LEAR CORP /DE/, 10-Q, 1997-08-12

LEAR CORP /DE/
10-Q, 1997-08-12
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 June 28, 1997

[ ] 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 CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization)

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

13-3386776
(I.R.S. Employer Identification No.)

48086-5008
(zip code)

(248) 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.

Number of shares of Common Stock, $0.01 par value per share, outstanding at
July 31, 1997: 66,330,112

================================================================================
<PAGE> 2

LEAR CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 28, 1997

INDEX

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I -- Financial Information:
Item 1 -- Consolidated Financial Statements
Introduction to the Consolidated Financial Statements......................... 3
Consolidated Balance Sheets -- June 28, 1997 and December 31, 1996............ 4
Consolidated Statements of Income -- Three and Six Month Periods ended June
28, 1997 and June 29, 1996................................................... 5
Consolidated Statements of Cash Flows -- Six Month Periods ended June 28, 1997
and June 29, 1996............................................................ 6
Notes to the Consolidated Financial Statements................................ 7
Item 2 -- Management's Discussion and Analysis of Financial Condition and Results
of Operations................................................................. 11
Part II -- Other Information:
Item 4 -- Submission of Matters to a Vote of Security Holders.................... 15
Item 6 -- Exhibits and Reports on Form 8-K....................................... 16
Signatures......................................................................... 17
</TABLE>

2
<PAGE> 3

LEAR CORPORATION

PART I -- FINANCIAL INFORMATION

ITEM 1 -- CONSOLIDATED FINANCIAL STATEMENTS

INTRODUCTION TO THE CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements of Lear Corporation and
subsidiaries (the "Company") have been prepared by Lear Corporation, 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 Annual Report on Form
10-K as filed with the Securities and Exchange Commission for the period ended
December 31, 1996.

The financial information presented reflects all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation 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 CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
JUNE 28, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 16.5 $ 26.0
Accounts receivable, net........................................... 1,102.6 909.6
Inventories........................................................ 190.5 200.0
Recoverable customer engineering and tooling....................... 124.0 113.9
Other.............................................................. 93.5 97.9
---------- ----------
1,527.1 1,347.4
---------- ----------
LONG-TERM ASSETS:
Property, plant and equipment, net................................. 868.4 866.3
Goodwill, net...................................................... 1,452.8 1,448.2
Other.............................................................. 166.6 154.9
---------- ----------
2,487.8 2,469.4
---------- ----------
$ 4,014.9 $3,816.8
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings.............................................. $ 24.5 $ 10.3
Accounts payable................................................... 1,050.4 960.5
Accrued liabilities................................................ 601.7 520.2
Current portion of long-term debt.................................. 9.7 8.3
---------- ----------
1,686.3 1,499.3
---------- ----------
LONG-TERM LIABILITIES:
Deferred national income taxes..................................... 43.8 49.6
Long-term debt..................................................... 994.1 1,054.8
Other.............................................................. 185.8 194.4
---------- ----------
1,223.7 1,298.8
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 150,000,000 authorized; 66,252,554
issued at June 28, 1997 and 65,586,129 issued at December 31,
1996............................................................ .7 .7
Additional paid-in capital......................................... 844.6 834.5
Notes receivable from sale of common stock......................... (.5) (.6)
Less -- Common stock held in treasury, 10,230 shares at cost....... (.1) (.1)
Retained earnings.................................................. 297.1 194.1
Minimum pension liability adjustment............................... (1.0) (1.0)
Cumulative translation adjustment.................................. (35.9) (8.9)
---------- ----------
1,104.9 1,018.7
---------- ----------
$ 4,014.9 $3,816.8
========== ==========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

4
<PAGE> 5

LEAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................................. $1,839.3 $1,618.7 $3,563.3 $3,024.5
Cost of sales......................................... 1,625.8 1,451.8 3,171.9 2,737.0
Selling, general and administrative expenses.......... 67.2 49.0 133.3 92.3
Amortization of goodwill.............................. 9.7 7.4 19.4 14.7
-------- -------- -------- --------
Operating income.................................... 136.6 110.5 238.7 180.5
Interest expense...................................... 26.7 23.1 53.9 47.5
Other expense, net.................................... 7.3 3.9 12.8 7.0
-------- -------- -------- --------
Income before provision for national income taxes... 102.6 83.5 172.0 126.0
Provision for national income taxes................... 41.5 33.4 69.0 50.1
-------- -------- -------- --------
Net income.......................................... $ 61.1 $ 50.1 $ 103.0 $ 75.9
======= ======= ======= =======
Net income per common share......................... $ .89 $ .83 $ 1.51 $ 1.26
======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

5
<PAGE> 6

LEAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN MILLIONS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 28, JUNE 29,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................. $ 103.0 $ 75.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of goodwill............................ 87.3 67.7
Amortization of deferred financing fees.............................. 1.7 1.6
Other, net........................................................... (20.1) (.1)
Change in working capital items, net................................. (48.4) (19.3)
-------- --------
Net cash provided by operating activities.......................... 123.5 125.8
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment.............................. (75.1) (64.9)
Acquisitions, net....................................................... (59.1) (306.4)
Other, net.............................................................. 1.4 1.9
-------- --------
Net cash used in investing activities.............................. (132.8) (369.4)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in long-term debt, net........................................... (56.2) 260.1
Increase (decrease) in cash overdrafts.................................. 38.7 (8.0)
Short-term borrowings, net.............................................. 10.8 (5.4)
Other, net.............................................................. 3.5 .5
-------- --------
Net cash provided by (used in) financing activities................ (3.2) 247.2
-------- --------
Effect of foreign currency translation.................................... 3.0 (5.7)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS................................... (9.5) (2.1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......................... 26.0 34.1
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................ $ 16.5 $ 32.0
======== ========
CHANGES IN WORKING CAPITAL, net of impact of acquisitions:
Accounts receivable..................................................... $ (234.1) $ (141.0)
Inventories............................................................. 5.2 15.7
Accounts payable........................................................ 89.5 124.1
Accrued liabilities and other........................................... 91.0 (18.1)
-------- --------
$ (48.4) $ (19.3)
======== ========
SUPPLEMENTARY DISCLOSURE:
Cash paid for interest.................................................. $ 53.2 $ 46.8
======== ========
Cash paid for income taxes.............................................. $ 41.7 $ 41.6
======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

