LEAR SEATING CORP
10-Q, 1995-05-16
PUBLIC BLDG & RELATED FURNITURE
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<PAGE>   1
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

(Mark One)
 /X/            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

 For the quarterly period ended APRIL 1, 1995

                                       OR

 / /            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from                   to 
                                -----------------    -----------------

 COMMISSION FILE NUMBER:  1-11311

                            LEAR SEATING CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                 13-3386776 
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)            

    21557 TELEGRAPH ROAD, SOUTHFIELD, MI                 48034
 (Address of principal executive offices)              (zip code)

                                 (810) 746-1500
              (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 the
filing requirements for the past 90 days.      Yes  X   No 
                                                   ---     ---

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

Approximate number of shares of Common Stock, $0.01 par value per share,
outstanding at April 29, 1995:   46,090,123 





<PAGE>   2


                            LEAR SEATING CORPORATION

                                   FORM 10-Q

                      FOR THE QUARTER ENDED APRIL 1, 1995

                                     INDEX



  Part I - Financial Information:                                       Page No.

    Item 1 - Consolidated Financial Statements
 
          Introduction to the Consolidated Financial Statements             3 

          Consolidated Balance Sheets - April 1, 1995 and
             December 31, 1994                                              4

          Consolidated Statements of Income - Three Month Periods
             ended April 1, 1995 and April 2, 1994                          5

          Consolidated Statements of Cash Flows - Three Month
             Periods ended April 1, 1995 and April 2, 1994                  6

          Notes to Consolidated Financial Statements                        7

   Item 2 - Management's Discussion and Analysis of
              Financial Condition and Results of Operations                 10

  Part II - Other Information:

   Item 6 - Exhibits and Reports on Form 8-K                                13 
  
  Signatures                                                                14

  Exhibit Index                                                             15





                                       2
<PAGE>   3

                            LEAR SEATING CORPORATION

PART I - FINANCIAL INFORMATION

ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS

INTRODUCTION TO THE CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements of Lear Seating Corporation and
subsidiaries (Note 1) have been prepared by Lear Seating Corporation ("the
Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations.  The Company believes that the
disclosures are adequate to make the information presented not misleading when
read in conjunction with the financial statements and the notes thereto
included in the Company's Form 10-K as filed with the Securities and Exchange
Commission for the period ended December 31, 1994.

The financial information presented reflects all adjustments (consisting only
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of the results of operations and statements of
financial position for the interim periods presented.  These results are not
necessarily indicative of a full year's results of operations.





                                       3
<PAGE>   4

                   LEAR SEATING CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                        (IN MILLIONS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                April 1,     December 31,
                                                                                 1995            1994
                                                                                 ----            ----
                                                                              (Unaudited)
  <S>                                                                        <C>             <C>
  ASSETS
  ------

  CURRENT ASSETS:
   Cash and cash equivalents                                                  $    16.2       $    32.0
   Accounts receivable                                                            675.2           579.8
   Inventories                                                                    114.8           126.6
   Unbilled customer tooling                                                       56.4            53.5
   Other                                                                           41.7            26.4 
                                                                                -------         -------
                                                                                  904.3           818.3
                                                                                -------         -------
  PROPERTY, PLANT AND EQUIPMENT:
   Land                                                                            37.0            36.6
   Buildings and improvements                                                     151.6           141.1
   Machinery and equipment                                                        332.1           326.8
                                                                                -------         -------
                                                                                  520.7           504.5
            Less-Accumulated depreciation                                        (162.7)         (150.3)
                                                                                -------         -------
                                                                                  358.0           354.2
                                                                                -------         -------
  OTHER ASSETS:
   Goodwill, net                                                                  496.0           499.5
   Deferred financing fees and other                                               39.6            43.1
                                                                                -------         -------
                                                                                  535.6           542.6
                                                                                -------         -------
                                                                              $ 1,797.9       $ 1,715.1
                                                                                =======         =======
  LIABILITIES AND STOCKHOLDER'S EQUITY
  ------------------------------------

  CURRENT LIABILITIES:
    Short-term borrowings                                                     $    23.8       $    84.1
    Cash overdrafts                                                                25.7            27.6
    Accounts payable                                                              686.8           656.7
    Accrued liabilities                                                           218.9           210.9
    Current portion of long-term debt                                               1.6             1.9
                                                                                -------         -------
                                                                                  956.8           981.2
                                                                                -------         -------
  LONG-TERM LIABILITIES:
    Deferred national income taxes                                                 25.4            25.3
    Long-term debt                                                                519.9           418.7
    Other                                                                          78.7            76.3
                                                                                -------         -------
                                                                                  624.0           520.3
                                                                                -------         -------
  COMMITMENTS AND CONTINGENCIES

  STOCKHOLDERS' EQUITY:
    Common stock, $.01 par value, 150,000,000 authorized at April 1,
      1995 and December 31, 1994; 46,089,103 issued at April 1, 1995 
      and 46,088,278 issued at December 31, 1994                                     .5              .5
  Additional paid-in capital                                                      274.3           274.3
  Notes receivable from sale of common stock                                       (1.0)           (1.0)
  Less- Common stock held in treasury, 10,230 shares at
    April 1, 1995 and December 31, 1994, at cost                                    (.1)            (.1)
  Retained deficit                                                                (32.4)          (49.4)
  Minimum pension liability adjustment                                             (5.8)           (5.8)
  Cumulative translation adjustment                                               (18.4)           (4.9)
                                                                                -------         -------
                                                                                  217.1           213.6
                                                                                -------         -------
                                                                              $ 1,797.9       $ 1,715.1
                                                                                =======         =======
</TABLE>


       The accompanying notes are an integral part of this balance sheet.





                                       4
<PAGE>   5


                   LEAR SEATING CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                      (IN MILLIONS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                    ------------------
                                                                April 1,         April 2,
                                                                  1995             1994
                                                                  ----             ----
                                                                (Unaudited)
 <S>                                                            <C>              <C>
 Net sales                                                      $  1,043.5       $    686.7

 Cost of sales                                                       966.9            636.7

 Selling, general and  administrative expenses                        25.8             16.9

 Amortization of goodwill                                              3.1              2.8     
                                                                  --------         --------      
    Operating income                                                  47.7             30.3

 Interest expense                                                     14.2             13.9

 Other expense, net                                                    2.1              2.6     
                                                                  --------         --------      
 Income before provision for
    national income taxes                                             31.4             13.8

 Provision for national income taxes                                  14.4              7.3     
                                                                  --------         --------      
    Net income                                                  $     17.0       $      6.5
                                                                  ========         ========

    Net income  per common share                                $      .34       $      .16
                                                                  ========         ========
</TABLE>





        The accompanying notes are an integral part of these statements.





                                       5
<PAGE>   6

                   LEAR SEATING CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                        Three Months      Three Months
                                                                                            Ended             Ended
                                                                                        April 1, 1995     April 2, 1994
                                                                                        -------------     -------------
    <S>                                                                                  <C>                <C>
    CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                                          $   17.0            $    6.5
     Adjustments to reconcile net income to net cash provided by operating
      activities:      
      Depreciation and amortization of goodwill                                              18.4                13.1
      Amortization of deferred financing fees                                                  .6                  .5
      Deferred national income taxes                                                           .1                 (.9)
      Other, net                                                                              5.8                 2.0
      Change in working capital items                                                       (77.2)              (59.5)    
                                                                                          -------             -------
              Net cash used by operating activities                                         (35.3)              (38.3)    
                                                                                          -------             -------


    CASH FLOWS FROM INVESTING ACTIVITIES:
     Additions to property, plant and equipment                                             (23.6)              (15.4)
     Other, net                                                                                .1                 3.6       
                                                                                          -------             -------
              Net cash used by investing activities                                         (23.5)              (11.8)    
                                                                                          -------             -------
    CASH FLOWS FROM FINANCING ACTIVITIES:
     Change in long-term debt, net                                                          101.2                 6.6
     Short-term borrowings, net                                                             (57.0)               (1.4)
     Increase (decrease) in cash overdrafts                                                  (2.0)               25.0
     Other, net                                                                              --                    .1        
                                                                                          -------             -------
              Net cash provided by financing activities                                      42.2                30.3      
                                                                                          -------             -------
    Effect of foreign currency translation                                                     .8                 (.8)      
                                                                                          -------             -------
    NET CHANGE IN CASH AND CASH EQUIVALENTS                                                 (15.8)              (20.6)    
                                                                                          -------             -------
    CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                         32.0                55.0      
                                                                                          -------             -------
    CASH AND CASH EQUIVALENTS AT END OF PERIOD                                           $   16.2            $   34.4
                                                                                          =======             =======
    CHANGES IN WORKING CAPITAL
      Accounts receivable                                                                $ (111.7)           $  (57.3)
      Inventories                                                                             5.0                 4.1
      Accounts payable                                                                       40.2                  .3
      Accrued liabilities and other                                                         (10.7)               (6.6)     
                                                                                          -------             -------
                                                                                         $  (77.2)           $  (59.5)
                                                                                          =======             =======
    SUPPLEMENTARY DISCLOSURE:
     Cash paid for interest                                                              $   19.1            $   11.8
                                                                                          =======             =======
     Cash paid for income taxes                                                          $   19.0            $    6.5
                                                                                          =======             =======
</TABLE>





        The accompanying notes are an integral part of these statements.





                                       6
<PAGE>   7

                  LEAR SEATING CORPORATION AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of Lear Seating
Corporation, a Delaware corporation ("the Company"), and its wholly-owned and
majority-owned subsidiaries.  Investments in less than majority-owned
businesses are generally accounted for under the equity method.

     A 33-for-1 split of the Company's common stock was effective as of the
Company's initial public offering in April, 1994.  All references to the
numbers of shares of common stock, stock options, warrants and income (loss)
per share in the accompanying consolidated financial statements and notes
thereto have been adjusted to give effect to the split.

(2) ACQUISITION OF FIAT SEAT BUSINESS

     On December 15, 1994, the Company purchased from Gilardini S.p.A., an
Italian Corporation, all of the outstanding common stock of Sepi S.p.A., an
Italian Corporation, all of the outstanding common stock of Sepi Poland 
S.p. Z.o.o. and a 35% interest in a Turkish joint venture (collectively, the
"Fiat Seat Business," or "FSB"). The FSB is engaged in the design and
manufacture of automotive seating, with its principal customers being Fiat
S.p.A. and its affiliates ("Fiat"). In connection with this transaction, the
Company and Fiat entered into a long-term supply agreement for certain products
produced by the FSB.

     This acquisition was accounted for as a purchase, and accordingly, the
operating results of the FSB have been included in the accompanying financial
statements since the date of the acquisition.  Because the Company consolidates
the FSB on a one month lag, the results of operations for the quarter ended
April 1, 1995 includes only the results of operations of the FSB from the
acquisition date to the end of February 1995.

         Assuming the acquisition had taken place as of the beginning of the
fiscal quarter ending April 2, 1994, the consolidated pro forma results of
operations of the Company for the first quarter of 1994 would have been as
follows, after giving effect to certain adjustments, including certain
operations adjustments consisting principally of management's estimates of the
effects of product pricing adjustments negotiated in connection with the
acquisition, increased interest expense, depreciation adjustments of certain
costs assumed by the seller and the related income tax effects (Unaudited: in
millions, except per share data):


<TABLE>
             <S>                                      <C>
               Net sales                                $793.2
               Net income                                  1.1
               Net income per share                    $  0.03

</TABLE>





                                       7
<PAGE>   8

                  LEAR SEATING CORPORATION AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(3)  INVENTORIES

         Inventories are stated at the lower of cost or market.  Cost is
determined principally using the first-in, first out method.  Finished goods
and work-in-process inventories include material, labor and manufacturing
overhead costs.

