTUNGS-GMBH with STATUTES set forth in ANNEX 2.1 B. The COMPANY shall be established for an indefinite period of time subject to the right of either PARTY to terminate this Agreement as per SECTION 17 hereof. 2.2 The name of the COMPANY shall be: "BST Restraint Systems International GmbH & Co. KG" The name of the VERWALTUNGS-GMBH shall be: "BST Restraint Systems Verwaltungs-GmbH" On its corporate stationary the COMPANY may add to its name the words: "A joint venture of Siemens and Breed" 2.3 The COMPANY and the VERWALTUNGS-GMBH shall have their registered seats and administrative head offices at Alzenau, Germany. 2.4 The scope of the COMPANY shall be: the worldwide research, development, engineering, assembly, marketing and sale of SRS-SYSTEMS, and the purchase, marketing and sale of COMPONENTS, and the holding of participations in companies which are engaged in businesses as described in SUBSECTION 2.4.1 and 2.4.2 hereof. 2.5 It is understood, that the COMPANY and the SUBSIDIARIES shall exercise the worldwide research, development and engineering of SRS-SYSTEMS on a contractual basis. The COMPANY may perform by itself or through its SUBSIDIARIES on a worldwide basis all activities related to this scope, including but not limited to the representation, administration or acquisition of other enterprises of the same or a similar nature and participation in such enterprises. Furthermore, the COMPANY may establish branches and/or SUBSIDIARIES worldwide. The scope of the COMPANY may be extended by unanimous resolution of the PARTNERSHIP MEETING. 2.6 It is understood, that any SUBSIDIARY established by the COMPANY or the VERWALTUNGS-GMBH shall be found in the most beneficial way in respect of taxation and liability. All shares of SUBSIDIARIES in the form of a corporation with its registered seat outside Germany shall be solely owned by the VERWALTUNGS-GMBH or any other legal entity agreed upon by the PARTIES. 2.7 The COMPANY shall have a registered liability capital ("Haftkapital") to be registered in the companies' register ("Handelsregister") in an aggregate amount of DM 10.000.000 (Deutsche Mark ten million) divided into one (1) CAPITAL INTEREST of DM 5.020.000 (Deutsche Mark five million twenty thousand) held by SIEMENS or an AFFILIATE designated by SIEMENS and into one (1) CAPITAL INTEREST of DM 4.980.000 (Deutsche Mark four million ninety eight thousand) held by BREED or an AFFILIATE designated by BREED. 2.8 The scope of the VERWALTUNGS-GMBH as general partner ("Komplement@r") in the COMPANY shall be the assumption of the personal liability for and the management of the COMPANY. The VERWALTUNGS- GMBH will not hold any interest in the COMPANY'S capital. Its aggregate share capital shall be DM 50,000 (Deutsche Mark fifty thousand) divided into one (1) CAPITAL INTEREST of DM 25.100 (Deutsche Mark twenty five thousand one hundred) held by SIEMENS, or an AFFILIATE designated by SIEMENS, and one (1) CAPITAL INTEREST of, DM 24.900 (Deutsche Mark twenty four thousand nine hundred) held by BREED, or an AFFILIATE designated by BREED. 2.9 As of the CLOSING DATE, the CAPITAL INTERESTS in the COMPANY and the CAPITAL INTERESTS in the VERWALTUNGS-GMBH shall be fully paid in as provided for in SECTION 3 hereof and the ratio of shareholding of SIEMENS, or an AFFILIATE designated by SIEMENS, shall be 50,2 % and the ratio of shareholding of BREED or an AFFILIATE designated by BREED, shall be 49,8 % in the COMPANY and the VERWALTUNGS- GMBH, as provided for in SECTION 2.7 and 2.8 hereof. 2.10 The CAPITAL INTERESTS in the COMPANY and the CAPITAL INTERESTS in the VERWALTUNGS-GMBH may only be transferred together and to the same extent. Therefore, to the extent that in this AGREEMENT or the ARTICLES OF LIMITED PARTNERSHIP any provisions have been agreed for a voluntary or involuntary transfer of CAPITAL INTERESTS in the COMPANY, such provisions, in particular SECTION 5., shall apply mutatis mutandis to a transfer of CAPITAL INTERESTS in the VERWALTUNGS-GMBH subject to the hereof condition that any such transfer shall occur simultaneously. The same shall apply to any other disposal or encumbrance of the CAPITAL INTERESTS. 3. Contributions 3.1 Immediately after the EFFECTIVE DATE, SIEMENS, or an AFFILIATE designated by SIEMENS, and BREED, or an AFFILIATE designated by BREED, shall jointly form the VERWALTUNGS-GMBH and shall make their contributions to the aggregate share capital in cash in order to receive in return their respective CAPITAL INTERESTS, as provided for in SUBSECTION 2.8 hereof. 3.2. After the incorporation of the VERWALTUNGS-GMBH, the VERWALTUNGS-GMBH as general partner ("Komplementar"), SIEMENS, or an AFFILIATE designated by SIEMENS, and BREED, or an AFFILIATE designated by BREED, as limited partners ("Kommanditisten") shall jointly form the COMPANY and SIEMENS, or an AFFILIATE designated by SIEMENS, as well as BREED, or an AFFILIATE designated by BREED, shall make their contributions to the aggregate share capital of the COMPANY in kind as provided for in SUBSECTION 3.2.1, 3.2.2 and 3.2.3 hereof in order to receive in return their respective CAPITAL INTERESTS as provided for in SUBSECTION 2.7 hereof: 3.2.1 SIEMENS, or an AFFILIATE designated by SIEMENS, shall according to SECTION 3.2 contribute all of the shares of PARS to the COMPANY with economic effect as of the EFFECTIVE DATE.The value of the shares of PARS is DM 9.318.000,-- (Deutsche Mark nine million threehundred eighteen thousand) as of September 30, 1997. 3.2.2 Prior to the EFFECTIVE DATE BREED, and an AFFILIATE designated by BREED, shall form the US- PARTNERSHIP as a limited partnership and transfer the tangible assets with respect to development, research and testing of SRS-SYSTEMS as described in ANNEX 3.2.2 into the US-PARTNERSHIP. Any licenses or transfer of SRS- BACKGROUND-TECHNOLOGY shall be solely provided according to SECTION 15. BREED shall be the limited partner in the US-PARTNERSHIP with capital interests of 99% and the AFFILIATE designated by BREED shall be the general partner in the US-PARTNERSHIP with capital interest of 1 %. BREED shall according to SECTION 3.2 contribute all its interests as a limited partner of the US-PARTNERSHIP to the COMPANY and the AFFILIATE designated by BREED shall according to SECTION 3.2 transfer all its interests as a general partner of the US- PARTNERSHIP to the VERWALTUNGS-GMBH with economic effect as of the EFFECTIVE DATE.The value of the assets to be transfered by BREED, and an AFFILIATE designated by BREED, into the US-PARTNERSHIP and accordingly the value of the interests of the US-PARTNERSHIP are DM 9.318.000,-- (Deutsche Mark Mark nine million threehundred eighteen thousand) as of the EFFECTIVE DATE. 3.2.3 The shares of PARS and interests in the US-PARTNERSHIP contributed by the respective PARTNER shall be entered in the registered liability contribution of the contributing PARTNER in the COMPANY up to an amount of DM 5.020.000 (Deutsche Mark five million twenty thousand) for SIEMENS or an AFFILIATE designated by SIEMENS and up to an amount of DM 4.980.00 (Deutsche Mark four million ninety eight thousand) for BREED or an AFFILIATE designated by BREED. The exceeding amount of DM 8.636.000 (Deutsche Mark eight million sixhundred thirty-six thousand) shall be entered in the joint capital reserve of the COMPANY. 3.2.4 The shares in PARS shall be contributed by SIEMENS or an AFFILIATE designated by SIEMENS, to the COMPANY under the condition that any and all risks resulting from product liability or liability for infringement of proprietary rights or any other liabilities for any products produced or developed or services rendered before the CLOSING DATE shall remain with SIEMENS who shall hold the COMPANY harmless from any and all claims of third parties resulting therefrom. The interests in the US-PARTNERSHIP shall be contributed by BREED and an AFFILIATE designated by BREED, to the COMPANY and the VERWALTUNGS-GMBH under the condition that any and all risks resulting from product liability or liability for infringement of proprietary rights or any other liabilities for any products produced or developed or services rendered before the CLOSING DATE shall remain with BREED and the AFFILIATE designated by BREED who shall hold the COMPANY and the VERWALTUNGS-GMBH harmless from any and all claims of third parties resulting therefrom. 