6
<PAGE> 7

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

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

(2) ACQUISITION OF MASLAND CORPORATION AND PRO FORMA FINANCIAL DATA

On June 27, 1996, the Company, through a wholly owned subsidiary ("PA
Acquisition Corp."), acquired 97% of the issued and outstanding shares of common
stock of Masland Corporation ("Masland") pursuant to an offer to purchase which
was commenced on May 30, 1996. On July 1, 1996, the remaining issued and
outstanding shares of common stock of Masland were acquired and PA Acquisition
Corp. merged with and into Masland, such that Masland became a wholly-owned
subsidiary of the Company. The aggregate purchase price for the acquisition of
Masland (the "Masland Acquisition") was $475.7 million (including the assumption
of $80.7 million of Masland's existing net indebtedness and $10.0 million in
fees and expenses). Masland was a leading supplier of floor and acoustic systems
to the North American automotive market. Masland also was a major supplier of
interior luggage compartment trim components and other acoustical products which
are designed to minimize noise, vibration and harshness for passenger cars and
light trucks.

The Masland Acquisition was accounted for as a purchase, and accordingly,
the assets purchased and liabilities assumed in the acquisition have been
reflected in the accompanying consolidated balance sheets and the operating
results of Masland have been included in the consolidated financial statements
since the date of acquisition.

The following pro forma unaudited financial data is presented to illustrate
the estimated effects of (i) the Masland Acquisition (including the refinancing
of certain debt of Masland pursuant to the Company's prior revolving senior
credit facilities (the "Prior $1.8 billion Credit Agreements")), and (ii) the
issuance of 7,500,000 shares of the Company's common stock and the issuance of
$200.0 million aggregate principal amount of the Company's 9 1/2% Subordinated
Notes in July, 1996, and the application of the net proceeds to the Company
therefrom to repay indebtedness outstanding under the Company's Prior $1.5
billion Credit Agreement, a portion of which was incurred to finance the Masland
Acquisition, (collectively, the "Pro Forma Transactions") as if the Pro Forma
Transactions had occurred as of January 1, 1996 (unaudited; in millions, except
per share data):

<TABLE>
<CAPTION>
THREE MONTHS ENDED, SIX MONTHS ENDED,
JUNE 29, 1996 JUNE 29, 1996
------------------- -----------------
<S> <C> <C>
Net sales................................... $ 1,758.9 $ 3,286.2
Net income.................................. $ 49.8 $ 77.7
Net income per common share................. $ .73 $ 1.15
</TABLE>

(3) ACQUISITION OF DUNLOP COX

On June 5, 1997, the Company acquired all of the outstanding shares of
common stock of Dunlop Cox Limited ("Dunlop Cox") for approximately $60 million
(the "Dunlop Cox Acquisition"). Dunlop Cox, based in Nottingham, England,
provides Lear with the ability to design and manufacture manual and
electronically-powered automotive seat adjusters. For the year ended December
31, 1996, Dunlop Cox had sales of approximately $39 million. The Dunlop Cox
Acquisition was accounted for as a purchase, and accordingly, the assets
purchased and liabilities assumed have been reflected at their estimated fair
market value in the accompanying balance sheet as of June 28, 1997. The
operations of Dunlop Cox from the acquisition date were not material to the
consolidated statement of income of the Company.

7
<PAGE> 8

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(4) 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>
JUNE 28, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Raw materials............................................ $125.5 $124.7
Work-in-process.......................................... 21.0 25.0
Finished goods........................................... 44.0 50.3
------ ------
$190.5 $200.0
====== ======
</TABLE>

(5) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciable property is
depreciated over the estimated useful lives of the assets, using principally the
straight-line method. A summary of property, plant and equipment is shown below
(in millions):

<TABLE>
<CAPTION>
JUNE 28, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Land.................................................... $ 55.5 $ 52.3
Buildings and improvements.............................. 303.6 287.6
Machinery and equipment................................. 869.2 836.8
-------- --------
Total property, plant and equipment..................... 1,228.3 1,176.7
Less accumulated depreciation........................... (359.9) (310.4)
-------- --------
Net property, plant and equipment....................... $ 868.4 $ 866.3
======== ========
</TABLE>

(6) LONG-TERM DEBT

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

<TABLE>
<CAPTION>
JUNE 28, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Credit agreements........................................ $441.1 $ 481.3
Industrial revenue bonds................................. 32.0 22.6
Other.................................................... 60.7 89.2
------ --------
533.8 593.1
Less -- Current portion.................................. (9.7) (8.3)
------ --------
524.1 584.8
------ --------
9 1/2% Subordinated Notes.............................. 200.0 200.0
8 1/4% Subordinated Notes.............................. 145.0 145.0
11 1/4% Senior Subordinated Notes...................... 125.0 125.0
------ --------
470.0 470.0
------ --------
$994.1 $1,054.8
====== ========
</TABLE>

On July 15, 1997, the Company redeemed all of its 11 1/4% Senior
Subordinated Notes due 2000 at par using borrowings under its existing $1.8
billion multi-currency revolving credit facility with a syndicate of lenders
(the "Credit Agreement").

8
<PAGE> 9

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(7) COMMON SHARES OUTSTANDING

The weighted average number of shares of common stock outstanding is as
follows for the periods presented:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary......................... 68,070,273 60,060,508 68,059,280 59,984,438
Fully Diluted................... 68,282,638 60,078,101 68,248,762 60,052,761
</TABLE>

(8) FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments selectively to offset
exposures to market risks arising from changes in foreign exchange rates and
interest rates. Derivative financial instruments currently utilized by the
Company primarily include forward foreign exchange contracts and interest rate
swaps.