         Inventories are comprised of the following (in millions):

<TABLE>
<CAPTION>
                                                   April 1,      December 31,
                                                    1995             1994
                                                    ----             ----
          <S>                                    <C>              <C>
          Raw materials                          $  84.6          $   93.4
          Work-in-process                           11.8              13.9
          Finished goods                            18.4              19.3
                                                   -----             -----
                                                 $ 114.8           $ 126.6
                                                   =====             =====
</TABLE>                          


(4)  LONG-TERM DEBT

         Long term debt is comprised of the following (in millions):

<TABLE>
<CAPTION>
                                                   April 1,       December 31,
                                                    1995              1994
                                                    ----              ----
          <S>                                    <C>               <C>
          Domestic revolving credit loan         $ 219.9           $ 121.9
          German term loan                           7.2               7.1
          Industrial Revenue Bonds                  19.0              19.0
          Loans from Governmental Agencies           5.4               2.6
                                                   -----             -----
                                                   251.5             150.6
          Less- Current portion                     (1.6)             (1.9)
                                                   -----             -----
                                                   249.9             148.7
                                                   -----             -----

          Subordinated Debt:
            8 1/4 % Subordinated Notes             145.0             145.0
            11 1/4 % Senior Subordinated Notes     125.0             125.0
                                                   -----             -----
                                                   270.0             270.0
                                                   -----             -----
                                                 $ 519.9           $ 418.7
                                                   =====             =====
</TABLE>





                                       8
<PAGE>   9

                  LEAR SEATING CORPORATION AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(5) POST-RETIREMENT BENEFITS FOR FOREIGN PLANS

     On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Post-Retirement Benefits" for its
foreign plans. The Company adopted this statement for its domestic plans in
July, 1993.  This standard requires that the expected cost of post-retirement
benefits be charged to expense during the years in which the employees render
service to the Company.  The adoption of this statement for the Company's
foreign plans did not have a material effect on the Company's financial
position or results of operations.

(6) COMMON SHARES OUTSTANDING

     The weighted average number of shares of common stock after giving effect
to the split of the Company's common stock (Note 1) is as follows for the
periods presented:


<TABLE>
<CAPTION>
                                       Three Months Ended
                                       ------------------

                              April 1, 1995        April 2, 1994
                              -------------        -------------
          <S>                  <C>                  <C>
          Primary              49,422,847           41,963,565
          Fully Diluted        49,422,847           42,014,029
</TABLE>





                                       9
<PAGE>   10

ITEM 2 - MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL          
         CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

THREE MONTHS ENDED APRIL 1, 1995 VS. THREE MONTHS ENDED APRIL 2, 1994.

     Net sales of $1,043.5 million in the quarter ended April 1, 1995 surpassed
the first quarter of calendar 1994 by $356.8 million or 52.0%.  Sales in the
first quarter of the current fiscal year benefited from incremental volume on
mature seating programs in North America and Europe, increased seat content per
vehicle, new business in the United States and Europe and the acquisition of
the Fiat Seat Business in December 1994.

     Net sales in the United States of $499.4 million increased in the first
quarter of calendar 1995 as compared to the first quarter of the prior year by
$31.0 million or 6.6%.  Sales in the current quarter reflect the benefit of
new General Motors passenger car and Ford truck programs as well as modest
vehicle production increases by domestic automotive manufacturers on carryover
seat programs.  Partially offsetting the increases in sales was the relocation
of a passenger car program to Canada.

     Net sales in Canada increased by $148.5 million to $215.0 million in the
quarter ended April 1, 1995 compared to $66.5 million in the quarter ended
April 2, 1994.  Sales in 1995 benefited from the attainment of targeted levels
for a General Motors replacement passenger car program as compared to downtime
in the prior year.  Further contributing to the increase in sales was the
relocation of a passenger car program, incremental volume on a new Ford truck
program and improved production activity on mature seating programs.

     Net sales in Europe of $276.5 million in the current fiscal quarter
surpassed the first quarter of calendar 1994 by $173.2 million or 167.7%.
Sales in the quarter ended April 1, 1995 benefited from the contribution of
$82.9 million in sales from the FSB acquisition, as well as new business in
England, additional volumes on existing programs in Germany and Sweden.  In
addition, favorable exchange rate fluctuations accounted for $19.3 million of
the increase.

     Net sales in Mexico of $52.6 million in the quarter ended April 1, 1995
exceeded sales during the comparable period in the prior year by $4.1 million
or 8.4% largely as a result of increased production requirements on carryover
Ford passenger car and Chrysler truck programs which offset reduced sales to
Volkswagen.

     Gross profit (net sales less cost of sales) and gross margin (gross profit
as a percentage of sales) were $76.6 million and 7.3%, respectively, for the
quarter ended April 1, 1995 as compared to $50.0 million and 7.3%,
respectively, in the first quarter of 1994. Gross profit in the first quarter
of 1995 benefited from increased volumes on mature North American seating       
programs, along with improved performance at the Company's Scandinavian
operations, and cost reduction programs. These benefits were partially offset
by delayed new program start-up expenses, increased engineering expenses, and
pre-production and facility costs associated with new ventures in the Pacific
Rim.





                                       10
<PAGE>   11


     Selling, general and administrative expenses as a percentage of net sales
for the current quarter remained the same as the prior year at 2.5%.  Actual
selling, general and administrative expenses increased by $8.9 million largely
as a result of the acquisition of FSB, engineering and support expenses
associated with the expansion of business and expenses related to the pursuit
of new business opportunities.

     Operating income and operating margin (operating income as a percentage of
net sales) were $47.7 million or 4.6%, respectively, for the first quarter of
1995 as compared to $30.3 million or 4.4%, respectively, for the first quarter
of 1994.  For the quarter ended April 1, 1995 as compared to the prior year,
the increase in operating income was largely attributable to the increase in
sales volumes on North American and Scandinavian mature seating programs,
partially offset by higher engineering and administrative support expenses and
operating losses associated  with the integration of FSB into the Company's
operations.  Non-cash depreciation and amortization charges were $18.4 million
during the quarter ended April 1, 1995 compared to $13.1 million in the
comparable period in the prior year.

     During the first quarter of 1995, interest expense increased slightly in
comparison to the prior year.  This was the result of additional interest
incurred on debt used to finance the FSB acquisition.

     Other expense, including state and local taxes, foreign exchange gains and
losses, minority interests and equity in income of affiliates, decreased
slightly in comparison to the prior year.  This was primarily due to increased
income derived from joint ventures accounted for under the equity method.

     Net income for the first quarter of 1995 was $17.0 million, or $.34 per
share, as compared to net income of $6.5 million, or $.16 per share, in the
prior year first quarter.  The provision for income taxes in the current
quarter was $14.4 million translating into an effective tax rate of 45.9%,
below the 52.9% rate for the first quarter of last year.  Earnings per share
increased by 113% as compared to the prior year quarter, despite the fact that
the number of shares outstanding increased from 42 million shares to 49.4
million shares.  The increase in shares outstanding is primarily the result of
the initial public offering in April, 1994.

LIQUIDITY AND CAPITAL RESOURCES

     As of April 1, 1995, the Company had a $500.0 million revolving credit
facility (the "Credit Agreement") under which $219.9 million was borrowed and
outstanding and $61.7 million was committed and outstanding under letters of
credit, leaving $218.4 million unused and available.  The Company also had
$19.0 million of Industrial Revenue Bonds (IRBs) outstanding,  payable in 2024,
as well a term loan in Germany of $7.2 million, and governmental agency loans
in  Canada and Italy of approximately $3.2 and $2.2 million, respectively.  As
of April 1, 1995, the Company had net cash and cash equivalents of $16.2
million.

     Amounts available under the Credit Agreement will be reduced by $58.8
million every six months beginning November 30, 1997, and the Credit Agreement
will expire on November 30, 1999.  Excluding amounts outstanding under the
Credit Agreement which will be due upon the expiration of the Credit Agreement,
the Company's scheduled principal payments for the





                                       11
<PAGE>   12

remainder of calendar year 1995 are $1.3 million and are $1.9 million for each
of the next three calendar years and $1.3 million in 1999.

         On April 19, 1995, Lear Seating Canada, Ltd. entered into a revolving
term credit facility with The Bank of Nova Scotia, making available for the
Company's Canadian operations funds of up to $25 million Canadian.  This
agreement replaced the Canadian Credit Agreement dated March 8, 1989.

     Net cash flows used by operating activities were $35.3 million during the
quarter ended April 1, 1995 compared to $38.3 million during the comparable
period in 1994, principally due to higher earnings in 1995 which was partially
offset by the change in working capital.

     The net change in working capital increased  from a $59.5 million net use
of funds for the quarter ended April 2, 1994 to a $77.2 million use of funds
for the quarter ended April 1, 1995 primarily as a result of  the increase in
receivable levels caused by the 52% increase in net sales and the lower level
of European receivable factoring. The cash provided from the increase in
accounts payable and cash overdrafts combined was $38.2 million compared to
$25.3 million for the same period in 1994 and  is consistent with the increased
sales levels.  Also contributing to the decrease in operating cash flows were
higher reimbursable preproduction development and production tooling costs
attributable to new programs.

     In the quarter ended April 1, 1995, net cash used by investing activities
increased by $11.7 million to $23.5 million due to a significant number of new
programs scheduled to begin production during calendar 1995.  During the first
quarter of 1995, the Company's capital expenditures totaled $23.6 million and
the Company currently anticipates an additional $80 million during the
remainder of fiscal 1995.  Potential new business in South America and South
Africa would  further increase capital expenditures.

     The Company believes that cash flows from operations and available credit
facilities will be sufficient to meet its debt service obligations, projected
capital expenditures and working capital requirements.





                                       12
<PAGE>   13

                            LEAR SEATING CORPORATION

PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

     No exhibits or reports on Form 8-K were filed during the quarter ended
April 1, 1995.





                                       13
<PAGE>   14

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.




LEAR SEATING CORPORATION


Dated: May 15, 1995     By: /s/  James H. Vandenberghe
                            --------------------------
                            James H. Vandenberghe
                            Executive Vice President
                            Chief Financial Officer





                                       14
<PAGE>   15

                            LEAR SEATING CORPORATION
                                   FORM 10-Q
                                 EXHIBIT INDEX
                      FOR THE QUARTER ENDED APRIL 1, 1995


 EXHIBIT
 NUMBER
 10.1        Credit Agreement dated April 19, 1995 between Lear Seating Canada,
             Ltd. and The Bank of Nova Scotia with respect to the establishment
             of credit facilities, filed herewith.

 27.         Financial Data Schedule for the Quarter Ended April 1, 1995.






<PAGE>   1
                                                                    EXHIBIT 10.1




[SCOTIABANK LETTERHEAD]

                                                                  April 19, 1995

Lear Seating Canada Ltd.
536 Manitou Drive
Kitchener, Ontario
N2G 4C2

Attention: Mr. Donald J. Stebbins

Dear Sirs:

        RE:  ESTABLISHMENT OF REVOLVING TERM CREDIT FACILITY
             IN FAVOUR OF LEAR SEATING CANADA LTD.          