3.2.5 The CONTRIBUTION AGREEMENTS shall each contain adequate representations and warranties substantially in the form as stated in ANNEX 3.2.5. 3.3 With the exception of costs and expenses for counsel and auditors to be borne solely by each PARTY, SIEMENS and BREED shall jointly bear all costs and expenses related to the formation of the VERWALTUNGS-GMBH and the COMPANY unless the ARTICLES OF LIMITED PARTNERSHIP or the STATUTES stipulate that the costs and expenses, such as for the notarized application to and the registration in the companies' register ("Handelsregister") as well as the publication costs, shall be borne directly by the VERWALTUNGS-GMBH or the COMPANY. SIEMENS shall solely bear all cost and expenses ,including any and all duties and taxes, related to the contribution of the shares in PARS to the COMPANY as per SUBSECTIONS 3.2.1. and BREED shall solely bear all cost and expenses, including any and all duties and taxes, related to the contribution of the interests in the US-PARTNERSHIP to the COMPANY and the VERWALTUNGS-GMBH as per SUBSECTION 3.2.2. BREED shall solely bear all costs and expenses, including any and all duties and taxes, related to the formation of the US-PARTNERSHIP and the transfer of the assets thereto as per SUBSECTION 3.2.2. 3.4 Third parties shall only be permitted to join the VERWALTUNGS-GMBH and the COMPANY if all PARTIES approve. 3.5 After the implementation of the contribution according to SUBSECTION 3.2.1 and 3.2.2 the corporate names of the SUBSIDIARIES shall be changed as far as legally possible 3.5.1 PARS in "BST Restraint Systems-GmbH 3.5.2 US-PARTNERSHIP in BST Restraint Systems-LP Any other SUBSIDIARY of the COMPANY or the VERWALTUNGS-GMBH shall be named with a similar name as far as legally possible. 4. CHANGE OF CONTROL 4.1 If, after the incorporation of the COMPANY and/or the VERWALTUNGS- GMBH, a CHANGE OF CONTROL occurs in respect of a PARTY, this PARTY shall notify this to the other PARTY without undue delay and shall sell all or part of its CAPITAL INTERESTS in the COMPANY and the VERWALTUNGS-GMBH to the other PARTY if and to the extent so requested by the other PARTY. Such a request shall be made in writing not later than three (3) months after the notification. The price for the CAPITAL INTERESTS shall be agreed upon by the PARTIES and, failing such agreement, shall be determined by an ACCOUNTING FIRM jointly appointed by the PARTIES. The opinion of the ACCOUNTING FIRM as to the price of the CAPITAL INTERESTS shall be based on a generally accepted valuation method being in common use at the time of appointment of the ACCOUNTING FIRM and shall result in a reasonable, arm's-length price on the basis of a willing buyer and a willing seller of the relevant CAPITAL INTERESTS. The cost of the opinion of the ACCOUNTING FIRM shall be paid by the selling PARTY. 4.2 Insofar as the conditions as set out in sentence 1 of SUBSECTION 4.1 already exist and have been disclosed in writing at the time of SIGNATURE, this shall not be deemed to be CHANGE OF CONTROL within the meaning of this provision. 4.3 An AFFILIATE of a PARTY shall be deemed not to be a third party within the meaning of this provision, but only as long as it remains an AFFILIATE. 5. Disposal of CAPITAL INTERESTS 5.1 For a time period of six (6) years commencing at the CLOSING DATE, the transfer of any CAPITAL INTERESTS by a PARTY to a third party or any other disposal or encumbrance thereof shall not be permitted and after such six (6) years time period shall require the prior written consent of the other PARTY, such consent to be given if and when the following conditions are fulfilled: (A) If a PARTY (the "OFFEROR") wishes to transfer its CAPITAL INTERESTS in the COMPANY, it shall first offer such CAPITAL INTERESTS in writing (the "OFFER") to the other PARTY (the "OFFEREE"). (B) If within one (1) months from receipt of the OFFER the OFFEREE indicates in writing that he is not interested in purchasing the CAPITAL INTERESTS or does not reply to the OFFER, the OFFEROR shall have the right to offer its CAPITAL INTERESTS to a third party of whose identity the OFFEROR has immediately informed the OFFEREE. In such a case, the OFFEREE may withhold its approval only for cause which must relate to the potential third party purchaser. Such cause shall be deemed to be constituted without limitation if such third party purchaser is a direct competitor of the OFFEREE. (C) If within one (1) months from receipt of the OFFER the OFFEREE indicates in writing that he is interested in purchasing the CAPITAL INTERESTS, the PARTIES shall seek to agree on a reasonable purchase price on an arm's length basis. (D) If the PARTIES fail to agree on the purchase price within two (2) months from the time the OFFER was received by the OFFEREE, they shall, within a period of one (1) month commencing after the elapse of the aforementioned two-month period, ask an ACCOUNTING FIRM, jointly appointed by the PARTIES, to prepare an opinion on the price to be paid for the CAPITAL INTERESTS. The opinion of the ACCOUNTING FIRM as to the price of the CAPITAL INTERESTS shall be based on a generally accepted valuation method being in common use at the time of appointment of the ACCOUNTING FIRM and shall result in a reasonable, arm's-length price on the basis of a willing buyer and a willing seller of the relevant CAPITAL INTERESTS. The cost of the opinion of the ACCOUNTING FIRM shall be shared by the OFFEROR and the OFFEREE in proportion to their then respective CAPITAL INTERESTS. (E) The OFFEROR shall inform the OFFEREE within one (1) month from receiving the opinion of the ACCOUNTING FIRM on the price whether he is prepared to sell his CAPITAL INTERESTS at the price stated in the opinion. If the OFFEROR refuses to sell his CAPITAL INTERESTS at that price or if he does not inform the OFFEREE within that one (1) month period, he shall not be entitled to sell his CAPITAL INTERESTS to such third party. (F) The OFFEREE shall inform the OFFEROR within one (1) month after the OFFEROR has indicated his willingness to sell whether he is prepared to purchase the CAPITAL INTERESTS at the given price pursuant to SUBSECTION (E) hereof. If the OFFEREE refuses to purchase the CAPITAL INTERESTS at this price or if he does not within the period of one (1) month inform the OFFEROR, the OFFEROR shall have the right to offer his CAPITAL INTERESTS for sale to a third party of whose identity the OFFEROR has immediately informed the OFFEREE. In such a case, the OFFEREE may withhold its approval only for cause which must relate to the potential third party purchaser. Such cause shall be deemed to be constituted without limitation if such third party purchaser is a direct competitor of the OFFEREE. 5.2 Before the transfer of CAPITAL INTERESTS to a third party is executed, the OFFEREE shall have the right to require the offered CAPITAL INTERESTS to be sold to him on the same terms and conditions as offered to the third party. Such right of first refusal shall be exercised in writing within a period of three (3) weeks after the OFFEROR has informed the OFFEREE in writing of the name and the address of the third party and of the terms of the transfer agreement. 5.3 The restrictions on transfer contained in SECTIONS 5.1 and 5.2 hereof shall not apply to a transfer of CAPITAL INTERESTS in the COMPANY to an AFFILIATE or from an AFFILIATE to the respective PARTY. The transfer shall only be made on the condition that the AFFILIATE shall be bound by the terms of this AGREEMENT, the ARTICLES OF LIMITED PARTNERSHIP and the STATUTES and, if so required by the PARTIES, if applicable, will not permit the AFFILIATE to cease to be an AFFILIATE without first procuring the transfer of the CAPITAL INTERESTS in the COMPANY owned by that AFFILIATE either to the other PARTY or to one of its AFFILIATES. 5.4 If so required by the OFFEREE, the OFFEROR, when selling its CAPITAL INTERESTS to a third party, shall undertake that, prior to and as a precondition to such transfer, the third party shall have entered into an agreement with the OFFEROR, whereby the third party shall be bound by the terms of this AGREEMENT, the ARTICLES OF LIMITED PARTNERSHIP and the STATUTES in every way as if the third party were a party to this AGREEMENT and had been such a party from the date when this AGREEMENT came into force. 