Certain foreign currency contracts entered into by the Company qualify for
hedge accounting as only firm commitments to purchase raw materials in a foreign
currency are hedged. Gains and losses from these contracts are deferred and
generally recognized in cost of sales as of the settlement date. Other foreign
currency contracts entered into by the Company, which do not receive hedge
accounting treatment, are marked to market with unrealized gains or losses
recognized in other expense in the income statement. Interest rate swaps are
accounted for by recognizing interest expense and interest income in the amount
of anticipated interest payments.

(9) FINANCIAL ACCOUNTING STANDARDS

Earnings per Share

During 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which changes the calculation of earnings per share to be more
consistent with countries outside of the United States. In general, the
statement requires two calculations of earnings per share to be disclosed, basic
EPS and diluted EPS. Basic EPS is to be computed using only weighted average
shares outstanding. The Company's diluted EPS is computed using the average
share price for the period when calculating the dilution of options and
warrants. This statement must be adopted by the Company in its December 31, 1997
consolidated financial statements and early adoption is not permitted. If this
statement had been adopted for the periods presented, the net income and per
share amounts would have been as follows (unaudited; in millions, except per
share data):

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income................................. $61.1 $50.1 $103.0 $75.9
===== ===== ====== =====
Basic net income per share................. $ .92 $ .88 $ 1.56 $1.34
===== ===== ====== =====
Diluted net income per share............... $ .90 $ .83 $ 1.51 $1.27
===== ===== ====== =====
</TABLE>

Comprehensive Income

During 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for the reporting and display of
comprehensive income. Comprehensive income is defined as all changes in a
Company's net assets except changes resulting from transactions with
shareholders. It differs from net income in that certain items currently
recorded to equity would be a part of comprehensive income.

9
<PAGE> 10

LEAR CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Comprehensive income must be reported in a financial statement with the
cumulative total presented as a component of equity. This statement must be
adopted by the Company in its 1998 quarterly financial statements.

Segment Information

On June 30, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information", which introduces a new model for
segment reporting based upon the way the chief operating decision-maker
organizes segments within the Company for making operating decisions and
assessing performance. The Statement requires disclosures for each segment that
are similar to those currently required with the addition of quarterly
disclosure requirements and geographic data by country. This statement must be
adopted by the Company in its December 31, 1998 consolidated financial
statements.

(10) SUBSEQUENT EVENTS

On June 30, 1997, the Company's then-largest shareholders, certain merchant
banking partnerships affiliated with Lehman Brothers Holdings Inc., sold all
10,284,854 of their shares of common stock of Lear in a secondary offering.

On July 31, 1997, the Company acquired certain equity and partnership
interests in Keiper Car Seating GmbH & Co. and certain of its subsidiaries and
affiliates (collectively, "Keiper") for approximately $260 million. Keiper was a
leading supplier of automotive vehicle seat systems with operations in Germany,
Italy, Hungary, Brazil and South Africa, with unaudited sales for the year ended
December 31, 1996 of approximately $615 million.

On August 4, 1997, the Company entered into a definitive agreement to
acquire ITT Automotive Seat Sub-Systems Unit ("ITT Seat Sub-Systems"), a North
American supplier of power seat adjusters and power recliners. ITT Seat
Sub-Systems had 1996 sales to non-Lear facilities of approximately $115 million.

10
<PAGE> 11

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

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 28, 1997 VS. THREE MONTHS ENDED JUNE 29, 1996.

Net sales increased by 13.6% to $1,839.3 million in the second quarter of
1997 as compared to $1,618.7 million in the second quarter of 1996. Net sales
for the quarter ended June 28, 1997 benefited from the acquisitions of Masland
Corporation ("Masland"), Borealis Industrier, AB ("Borealis") and Empetek
Autodily S.R.O. ("Empetek") in June 1996, December 1996 and March 1997,
respectively, which collectively accounted for $226.3 million of the increase,
and new business introduced globally within the past year. Partially offsetting
the increase in sales were the adverse impacts of the General Motors and
Chrysler work stoppages in the United States, Canada and Mexico and exchange
rate fluctuations in Europe. As a result of Lear's continued global expansion,
the Company anticipates that foreign exchange fluctuations will continue to have
an impact on net sales.

Net sales in the United States and Canada of $1,193.9 million increased in
the second quarter of 1997 as compared to the second quarter of 1996 by $148.6
million or 14.2%. Sales in the current quarter benefited from the contribution
of $156.0 million in sales from the Masland acquisition and new sport utility
and truck programs introduced by domestic automotive manufacturers as industry
build schedules for mature programs remained essentially unchanged. Partially
offsetting the increase in sales was downtime associated with customer work
stoppages which collectively impacted revenue by $59.4 million.

Net sales in Europe of $484.1 million in the second quarter of 1997
surpassed the comparable period in the prior year by $49.8 million or 11.5%.
Sales in the quarter ended June 28, 1997 benefited from $54.5 million in sales
from the Borealis acquisition and vehicle production increases on established
programs in Italy and Austria. Partially offsetting the increase in sales were
unfavorable exchange rate fluctuations in Germany, Italy, Sweden, and Austria.

Net sales of $161.3 million in the Company's remaining geographic regions,
consisting of Mexico, South America, the Asia/Pacific Rim region and South
Africa, exceeded the second quarter of 1996 by $22.2 million or 16.0%. Sales in
the second quarter of 1997 reflect increased market demand for new and ongoing
seat programs in South America and $12.3 million in sales from the Masland
acquisition. Partially offsetting the increase in sales was the Chrysler work
stoppage and the production phase out of a General Motors truck program.

Gross profit (net sales less cost of sales) and gross margin (gross profit
as a percentage of net sales) were $213.5 million and 11.6% for the second
quarter of 1997 as compared to $166.9 million and 10.3% for the second quarter
of 1996. Gross profit in 1997 reflects the contribution of the Masland and
Borealis acquisitions coupled with the benefits derived from increased foreign
sales. Partially offsetting the increase in gross profit was the impact of
customer work stoppages in North America.