          The Bank of Nova Scotia (the "Bank") is pleased to advise that,
subject to your acceptance, the Bank will make available to Lear Seating
Canada Ltd. (the "Borrower") the revolving term credit facility described in
this Agreement upon the following terms and conditions, and that this Agreement
shall replace the existing loan agreement dated March 8,1989, as amended to
date, between the parties, together with the grid promissory note therefor,
which loan agreement and grid promissory note shall terminate and cease to be of
effect (whereupon the Borrower shall be released from its obligation to provide
a letter of credit in favour of the Bank as collateral security therefor), with
outstanding availments thereunder constituting outstanding applicable
Availments (as defined below) under this Agreement:

CREDIT                       Revolving Term Credit.
FACILITY
                             $25,000,000 Cdn.,  under which are available
                                                Canadian and U.S.dollar
                                                advances and
                                                bankers' acceptances of Canadian
                                                dollar bills of exchange (each
                                                a"BA"), together with standby
                                                and commercial letters of credit
                                                and letters of guarantee (each a
                                                "Documentary Instrument"), the
                                                terms and conditions of which 
                                                are contained in Schedules "A" 
                                                and "B" hereto;

                             (the "Credit", with each availment thereunder
                             being an "Availment").

BOOKING POINT                Kitchener Main Branch
                             64 King Street West
                             Kitchener, Ontario
                             N2G 3X1
                             (the "Branch")
<PAGE>   2
To:  Lear Seating Canada Ltd.                                           Page 2

PURPOSES                     General corporate purposes.

INTEREST RATE/               The interest rate for each type of advance, the
FEE ADJUSTMENTS              issuance fees for BA's and the stand-by fee shall
                             all fluctuate in accordance with the Parent
                             Company's Coverage Ratio and Debt Ratio, and
                             together such ratios shall be determinative as to
                             the applicable "Pricing Level" in effect for
                             certain interest rates and fees hereunder at any
                             time and from time to time as follows:

<TABLE>
<CAPTION>
                             Coverage Ratio         Debt Ratio        Pricing Level
                             --------------     ------------------    -------------
                             <S>                <C>                      <C>
                             Less than 4.0:1    Greater than 3.25:1      Level 1

                             4.0:1 or greater   3.25:1 or less but
                             but less than      greater than
                             5.0:1              1.75:1                   Level 2

                             5.0:1 or greater   1.75 or less             Level 3
</TABLE>

                             If a discrepancy arises between the Coverage Ratio
                             and the Debt Ratio such that one ratio falls
                             within one of the above Pricing Levels and the
                             other ratio falls within a different Pricing
                             Level, then the Pricing Level with the higher
                             interest rates and fees will prevail for the
                             purposes of determining the affected interest
                             rates and fees.

                             Subject to the limitations expressed in this
                             section, any change in the interest rates and fees
                             hereunder (a "Pricing Change") shall be effective
                             on the second Business Day (as defined below in
                             the section captioned NOTICE) following the
                             earlier of:

                             (i)     the Bank's receipt of a quarterly
                                     compliance certificate (as required by the
                                     REPORTING section hereof) indicating that
                                     a change has occurred in the above ratios
                                     such that the Pricing Level should be
                                     adjusted; and

                             (ii)    the due date for a quarterly compliance
                                     certificate, if that certificate, whenever
                                     actually received by the Bank, discloses
                                     that a change has occurred in the above
                                     ratios such that the Pricing Level should
                                     be adjusted.

                             The interest rates and fees payable by virtue of
                             any Pricing Change shall continue to be payable
                             until the second Business Day following the
                             earlier of the Bank's receipt and the due date for
                             the next quarterly compliance certificate
                             indicating that a further Pricing Change should
                             occur as a result of changes in the above ratios 
                             as at the end of the applicable fiscal period.  
<PAGE>   3

To:  Lear Seating Canada Ltd.                                           Page 3


                             No Pricing Change which results in a reduction of
                             interest rates and fees hereunder shall be
                             permitted at any time that an Event of Default has
                             occurred and is continuing hereunder.  Further,
                             notwithstanding the foregoing, in the event that
                             any compliance certificate is not provided to the
                             Bank within 95 days of the end of any fiscal
                             quarter of the Borrower in any of its fiscal
                             years, other than any last fiscal quarter, or
                             within 105 days of any last fiscal quarter of the
                             Borrower in any of its fiscal years, a Pricing
                             Change shall be deemed to have occurred on the
                             second Business Day following such date, with all
                             affected interest rates and fees increasing
                             automatically to the next Pricing Level having
                             higher interest rates and fees (unless Pricing
                             Level 1 is already then in effect) and such
                             increased interest rates and fees shall remain in
                             effect subject to the terms of this section or
                             until receipt by the Bank of the relevant overdue
                             compliance certificate, whereupon, in the latter
                             event only, a further Pricing Change shall occur
                             on the second Business Day following the date of
                             the Bank's receipt thereof if warranted by the
                             particulars disclosed in such certificate.

                             For the purposes of this Agreement:

                             (a)     "Parent Company" shall mean Lear Seating 
                                      Corporation, the U.S. parent company of 
                                      the Borrower;

                             (b)     "Coverage Ratio" and "Debt Ratio", and all
                                     defined terms used in each such definition
                                     shall have the respective meanings
                                     ascribed to them in the Syndicated Credit
                                     Agreement, provided that each such term
                                     shall be read for the purposes of this
                                     Agreement as if to exclude the term
                                     "Adjustment Date"; and

                             (c)     "Syndicated Credit Agreement" shall mean
                                     the second amended and restated credit
                                     agreement dated as of November 29, 1994 by
                                     and among the Parent Company, as borrower,
                                     Chemical Bank, as administrative agent for
                                     the lenders, certain managing agents
                                     including the Bank (the Bank being a
                                     lender thereunder also) and the other
                                     lenders signatory thereto pursuant to
                                     which loan commitments currently in the
                                     maximum principal amount of $500,000,000
                                     U.S. are available to the Parent Company.

LIMITATION ON                The aggregate amount, expressed in Canadian
AVAILABILITY                 dollars, of Availments outstanding under the 
                             Credit at any time and of all Obligations of the 
                             Borrower known by the Borrower to exist at such 
                             time shall not exceed the committed limit of the 
                             Credit at such time.  If this restriction is 
                             exceeded, the Bank may require the
<PAGE>   4

To:  Lear Seating Canada Ltd.                                            Page 4

                             applicable excess to be repaid within a period of
                             not more than 30 days of the date that such excess
                             first arises.  For the purposes of this Agreement:

                             (a)     "Obligations" shall have the meaning 
                                      ascribed to such term in the General 
                                      Security Agreement; and

                             (b)     "General Security Agreement" shall mean
                                     the amended and restated general security
                                     agreement by and among the Borrower, as
                                     obligor, Chemical Bank, as administrative
                                     agent for the lenders and the lenders
                                     party to the Syndicated Credit Agreement,
                                     including the Bank.

CREDIT                       Advances.  Canadian and U.S. dollar advances may be
AVAILMENTS                   obtained under the Credit by the Borrower
                             selecting in respect of each such advance one of
                             the interest options as follows:

                             (1)     Canadian dollars as Prime Rate Advances in
                                     whole multiples of $100,000 Cdn.:  Prime
                                     Lending Rate (as defined below) plus a per
                                     annum margin fluctuating in accordance
                                     with the applicable Pricing Level
                                     (determined above) as follows:

<TABLE>
<CAPTION>
                                     Pricing                 Interest Rate
                                     Level                   Margin (%)  
                                     -------                 ------------
                                     <S>                    <C>
                                     Level 1                1/2

                                     Level 2                1/4

                                     Level 3                 -
</TABLE>

                             (2)     U.S. dollars as Base Rate Advances in
                                     whole multiples of $100,000 U.S.:
                                     Alternate Base Rate (as defined below)
                                     plus a per annum margin fluctuating in
                                     accordance with the applicable Pricing
                                     Level (determined above) as follows:

<TABLE>
<CAPTION>
                                     Pricing                 Interest Rate
                                     Level                   Margin (%)  
                                     -------                 ------------
                                     <S>                    <C>
                                     Level 1                1/2

                                     Level 2                1/4

                                     Level 3                 -
</TABLE>

                             (3)     U.S. dollars as LIBOR Advances in whole
                                     multiples of $100,000 U.S.:  LIBO Rates
                                     (as defined below) for 1, 2, 3 or 6 month
                                     LIBOR Periods plus a per annum margin
                                     fluctuating in accordance with the
                                     applicable Pricing Level (determined
                                     above) as follows:
<PAGE>   5

To:  Lear Seating Canada Ltd.                                            Page 5


<TABLE>
<CAPTION>
                                     Pricing                 Interest Rate
                                     Level                   Margin (%)   
                                     -------                 -------------
                                     <S>                      <C>
                                     Level 1                  1 1/4

                                     Level 2                  1

                                     Level 3                    3/4
</TABLE>

                             A conversion from a LIBOR Advance to another
                             Availment may only be made on the expiry of the
                             applicable LIBOR Period, unless the Borrower
                             indemnifies the Bank for the costs of the Bank
                             resulting from the early termination of such LIBOR
                             Period.  No LIBOR Period may extend beyond the
                             maturity date of the Credit as provided for below
                             in the section captioned MATURITY, except as
                             provided in paragraph (5) under the section
                             captioned COVENANTS.

                             BA's.  BA's may be obtained by the Borrower under
                             the Credit, provided that each such BA shall be
                             denominated in a whole multiple of $100,000 Cdn.
                             and shall have a term to maturity of 30 to 180
                             days.  The Borrower shall pay, upon issuance of
                             each BA, a per annum fee determined as set out
                             below, calculated on the basis of a 365 day year
                             on the face amount of such BA for the number of
                             days to elapse to maturity (exclusive of days of
                             grace), subject to a minimum fee of $100 Cdn. per
                             BA transaction.  Each BA may be converted to
                             another Availment, but only on the maturity date
                             of such BA.  Any BA not paid by the Borrower on
                             its maturity date will be paid by the Bank and
                             such payment shall constitute a Prime Rate Advance
                             under the Credit.  No term of a BA may extend
                             beyond the maturity date of the Credit as provided
                             for below in the section captioned MATURITY,
                             except as provided in paragraph (5) under the
                             section captioned COVENANTS.  The issuance fee for
                             BA's shall fluctuate in accordance with the
                             applicable Pricing Level (determined above) as
                             follows:

<TABLE>
<CAPTION>
                             Pricing                    Issuance Fee
                             Level                      Per Annum (%)
                             -------                    -------------
                             <S>                             <C>
                             Level 1                         1 1/4

                             Level 2                         1

                             Level 3                           3/4
</TABLE>

                             Documentary Instruments.  Refer to the attached 
                             Schedules "A" and "B" to this Agreement.