5.5 Should one of the PARTIES be prevented from accepting the OFFER or from exercising the pre-emptive right according to SUBSECTION 5.1 or 5.2 hereof due to the laws in force in Germany or the US or due to the compliance with any order or regulation of governmental authorities in Germany or the US or of the authorities of the European Union, such PARTY shall then be entitled to assign such rights to a third party to which the respective change in law, order or regulation does not apply. 5.6 Except as otherwise provided in SUBSECTION 5.5 none of the PARTIES shall assign all or part of its rights or obligations under this AGREEMENT to any other company or person without obtaining the prior written consent of the other PARTY. Such consent is however not necessary in connection with a transfer of CAPITAL INTERESTS to an AFFILIATE or from an AFFILIATE to the respective PARTY in accordance with SUBSECTION 5.3 hereof. 5.7 Notwithstanding SUBSECTION 5.1 to 5.6 each PARTY shall inform the other PARTY prior to any execution of transfer of CAPITAL INTERESTS in writing. II. ORGANIZATION OF THE COMPANY 6. Bodies of the COMPANY 6.1 The corporate bodies of the COMPANY are - the PARTNERSHIP MEETING; - the PARTNERS' BOARD. - the MANAGEMENT 6.2 The corporate bodies of the VERWALTUNGS-GMBH are - the SHAREHOLDERS' MEETING; - the MANAGEMENT. 7. PARTNERSHIP MEETING 7.1 The PARTNERSHIP MEETING is the supreme authority of the COMPANY. It shall pass and ratify resolutions with regard to all activities and business actions to which it is entitled. Its resolutions shall be binding upon all other bodies of the COMPANY. 7.2 The PARTNERSHIP MEETING shall resolve upon (A) amendments of the ARTICLES OF LIMITED PARTNERSHIP, including but not limited to, changes of the scope of the COMPANY, the increase or decrease of the partnership capital, the increase or decrease of PARTNERS interests in the COMPANY, the sale of PARTNERS interests to third parties; (B) merger with or demerger from or management contracts with any other company; (C) dissolution of the COMPANY and disposition of the COMPANY'S property in case of its dissolution; (D) sale of all or substantially all of the assets of the COMPANY; (E) determination of the annual financial statements and allocation of the financial result (such as dividends and distributions); (F) designation of the AUDITOR; (G) appointment and dismissal of the MANAGEMENT pursuant to the procedures in SUBSECTION 9.3; (H) all other matters if so required by mandatory law. The resolution as listed in SUBSECTION 7.2 letter A to H require an unanimous vote of the PARTNERS. 7.3 PARTNERS resolutions shall regularly be adopted at PARTNERSHIP MEETINGS. Unless mandatory law requires otherwise, resolutions may, however, also be adopted in writing or by telefax if all PARTNERS concerned agree thereto in writing or by telefax. A PARTNERSHIP MEETING may also be held by video conference if all PARTNERS agree. A PARTNERSHIP MEETING need not to be held if all PARTNERS agree in writing with the resolution to be taken. In such a case, the MANAGEMENT shall immediately after receipt of the written vote inform all PARTNERS about the result thereof. 7.4 Decisions of the PARTNERSHIP MEETING shall be taken by unanimous vote of the liability capital according to SUBSECTION 2.7, unless otherwise required by this AGREEMENT, in accordance with the ARTICELS OF LIMITED PARTNERSHIP or by strictly binding law. Every Deutsche Mark one thousand (DM 1,000.00) of a PARTNERS CAPITAL INTEREST in the COMPANY shall confer one (1) vote. The VERWALTUNGS-GMBH as general partner shall have no right to vote. 7.5 Each of the PARTIES shall at all times exercise its powers and votes in the COMPANY towards procuring that the COMPANY will comply with all obligations under this AGREEMENT, the ARTICLES OF LIMITED PARTNERSHIP and that all key personnel of the COMPANY and any representative of either PARTY will implement the provisions of this AGREEMENT in relation to the COMPANY and any other PARTY. 7.6 A PARTNERSHIP MEETING may be called by the MANAGEMENT or by any PARTNER. The PARTNERSHIP MEETING shall be called by giving four (4) weeks prior notice in writing or by telefax, indicating the agenda, the place and the date of the PARTNERSHIP MEETING. PARTNERSHIP MEETINGS shall generally take place at the head office of the COMPANY if not otherwise agreed upon by all PARTNERS. 7.7 For the purpose of resolutions to be adopted by the PARTNERSHIP MEETING each PARTNER may be represented by written proxy given to a member of its Company authorized to represent the same or to an attorney at law, an auditor or a tax-advisor. 7.8 A quorum shall exist in a PARTNERSHIP MEETING if all PARTNERS are represented therein. If no quorum exists in a PARTNERSHIP MEETING, then a second meeting having the same agenda shall be called within one (1) week and a quorum shall be deemed to exist in such second meeting regardless of the liability capital represented therein; reference to this provision shall be included in the notice for such PARTNERSHIP MEETING. 7.9 The ordinary PARTNERSHIP MEETING shall be held within the first six (6) months of the running FISCAL YEAR. It shall resolve on the approval of the annual financial statement and the employment of the annual profit, the approval of the acts of the MANAGEMENT for the previous FISCAL YEAR and the appointment of the AUDITORS for the running FISCAL YEAR. 7.10 Unless a notarial recording is required, the course of the PARTNERSHIP MEETING shall be recorded in minutes reflecting the place and date of the PARTNERSHIP MEETING, the participants therein, the items of the agenda, the material contents of negotiations and the resolutions adopted by the PARTNERS. The minutes shall be signed by the chairman and by the keeper of the minutes and a copy shall be furnished to each of the PARTNERS and to the general partner. 7.11 Any action challenging the validity of a PARTNERS' resolution shall be excluded unless it is filed within one (1) month after receipt of the minutes pertaining thereto. 7.12 If a DEADLOCK occurs in the PARTNERSHIP MEETING, then each PARTNER has the right to request a new voting on the same item. Such new voting shall occur within one (1) month counting from the date of the last voting. 7.13 If in the second voting pursuant to SUBSECTION 7.12 hereof unanimity cannot be reached the respective upper management of each PARTY, i.e. the chairman of BREED and the chairman of SIEMENS' Automotive Systems Group, shall be asked for a final decision. 7.14 If the upper management of the PARTIES cannot reach an unanimous final decision within forty-five (45) days after the second voting pursuant to SUBSECTION 7.13 hereof the PARTIES shall immediately consult each other as to whether one of them wishes to purchase the entire CAPITAL INTERESTS held by the other PARTY or its AFFILIATE. If none of the PARTIES is willing to purchase then each PARTY shall have the right to demand the dissolution of the COMPANY according to SECTION 18 hereof. If one of the PARTIES is willing to purchase the other PARTY shall be obligated to sell. The purchase price shall be determined in accordance with SUBSECTION 5.1 letter D hereof, provided, however, that the opinion of the ACCOUNTING FIRM shall be final and binding upon both PARTIES. If both PARTIES wish to purchase, then each PARTY shall submit to the respective other PARTY a sealed envelope containing the purchase price at which it is prepared to purchase the CAPITAL INTERESTS of the other PARTY and at which it is prepared to sell its own CAPITAL INTERESTS to the other PARTY. The purchase price offer submitted by sealed envelope constitutes an irrevocable offer to purchase the CAPITAL INTERESTS of the other PARTY at the purchase price stated therein. The PARTY whose purchase price offer is higher shall automatically be entitled to purchase, and the other PARTY shall be obligated to sell the CAPITAL INTERESTS at such higher purchase price. The transactions to sell and purchase according to this SUBSECTION 7.14 shall be completed without undue delay. 