Selling, general and administrative expenses, including research and
development, as a percentage of net sales increased to 3.7% in the second
quarter of 1997 as compared to 3.0% in the second quarter of 1996. Actual
expenditures increased in comparison to prior year due to the inclusion of
Masland and Borealis operating expenses and increased design, development and
administrative expenses necessary to support domestic and international
business.

Operating income and operating margin (operating income as a percentage of
net sales) improved to $136.6 million and 7.4% for the quarter ended June 28,
1997 as compared to $110.5 million and 6.8% a year earlier. For the current
quarter, operating income benefited from the incremental operating income
generated from acquisitions along with the benefits derived from global vehicle
build schedules for new and ongoing programs. Partially offsetting the increase
in operating income were reduced utilization at General Motors and Chrysler
facilities and increased engineering and administrative support expenses at
North American and European technology centers. Non-cash depreciation and
amortization charges were $43.8 million and $34.5 million for the second quarter
of 1997 and 1996, respectively.

11
<PAGE> 12

For the quarter ended June 28, 1997, interest expense increased by $3.6
million to $26.7 million as compared to the corresponding period in the prior
year. The increase in interest expense was largely the result of borrowings
incurred to finance the Masland and Borealis acquisitions which more than offset
the proceeds generated from the Company's July 1996 common stock offering.

Other expenses for the three months ended June 28, 1997, which include
state and local taxes, foreign exchange, minority interests in consolidated
subsidiaries, equity in net income of affiliates and other non-operating
expenses, increased to $7.3 million from $3.9 million in the second quarter of
1996 primarily due to state and local taxes and foreign exchange losses.

Net income for the second quarter of 1997 was $61.1 million, or $.89 per
share, as compared to $50.1 million, or $.83 per share in the prior year second
quarter. The provision for income taxes was $41.5 million resulting in an
effective tax rate of 40.4% for the current quarter as compared to $33.4 million
and an effective tax rate of 40.0% in the prior year. Earnings per share
increased in the second quarter of 1997 by 7.2% despite the previously mentioned
customer work stoppages and an increase in the weighted average number of shares
outstanding of approximately 8.2 million shares.

SIX MONTHS ENDED JUNE 28, 1997 VS. SIX MONTHS ENDED JUNE 29, 1996.

Net sales of $3,563.3 million for the six month period of 1997 increased by
$538.8 million or 17.8% as compared to $3,024.5 million for the six month period
of 1996. Sales as compared to the prior year benefited from acquisitions,
primarily Masland and Borealis, which accounted for $433.9 million of the
increase, new business introduced worldwide within the past twelve months and
incremental volume and content on established programs in North America and
South America. Partially offsetting the increase in sales were customer work
stoppages and exchange rate fluctuations in Europe.

Gross profit and gross margin improved to $391.4 million and 11.0% in the
first half of 1997 as compared to $287.5 million and 9.5% a year earlier. Gross
profit in the current six months reflects the contribution of the Masland and
Borealis acquisitions coupled with the benefits derived from increased global
market demand on new and carryover programs. Partially offsetting the increase
in gross profit were the General Motors and Chrysler work stoppages in the
second quarter of 1997.

Selling, general and administrative expenses, including research and
development, for the six month period ended June 28, 1997, increased as a
percentage of net sales to 3.7% from 3.1% in the prior year. Actual expenditures
increased in comparison to prior year due to the inclusion of Masland and
Borealis operating expenses and increased North American and European
engineering and administrative expenses required to support the expansion of
existing business and expenses related to the pursuit of new business
opportunities.

Operating income and operating margin improved to $238.7 million and 6.7%
in the first half of 1997 as compared to $180.5 million and 6.0% for the first
half of 1996. Operating income in the first half of 1997 benefited from the
acquisition of Masland coupled with increased industry build schedules by
domestic and foreign automotive manufacturers on new and established programs.
Partially offsetting the increase in operating income were engineering and
administrative support expenses and the adverse impact of customer work
stoppages in the second quarter of 1997. Non-cash depreciation and amortization
charges were $87.3 million and $67.7 million for the first half of 1997 and
1996, respectively.

For the six months ended June 28, 1997, interest expense increased by $6.4
million to $53.9 million over the first six months of 1996 largely as a result
of interest on additional debt incurred to finance the Masland and Borealis
acquisitions.

Other expenses for the first half of 1997, which include state and local
taxes, foreign exchange, minority interests in consolidated subsidiaries, equity
in net income of affiliates and other non-operating expenses increased to $12.8
million from $7.0 million for the first half of 1996 due to increased provisions
for minority interest and state and local taxes.

Net income for the first six months of 1997 was $103.0 million or $1.51 per
share as compared to $75.9 million or $1.26 per share for the first six months
of 1996. Earnings per share in the current six month

12
<PAGE> 13

period increased by 19.8% over the same period in 1996, despite the impact of
the General Motors and Chrysler work stoppages and an increase in the weighted
average number of shares outstanding of approximately 8.1 million shares. The
provision for income taxes in the current period was $69.0 million, or an
effective tax rate of 40.1% as compared to $50.1 million, or an effective tax
rate of 39.8% in the previous year.

LIQUIDITY AND FINANCIAL CONDITION

Lear's financial position continued to strengthen during the first half of
1997 despite the additional debt incurred in 1997 to acquire Dunlop Cox and
Empetek and the impact of the General Motors and Chrysler work stoppages. Strong
cash flows were sufficient to offset acquisition costs and resulted in an
improved total debt to total capitalization ratio of 48.2% at June 28, 1997, as
compared to 49.7% at March 29, 1997 and 51.3% at December 31, 1996. In addition,
Lear received upgrades from both Standard and Poor's Corporation ("S&P") and
Moody's Investors Service ("Moody's"). On June 27, 1997, S&P upgraded Lear's
corporate rating from BB+ to BBB- and the Company's 8 1/4% and 9 1/2%
Subordinated Notes from BB- to BB+. On August 7, 1997, Moody's upgraded Lear's
$1.8 billion secured bank facility (the "Credit Agreement") from Ba1 to Baa3 and
the 8 1/4% and 9 1/2% Subordinated Notes from B1 to Ba3.