STAND-BY FEE                 The Borrower shall pay, on the last Business Day
                             of each calendar quarter, a per annum stand-by fee
                             determined as set out below, computed on the
                             unused
<PAGE>   6

To:  Lear Seating Canada Ltd.                                            Page 6

                             portion of the committed limit of the Credit as it
                             may be reduced from time to time, calculated daily
                             in arrears on the basis of a 365 day year for the
                             actual number of days elapsed from the date of the
                             Borrower's execution of this Agreement.  For
                             purposes of calculating the amount of stand-by fee
                             payable in respect of U.S. dollar Availments
                             outstanding hereunder, the Canadian dollar
                             exchange equivalent thereof shall be determined by
                             the Bank on and for each Business Day in
                             accordance with the spot rate of exchange for U.S.
                             dollars as announced by the Bank of Canada not
                             later than 12:00 noon (Toronto time) on such day,
                             or, if such rate is not announced by the Bank of
                             Canada by such time on any Business Day, the
                             applicable rate of exchange for the relevant
                             currency conversion shall be that which was last
                             announced by the Bank of Canada.  The Borrower
                             shall be entitled to cancel all or any of the
                             unused portion of the committed limit of the
                             Credit at any time and from time to time without
                             penalty on not less than 30 days' written notice
                             to the Bank and upon payment of all accrued
                             stand-by fee to such date of cancellation,
                             whereupon the committed limit of the Credit shall
                             be permanently reduced accordingly.  The stand-by
                             fee shall fluctuate in accordance with the
                             applicable Pricing Level (determined above) as
                             follows:

<TABLE>
<CAPTION>
                             Pricing                     Stand-by Fee
                             Level                       Per Annum (%)
                             -------                     -------------
                             <S>                             <C>
                             Level 1                          3/8

                             Level 2                          1/4

                             Level 3                          1/5
</TABLE>

MATURITY                     Termination.  The Credit shall revolve and may be
                             drawn down until the earlier of (a) March 31, 1997
                             inclusive and (b) the date of expiry of the loan
                             commitments under the Syndicated Credit Agreement
                             or any successor thereto, when all amounts then
                             outstanding or accrued hereunder shall be payable.
                             The term of the Credit may be extended for
                             successive periods of up to one year in the
                             absolute discretion of the Bank, upon the
                             Borrower's written request therefor received not
                             later than January 31 of each year, provided that,
                             in no event shall the term of the Credit be
                             extended beyond November 30, 1999.  If the Bank
                             does not give written notice to the Borrower of
                             its consent to any such requested extension on or
                             before March 1 in any year, neither the requested
                             extension nor any further extension shall be
                             permitted thereafter and the term of the Credit
                             shall expire as otherwise provided.  No extension
                             shall be effective if maturity of the Credit shall
                             first occur for the reason specified above in
                             clause (b) of this section
<PAGE>   7

To:  Lear Seating Canada Ltd.                                           Page 7

                             or if the Bank terminates the Credit at any time
                             prior to the commencement of any extended term
                             upon the occurrence of any Event of Default
                             hereunder.  If any scheduled date of termination
                             should not fall on a Business Day, then all
                             amounts otherwise payable under this Agreement
                             upon termination of the Credit shall instead be
                             payable on the Business Day immediately preceding
                             such date.

                             Outstanding BA's.  If, at any time prior to the
                             maturity date of any BA issued hereunder, the
                             Credit is terminated, the Borrower shall pay to
                             the Bank, on demand, an amount with respect to
                             each such BA equal to the total of amounts which
                             would be required to purchase in the Canadian
                             money market, as of 10:00 a.m. (Eastern time) on
                             the date of payment of such demand, Government of
                             Canada treasury bills in an aggregate amount equal
                             to the face amount of such BA and having in each
                             case a term to maturity similar to the period from
                             such demand to maturity of such BA; provided that,
                             subject to the provisions of paragraph (5) of the
                             section below captioned COVENANTS, no such payment
                             shall be required to be made by the Borrower with
                             respect to any BA prior to its date of maturity if
                             such BA is outstanding at the time of the
                             Borrower's receipt of any notice of repayment
                             given by the Bank to the Borrower in accordance
                             with the aforesaid paragraph (5) of the section
                             captioned COVENANTS.  Upon payment by the Borrower
                             as required under this paragraph, the Borrower
                             shall have no further liability in respect of each
                             such BA and the Bank shall be entitled to all of
                             the benefits of, and be responsible for all
                             payments to third parties under, such BA and the
                             Bank shall indemnify and hold harmless the
                             Borrower in respect of all amounts which the
                             Borrower may be required to pay under each such BA
                             to any party other than the Bank.

                             Outstanding Documentary Instruments.  Refer to the
                             attached Schedule "A" to this Agreement.

CALCULATION                  Determination of Rates.  "Prime Lending Rate" is a
& PAYMENT                    variable per annum reference rate of interest (as
                             announced and adjusted by the Bank from time to
                             time) for loans made by the Bank in Canada in
                             Canadian dollars.  "Alternate Base Rate" is a
                             fluctuating interest rate per annum (as shall be
                             in effect from time to time) (rounded to the
                             nearest 1/100 of 1%) for loans made by the Bank in
                             Canada in U.S. dollars  equal to the greater of:
                             (a) the annual rate of interest announced from
                             time to time by the Bank in Canada as its "Base
                             Rate Canada"; and (b) 0.5% per annum above the
                             rate set forth for such date opposite the caption
                             "Federal Funds (Effective)" in the weekly
                             statistical release designated as "H.15(519)", or
                             any successor publication, published by the
                             Federal
<PAGE>   8

To:  Lear Seating Canada Ltd.                                             Page 8

                             Reserve System.  If for any reason the Bank shall
                             have determined (which determination shall be
                             conclusive, absent manifest error) that it is
                             unable to ascertain the Federal Funds (Effective)
                             for any reason, including without limitation, the
                             inability or failure of the Bank to obtain
                             sufficient bids or publications in accordance with
                             the terms hereof, the rate announced by the Bank
                             in Canada as its "Base Rate Canada" shall be the
                             Alternate Base Rate until the circumstances giving
                             rise to such inability no longer exist.  The "LIBO
                             Rate" for each LIBOR Period (being the applicable
                             interest period chosen by the Borrower for a LIBOR
                             Advance) means the rate of interest per annum at
                             which the Bank is offered deposits by prime banks
                             in the London interbank market, as at 11:00 a.m.
                             (London, England time), on the second Business Day
                             prior to the commencement of such LIBOR Period, in
                             an amount of U.S. dollars similar to the amount of
                             the applicable LIBOR Advance for a deposit period
                             comparable to such LIBOR Period.  LIBOR Advances
                             are offered subject to the availability to the
                             Bank of appropriate LIBO Rate quotations.

                             Interest Calculation and Payment.  Interest
                             computed with reference to Prime Lending Rate or
                             Alternate Base Rate shall accrue from day to day
                             for the actual number of days elapsed and shall be
                             calculated and payable quarterly, not in advance,
                             on the last Business Day of each calendar quarter.
                             Interest computed with reference to a LIBO Rate
                             shall accrue from day to day for the actual number
                             of days elapsed and shall be calculated and
                             payable at the end of the applicable LIBOR Period
                             and, if such LIBOR Period is in excess of 3
                             months, at the end of each 3 month period during
                             such LIBOR Period.  If the last day of any LIBOR
                             Period should not fall on a Business Day, then all
                             interest payable in respect of the applicable
                             advance upon maturity thereof shall instead be
                             payable on the Business Day immediately preceding
                             the last day of such LIBOR Period.  Interest
                             computed with reference to Prime Lending Rate
                             shall be calculated on the basis of a 365 day
                             year, but interest computed with reference to the
                             Alternate Base Rate or a LIBO Rate shall be
                             calculated on the basis of a year of 360 days.

                             Change In Margin.  Whenever this Agreement calls
                             for an increase or decrease on a certain date in a
                             margin over a reference rate in respect of
                             interest on an advance or the fees for issuance of
                             a BA, the Borrower shall pay interest or fees or
                             shall be entitled to receive a refund from the
                             Bank on interest or fees already paid, as
                             applicable, calculated proportionately with
                             reference to the new margin effective from such
                             date, notwithstanding that, in the case of an
                             advance, such advance was made prior to
<PAGE>   9

To:  Lear Seating Canada Ltd.                                            Page 9

                             such date and, in the case of a BA, the fee is to 
                             be calculated and paid prior to such date.

                             LIBOR Periods.  The Borrower shall designate the
                             LIBOR Period to apply to each LIBOR Advance in its
                             notice of any drawdown of such advance, any
                             conversion to such advance and any renewal of an
                             existing LIBOR Period, provided that, upon failure
                             of the Borrower to give notice of any such
                             designation, when applicable, as required under
                             this Agreement, the Bank shall convert the
                             affected LIBOR Advance to a Base Rate Advance for
                             the purpose of determining the interest rate with
                             respect to same.

                             Default of Payment.  Amounts not paid when due in
                             respect of a Prime Rate Advance or a Base Rate
                             Advance shall bear interest at the rates
                             applicable thereto, plus 2% per annum.  Amounts
                             not paid when due in respect of a LIBOR Advance
                             may be constituted a Base Rate Advance by the Bank
                             and the Bank may so convert such advance.  Any
                             other monetary obligation of the Borrower arising
                             under this Agreement which is not paid when due
                             shall be deemed to be an amount not paid when due
                             in respect of a Prime Rate Advance or a Base Rate
                             Advance, as applicable.  Interest payable under
                             this paragraph shall accrue from day to day for
                             the actual number of days elapsed, shall be
                             calculated and payable upon demand, and shall be
                             compounded monthly until paid.  The rights of the
                             Bank under this paragraph shall continue to apply
                             from the date of such default for so long as such
                             default shall continue, both before and after
                             demand and judgment.

                             Interest Act (Canada).  Whenever a rate of
                             interest hereunder is calculated on the basis of a
                             year (the "deemed year") which contains fewer days
                             than the actual number of days in the calendar
                             year of calculation, such rate of interest shall
                             be expressed as a yearly rate for purposes of the
                             Interest Act (Canada) by multiplying such rate of
                             interest by the actual number of days in the
                             calendar year of calculation and dividing it by
                             the number of days in the deemed year.

REPAYMENTS                   The Borrower may make any repayment of an advance
                             in a whole multiple of $100,000 Cdn. in the case
                             of Prime Rate Advances and of $100,000 U.S. in the
                             case of a Base Rate Advance, but any repayment in
                             respect of a LIBOR Advance may be made only in a
                             whole multiple of $100,000 U.S. and shall be
                             subject to the terms and conditions set out in the
                             section below captioned INDEMNITY PROVISIONS.  No
                             repayment of any advance made by way of overdraft
                             (if such advance is permitted by the Bank
                             hereunder) shall be subject to any limitation that
                             it be in a whole multiple or minimum of any
                             amount.
<PAGE>   10

To:  Lear Seating Canada Ltd.                                           Page 10


SECURITY                     Unsecured.

CONDITIONS TO                Initial Drawdown.  The right of the Borrower to
UTILIZATION                  obtain the initial drawdown hereunder is subject 
                             to the condition precedent that the Bank has 
                             received, in form and substance satisfactory to  
                             it, evidence of authority to borrow hereunder and 
                             to execute and deliver this Agreement, together 
                             with executed copies of such documentation and, 
                             if requested by the Bank, opinions of counsel as  
                             to the validity and enforceability of the same.