7.15 The provisions of this SECTION 7 shall apply mutatis mutandis for the SHAREHOLDERS MEETING of the VERWALTUNGS-GMBH. 8. PARTNERS' BOARD 8.1 A PARTNERS' BOARD shall be formed for the COMPANY, consisting of six (6) members. Three (3) members of the PARTNERS' BOARD shall be appointed by SIEMENS. Three (3) members of the PARTNERS' BOARD shall be appointed by BREED. The members of the PARTNERS' BOARD may represent each other mutually on the basis of written or telexed/telefaxed power of attorney. The PARTNERS' BOARD shall elect from among its members a chairman and a vice chairman, it being understood that the chairman of the PARTNERS' BOARD shall be nominated by the PARTNER not nominating the CEO and that the vice chairman of the PARTNERS' BOARD shall be nominated by the PARTNER nominating the CEO, as provided for herein. 8.2 The task of the PARTNERS' BOARD shall be to establish the principles of business policy and ensuring adherence thereto. The PARTNERS' BOARD shall supervise the MANAGEMENT and shall be entitled to issue directions to the MANAGEMENT. 8.3 The PARTNERS BOARD shall decide on all matters which require approval of the PARTNERS BOARD according to this AGREEMENT, the ARTICELS OF LIMITED PARTNERSHIP or the rules of procedure for the PARTNERS' BOARD. Further details shall be governed by the ARTICELS OF LIMITED PARTNERSHIP and the rules of procedure for the PARTNERS' BOARD to be adopted by the PARTNERSHIP MEETING in accordance with ANNEX 8.3. 8.4 The PARTNERS BOARD shall at least meet four (4) times a year. 8.5 If a DEADLOCK occurs in the PARTNERS' BOARD, the members of the PARTNERS' BOARD shall submit the item for decision to the PARTNERSHIP MEETING. 8.6 A supervisory board shall not be formed for the COMPANY and/or the VERWALTUNGS-GMBH unless required by strictly binding law. 9. MANAGEMENT 9.1 The MANAGEMENT of the COMPANY shall be assumed by the VERWALTUNGS-GMBH. 9.2 The VERWALTUNGS-GMBH shall act through the two (2) members of its own MANAGEMENT, a CEO and a CFO. The VERWALTUNGS-GMBH itself and its MANAGEMENT shall be exempt from the restrictions of Section 181 of the German Civil Code ("Buhrgerliches Gesetzbuch") to the extent that transactions between the COMPANY and the VERWALTUNGS-GMBH are concerned. Any further exemptions shall require a resolution of the shareholders of the VERWALTUNGS-GMBH according to a proposal to be decided upon by the PARTNERS BOARD. 9.3 Each PARTY has the right to nominate one (1) member to the MANAGEMENT of the VERWALTUNGS-GMBH according to the following procedure. 9.3.1 The initial CEO of the VERWALTUNGS-GMBH will be nominated by SIEMENS and is subject to BREEDS approval, such approval not to be unreasonably withheld. The CEO will be given a three-year term. 9.3.2 The initial CFO of the VERWALTUNGS-GMBH will be nominated by BREED and is subject to SIEMENS' approval, such approval not to be unreasonably withheld. The CFO will be given a term which shall end on the same date as the term of the CEO. 9.3.3 If the CEO or the CFO is removed for any reason during his respective term, then the PARTY which nominated such officer shall nominate his replacement, subject to the other PARTY'S approval, such approval not to be unreasonably withheld. Such replacement officer's term shall end on the same date as the term of the officer which he is replacing. 9.3.4 At the end of the initial three-year term, if the PARTNERS' BOARD agrees to renew the term of the CEO, then the CEO shall be given an additional term of three years. In that event, at BREED'S election, the CFO shall either: (i) be given an additional term ending on the same date as the CEO's new term; or (ii) replaced by a new CFO nominated by BREED, subject to SIEMENS' approval, such approval not to be unreasonably withheld: Such replacement CFO to be given a term contract which shall end on the same date as the CEO's new term. 9.3.5 At the end of the initial three year term, if the PARTNERS' BOARD does not agree to renew the CEO's employment, then the replacement CEO of the VERWALTUNGS-GMBH will be nominated by BREED and is subject to SIEMENS' approval, such approval not to be unreasonably withheld. The replacement CEO will be given a three-year term. Likewise, if the CFO's employment will not be renewed, the replacement CFO will be nominated by SIEMENS, subject to BREED'S approval, such approval not to be unreasonably withheld. The replacement CFO will be given a term which shall end on the same date as the term of the replacement CEO. If either of these replacement officers is removed, they shall be replaced in accordance with the procedure described in SUBSECTION 9.3.3. 9.3.6 Thereafter, each time that the PARTNERS' BOARD does not agree to renew the CEO's employment, a new CEO will be nominated by the PARTY which did not nominate such non-renewed CEO and a new CFO will be nominated by the other PARTY. 9.4 The CEO and the CFO shall jointly represent the VERWALTUNGS-GMBH and consistently the COMPANY. As long as there is only one manager on duty he is entitled to represent the VERWALTUNGS-GMBH and consistently the COMPANY alone. 9.5 The MANAGEMENT shall have the broadest powers to manage and supervise the business and the affairs of the COMPANY and to supervise the business and the affairs of its SUBSIDIARIES and, being the head of the executive organization of the COMPANY, shall have full authority to manage and direct its business and affairs with the exception of those matters which are explicitly reserved to the PARTNERSHIP MEETING or to the PARTNERS' BOARD by this AGREEMENT or by the ARTICLES OF LIMITED PARTNERSHIP or by decision of the PARTNERSHIP MEETING or by the STATUTES or by mandatory law. 9.6 The MANAGEMENT shall, in addition to other duties, with respect to the COMPANY and the VERWALTUNGS-GMBH - be responsible for the proper conduct of the business; - be responsible for the efficient organization; - be responsible for all their activities and all the personnel; - keep the PARTNERSHIP MEETING, the PARTNERS' BOARD and the SHAREHOLDERS' MEETING informed about all major business activities; - prepare all business plans and budgets; - prepare the annual report, the balance sheet and the profit and loss statement; 9.7 The following actions of the MANAGEMENT with respect to the COMPANY including its SUBSIDIARIES and/or the VERWALTUNGS-GMBH including its SUBSIDIARIES shall be submitted for consideration to the PARTNERS' BOARD and no action may be taken on such matters without the prior approval of the PARTNERS' BOARD: (A) all business plans and amendments thereto including, but not limited to, the operating, financial and investment budgets and the headcount and sales plans; (B) substantial deviations from the approved business plans; (C) principles concerning general terms of employment and specification thereof, including without limitation the hiring and terms of employment of the management of the SUBSIDIARIES; (D) conclusion, specification or termination of employment contracts if the annual salary exceeds limits of 125.000 $ (onehundred and twenty-five thousand US Dollar) if the salary is defined in US Dollar or 200.000 DM (two hundred thousand Deutsche Mark) if the salary is defined in Deutsche Mark or, in case of a termination, if a compensation including benefits of more than 125.000 $ (onehundred and twenty-five thousand US Dollar ) if defined in US Dollar or 200.000 DM (two hundred thousand Deutsche Mark) if defined in Deutsche Mark shall be granted; (E) capital expenditures and investments (including capitalized leases) not included in the annual business plan and exceeding in individual instance 500.000 $ ( fivehundred thousand US Dollar), except the use of surplus cash for short-time financial investments in highly rated securities for a period not exceeding one year; (F) acquisition and sale of investment in any other enterprises, or merging or consolidating with any other enterprise or entering into or terminating any joint venture or strategic alliance with other enterprises; (G) establishment of new business sites and closing of existing ones, or the purchase, sale or other disposition of real estate; (H) establishment of SUBSIDIARIES beyond PARS and US-PARTNERSHIP; (I) sale or disposal of fixed assets or other material assets other than in the ordinary course of business; (J) issuing of debt securities, borrowing money or otherwise incurring indebtedness other than in the ordinary course of its business, the mortgaging, pledging or encumbering of assets to secure any indebtedness, or the incurring of any other long-term (more than 12 months) obligations; (K) conclusion or termination of agreements regarding intellectual property rights and know-how related to COMPONENTS and