As of June 28, 1997, the Company had $441.1 million outstanding under the
Credit Agreement, which matures on September 30, 2001, and $50.1 million
committed under outstanding letters of credit, resulting in approximately $1.3
billion unused and available. On July 15, 1997, the Company took advantage of
the favorable interest rate environment by redeeming $125.0 million in aggregate
principal amount of its 11 1/4% Senior Subordinated Notes due 2000 at par with
borrowings under the Credit Agreement.

In addition to debt outstanding under the Credit Agreement, the Company had
an additional $587.2 million of debt outstanding as of June 28, 1997, consisting
primarily of $470.0 million of subordinated notes (including the $125.0 million
11 1/4% Senior Subordinated Notes) due between the years 2000 and 2006.

Net cash provided by operating activities was $123.5 million during the
first six months of 1997 compared to $125.8 million for the same period in 1996.
Net income increased 35.7%, from $75.9 million in the first six months of 1996
to $103.0 million in the same period of 1997, as a result of acquisitions, new
business programs and increased volume and content on existing programs. In
addition, net income included non-cash depreciation and goodwill amortization
charges of $87.3 million in the first half of 1997 and $67.7 million in 1996.
Cash flow provided by increased earnings was partially offset by the net change
in working capital, primarily due to the timing of accounts receivable
collections.

Net cash used in investing activities decreased from $369.4 million in the
first six months of 1996 to $132.8 million in 1997. The 1996 Masland acquisition
resulted in a net use of funds of $306.4 million while the 1997 Dunlop Cox and
Empetek acquisitions resulted in an aggregate net use of $59.1 million. Capital
expenditures increased from $64.9 million in the first half of 1996 to $75.1
million in the same period of 1997 as a result of acquisitions and expenditures
incurred to support future programs. Approximately $120 million of additional
capital expenditures are expected for the remainder of 1997.

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.

ACCOUNTING POLICIES

Also during 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information". SFAS No. 130 requires

13
<PAGE> 14

increased disclosure of comprehensive income and must be adopted by the Company
in its 1998 quarterly financial statements. SFAS No. 131 requires limited
segment data on a quarterly basis and geographic data by country. SFAS No. 131
must be adopted by the Company in its December 31, 1998 consolidated financial
statements. These requirements are discussed in further detail in Note 9 to its
June 28, 1997 quarterly financial statements included herein.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
any forward-looking statements, including statements regarding the intent,
belief, or current expectations of the Company or its management, are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those in the forward-looking
statements as a result of various factors including, but not limited to, (i)
general economic conditions in the markets in which the Company operates, (ii)
fluctuations in worldwide or regional automobile and light truck production,
(iii) labor disputes involving the Company or its significant customers, (iv)
changes in practices and/or policies of the Company's significant customers
towards outsourcing automotive components and systems and (v) other risks
detailed from time to time in the Company's Securities and Exchange Commission
filings. The Company does not intend to update these forward-looking statements.

14
<PAGE> 15

LEAR CORPORATION

PART II -- OTHER INFORMATION

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Annual Meeting of Stockholders of Lear Corporation was held on May
15, 1997. At the meeting, the following matters were submitted to a vote of the
stockholders of Lear Corporation. Pursuant to the rules of the New York Stock
Exchange, there were no broker non-votes in any of the matters described below.

(1) The election of four directors to hold office until the Annual
Meeting of Stockholders in the year 2000. The vote with respect to each
nominee was as follows:

<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
- ------------------ ---------- --------
<S> <C> <C>
G. Andrea Botta 31,784,755 89,983
Irma B. Elder 31,782,889 91,849
David P. Spalding 31,675,637 199,101
James A. Stern 31,675,173 199,565
</TABLE>

(2) To approve the Lear Corporation Long-Term Stock Incentive Plan

<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
- ------------------ ---------- --------
<S> <C> <C>
43,493,297 15,610,375 77,892
</TABLE>

(3) The appointment of the firm of Arthur Andersen LLP as independent
auditors of Lear Corporation for the year ending December 31, 1997.

<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
- ------------------ ---------- --------
<S> <C> <C>
59,082,630 64,524 34,410
</TABLE>

15
<PAGE> 16

ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

<TABLE>
<C> <S>
10.1 Lear Corporation 1996 Stock Option Plan, as amended and restated, filed
herewith.
10.2 Lear Corporation Long-Term Stock Incentive Plan, as amended and restated,
filed herewith.
10.3 Lear Corporation Outside Directors Compensation Plan, as amended and restated,
filed herewith.
10.4 Second Amended and Restated Secured Promissory Note dated as of March 29, 1997
between Lear Corporation and James A. Hollars, filed herewith.
10.5 Purchase Agreement dated as of May 26, 1997 among Keiper GmbH & Co., Putsch
GmbH & Co. KG, Keiper Recaro GmbH, Keiper Car Seating Verwaltungs GmbH, Lear
Corporation GmbH & Co. and Lear Corporation, filed herewith.
27.1 Financial Data Schedule for the Quarter Ended June 28, 1997.
</TABLE>

(b) The following reports on Form 8-K were filed during the quarter ended
June 28, 1997.

April 3, 1997 -- Form 8-K relating to the promotion of certain of the
Company's executive officers.
June 6, 1997 -- Form 8-K relating to the impact of work stoppages at
General Motors and Chrysler assembly plants.