                             Each Utilization.  The right of the Borrower to
                             obtain at any time any drawdown of an Availment
                             (including the initial drawdown) or any conversion
                             from one Availment to another or any renewal of a
                             LIBOR Period hereunder (each a "Utilization") is
                             subject to the further conditions precedent that
                             at the time of such Utilization:

                             (1)     in the case where such Utilization is a
                                     drawdown, a conversion to a LIBOR Advance
                                     or a renewal of any LIBOR Advance, no
                                     event or circumstance has occurred and is
                                     continuing, or would result from the
                                     making of such Utilization, which
                                     constitutes an Event of Default or would
                                     constitute an Event of Default but for the
                                     requirement that notice be given or time
                                     elapse, or both, or, which when considered
                                     by itself or together with other past or
                                     then existing events or circumstances,
                                     constitutes or would constitute a material
                                     adverse change in the business prospects
                                     or financial condition of the Borrower and
                                     its subsidiaries on a consolidated basis;

                             (2)     the Limitation on Availability hereunder
                                     has not been exceeded and shall not be
                                     exceeded as a result of such Utilization;
                                     and

                             (3)     the Bank has received such other
                                     information as the Bank may have
                                     reasonably requested upon giving prior
                                     reasonable notice thereof to the Borrower.

NOTICE                       The Borrower shall give to the Bank 2 Business
                             Days' notice of each Utilization or repayment in
                             respect of a LIBOR Advance and same Business Day's
                             notice of each Utilization or repayment in respect
                             of any other type of Availment.  As used herein, a
                             "Business Day" means any day other than a
                             Saturday, or a Sunday, or a day that banks are
                             lawfully closed for business in Toronto, Ontario,
                             or, if in respect of a Base Rate Advance, New York
                             City, or, if in respect of a LIBOR Advance, any
                             other day on which transactions cannot be carried
                             out by and between banks in the London interbank
                             market.
<PAGE>   11

To:  Lear Seating Canada Ltd.                                          Page 11


                             Any notice or communication shall be deemed to
                             have been given to a party hereunder (i) upon
                             delivery in writing to such party at its address
                             as noted on page 1 hereof or at the address of
                             which such party last notified the other, or (ii)
                             upon oral (including telephone) transmission to an
                             appropriate officer of such party, provided that
                             such officer believed at such time in good faith
                             that such notice or communication was given by an
                             appropriate officer of the notifying or
                             communicating party, or (iii) upon receipt by the
                             Bank of a Canadian or U.S. dollar cheque or wire
                             transfer drawn on an account of the Borrower
                             maintained at the Branch, which receipt, in the
                             absolute discretion of the Bank, may constitute
                             notice to the Bank of drawdown by way of a Prime
                             Rate Advance or a Base Rate Advance, as
                             applicable, under the Credit.  Notice or
                             communication to the Bank hereunder (other than
                             notice given in the manner as set out in (iii) of
                             this section) to be effective on a certain
                             Business Day must be given prior to 11:00 a.m.
                             (Eastern time) on that Business Day.  Each notice
                             or communication given by a party hereunder shall
                             be binding on it and shall not be revocable
                             without the other party's consent.

REPRESENTATIONS              The Borrower represents and warrants that:
AND WARRANTIES
                             (a)     this Agreement is a legal, valid and
                                     binding obligation of the Borrower
                                     enforceable against it in accordance with
                                     its terms; is not contrary to any
                                     contractual restriction binding on it; and
                                     its execution and delivery of the same
                                     neither requires a third party consent nor
                                     would entitle any third party to
                                     accelerate any debt owing to it; and

                             (b)     it does not have outstanding, as of the
                                     date hereof, any indebtedness for borrowed
                                     money, nor any liability for borrowed
                                     money (including, without limitation,
                                     contingent liability under any guarantee),
                                     other than indebtedness incurred to the
                                     Province of Ontario having a maximum
                                     aggregate principal amount of $4,500,000
                                     Cdn., indebtedness and liability incurred
                                     to the Bank and contingent liability under
                                     a guarantee in a maximum principal amount
                                     of $6,000,000 Cdn. dated April 26, 1989,
                                     as amended on August 11, 1992, in respect
                                     of the indebtedness and liability of
                                     General Seating of Canada Ltd. incurred to
                                     Dai-Ichi Kangyo Bank (Canada) Ltd.

                             All of the representations and warranties of the
                             Borrower contained herein shall survive the
                             execution and delivery of this Agreement
                             notwithstanding any investigation made at any time
                             by or on behalf of the Bank.
<PAGE>   12

To:  Lear Seating Canada Ltd.                                           Page 12


COVENANTS                    The Borrower hereby covenants:

                             (1)     to maintain, and cause its material
                                     subsidiaries to maintain, their respective
                                     corporate existences and conduct their
                                     respective businesses in the normal
                                     course;

                             (2)     to promptly notify the Bank of the
                                     occurrence of any event or circumstance
                                     which constitutes an Event of Default or
                                     would constitute an Event of Default but
                                     for the requirement that notice be given
                                     or time elapse or both and to provide to
                                     the Bank a detailed statement of a senior
                                     officer of the Borrower of the steps, if
                                     any, being taken to cure or remedy such
                                     default;

                             (3)     to maintain, or cause to be maintained, a
                                     minimum Consolidated Net Worth of
                                     $55,000,000 Cdn. at all times during the
                                     first three fiscal quarters of the
                                     Borrower's 1995 fiscal year and of
                                     $65,000,000 Cdn. at all times thereafter.
                                     For the purposes of this Agreement,
                                     "Consolidated  Net Worth" shall mean, at
                                     any particular time, Shareholders' Equity,
                                     where "Shareholders' Equity" means all
                                     amounts which would be included under
                                     shareholders' equity on a consolidated
                                     balance sheet of the Borrower and its
                                     subsidiaries determined on a consolidated
                                     basis plus inter-company indebtedness of
                                     the Borrower and its subsidiaries which is
                                     postponed and subordinated to the Bank in
                                     a form and manner satisfactory to the Bank
                                     in its sole discretion, all calculated as
                                     at the date of determination in accordance
                                     with generally accepted accounting
                                     principles established by the Canadian
                                     Institute of Chartered Accountants or any
                                     successor thereto ("Canadian GAAP");
                                     provided that any amortization of
                                     goodwill, deferred financing fees or
                                     license fees (including any write-offs of
                                     deferred financing fees and license fees)
                                     shall not be taken into account in
                                     determining Consolidated Net Worth;

                             (4)     to maintain a ratio of Consolidated
                                     Operating Profit to net interest expense
                                     of at least 3.0:1 at all times.  For the
                                     purposes of this paragraph, "Consolidated
                                     Operating Profit" shall mean, without
                                     duplication, at any particular time and
                                     with respect to the previous four
                                     consecutive fiscal quarters of the
                                     Borrower ended on the last day of the most
                                     recently-ended fiscal quarter,
                                     consolidated net income of the Borrower
                                     and its subsidiaries for such period
                                     excluding (i) extraordinary gains and
                                     losses arising from the sale of material
                                     assets and other extraordinary and/or
                                     non-recurring gains and losses, (ii)
<PAGE>   13

To:  Lear Seating Canada Ltd.                                           Page 13

                                     charges, premiums and expenses associated
                                     with the discharge of indebtedness, (iii)
                                     other non-cash items reducing net income,
                                     (iv) license fees (and any write-offs
                                     thereof), (v) stock compensation expense,
                                     (vi) deferred financing fees (and any
                                     write-offs thereof), (vii) foreign
                                     exchange gains and losses, (viii)
                                     miscellaneous income and expenses and (ix)
                                     miscellaneous gains and losses arising
                                     from the sale of assets plus, to the
                                     extent deducted in determining
                                     consolidated net income, the excess of (i)
                                     the sum of (A) consolidated interest
                                     expense, (B) any expenses for taxes, (C)
                                     depreciation and amortization expense and
                                     (D) minority interests in income of
                                     subsidiaries over (ii) net equity earnings
                                     in affiliates (excluding subsidiaries).
                                     For the purposes of this Agreement,
                                     "affiliate" and "affiliates" means an
                                     affiliated body corporate within the
                                     meaning ascribed to such term in the
                                     Business Corporations Act (Ontario), as
                                     amended;

                             (5)     to repay all of its indebtedness and
                                     liability incurred or accrued under this
                                     Agreement if the Bank should at any time
                                     withdraw as a party to the Syndicated
                                     Credit Agreement, subject to the Bank
                                     giving the Borrower not less than 60 days'
                                     prior written notice of the due date for
                                     any such repayment, the date thereof not
                                     to be earlier in any event than the date
                                     that the Bank's withdrawal from the
                                     Syndicated Credit Agreement becomes
                                     effective; provided that, if any Availment
                                     (excluding any Prime Rate Advance and any
                                     Base Rate Advance) is outstanding on the
                                     date of receipt by the Borrower of any
                                     such notice and if the maturity or expiry
                                     date of such Availment should not occur
                                     until after the aforesaid 60-day period
                                     has expired, then, all payments in respect
                                     of such Availment, which, if not for the
                                     giving of the notice provided for in this
                                     Covenant (5), would otherwise be due after
                                     expiry of the 60-day period, shall instead
                                     be made as and when otherwise required by
                                     this Agreement, except that, in the case
                                     of any applicable Documentary Instrument,
                                     payments of principal, interest and other
                                     amounts arising from any drawing
                                     thereunder shall be made on the second
                                     Business Day following such drawing.
                                     Notwithstanding any other term or
                                     condition of this Agreement, the Borrower
                                     agrees that no further credit shall be
                                     available to the Borrower under this
                                     Agreement after the date of its receipt of
                                     the notice referred to above and that, if
                                     all amounts payable under this Covenant
                                     (5) are received by the Bank within the
                                     aforesaid 60-day period, the Credit shall
                                     terminate on the date of final
<PAGE>   14

To:  Lear Seating Canada Ltd.                                           Page 14

                                     payment thereof; provided further that,
                                     the Borrower's entitlement to obtain
                                     credit hereunder shall be re- instated and
                                     the Credit shall expire on the maturity
                                     date as otherwise provided subject to the
                                     terms and conditions of this Agreement, if
                                     (i) at any time prior to the due date for
                                     repayment specified in any such notice by
                                     the Bank, the Borrower provides an
                                     irrevocable standby letter of credit, in
                                     form and substance satisfactory to the
                                     Bank in its sole discretion, for a
                                     principal amount not less than the
                                     committed limit of the Credit at such
                                     time, plus interest, fees and other
                                     amounts outstanding and payable under this
                                     Agreement and (ii) no Event of Default or
                                     material adverse change in the financial
                                     condition of the Borrower has occurred at
                                     any time prior to or upon the Bank's
                                     receipt of such letter of credit.  The
                                     giving of any notice by the Bank under
                                     this Covenant (5) shall not affect the
                                     respective rights, privileges or
                                     obligations of the parties to this
                                     Agreement except as expressly set out in
                                     this Covenant (5);

                             (6)     not to incur, nor to permit its
                                     subsidiaries to incur, directly or
                                     indirectly, any indebtedness or liability
                                     for borrowed money after the date hereof,
                                     whether actual or contingent (including,
                                     without limitation, liability under any
                                     guarantee) other than the re-financing of
                                     any existing obligation of the Borrower as
                                     disclosed above in clause (b) of the
                                     section hereof captioned REPRESENTATIONS
                                     AND WARRANTIES, amounts that the Bank is
                                     satisfied are incurred in the normal
                                     course of business and indebtedness and
                                     liability for borrowed money incurred to
                                     affiliates; and

                             (7)     to notify the Bank in writing of the
                                     amount and currency of each additional
                                     Obligation incurred or to be incurred by
                                     or on behalf of the Borrower under the
                                     General Security Agreement, with such
                                     written notice to include the date that
                                     the applicable Obligation was or will be
                                     incurred and to be given not later than 2
                                     Business Days after the date that such
                                     Obligation was incurred; provided that, if
                                     advance notice of any additional
                                     Obligation is given to the Bank, and the
                                     date, amount or currency thereof as
                                     specified in such notice does not
                                     correspond with the actual date, amount or
                                     currency of that Obligation as and when
                                     incurred, the Borrower further covenants
                                     to correct the affected notice in a
                                     supplementary written notice to the Bank
                                     within 2 Business Days of the date that
                                     the applicable Obligation was incurred, or
                                     if
<PAGE>   15

To:  Lear Seating Canada Ltd.                                           Page 15

                                     appropriate, to advise the Bank that no 
                                     such additional Obligation will be 
                                     incurred.