SRS-SYSTEMS; (L) conclusion or termination of agency and distribution agreements (M) conclusion of lease agreements with a term exceeding three (3) years or with an aggregate annual payment exceeding an aggregate annual limit of 250.000 $ (twohundred and fifty thousand US Dollar ); (N) establishment or change of any significant accounting principles and practices; (O) startup of new or discontinuation of active product lines; (P) product and marketing strategy, including pricing policy, and marketing the products of any third party; (Q) fundamental change in the scope or character of business of the COMPANY and/or its SUBSIDIARIES or actions outside the scope of the COMPANY previously defined in SUBSECTION 2.4.; (R) substantial changes in the organizational structure of the COMPANY; (S) initiating any legal or arbitral actions or settling any claims, causes of action or rights against any third parties (with the exception of collecting outstanding accounts receivables) or commencing bankruptcy or insolvency proceedings; (T) conclusion or termination of agreements between either of the PARTIES and the COMPANY and/or its SUBSIDIARIES except as otherwise stated in this AGREEMENT; (U) the promise or granting of any employment benefits, pension commitments or special annual payments exceeding the normal salary (including without limitation Christmas bonuses) or any modifications thereof; (V) the granting of commercial power of representation ("Handlungsvollmacht") and commercial power of attorney ("Prokura"); (W) all other matters exceeding the ordinary course of business of the COMPANY or the SUBSIDIARIES. 9.8 Decisions of the MANAGEMENT shall be taken by unanimous vote of its members. In case unanimity cannot be reached, the PARTRNERS' BOARD shall decide. 9.9 Rules of procedure for the members of the MANAGEMENT shall be adopted by the SHAREHOLDERS' MEETING in accordance with ANNEX 9.9. 10. Staff, Non-Solicitation of Employees 10.1. Before hiring new employees for the COMPANY and/or its SUBSIDIARIES, the COMPANY and/or the VERWALTUNGS-GMBH shall examine whether employees with the necessary qualification are available from the PARTIES or their AFFILIATES. 10.2 Neither SIEMENS or BREED shall solicit or hire the employees of either corporation or the COMPANY. However, the PARTIES remain free to run general advertisements for employment. 11. Organizational Structure The COMPANY and its initial SUBSIDIARIES, i.e. PARS and US-PARTNERSHIP, shall have the initial organizational structure as set forth in ANNEX 11 and as amended from time to time by resolution of the PARTNERS' BOARD. III. OPERATION OF THE COMPANY 12. Initial Business Plan, Budget 12.1 The initial business plan as per ANNEX 12.1 shall be submitted by the MANAGEMENT to the PARTNERS' BOARD for approval at its first meeting. 12.2 The COMPANY shall operate pursuant to an operating budget approved by the PARTNERS' BOARD at its inaugural meeting and subject to annual review. 13. Profit and Loss, Financing, Corporate Opportunities 13.1 The PARTNERSHIP MEETING for the COMPANY and the SHAREHOLDERS' MEETING for the VERWALTUNGS-GMBH shall take the resolution on the allocation of the financial results as per SUBSECTION 7.2 letter (E) hereof. 13.2 In case that any profit of the COMPANY and/or the VERWALTUNGS-GMBH is allocated to the PARTIES, this profit shall be distributed among the PARTIES in proportion to the value of their respective CAPITAL INTERESTS. 13.3 The COMPANY and the VERWALTUNGS-GMBH shall meet their financial requirements by their own means or by loans raised locally from banks or other third parties unless the PARTNERS' BOARD otherwise decides upon. The PARTIES are not obliged to make further contributions in addition to their contribution as per SECTION 3 hereof, unless otherwise provided for in this AGREEMENT. 13.4 SIEMENS and BREED shall provide funding to the extent revenues and external funding sources (such as but not limited to loans raised from banks or other third parties) are inadequate to cover budgeted operating expenses and capital expenditures. Neither PARTY can be compelled to provide funding for expenses and capital expenditures above budgeted amounts, except that each PARTY must fund up to 500.000 $ (fivehundred thousand US Dollar), each FISCAL YEAR, if required, to prevent insolvency of the COMPANY for German statutory purposes or to enable the PARTIES to transfer losses of the COMPANY under Sect. 15a of the German Income Tax Code ("Einkommensteuergesetz"), as decided upon by the PARTNERS' BOARD. 13.5 If a research and development opportunity with respect to new SRS-SYSTEMS or COMPONENTS therefor are presented to either PARTY, such PARTY shall present such opportunity to the COMPANY. If the other PARTY refuses to fund it in the COMPANY and/or its SUBSIDIARIES, the presenting PARTY will be permitted to take and exploit the opportunity for its own account. 14. Books and Records, FISCAL YEAR, Financial Statements 14.1 Full and accurate books of account, financial records and annual financial statements shall be made according to German accounting practices showing the condition of the business and finances of the COMPANY and the VERWALTUNGS-GMBH and the ownership of each PARTY and shall be kept at the principal office of the COMPANY and the VERWALTUNGS-GMBH. Each PARTY, or its designated representatives, shall have access to and may inspect and copy any part thereof. In addition, the COMPANY and the VERWALTUNGS-GMBH shall forward monthly financial reports to each PARTY, which reports shall be presented in such format and shall contain such information as the PARTNERS' BOARD shall agree. The financial records and annual financial statements of the SUBSIDIARIES shall be made according to the generally accepted accounting principles at their registered seat. 14.2 The COMPANY and the VERWALTUNGS-GMBH shall also furnish to each PARTY such additional financial information and statements as such PARTY may reasonably request for its internal reporting procedures and for the preparation of its consolidated financial statements for any FISCAL YEAR in which the COMPANY and/or the VERWALTUNGS-GMBH are included in its tax consolidation. The COMPANY and the VERWALTUNGS-GMBH shall provide BREED at August 1. each year with the reconciliation of the net-earning statement of the COMPANY and the VERWALTUNGS-GMBH from German-GAAP to US-GAAP for the period commencing from July 1 to June 30 of the consecutive year. 14.3 The FISCAL YEAR of the COMPANY and of the VERWALTUNGS-GMBH shall run from October 1 to September 30 of the consecutive year. At the end of each FISCAL YEAR, an audit of the COMPANY'S and the VERWALTUNGS-GMBH'S financial statements shall be performed by the AUDITOR. 14.4 The MANAGEMENT shall, within the first three (3) months of each FISCAL YEAR prepare the annual financial statements (balance sheet, profit and loss account including notes and a statement of cash flow) plus an annual FISCAL YEAR report for the previous FISCAL YEAR, for the COMPANY and the VERWALTUNGS-GMBH observing the respective provisions on corporations as per Secs. 264 et seq. of the German Commercial Code ("Handelgesetzbuch"). The annual financial statements record shall, without undue delay, be submitted to the AUDITOR for auditing. The audit shall be performed by observing Secs. 316 et seq. of the German Commercial Code. 14.5 The MANAGEMENT shall submit the audited financial statements together with the audit report immediately after their completion to each of the PARTNERS. The PARTNERSHIP MEETING shall resolve within the first six (6) months of the running FISCAL YEAR on the approval of the annual financial statement and the employment of the annual profit, the approval of the acts of the MANAGEMENT for the previous FISCAL YEAR and the appointment of the auditors for the running FISCAL YEAR, according to SUBSECTION 7.2 letter F hereof. 