16
<PAGE> 17

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 CORPORATION

By: /s/ DONALD J. STEBBINS

------------------------------------
Donald J. Stebbins
Senior Vice President and
Chief Financial Officer

Dated: August 12, 1997

17
<PAGE> 18

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.1 Lear Corporation 1996 Stock Option Plan, as amended and restated, filed herewith.
10.2 Lear Corporation Long-Term Stock Incentive Plan, as amended and restated, filed
herewith.
10.3 Lear Corporation Outside Directors Compensation Plan, as amended and restated, filed
herewith.
10.4 Second Amended and Restated Secured Promissory Note dated as of March 29, 1997
between Lear Corporation and James A. Hollars, filed herewith.
10.5 Purchase Agreement dated as of May 26, 1997 among Keiper GmbH & Co., Putsch GmbH &
Co. KG, Keiper Recaro GmbH, Keiper Car Seating Verwaltungs GmbH, Lear Corporation
GmbH & Co. and Lear Corporation, filed herewith.
27.1 Financial Data Schedule for the Quarter Ended June 28, 1997.
</TABLE>

<PAGE> 1
EXHIBIT 10.1

LEAR CORPORATION
1996 STOCK OPTION PLAN
(As Amended and Restated Effective January 1, 1997)

1. Purpose. The purposes of the Lear Corporation 1996 Stock Option
Plan (the "Plan") are, in general, to give Lear Corporation (the "Company") a
significant advantage in retaining employees, officers and directors and to
provide an incentive to selected key employees, officers and Eligible Directors
(as defined in Section 6(a)) of the Company, its subsidiaries and any parent
("Affiliates"), within the meaning of Section 424(f) of the Internal Revenue
Code of 1986, as amended ("Code"), and consultants and advisors whom the
Committee (as defined in Section 3) determines provide substantial and important
services to the Company (as limited in Section 6(a)), to acquire a proprietary
interest in the Company, to continue as employees, officers and directors or in
their other capacities, and to increase their efforts on behalf of the Company.
2. The Plan. Two types of stock options may be granted under the
Plan: incentive stock options as defined in Code Section 422 and the regulations
promulgated thereunder ("ISOs") and options that do not qualify as incentive
stock options ("NQSOs"). All options shall be exercisable to purchase shares of
common stock, $.01 par value (the "Common Stock"), of the Company.
Collectively, ISOs and NQSOs are referred to herein as "Options".
Subject to Sections 3 and 6(a), ISOs may be awarded to key employees
of the Company and its Affiliates, including employees who are officers and
Eligible Directors (as defined in Section 6(a)), but shall not be awarded to
Eligible Directors or others who are not employees.

<PAGE> 2

Subject to Sections 3 and 6(a), NQSOs may be awarded to employees,
Eligible Directors (as defined in Section 6(a)), and consultants and advisors
whom the Committee (as defined in Section 3) determines provide substantial and
important services to the Company (as limited in Section 6(a)).
To the extent that any Option is not designated as an ISO, or even if
so designated it does not qualify as an ISO, it shall be treated as a NQSO.
3. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company or any other committee
appointed by the Board of Directors of the Company, which committee for purposes
of this Plan shall be treated as the Compensation Committee, (the "Committee").
The Committee shall act by a majority of its members at the time in office and
eligible to vote on any particular matter, and such action may be taken either
by a vote at a meeting or in writing without a meeting. Subject to the
provisions of the Plan, the Committee shall from time to time and at its
discretion: (i) grant Options; (ii) determine which key employees, officers and
Eligible Directors (as defined in Section 6(a)), and consultants and advisors
performing substantial and important services (as limited in Section 6(a)) may
be granted such Options under the Plan ("Grantees"); (iii) determine whether any
Option shall be an ISO or NQSO; (iv) determine the number of shares subject to
each Option; (v) determine the term of each Option granted under the Plan; (vi)
determine the date or dates on which the Option shall vest and become
exercisable; (vii) determine the exercise price of any Option; (viii) determine
the fair market value of the Common Stock subject to the Options; (ix) determine
the terms of any agreement pursuant to which Options are granted; (x) amend any

-2-
<PAGE> 3

such agreement with the consent of the Grantee; and (xi) determine any other
matters specifically delegated to it under the Plan or necessary for the proper
administration of the Plan.
The Committee shall also have the sole and complete authority and
discretion to interpret and construe the terms of the Plan, of any agreement
pursuant to which Options are granted, and of any Option. Such interpretation
and construction by the Committee shall be final, binding and conclusive upon
all persons including, without limitation, the Company, stockholders of the
Company, the Plan and all persons claiming an interest under the Plan.
Notwithstanding anything contained in this Section to the contrary, no term of
the Plan relating to ISOs shall be interpreted, nor shall any discretion or
authority of the Committee be exercised, so as to disqualify the Plan under Code
Section 422 or, without the consent of the Grantee, to disqualify any ISO held
by a Grantee under Code Section 422.
No member of the Committee or any director, officer, employee or agent
of the Company shall be liable for any action, interpretation or construction
made in good faith with respect to the Plan or any Option granted hereunder.
4. Effectiveness and Termination of Plan. This Plan shall terminate
on the earliest of:
a. The tenth anniversary of the effective date of the Plan
as determined under this Section 4;
b. The date when all shares of the Common Stock reserved
for issuance under the Plan shall have been acquired
through exercise of Options granted under the Plan; or

-3-
<PAGE> 4

c. The date determined by the Company's Board of Directors
or the Committee.
This Plan shall become effective as of the date this Plan is approved by the
stockholders. Any Option outstanding under the Plan when the Plan terminates
shall remain in effect in accordance with the respective terms and conditions of
the Option and the Plan.
5. The Stock. The aggregate number of shares of Common Stock that may
be issued under the Plan shall be 1,000,000 shares; provided, however, that the
maximum number of shares of Common Stock available with respect to the Options
granted by the Committee to any one Grantee under the Plan shall not exceed
100,000. Such number of shares may be set aside out of the authorized but
unissued shares of Common Stock not reserved for any other purpose, or shares of
Common Stock held in or acquired for the treasury of the Company. If any Option
terminates or expires unexercised, in whole or in part, the shares thereby
released may again be made subject to Options granted hereunder.
6. Grant, Terms and Conditions of Options. Options may be granted by
the Committee at any time and from time to time prior to the termination of the
Plan. Each Option granted under the Plan shall be evidenced by an agreement in
substantially the form attached hereto as Exhibit A. The terms and conditions
of such Option agreement need not be identical with respect to each Grantee. The
Committee shall set forth in each such agreement: (i) the exercise price of the
Option; (ii) the number of shares of Common Stock subject to, and the expiration
date of, the Option; (iii) the manner, time and rate of exercise or vesting of
the Option; and (iv) whether the Option is an ISO or NQSO. For purposes of this
Section, an Option shall be deemed granted on the date the Committee selects an
individual to be a Grantee,