EVENTS OF                    Upon the occurrence and continuation of any Event 
DEFAULT                      of Default, the Bank may terminate the Credit 
                             and/or demand payment of all indebtedness and 
                             liability outstanding and accrued hereunder to 
                             the date of demand and proceed to take such steps 
                             as it deems fit.

                             An Event of Default shall occur if:

                             (1)     the Borrower fails to pay any amount of
                                     principal within 3 Business Days of when
                                     due or fails to pay any amount of
                                     interest, fees or other amounts within 5
                                     Business Days of when due under the
                                     Credit, or makes any representation or
                                     warranty hereunder which is incorrect in
                                     any material respect;

                             (2)     the Borrower breaches any material
                                     covenant hereof (including, without
                                     limitation, any covenant made hereunder in
                                     the above section captioned COVENANTS) or
                                     fails to comply with any other material
                                     term or condition hereof and such breach
                                     of covenant or material non-compliance
                                     (other than a covenant to pay or a
                                     covenant impossible to remedy or a
                                     material breach of any representation or
                                     warranty) continues for 10 Business Days
                                     or more after notice to remedy same, or
                                     the Borrower fails to pay any excess
                                     amount due in respect of the Limitation On
                                     Availability hereunder within the time
                                     period specified in any demand therefor;
                                     or

                             (3)     the Borrower or any subsidiary of the
                                     Borrower admits its inability to pay its
                                     debts generally; becomes a bankrupt
                                     (voluntarily or involuntarily); or,
                                     becomes subject to any proceeding seeking
                                     liquidation, rearrangement, relief of
                                     creditors or the appointment of a receiver
                                     or trustee over, or any judgment or order
                                     which has or might have a material and
                                     adverse effect on, any substantial part of
                                     its property or undertaking; unless, in
                                     the event of an involuntary bankruptcy or
                                     a proceeding for any of the remedies
                                     specified above in this section (other
                                     than a voluntary bankruptcy), the affected
                                     corporation has obtained a dismissal,
                                     permanent stay or other similar
                                     disposition not more than 60 days from (i)
                                     the date of the filing of a petition, in
                                     the case of an involuntary bankruptcy, or
                                     (ii) the date of service of the relevant
                                     statement of claim, application or other
                                     process, in the case of any other
                                     proceeding; or

                             (4)     The Borrower or any subsidiary of the
                                     Borrower:
<PAGE>   16

To:  Lear Seating Canada Ltd.                                           Page 16


                                     (a)        fails to pay any of its (other)
                                                indebtedness or liability when
                                                due, such failure continues
                                                after any applicable grace
                                                period specified in an
                                                agreement or instrument
                                                relating to such (other)
                                                indebtedness or liability and,
                                                as a result thereof, the
                                                Borrower or applicable
                                                subsidiary is then in default
                                                of payment of an aggregate
                                                principal amount of
                                                indebtedness and liability of
                                                $10,000,000 U.S. (or the
                                                Canadian dollar equivalent
                                                thereof) or more; or

                                     (b)        permits any material default
                                                under any agreement or
                                                instrument relating to its
                                                (other) indebtedness or
                                                liability, or any other event,
                                                to occur and to continue after
                                                any applicable grace period
                                                specified in such agreement or
                                                instrument and the effect of
                                                such default or event is to
                                                accelerate, or to permit the
                                                acceleration of, the maturity
                                                of that indebtedness or
                                                liability such that the
                                                aggregate principal amount of
                                                the indebtedness and liability
                                                incurred by the Borrower or
                                                applicable subsidiary which
                                                then has been or may be
                                                accelerated by the relevant
                                                creditor(s) exceeds $10,000,000
                                                U.S. (or the Canadian dollar
                                                equivalent thereof);

                                     (irrespective of whether either of the
                                     aforesaid aggregate principal amounts, or
                                     any portion thereof, is incurred jointly,
                                     severally or jointly and severally,
                                     provided that the calculation of such
                                     aggregate principal amounts shall be made
                                     without duplication); or

                             (5)     subject to the above paragraphs (1) and
                                     (4) of this section, an "Event of Default"
                                     within the meaning of the Syndicated
                                     Credit Agreement occurs thereunder as a
                                     result of any of the events or
                                     circumstances specified in Section 9 (h)
                                     thereof; or

                             (6)     subject to the above paragraphs (1), (4)
                                     and (5) of this section, any other event
                                     of default occurs under the Syndicated
                                     Credit Agreement or any successor thereto
                                     which results in the acceleration of any
                                     amount of the Parent Company's
                                     indebtedness or liability outstanding
                                     thereunder and/or the termination of the
                                     lenders' commitments thereunder; or

                             (7)     any of Sections 8.2 (l), 8.2 (o) or 8.3 of
                                     the Syndicated Credit Agreement as each
                                     relates to the Borrower is amended,
                                     substituted or abolished
<PAGE>   17

To:  Lear Seating Canada Ltd.                                           Page 17

                                     at any time without the prior written 
                                     consent of the Bank; or

                             (8)     any course of action is undertaken by the
                                     Borrower or any material subsidiary of the
                                     Borrower, or with respect to such
                                     corporation or its capital stock by
                                     another party, which is intended to result
                                     in, or would result (in the reasonable
                                     opinion of the Bank) in, its
                                     reorganization or reconstruction, or its
                                     consolidation, amalgamation or merger with
                                     another corporation, or the transfer of
                                     all or substantially all of the
                                     undertaking and assets of such
                                     corporation; or

                             (9)     there occurs or is announced or is
                                     scheduled any change in the ownership of
                                     the Borrower such that the Parent Company
                                     or any wholly-owned subsidiary of the
                                     Parent Company ceases, or would cease, to
                                     beneficially own 100% of the issued and
                                     outstanding capital stock in the Borrower
                                     at any time; or

                             (10)    any affiliate of the Borrower or of a
                                     subsidiary of the Borrower which is a
                                     party to a postponement and subordination
                                     agreement entered into with the Bank (a
                                     "Postponement and Subordination
                                     Agreement") fails to substantially
                                     perform, observe or otherwise comply with
                                     any material term or condition of that
                                     Postponement and Subordination Agreement
                                     and such failure continues for 15 Business
                                     Days or more after notice given by the
                                     Bank to the applicable affiliate to remedy
                                     same; or any such affiliate party to a
                                     Postponement and Subordination Agreement
                                     denies, to any extent, its obligations
                                     under such Postponement and Subordination
                                     Agreement or claims such Postponement and
                                     Subordination Agreement to be, with
                                     respect to itself or any other party
                                     thereto, invalid or withdrawn in whole or
                                     in part; or any Postponement and
                                     Subordination Agreement is invalidated in
                                     whole or in part by any Act, regulation or
                                     governmental action; or any Postponement
                                     and Subordination Agreement ceases to be
                                     the valid, binding and enforceable
                                     obligation of the applicable affiliate(s).

CHANGE OF                    No amendment or other modification, substitution,
INTERPRETATION               abolition or waiver to or of:

                             (i)     any provision of the Syndicated Credit
                                     Agreement or the General Security
                                     Agreement, or any portion of any provision
                                     of either such agreement, which is
                                     specifically referenced in this Agreement,
                                     including, without limitation, any defined
                                     term
<PAGE>   18

To:  Lear Seating Canada Ltd.                                           Page 18

                                     of the Syndicated Credit Agreement or of
                                     the General Security Agreement referenced
                                     herein (each a "Referenced Term"); or

                             (ii)    any defined term of the Syndicated Credit
                                     Agreement or the General Security
                                     Agreement which is used in or is otherwise
                                     relevant to any Referenced Term but which
                                     is not specifically referenced in this
                                     Agreement (each a "Referenced Term" also)

                             shall be binding upon the Bank for the purposes of
                             this Agreement unless the Bank gives its prior
                             written consent thereto for the express purpose of
                             the relevant amendment, modification,
                             substitution, abolition or waiver.  Each
                             Referenced Term shall survive termination of or
                             the Bank's withdrawal from the Syndicated Credit
                             Agreement or the General Security Agreement, as
                             applicable, and shall survive the invalidity of
                             the Syndicated Credit Agreement or the General
                             Security Agreement or any portion of any provision
                             or defined term of either such agreement which
                             constitutes a Referenced Term for the purposes of
                             this Agreement.

DETERMINATION                The Bank shall have the right to determine at any
                             time, and in its discretion reasonably exercised,
                             as to whether any event, circumstance or thing
                             envisaged in this Agreement is or would be
                             "material", "adverse" or "substantial", as such
                             terms are used herein.  Any accounting terms used
                             and not specifically defined herein shall be
                             construed in accordance with Canadian GAAP or, as
                             applicable, generally accepted U.S. accounting
                             principles, consistently applied, and except as
                             may be otherwise provided herein all financial
                             data and statements submitted pursuant to this
                             Agreement shall be prepared in accordance with
                             such principles.

INDEMNITY                    If the introduction or implementation of or any
PROVISIONS                   change in or in the interpretation of, or any 
                             change in its application to the Borrower of, 
                             any law or any regulation or guideline issued by 
                             any central bank or other governmental authority 
                             (whether or not having the force of law), 
                             including, without limitation, any reserve or 
                             special deposit requirement or any tax (other 
                             than tax on the Bank's general income) or any 
                             capital requirement, has due to the Bank's 
                             compliance the effect, directly or indirectly, of 
                             (i) increasing the cost to the Bank of performing 
                             its obligations hereunder or under any BA or 
                             Documentary Instrument; (ii) reducing any amount 
                             received or receivable by the Bank or its 
                             effective return hereunder or in respect of any 
                             BA or Documentary Instrument or on its capital; 
                             or (iii) causing the Bank to make any payment or 
                             to forgo any return based on any amount received or
                             
<PAGE>   19

To:  Lear Seating Canada Ltd.                                           Page 19

                             receivable by the Bank hereunder or in respect
                             of any BA or Documentary Instrument, then upon
                             receipt by the Borrower of a certificate from the
                             Bank setting forth in reasonable detail any
                             additional costs, reduced amount receivable or
                             foregone return, the Borrower shall pay such
                             amount as shall compensate the Bank for any such
                             cost, reduction, payment or forgone return.  The
                             Borrower shall further indemnify the Bank for all
                             costs, losses and expenses which may at any time
                             be imposed on, incurred by or asserted against the
                             Bank in any way relating to or arising out of the
                             execution, delivery or enforcement of this
                             Agreement, the transactions contemplated hereby
                             (including, without limitation, the making and
                             maintaining of any Availment hereunder) and/or the
                             early termination of any LIBOR Period and agrees
                             that the Bank shall have no liability to the
                             Borrower for any reason in respect of any
                             Availment other than on account of the Bank's
                             gross negligence or wilful misconduct.  Any
                             certificate of the Bank in respect of the
                             foregoing will be conclusive and binding upon the
                             Borrower, except for manifest error, provided that
                             the Bank shall determine the amounts owing to it
                             in good faith using any reasonable averaging and
                             attribution methods.