15. Guidelines for the Operation of the COMPANY 15.1 Concerning the scope of the COMPANY as defined in SUBSECTION 2.4.1 hereof, the PARTIES agree to work exclusively together through the COMPANY and/or the SUBSIDIARIES, insofar as legally possible and insofar as the customers do not wish to place an order with only one of the PARTIES or their AFFILIATES, alone or together with another Party. The PARTIES shall immediately notify each other if any inquiries concerning the scope of the COMPANY become known to them. 15.2 If a customer of the COMPANY or the SUBSIDIARIES request the use of components of third parties, the COMPANY or the SUBSIDIARY shall be permitted to purchase such component from such third parties. Under such circumstances neither PARTY shall be obliged to provide technical support for such components. Any technical information generated by the COMPANY or the SUBSIDIARIES as a result of the use of such third parties components shall be considered SRS-FORGROUND TECHNOLOGY. 15.3 The COMPANY and/or its SUBSIDIARIES will act as a reseller for the PARTIES on a non-exclusive basis in order to market and sell COMPONENTS worldwide. Customers will be invoiced by the COMPANY or the SUBSIDIARIES and SIEMENS and BREED will then invoice the COMPANY or the SUBSIDIARIES. The external and internal pricing, sales and invoicing of COMPONENTS shall be handled according to the principles laid down in ANNEX 15.3. 15.4 Each of the PARTIES agrees that it shall not sell COMPONENTS, either directly or indirectly, to third parties which compete with the COMPANY or the SUBSIDIARIES in the sale of SRS-SYSTEMS and COMPONENTS, unless such PARTY receives the prior written permission of the PARTNERS' BOARD. 15.5 The preferred suppliers of the COMPANY shall be the PARTIES and their AFFILLIATES under supply contracts if and to the extent that price, quality, technology and volume are at least comparable to those obtainable by the PARTIES' competitors on the market. 15.6 The SRS-BACKGROUND TECHNOLOGY of either BREED or SIEMENS in its Automotive Systems Group subdivision safety and chassis systems location Regensburg, Germany shall be licensed on an arms length, non exclusive basis under technology transfer contracts to the other PARTY as well as to the COMPANY and its SUBSIDIARIES as of the CLOSING DATE to be used exclusively for the purposes as described in SUBSECTION 2.4.1. Upon termination of this AGREEMENT all such licenses shall immediately terminate except for the use of the fulfillment of existing contractual commitments, provided, however, that upon termination of this AGREEMENT as per SUBSECTION 17.6 (A), the licenses granted to the PARTY terminating this AGREEMENT and to the COMPANY and its SUBSIDIARIES shall remain in full force and effect. At any time, no assignment or sublicensing of SRS- BACKGROUND TECHNOLOGY shall be permitted without the prior written approval of the PARTY owning such SRS- BACKGROUND TECHNOLOGY. 15.7 Except as otherwise agreed in development contracts between one PARTY and the COMPANY or the SUBSIDIARIES SRS-FOREGROUND-TECHNOLOGY generated by the COMPANY or the SUBSIDIARIES on the basis of development or research agreements with both PARTIES shall be owned jointly by SIEMENS and BREED and those ownership rights shall continue following termination of this AGREEMENT. Either PARTY shall be entitled to assign or sublicense such SRS-FOREGROUND-TECHNOLOGY to third parties with the other PARTY'S consent, which shall not be unreasonably withheld, during the term of this AGREEMENT and without the other PARTY'S consent following termination of this AGREEMENT or dissolution of the COMPANY and the VERWALTUNGS-GMBH. 15.8 SRS-FOREGROUND-TECHNOLOGY generated by either SIEMENS in its Automotive Systems Group subdivision safety and chassis systems location Regensburg, Germany and BREED outside the COMPANY shall remain with the generating PARTY but shall be licensed on an arms length, non exclusive basis under technology transfer contracts to the other PARTY as well as to the COMPANY and its SUBSIDIARIES to be used exclusively for the purposes as described in SUBSECTION 2.4.1. Upon termination of this AGREEMENT all such licenses shall immediately terminate except for the use of the fulfillment of existing contractual commitments, provided, however, that upon termination of this AGREEMENT as per SUBSECTION 17.6 (A), the licenses granted to the PARTY terminating this AGREEMENT and to the COMPANY and its SUBSIDIARIES shall remain in full force and effect. At any time, no assignment or sublicensing of such SRS-FOREGROUND TECHNOLOGY shall be permitted without the prior written approval of the PARTY owning such SRS-FOREROUND TECHNOLOGY. 15.9 The sole obligation of the PARTY, COMPANY and the SUBSIDIARY which is a licensor in accordance with this SECTION 15 under any SRS-BACKGROUND TECHNOLOGY as well as SRS-FOREGROUND TECHNOLOGY shall be to forward same on an "as available basis" to the relevant licensee as provided in the applicable technology transfer agreement, and, to correct errors that might have occurred in the relevant information without undue delay after such errors become known to the relevant licensor. THE WARRANTIES SET FORTH IN THIS SUBSECTION 15.10 APPLY TO ALL SRS- BACKGROUND TECHNOLOGY AND SRS-FOREGROUND TECHNOLOGY LICENSED OR KNOWINGLY DISCLOSED HEREUNDER AND ARE IN LIEU OF ALL WARRANTIES EXPRESS OR IMPLIED INCLUDING WITHOUT LIMITATION THE WARRANTIES THAT SRS-BACKGROUND TECHNOLOGY AND SRS- FOREGROUND TECHNOLOGY CAN BE USED WITHOUT INFRINGING STATUTORY AND OTHER RIGHTS OF THIRD PARTIES. No licensor shall be liable for any indirect or consequential damages of its licensee, including loss of profit or interest, under any legal cause whatsoever and on account of whatsoever reason, except where such liability is mandatory by applicable law. Nothing in this AGREEMENT shall obligate either PARTY, COMPANY or the SUBSIDIARIES to apply for, take out, maintain or acquire any statutory protection, in any country. 15.10 Either PARTY shall be responsible for warranty and liability, including recall actions, arising from its COMPONENTS marketed by the COMPANY or the SUBSIDIARIES to customers, and shall indemnify the COMPANY or the SUBSIDIARIES and the other PARTY and hold them harmless from third parties' claims. The responsibility for all other cases of warranty and liability, including recall actions, which cannot be clearly allocated to a PARTY or to the COMPANY or the SUBSIDIARIES, shall be deemed to be allocated to the COMPANY or the SUBSIDIARIES, which exercises the respective business, unless the PARTNERS' BOARD otherwise decides on a case by case basis. The COMPANY or the SUBSIDIARIES shall cover such risks with sufficient insurances. 15.11 Insofar as necessary for the proper operation of the COMPANY, the VERWALTUNGS-GMBH and their SUBSIDIARIES, SIEMENS and BREED shall provide administrative, financial, legal, consultancy and other services of similar kind to the COMPANY and the VERWALTUNGS-GMBH including their SUBSIDIARIES as requested by the COMPANY or the VERWALTUNGS-GMBH under service contracts on arm's length basis. 16. Contracts The PARTIES shall take the necessary steps to ensure that the contracts as provided for in this AGREEMENT shall be concluded between themselves and/or with the COMPANY or the SUBSIDIARIES as of the CLOSING DATE: - research and development contracts - license agreements - supply contracts - reseller basic -contracts - service contracts IV. TERM OF AGREEMENT, DISSOLUTION 17. Term of AGREEMENT 17.1 Except as otherwise stipulated in SUBSECTION 17.2, this AGREEMENT including its ANNEXES, if not a later date is agreed upon for the ANNEXES, shall not become binding until the EFFECTIVE DATE. 17.2 Notwithstanding SUBSECTION 17.1 SUBSECTION 17.2, 19.2, 19.3, 20, 21, 22 and 23.9 shall become binding upon SIGNATURE. 17.3 Except as provided otherwise in this AGREEMENT, this AGREEMENT shall only terminate upon either PARTY disposing of its entire CAPITAL INTERESTS in the COMPANY and the VERWALTUNGS-GMBH in accordance with the provisions under SECTIONS 4, 5 and SUBSECTION 7.14 of this AGREEMENT or in accordance with the ARTICLES OF LIMITED PARTNERSHIP or the STATUTES. The same shall apply if the COMPANY and the VERWALTUNGS-GMBH are dissolved and liquidated for any reason whatsoever. 17.4 This AGREEMENT may be ordinarily terminated by either PARTY giving six (6) months written notice to the other PARTY prior to the end of a FISCAL YEAR of the COMPANY, but not before the end of the sixth (6) FISCAL YEAR. 17.5 Any notice of termination of this AGREEMENT shall automatically extend to the COMPANY and the VERWALTUNGS-GMBH. The consequence of termination shall be the dissolution of the COMPANY and the VERWALTUNGS-GMBH. SECTION 18 shall apply mutatis mutandis. 