-4-
<PAGE> 5

determines the number of shares to be issued pursuant to such Option and
specifies the terms and conditions of the Option. Except as hereinafter
provided, Options granted pursuant to the Plan shall be subject to the following
terms and conditions:
a. Grantee. Subject to Section 2 hereof, the Grantees of any
Options hereunder shall be such key employees, officers and Eligible Directors
of the Company and its Affiliates, as determined by the Committee, and
consultants and advisors whom the Committee determines provide substantial and
important services to the Company. Notwithstanding the foregoing, the
substantial and important services provided by a consultant or an advisor may
not be in connection with the offer or sale of securities in a capital raising
transaction. An "Eligible Director" is any director who is an employee of the
Company or an Affiliate, or an Independent Director (as defined in Section
6(k)).
b. Price and Exercise. The exercise price of the shares of
Common Stock upon exercise of an Option shall be no less than the fair market
value of the shares at the time of the grant of an Option. If an ISO is granted
to an employee owning shares of the Company possessing more than 10% of the
total combined voting power of all classes of shares of the Company as defined
in Code Section 422 ("10% Stockholder"), the exercise price shall be no less
than 110% of the fair market value of the shares at the time of the grant of the
ISO. The fair market value of the Common Stock shall be:
(i) the closing price of publicly traded Common
Stock on the national securities exchange on which the Common
Stock is listed (if the Common Stock is so listed) or on the
NASDAQ National Market System (if the Common Stock is regularly
quoted on the NASDAQ National Market System);

-5-
<PAGE> 6

(ii) if not so listed or regularly quoted, the mean between
the closing bid and asked prices of publicly traded Common Stock in the
over-the-counter market; or
(iii) if such bid and asked prices are not available, as
reported by any nationally recognized quotation service selected by the
Company or as determined by the Committee in a manner consistent with the
provisions of the Code.
The notice of the exercise of any Option shall be accompanied by
payment in full of the exercise price. Except as hereinafter provided, the
exercise price shall be paid in United States dollars and in cash or by
certified or cashier's check payable to the order of the Company at the time of
purchase. At the discretion of the Committee, the exercise price, or any
portion thereof, may be paid with: (i) Common Stock acquired through the
exercise of an Option granted by the Company which Common Stock has been held by
the Grantee for at least one year, or any other Common Stock already owned by,
and in the possession of, the Grantee; or (ii) any combination of cash,
certified or cashier's check, and Common Stock meeting the requirements of
clause (i) above. Except as provided in the following sentence, any withholding
tax, up to the minimum withholding requirement for supplemental wages, shall be
paid with shares of Common Stock issuable to the Grantee upon exercise of the
Option, with a fair market value equal to the minimum required withholding tax.
If the Option is transferred pursuant to Section 7(b), however, any such
withholding obligation shall not be satisfied with shares of Common Stock
issuable to the Grantee upon exercise of the Option and may be paid by the
Grantee (not the transferee) with (i) cash or by certified or cashier's check;
(ii) Common Stock acquired through the exercise of an Option granted by the
Company which Common Stock has

-6-
<PAGE> 7

been held by the Grantee for at least one year, or any other Common Stock
already owned by, and in the possession of, the Grantee; or (iii) any
combination of cash, certified or cashier's check, and Common Stock meeting the
requirements of clause (ii) above. Shares of Common Stock used to satisfy the
exercise price of an Option and/or any required minimum withholding tax shall be
valued at their fair market value as determined by the Committee as of the date
of exercise.
c. Vesting. Options shall vest in accordance with the schedule
established for each Grantee; provided, however, that all Options awarded to a
Grantee shall vest immediately upon said Grantee's death or disability as
defined herein.
d. Forfeiture. Notwithstanding anything contained herein to
the contrary, the right (whether or not vested) of a Grantee to exercise his or
her outstanding Options, if any, shall be forfeited if the Committee determines,
in its sole discretion, that (i) the Grantee has entered into a business or
employment which is detrimentally competitive with the Company or substantially
injurious to the Company's financial interests; (ii) the Grantee has been
discharged from employment with the Company or an Affiliate for Cause; or (iii)
the Grantee performed acts of willful malfeasance or gross negligence in a
matter of material importance to the Company or an Affiliate. For purposes of
this Section 6(d), "Cause" shall have the meaning set forth in any unexpired
employment or severance agreement between the Grantee and the Company and/or an
Affiliate, and, in the absence of any such agreement, shall mean (i) the willful
and continued failure of the Grantee to substantially perform his or her duties
with or for the Company or an Affiliate, (ii) the engaging by the Grantee in
conduct which is significantly injurious to the Company or an Affiliate,
monetarily or otherwise, (iii) the Grantee's conviction

-7-
<PAGE> 8

of a felony, (iv) the Grantee's abuse of illegal drugs or other controlled
substances or (v) the Grantee's habitual intoxication. For purposes of this
Section 6(d), unless otherwise defined in the Grantee's employment or severance
agreement, an act or omission is "willful" if such act or omission was knowingly
done, or knowingly omitted to be done, by the Grantee not in good faith and
without reasonable belief that such act or omission was in the best interest of
the Company or an Affiliate.
e. Additional Restrictions on Exercise of an ISO. The aggregate
fair market value of Common Stock (determined at the time an ISO is granted)
with respect to which an ISO is exercisable for the first time by a Grantee
during any calendar year (under all incentive stock option plans, as defined in
Code Section 422, of the Company and its Affiliates) shall not exceed $100,000.
To the extent options are granted in excess of this limitation, they shall be
treated as NQSOs.
f. Duration of Options. Options may be granted for terms of up
to but not exceeding ten years from the effective date the particular Option is
granted. Notwithstanding the foregoing, ISOs granted to a 10% Stockholder may
be for a term of up to but not exceeding five years from the effective date the
particular ISO is granted.
g. Termination of Employment. A Grantee's right to exercise an
Option after the termination of his or her employment shall be only as follows:
(i) Retirement. If the Grantee has a termination of
employment by reason of retirement, he or she may within thirteen months
following such termination (but not later than the date on which the Option
would otherwise expire), exercise any Option that had vested and was
exercisable on the date of his or her retirement.