INDEMNITY FOR                The Borrower hereby represents and warrants that
ENVIRONMENTAL                its business and assets and those of its material
HAZARDS                      subsidiaries are operated in substantial
                             compliance with applicable environmental laws,
                             rules, regulations and orders ("Environmental
                             Laws") and that no enforcement action in respect
                             thereof is threatened or pending, to the best of
                             the knowledge, information and belief, after due
                             enquiry, of each and every senior officer of the
                             Borrower who could reasonably be expected to have
                             knowledge of such matters.  The Borrower covenants
                             to and to cause its subsidiaries to continue to so
                             operate and permit the Bank to conduct inspections
                             and appraisals of all or any of its and its
                             subsidiaries' records, business and assets at
                             reasonable times upon prior written notice to the
                             Borrower at any time and from time to time at the
                             Borrower's expense to ensure such compliance.  If
                             the Bank is required to expend any funds in
                             compliance with Environmental Laws, the Borrower
                             shall indemnify the Bank in respect of such
                             expenditures as if an advance had been made to the
                             Borrower under this Agreement for such purpose;
                             provided that the Bank shall have delivered to the
                             Borrower a certificate setting forth in reasonable
                             detail the basis for its expenditures, including
                             the Environmental Laws implicated and the amount
                             and nature of such expenditures.
<PAGE>   20

To:  Lear Seating Canada Ltd.                                           Page 20


REPORTING                    The Borrower shall provide to the Bank, to the
                             attention of Unit Head, Corporate Banking -
                             Ontario, 44 King Street West, Toronto, Ontario M5H
                             1H1:

                             (1)     unaudited, quarterly, consolidated
                                     financial statements of the Borrower
                                     within 60 days of the end of each of the
                                     first 3 quarters of each of its fiscal
                                     years;

                             (2)     audited, annual, consolidated financial
                                     statements of the Borrower within 150 days
                                     of each of its fiscal year-ends;

                             (3)     quarterly certificates of compliance,
                                     supported by detailed calculations:

                                     (i)        demonstrating that the Borrower
                                                has maintained all financial
                                                performance tests prescribed in
                                                this Agreement and confirming
                                                that no Event of Default has
                                                occurred or is continuing
                                                hereunder;

                                     (ii)       demonstrating that the Parent
                                                Company has maintained all
                                                financial performance tests
                                                prescribed in the Syndicated
                                                Credit Agreement and further
                                                confirming that no event of
                                                default has occurred or is
                                                continuing thereunder;

                                     (iii)      to confirm the Coverage and
                                                Debt Ratios affecting the
                                                Pricing Levels for certain
                                                interest rates and fees
                                                hereunder (determined in
                                                accordance with the Interest
                                                Rate/Fee Adjustments section
                                                hereof) which will be in
                                                effect, subject to the terms of
                                                the Interest Rate/Fee
                                                Adjustments section hereof, for
                                                the 90-day period commencing on
                                                the second Business Day
                                                immediately following the
                                                earlier of the Bank's receipt
                                                of a certificate and the due
                                                date therefor; and

                                     (iv)       to specify the aggregate amount
                                                of Obligations which are known
                                                by the Borrower to be
                                                outstanding as at the end of
                                                the applicable fiscal period,
                                                including, the aggregate amount
                                                of all Obligations which were
                                                incurred during such fiscal
                                                period;

                                     with each certificate to be signed by a
                                     senior executive officer of the Borrower
                                     and the Parent Company and to be provided
                                     as soon as feasible after the end of each
                                     fiscal quarter of the Borrower and in any
                                     event (if not already provided) within 60
                                     days of the end of each of the first 3
                                     quarters of each of the Borrower's
<PAGE>   21

To:  Lear Seating Canada Ltd.                                           Page 21

                                     fiscal years and within 105 days of each
                                     of the Borrower's fiscal year-ends; and

                             (4)     such other information as the Bank may 
                                     reasonably request.

EXPENSES                     All reasonable fees and out-of-pocket expenses of
                             the Bank in respect of preparation and enforcement
                             of this Agreement will be for the account of the
                             Borrower.

EXCHANGE                     Except as otherwise provided hereunder, the 
EQUIVALENCIES                Canadian dollar exchange equivalent of U.S. 
                             dollars shall be determined by the Bank in 
                             accordance with its normal practices from time to
                             time.  The aggregate amount of Canadian dollar 
                             Availments and the Canadian dollar exchange 
                             equivalent of U.S. dollar Availments outstanding 
                             at any time under the Credit shall not exceed the
                             Canadian dollar committed limit of the Credit at 
                             such time, and for such purposes the Bank may 
                             require any such excess resulting for any reason 
                             to be repaid within 30 days of notice thereof to 
                             the Borrower and until such repayment may refuse 
                             to allow a drawdown under the Credit.

PAYMENTS                     Unless otherwise directed by the appropriate
                             party, all disbursements to the Borrower shall be
                             made into an account designated by the Borrower
                             and all payments to the Bank shall be made in the
                             currency in respect of which the obligations
                             requiring such payment arose by depositing such
                             payments (whether by wire transfer or otherwise)
                             into an account designated by the Bank at the
                             Branch for value on the due date.  Upon the
                             occurrence and continuation of any Event of
                             Default hereunder, the Borrower hereby
                             acknowledges that the Bank shall be entitled, from
                             time to time and at any 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 the Bank
                             to or for the credit or the account of the
                             Borrower against any and all of the obligations of
                             the Borrower now or hereafter existing under this
                             Agreement, irrespective of whether or not the Bank
                             shall have made any demand under this Agreement.
                             The currency of account of all payments
                             contemplated hereunder shall be of the essence of
                             this Agreement.

EVIDENCE OF                  The Borrower acknowledges that the actual 
INDEBTEDNESS                 recording of any Availment under the Credit and 
                             interest, fees and other amounts due therefor 
                             under this Agreement in an account of the 
                             Borrower maintained by the Bank in respect thereof 
                             and payments made under the Credit in accordance 
                             with this Agreement shall constitute, except for 
                             manifest error, conclusive evidence of the 
                             Borrower's indebtedness and liability from time 
                             to time under this Agreement in respect of the 
                             Credit;
<PAGE>   22

To:  Lear Seating Canada Ltd.                                          Page 22

                             provided that the failure of the Bank to record
                             the indebtedness and liability of the Borrower in
                             such account shall not affect the obligation of
                             the Borrower to pay or repay such indebtedness and
                             liability in accordance with this Agreement.

JUDGMENT                     The obligation of the Borrower hereunder to make
CURRENCY                     payments in U.S. dollars shall not be discharged
                             or satisfied by any tender or recovery pursuant to
                             any judgment expressed in or converted into
                             Canadian dollars except to the extent to which
                             such tender or recovery shall result in the
                             effective receipt by the Bank of the full amount
                             of U.S. dollars so payable hereunder.
                             Accordingly, the obligation of the Borrower shall
                             be enforceable as an alternative or additional
                             cause of action for the purpose of recovery in
                             Canadian dollars of the amount (if any) by which
                             such effective receipt shall fall short of the
                             full amount of U.S. dollars so payable hereunder
                             and shall not be affected by any judgment being
                             obtained for any other sums due hereunder.

SEVERABILITY                 The invalidity or unenforceability of any
                             particular provision of this Agreement shall not
                             affect any other provision herein and the
                             Agreement shall be construed as if the invalid or
                             unenforceable provision had been omitted.

ASSIGNABILITY                The Borrower may not assign this Agreement.  The
& GOVERNING LAW              Bank may assign or grant participation in its 
                             rights and obligations hereunder to any of its
                             subsidiaries or affiliates without the consent of
                             the Borrower, and may assign or grant
                             participation in its rights and obligations
                             hereunder to any other third party with the prior
                             written consent of the Borrower (not to
                             unreasonably withheld), with each such assignee or
                             participant to be entitled to rely on the section
                             headed INDEMNITY PROVISIONS as set out above.
                             This Agreement shall be construed in accordance
                             with the law of the Province of Ontario.





                             *                      *                      *
<PAGE>   23

To:  Lear Seating Canada Ltd.                                           Page 23



          Please indicate your acceptance of this Agreement by signing
and returning to the Bank the enclosed duplicate copy of this letter,
together with Schedules "A" and "B" hereto, on or before April 19, 1995,
failing which the provisions hereof shall be of no force or effect.

                                       Yours truly,

Accepted this ____ day of              THE BANK OF NOVA SCOTIA
of April, 1995.


LEAR SEATING CANADA LTD.               by:  
                                          ------------------------
                                              S.P. Hart



by:                                    by: 
    ----------------------------          ------------------------
                                               M.L. Ness
    Name:                                      
          ----------------------              

    Title:                                    
          ----------------------
                                                    
by:
    ----------------------------         

    Name:
         -----------------------

    Title:
          ----------------------
<PAGE>   24


                                  SCHEDULE "A"

                            DOCUMENTARY INSTRUMENTS


           This Schedule is part of the letter loan agreement (the "Agreement")
dated April 19, 1995, between The Bank of Nova Scotia (the "Bank") and Lear
Seating Canada Ltd. (the "Applicant").  Canadian and U.S. dollar denominated
commercial and standby letters of credit and letters of guarantee (each a
"Documentary Instrument") shall be Availments which may be obtained under the
Revolving Term Credit referred to in the Agreement, provided that each
Documentary Instrument shall be in form satisfactory to the Bank and have a
term to expiry of not more than 365 days and further provided that the issuance
thereof will not contravene any law, regulation or order applicable to such
Documentary Instrument in any jurisdiction.  Each Commercial Documentary
Instrument shall be issued subject to the additional terms set forth in
Schedule "B" attached hereto.  All other capitalized terms not defined herein
shall have the respective meanings given to them in the Agreement.

           IN CONSIDERATION of the Bank issuing each Documentary Instrument,
the Applicant hereby agrees as follows:

    1.     The availability of the Credit shall be reduced by the face amount
of each Documentary Instrument for and during the period of time that the Bank
has a contingent liability thereunder.  The Applicant shall pay, upon issuance
of each Documentary Instrument for the guarantee of performance of the
Applicant's contractual obligations, a fee of 1/2 of 1% per annum, and upon
issuance of each Documentary Instrument for any other purpose, a fee of 3/4 of
1% per annum, calculated in each case on the face amount of such Documentary
Instrument for the actual number of days to elapse, based upon a year of 365
days, from and including the date of issuance thereof to the applicable date of
expiry.  The issuance fee shall be recalculated each time a particular
Documentary Instrument is reduced and the Bank will refund to the Borrower any
unearned issuance fee as a result of reductions in or cancellations of the
particular Documentary Instrument from the date of recalculation hereunder,
provided that in no event shall the minimum issuance fee paid in respect of the
particular Documentary Instrument be less than the greater of $100 Cdn. or
U.S., as applicable, or 1/4 of 1% per annum of the face amount of the
Documentary Instrument issued or renewed.  Each Documentary Instrument may be
converted to another Availment, but only on the expiry or cancellation of such
Documentary Instrument.  All drafts, bills of exchange, receipts, acceptances,
demands and other requests for payment drawn or issued under a Documentary
Instrument (any such instrument being a "Draft") and all other amounts paid by
the Bank under or in connection with any Documentary Instrument shall
constitute under the Credit a Prime Rate Advance to the extent that such
amounts are in Canadian dollars and a Base Rate Advance to the extent that such
amounts are in U.S. dollars.