17.6 The right to terminate this AGREEMENT extraordinarily without prior written notice for important cause shall remain unaffected thereby. Important cause shall be constituted without limitation if: (A) this AGREEMENT or the ARTICLES OF LIMITED PARTNERSHIP or the STATUTES or any of the related agreements provided for herein and necessary for the proper operation of the COMPANY and its SUBSIDIARIES has been materially breached by the other PARTY and despite prior written notice by the terminating PARTY and an adequate opportunity to cure the breach, the other PARTY has failed to cure the breach; (B) the other PARTY is permanently or for an unforeseeable period of time prevented from fulfilling its obligations under this AGREEMENT or the ARTICLES OF LIMITED PARTNERSHIP or the STATUTES or any of the related agreements provided for herein and necessary for the proper operation of the COMPANY and its SUBSIDIARIES; (C) the other PARTY undergoes bankruptcy, reorganization proceedings or any other insolvency proceedings opened against it by a court or another public authority or has voluntarily filed a respective petition or has involuntarily filed against it a respective petition which is not dismissed within sixty (60) days; (D) the other PARTY has become insolvent or faces a substantial deterioration, actual or imminent, in its assets without an appropriate plan to avoid such deterioration; (E) the other PARTY has an order entered against it either appointing a receiver or trustee for, or issuing a levy attachment against, a substantial portion of its assets, without such order being vacated, set aside or stayed within sixty (60) days; (F) the other PARTY has its CAPITAL INTERESTS in the COMPANY seized by a creditor based on an executory title which is not only provisionally enforceable or makes an assignment for the benefit of its creditors; (G) The other Party is dissolved. 17.7 SECTION 20 and 21 shall survive the termination of this AGREEMENT for whatever reasons. 18. Dissolution 18.1 The COMPANY and the VERWALTUNGS-GMBH shall be dissolved if so decided unanimously by the PARTNERSHIP MEETING and the SHAREHOLDERS' MEETING or according to a respective provision of this AGREEMENT. 18.2 Following any decision about the dissolution of the COMPANY and the VERWALTUNGS-GMBH the PARTIES shall commence an liquidation procedure according to the mandatory law. The liquidation shall be carried out as follows: 18.2.1 The assets of the COMPANY and the VERWALTUNGS-GMBH without the interests in the SUBSIDIARIES held by the COMPANY shall be distributed among the PARTIES taking into consideration the respective scope of business. If the assets, including any intellectual property rights like patents or other know-how developed during the existence of the COMPANY, can be allocated clearly to one of the PARTIES, this PARTY shall have the right to take over these assets. 18.2.2 The interests in the SUBSIDIARIES held by the COMPANY shall be retransfered to the PARTY, which has contributed such interests to the COMPANY or the VERWALTUNGS-GMBH according to SUBSECTION 3.2.1 and 3.2.2. Each PARTY shall bear all costs and expenses, including any and all duties and taxes, related to such retransfer of the shares and interests in the SUBSIDIARIES to the respective PARTY. 18.2.3 It is hereby understood that the allocation and take-over of assets as well as the retransfer of shares by one PARTY shall be compensated to the other PARTY if it results in a shift of value distributed among the PARTIES. The value of the assets and the interest in the SUBSIDIARIES shall be determined by an ACCOUNTING FIRM jointly appointed by the PARTIES. The opinion of the ACCOUNTING FIRM as to the value of the assets and the interests in the SUBSIDIARIES shall be based on a generally accepted valuation method being in common use at the time of appointment of the ACCOUNTING FIRM, however the opinion of the chartered ACCOUNTING FIRM shall be final and binding upon both PARTIES. 18.2.4 It is hereby understood, that all employees which were employed by either PARTY at the CLOSING DATE and transfered to the COMPANY or the SUBSIDIARIES shall, as far as legally possible, return to the respective PARTY. 18.3. The dissolution of the COMPANY and the VERWALTUNGS-GMBH shall be carried out in a manner that is most tax efficient for both PARTIES. 18.4 The dissolution may be averted by a PARTY buying the entire CAPITAL INTERESTS of the other PARTY in the COMPANY and the VERWALTUNGS-GMBH. 18.4.1 The PARTY unwilling to buy the other PARTY'S CAPITAL INTERESTS is obliged to sell its CAPITAL INTEREST, to the other PARTY. The purchase price shall be agreed upon by the PARTIES and, failing such agreement, shall be determined by an ACCOUNTING FIRM jointly appointed by the PARTIES. The opinion of the ACCOUNTING FIRM as to the price of the CAPITAL INTERESTS shall be based on a generally accepted valuation method being in common use at the time of appointment of the ACCOUNTING FIRM and shall result in a reasonable, arm's-length price on the basis of a willing buyer and a willing seller of the relevant CAPITAL INTEREST; however, that the opinion of the chartered ACCOUNTING FIRM shall be final and binding upon both PARTIES. The cost of the opinion of the ACCOUNTING FIRM shall be paid by the PARTY obliged to sell. 18.4.2 If both PARTIES are willing to purchase, SUBSECTION 7.14 sentences 5 to 7 shall apply mutatis mandis. The transaction to sell and purchase according to SUBSECTION 18.5.1 shall be completed without undue delay. 18.4.3 If neither PARTY is willing to buy the entire CAPITAL INTEREST in the COMPANY and in the VERWALTUNGS-GMBH and consent cannot be reached within two (2) months after receipt of the termination notice or after occurrence of any other cause upon which this AGREEMENT ends, the COMPANY and the VERWALTUNGS- GMBH have to be dissolved. V. OTHER PROVISIONS 19. EFFECTIVE DATE, Premerger Control 19.1 The EFFECTIVE DATE shall be the date on which each of the following conditions is fulfilled: 19.1.1 Signature of both PARTIES; 19.1.2 Approval of the Corporate Executive Board ("Zentralvorstand") of SIEMENS and the Board of Directors of BREED; 19.1.3 Obtaining of all the permissions or clearances, which the PARTIES jointly indentify to be relevant to the transaction under premerger control, or of any other competent antitrust authorities; 19.1.4 Expiration of any required premerger notification waiting period; 19.1.5 Submittal of the application for antitrust clearance under Art. 85 EEC Treaty. to the European Commission 19.2 Immediately after SIGNATURE, the PARTIES shall jointly file the relevant antitrust notifications and applications to any competent antitrust authority. The PARTIES shall assist each other with respect to the preparation of such notifications and applications and provide each other with all information requested by the competent antitrust authority. 19.3 Except as otherwise provided for in the Stock Purchase Agreement dated October, 14. 1997 including its annexes and the Make Whole Agreement dated November, 07. 1997 the PARTIES shall have no claims, of whatever kind, against each other in case that the creation of the COMPANY should not be approved in the premerger control procedure(s) or the antitrust clearance under Art. 85 EEC Treaty should not be given. 20. Applicable Law The substantive law applicable to this AGREEMENT and its ANNEXES, unless otherwise agreed upon in an ANNEX, is the law in force in Germany. 21. DISPUTE Settlement 21.1 DISPUTES in technical matters shall be referred to a single expert chosen by the PARTNERS' BOARD. Such expert's opinion shall be binding upon the PARTIES and/or the COMPANY. The expert's costs shall be borne by the COMPANY. 21.2 Any DISPUTE shall at first be settled by an amicable effort on the part of the PARTIES affected. An attempt to arrive at a settlement shall be deemed to have failed as soon as one of the PARTIES so notifies the other PARTY in writing. 21.3 If an attempt at settlement has failed, the DISPUTE shall be finally and binding settled under the commercial arbitration rules of the United Nations Commission on International Trade Law (the "Rules"). Each PARTY shall appoint an arbitrator, and then the two PARTY-appointed arbitrators shall appoint a third arbitrator, or failing agreement on such choice, such third arbitrator shall be appointed by the President of the International Chamber of Commerce in Paris. The third arbitrator shall have the qualifications to hold a judgeship. 