    2.     The Applicant shall pay to the Bank all of the Bank's contingent
liability in respect of (i) any Documentary Instrument outstanding upon any
termination of the Credit, and (ii) any Documentary Instrument which becomes
the subject matter of any order,
<PAGE>   25

                                     - 2 -

judgment, injunction or other such determination (an "Order"), or any petition
or other application for any Order by the Applicant or any other party,
restricting payment by the Bank under and in accordance with such Documentary
Instrument or extending the Bank's liability under such Documentary Instrument
beyond the expiration date stated therein, provided that payment in respect of
each such Documentary Instrument shall be due forthwith upon demand and in the
currency in which such Documentary Instrument is denominated (the "Instrument
Currency"); provided that, subject to the provisions of paragraph (5) of the
section below captioned COVENANTS, no such payment shall be required to be made
by the Applicant with respect to any Documentary Instrument prior to its date
of expiry if such Documentary Instrument is outstanding at the time of the
Applicant's receipt of any notice of repayment given by the Bank to the
Applicant in accordance with the aforesaid paragraph (5) of the section of the
Agreement captioned COVENANTS.

    3.     The Bank hereby agrees that it will, with respect to each
Documentary Instrument subjected to any such demand for payment under the
preceding section, upon the later of:

           (a)     the date on which any final and non-appealable order,
                   judgment or other such determination has been rendered or
                   issued either terminating any applicable Order, or
                   permanently enjoining the Bank from paying under such
                   Documentary Instrument; and

           (b)     the earlier of:

                   (i)       the date on which either the original counterpart
                             of such Documentary Instrument is returned to the
                             Bank for cancellation or the Bank is released by
                             the beneficiary thereof from any further
                             obligations in respect of such Documentary
                             Instrument; and,

                   (ii)      the expiry of such Documentary Instrument;

pay to the Applicant an amount in the applicable Instrument Currency equal to
any excess of the amount received by the Bank hereunder in respect of the
Bank's contingent liability under such Documentary Instrument (the "Received
Amount") over the equivalent in such Instrument Currency of the total of
amounts applied to reimburse the Bank for amounts paid by it under or in
connection with such Documentary Instrument (the Bank having the right to so
appropriate an aggregate sum equal to the amounts paid by it under the
applicable Documentary Instrument), together with an additional amount in such
Instrument Currency computed by applying a per annum rate as set out below to
the amount of such excess from time to time.  The applicable per annum rate
shall equal 3% per annum less than the Prime Lending Rate, if the applicable
Documentary Instrument is denominated in Canadian dollars or 3% less than the
Bank's Base Rate Canada, if the applicable Documentary Instrument is
denominated in U.S. dollars.  Such additional amount shall be calculated daily
on the basis of a 365 day year for the actual number of days elapsed from and
including the date
<PAGE>   26

                                     - 3 -

of payment to the Bank of the Received Amount to (but not including) the date
of return to the Applicant of the excess.

    4.     Amounts not paid when due hereunder shall, for the purposes of the
Agreement, be deemed to be amounts not paid when due for Prime Rate Advances if
in respect of Canadian dollars and Base Rate Advances if in respect of U.S.
dollars.

    5.     The obligations of the Applicant hereunder shall be absolute,
unconditional and irrevocable and shall not be reduced by any event or
occurrence including, without limitation, any lack of validity or
enforceability of a Documentary Instrument, or any Draft paid or acted upon by
the Bank or any of its correspondents being fraudulent, forged, invalid or
insufficient in any respect, or any claims which the Applicant may have against
any beneficiary or transferee of any Documentary Instrument; provided that the
Bank shall indemnify the Borrower for any cost, expense or other liability
resulting from the Bank's negligence or wilful misconduct.  The obligations of
the Applicant hereunder shall remain in full force and effect and shall apply
to any alteration to or extension of the expiration date of any Documentary
Instrument or any standby letter of credit issued to replace, extend or alter
any Documentary Instrument.

    6.     Any action, inaction or omission taken or suffered by the Bank or
any of the Bank's correspondents under or in connection with a Documentary
Instrument or any Draft made thereunder, if in good faith and in conformity
with foreign or domestic laws, regulations or customs applicable thereto shall
be binding upon the Applicant and shall not place the Bank or any of its
correspondents under any resulting liability to the Applicant.  Without
limiting the generality of the foregoing, the Bank and its correspondents may
receive, accept or pay as complying with the terms of a Documentary Instrument,
any Draft thereunder, otherwise in order which may be signed by, or issued to,
the administrator or any executor of, or the trustee in bankruptcy of, or the
receiver for any property of, or other person or entity acting as the
representative or in the place of, such beneficiary or its successors and
assigns.  The Applicant covenants that it will not take any steps against the
Bank or any of its correspondents, issue any instructions to the Bank or any of
its correspondents or institute any proceedings against the Bank or any of its
correspondents intended to derogate from the right or ability of the Bank or
its correspondents to honour and pay any Draft or Drafts.

    7.     The Applicant agrees to pay, upon 10 days' prior written notice
thereof, all reasonable costs and expenses of the Bank incurred in the
enforcement of the Bank's rights under this Agreement and, further, will
indemnify the Bank on demand against all loss or damage to the Bank arising out
of the issuance of or other action taken by the Bank in connection with any
Documentary Instrument including, without limitation, the costs relating to any
legal process instituted by any party restraining or seeking to restrain the
Bank from accepting or paying any Draft; provided that the Bank shall  have
delivered to the Borrower a certificate setting forth in reasonable detail all
such costs, expenses or damages.  The Applicant also agrees that the Bank shall
have no liability to it for any reason in respect of the issuance of any
Documentary Instrument other than on account of the Bank's
<PAGE>   27

                                     - 4 -

negligence or wilful misconduct.  All payments to be made to the Bank hereunder
shall be made for value on the date due and free of any withholding tax or
levy, other than taxes imposed on the net income of the Bank, and such taxes or
levies, other than as excepted, shall be paid by the Applicant.  The provisions
of this paragraph will survive payment in full hereunder.

    8.     This Schedule and Schedule "B" shall be binding upon the Applicant,
its successors and assigns and shall enure to the benefit of the Bank, its
successors, transferees and assigns.  Any provision of this Schedule and any
provision of Schedule "B" which is void or unenforceable shall be ineffective
to the extent void or unenforceable and shall be severable from the other
provisions  of the applicable Schedule and this Schedule and Schedule "B" shall
be interpreted as if such provision were not included  in Schedule "A" or
Schedule "B", as applicable.  Time and the currency of payment hereunder shall
be deemed to be of the essence hereof.  None of the terms of this Schedule or
of Schedule "B" shall be amended except in writing signed by the Bank and the
Applicant and any waiver by the Bank shall not constitute any further waiver.
The Uniform Customs and Practice for Documentary Credits as most recently
published by the International Chamber of Commerce (the "UCP") shall in all
respects apply to each standby or commercial letter of credit and shall be
deemed for such purpose to be a part hereof as if fully incorporated herein.
In the event of any conflict between the UCP and the governing law of the
Agreement, the UCP shall prevail to the extent necessary to remove the
conflict.
<PAGE>   28


                                  SCHEDULE "B"

                       COMMERCIAL DOCUMENTARY INSTRUMENTS


           This Schedule is part of the letter loan agreement (the "Agreement")
dated April 19, 1995, between The Bank of Nova Scotia (the "Bank") and Lear
Seating Canada Ltd. (the "Applicant").  Canadian and U.S. dollar denominated
commercial letters of credit (each a "Commercial Documentary Instrument") shall
be Availments which may be obtained under the Revolving Term Credit referred to
in the Agreement, provided that each Commercial Documentary Instrument shall be
in form satisfactory to the Bank and have a term to expiry of not more than 365
days and further provided that the issuance thereof will not contravene any
laws, regulations or orders applicable to such Documentary Instrument in any
jurisdiction.  All other capitalized terms not defined herein shall have the
respective meanings given to them in the Agreement.

           IN CONSIDERATION of the issue by the Bank from time to time of one
or more Commercial Documentary Instruments prepared in accordance with an
application or applications which have been or will be entered into by the
Applicant from time to time during the term of the Agreement and in addition to
the terms contained in Schedule "A" hereto, the Applicant hereby agrees with
the Bank as follows:

    1.     If a Commercial Documentary Instrument does not specify the unit
price of the goods, wares and merchandise and other commodities which may be
purchased or shipped under or by virtue of such Commercial Documentary
Instrument (the "Goods") and does not state that partial shipments are not
permitted, the Bank shall be entitled to be paid the full amount of any Draft
honoured in respect of a partial shipment notwithstanding that it is for an
amount that is disproportionate to the relative partial shipment.

    2.     All users of a Commercial Documentary Instrument shall be deemed to
be agents of the Applicant and neither the Bank nor its agents or
correspondents shall be responsible for the negligence or fraudulence of any
user of a Commercial Documentary Instrument, for the existence, nature,
condition, description, value, quality or quantity of the Goods, for the
packing, shipment, export, import, handling, storage or delivery thereof, or
for the safety or preservation thereof at any time, and neither the Bank nor
its agents or correspondents shall be liable for any loss resulting from the
total or partial destruction of or damage to or deterioration or fall in value
of the Goods, or from the delay in arrival or failure to arrive of either the
Goods or of any of the documents relating thereto, or from the inadequacy or
invalidity of any document or insurance, or from the default or insolvency of
any insurer, carrier or other person issuing any document with respect to the
Goods, or from failure to give or delay in giving notice of arrival of the
Goods or any other notice, or from any error in or misinterpretation of or
default or delay in the sending, transmission, arrival or delivery of any
message, whether in cipher or not, by post, telegraph, cable, wireless or
otherwise, and the obligations hereunder of the Applicant to the Bank shall not
be in any way lessened or affected if any Draft or document accepted, paid or
acted upon by the Bank or its agents or correspondents does not bear a
<PAGE>   29

                                     - 2 -

reference or sufficient reference to a Commercial Documentary Instrument or if
no note thereof is made on a Commercial Documentary Instrument.

<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1995
<PERIOD-START>                             JAN-01-1995
<PERIOD-END>                               APR-01-1995
<CASH>                                              16
<SECURITIES>                                         0
<RECEIVABLES>                                      675
<ALLOWANCES>                                         0
<INVENTORY>                                        115
<CURRENT-ASSETS>                                   904
<PP&E>                                             521
<DEPRECIATION>                                     163
<TOTAL-ASSETS>                                    1798
<CURRENT-LIABILITIES>                              957
<BONDS>                                            520
<COMMON>                                             1
                                0
                                          0
<OTHER-SE>                                         216
<TOTAL-LIABILITY-AND-EQUITY>                      1798
<SALES>                                           1044
<TOTAL-REVENUES>                                  1044
<CGS>                                              967
<TOTAL-COSTS>                                      967
<OTHER-EXPENSES>                                    31
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                  14
<INCOME-PRETAX>                                     31
<INCOME-TAX>                                        14
<INCOME-CONTINUING>                                 17
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                        17
<EPS-PRIMARY>                                      .34
<EPS-DILUTED>                                      .34
        

</TABLE>


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