21.4 The seat of arbitration shall be The Hague, The Netherlands. The procedural law of this place shall apply where the Rules are silent. 21.5 The language to be used in the arbitration proceedings shall be English. 21.6 The arbitral award shall be substantiated in writing. The arbitral tribunal shall decide on the matter of costs of the arbitration and on the allocation of expenditure among the respective PARTIES to the arbitration proceedings. The PARTY in whose favor a final arbitral award is rendered shall be entitled to be reimbursed its reasonable costs and reasonable attorneys fees by the other PARTY. 22. Confidentiality 22.1 Either PARTY shall use all business and technical information received from the other PARTY or the COMPANY and/or the VERWALTUNGS-GMBH in connection with this AGREEMENT and its performance and which the other PARTY expressly states to be confidential, or the confidential nature of which can be assumed on the basis of the circumstances of its disclosure, solely for the purposes for which it was provided, and shall treat it in the same way as its own business secrets and not make it available to any third party, unless the business or technical information in question: (A) is generally available from public sources or in the public domain; or (B) is received at any time from any third party without nondisclosure obligation to the disclosing PARTY; or (C) is shown to have been developed independently by the receiving PARTY without reliance on the disclosing PARTY'S confidential information or to have been known to the receiving PARTY prior to its disclosure by the disclosing PARTY; or (D) must be disclosed to a third party for the purpose of performing this AGREEMENT, if the third party is or becomes subject to an equivalent confidentiality obligation. 22.2 Through this SECTION 22 neither PARTY shall be prevented from making available its technology others than SRS-BACKGROUND TECHNOLOGY or SRS-FOREGROUND TECHNOLOGY developed independently by one PARTY to third parties if this technology is derived in part from the cooperation under this AGREEMENT, but is inseparably connected with that PARTY'S own know-how. 22.3 The obligations imposed by this SECTION 22 shall continue for a period of five (5) years after termination of this AGREEMENT. 22.4 The PARTIES shall cause the COMPANY AND THE SUBSIDIARIES to be bound by the same confidentiality obligations as imposed by this SECTION 22 with respect to the business and technical information which the COMPANY or the SUBSIDARIES will receive from either PARTY. 22.5 The conclusion of this AGREEMENT, as well as its content, is to be treated confidential by the PARTIES according to SUBSECTION 22.1. Any reference to business links between the PARTIES to the AGREEMENT must not be made in advertising literature until written approval has been received from the other PARTY which shall not be unreasonably withheld. 23. Miscellaneous 23.1 This AGREEMENT shall not be modified except by a written instrument executed by duly authorized representatives of the PARTIES hereto. 23.2 The governing language between the PARTIES shall be English. All reports, statements, balance sheets and the like to be prepared and issued under operation of the COMPANY as well as any auditing shall, in addition to requirements under the German law, also be done in the English language, if reasonably requested by a PARTY. The same applies for any kind of communication in and between the corporate bodies of the COMPANY and/or the VERWALTUNGS-GMBH and between the COMPANY and/or the VERWALTUNGS-GMBH and the PARTIES, unless otherwise decided by the PARTNERS' BOARD. 23.3 In the event that any provision herein shall be held to be invalid or unenforceable, the remaining provisions herein shall not be affected thereby. Should an individual provision of this AGREEMENT be or become ineffective or unenforceable for reasons beyond the PARTIES' control the PARTIES shall attempt to arrive amicably at a new provision on a favorable economic effect corresponding to the ineffective or unenforceable provision it is replacing. 23.4 Each PARTY hereto may request additional audits performed by an auditor of its choice who must be certified in Germany. The cost of the additional audit shall be borne by the PARTY requesting the audit. 23.5 The PARTIES hereto shall ensure that their representatives or nominees within the COMPANY and the VERWALTUNGS-GMBH, in executing their respective functions, will comply with the provisions of this AGREEMENT, the ARTICLES OF LIMITED PARTNERSHIP and the STATUTES as well as with any other agreements concluded or to be concluded between the PARTIES with respect to the COMPANY and/or the VERWALTUNGS-GMBH or any of their activities. 23.6 The following ANNEXES form an integral part of this AGREEMENT: ANNEX 1: COMPONENTS/SRS-SYSTEM ANNEX 2.1A: ARTICLES OF LIMITED PARTNERSHIP of the COMPANY ANNEX 2.1B: STATUTES of the VERWALTUNGS-GMBH ANNEX 3.2.2:Assets to be contributed by BREED to US-PARTNERSHIP ANNEX 3.2.5:Representations and Warranties of the CONTRIBUTION AGREEMENTS ANNEX 8.3: Rules of Procedure for the PARTNERS' BOARD ANNEX 9.9: Rules of Procedure for the MANAGEMENT ANNEX 11: Initial Organizational Structure of the COMPANY and its SUBSIDIARIES ANNEX 12.1: Business Plan ANNEX 15.3: Principles for pricing, sales and invoicing of components of SRS- SYSTEMS In the event of any ambiguity or conflict arising between the provisions of this AGREEMENT and those of the ANNEXES this AGREEMENT shall prevail. 23.7 In the event of any conflict between the provisions of this AGREEMENT and ARTICLES OF LIMITED PARTNERSHIP and the STATUTES or other corporate documents of the COMPANY and/or the VERWALTUNGS- GMBH, the provisions of this AGREEMENT shall prevail and the PARTIES shall exercise all voting and other rights and powers available to them so as to give effect to the provisions of this AGREEMENT and shall further procure any required amendment to the ARTICLES OF LIMITED PARTNERSHIP and/or the STATUTES and/or other constitutional documents of the COMPANY and/or the VERWALTUNGS-GMBH, as may be necessary. 23.8 This AGREEMENT, including its ANNEXES, entirely replaces and supersedes between the PARTIES the Non-Binding Memorandum of Understanding dated July, 22. 1997 entered into by the PARTIES and the Memorandum of Understanding including the Joint Venture Term Sheet dated October, 14. 1997 entered into by the PARTIES. 23.9 Either PARTY shall bear its own expenses, including those of counsel and auditors, in connection with this AGREEMENT and the COMPANY contemplated herein, unless otherwise provided for in this AGREEMENT or the ARTICLES OF LIMITED PARTNERSHIP or the STATUTES. The administrative fees for the pre-merger control procedure(s) as per SUBSECTION 19.1.3 as well as any expenses for outside counsels related to such premerge controll procedures and the filing procedure for the clearance under Art. 85 EEC Treaty shall be shared equally by the PARTIES. 24. Notices All communications and notices to be given under this AGREEMENT shall be delivered: if addressed to SIEMENS to: Siemens Aktiengesellschaft Rechtsabteilung Werner-von-Siemens-Str. 50 D-91050 Erlangen, Germany Telephone: ++49-9131-7-43592 Telefax: ++49-9131-7-29001 and if addressed to BREED to: Breed Technologies, Inc. Legal Department 5300 Old Tampa Highway Lakeland Florida 33807-3050, USA Telephone: ++1-941-688-6473 Telefax: ++1-941-688-6016 or any other address and/or telephone or telefax number designated in writing. IN WITNESS WHEREOF, the PARTIES have duly executed this AGREEMENT in Regensburg, Germany on [.....] [.......................]. Siemens Aktiengesellschaft Breed Technologies, Inc. - --------------------------- --------------------------- Name: Name: Title: Title: - ---------------------------- ---------------------------- Name: Name: Title: Title: EX-27 9 FDS -- WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 ART. 5 FDS FOR 2ND QUARTER 10-Q 0000891531 Marta Jones 1,000 1 6-MOS JUN-30-1998 SEP-1-1997 DEC-31-1997 1 32,300 0 287,100 0 121,300 502,600 503,400 156,000 1,665,400 1,322,300 0 0 115,000 300 (83,900) 1,665,400 535,900 535,900 479,700 479,700 392,600 0 35,400 (371,900 (49,900) (323,400) 0 (700) 0 (324,100) (10.22) (10.22)
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