-8-
<PAGE> 9

However, in the event of his or her death prior to the end of the thirteen-month
period after his or her retirement, his or her estate shall have the right to
exercise any Option that had vested and was exercisable on the date the Grantee
retired within thirteen months following the Grantee's termination of employment
(but not later than the date on which the Option would otherwise expire). If
the Grantee has a termination of employment by reason of retirement, and if such
termination of employment does not constitute a vesting event under an Option,
the Grantee shall forfeit such Option to the extent that it was not vested and
exercisable on the date of his or her termination of employment.
(ii) Death. If a Grantee dies while employed by the Company or an
Affiliate, the Option shall vest and become exercisable upon death and his or
her estate shall have the right for a period of thirteen months following the
date of such death (but not later than the date on which the Option would
otherwise expire) to exercise the Option.
(iii) Disability. If a Grantee has a termination of employment due to
disability, as defined in Code Section 22(e)(3), the Option shall vest and
become exercisable upon his or her termination of employment due to disability
and he or she shall have the right for a period of thirteen months following the
date of such termination of employment (but not later than the date on which the
Option would otherwise expire) to exercise the Option.
(iv) Other Reasons. Except as provided in Section 6(d) hereof, if the
Grantee terminates employment due to any reason other than those provided above
under "Retirement," "Death," or "Disability," the Grantee or his or her state
(in the event of

-9-
<PAGE> 10

his or her death after such termination) (a) may exercise any Option to the
extent that it was vested and exercisable on the date of his or her
termination of employment within the 30-day period following such
termination (but not later than the date on which the Option would
otherwise expire) and (b) shall forfeit any Option to the extent that it
was not vested and exercisable on the date of his or her termination of
employment. Notwithstanding the foregoing, for Options granted after
December 31, 1996, if the Grantee voluntarily terminates employment other
than as provided under "Retirement," "Death," or "Disability," the Grantee
or his or her estate (in the event of his or her death after such
termination) shall forfeit the right (whether or not vested) to exercise
the Option on the date of his or her termination of employment.
(v) Independent Directors. An Option received by an
Independent Director shall vest and become exercisable solely in accordance
with its terms.
For purposes of this Section 6(g):
(A) "Termination of employment" shall mean the termination
of a Grantee's employment with the Company or an Affiliate. A Grantee employed
by a subsidiary shall also be deemed to have a termination of employment if the
subsidiary ceases to be an Affiliate of the Company, and the Grantee does not
immediately thereafter become an employee of the Company or another Affiliate.
A Grantee who is a consultant or advisor shall be considered to have terminated
employment when substantial and important services, as determined by the
Committee, are no longer provided to the Company by the Grantee.
(B) "Retirement" shall mean termination of employment on or
after attaining the age established by the Company as the normal retirement age
in any unexpired employment

-10-
<PAGE> 11

agreement between the Grantee and the Company and/or an Affiliate, or, in the
absence of such an agreement, the normal retirement age under the defined
benefit tax-qualified retirement plan or, if none, the defined contribution
tax-qualified retirement plan, sponsored by the Company or an Affiliate in which
the Grantee participates.
(C) A Grantee's "estate" shall mean his or her legal
representatives upon his or her death or any person who acquires the right to
exercise an Option by reason of the Grantee's death. The Committee may in its
discretion require the transferee of a Grantee to supply it with written notice
of the Grantee's death, a copy of the will or such other evidence as the
Committee deems necessary to establish the validity of the transfer of an
Option.
h. Transferability of Option and Stock Acquired Upon Exercise of
Option. Options shall be transferable only by will or the laws of descent and
distribution. Options shall be exercisable during the Grantee's lifetime only
by the Grantee, or by the guardian or legal representative of the Grantee. The
Committee may, in its discretion, require a Grantee's guardian or legal
representative to supply it with such evidence as the Committee deems necessary
to establish the authority of the guardian or legal representative to exercise
the Option on behalf of the Grantee. Except as limited by applicable securities
laws and the provisions of Section 8 hereof, shares of Common Stock acquired
upon exercise of Options hereunder shall be freely transferable.
i. Modifications, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding Options granted under the Plan. The
Committee may not lower the exercise price of outstanding Options, or accept
surrender of outstanding Options (to the extent not theretofore

-11-
<PAGE> 12

exercised) and grant new Options in substitution therefor (to the extent not
theretofore exercised) without approval of the holders of a majority of the
outstanding voting stock of the Company. The Committee shall not, however,
modify any outstanding ISO so as to specify a lower exercise price.
Notwithstanding the foregoing, no modification of an Option shall, without the
consent of the Grantee, alter or impair any rights or obligations under any
Option theretofore granted under the Plan or adversely affect the status of an
ISO under Code Section 422.
j. Other Terms and Conditions. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms, as
the Committee shall deem appropriate.
k. Independent Directors Grants. An Option under the Plan for
1,250 shares of Common Stock shall be granted each year to each person who is
serving as an Independent Director on the date of the first Board of Directors
meeting following the annual stockholders meeting. The exercise price for an
Option granted under this Section shall be equal to the fair market value of the
shares of Common Stock subject to the Option on the date of grant. Any Options
granted to an Independent Director pursuant to this Section 6(k) shall vest and
become exercisable, regardless of such Independent Director's continued service
as a member of the Board of Directors of the Company, upon the earlier of (i)
such Grantee's death or disability, as defined herein, or (ii) three years from
the effective date of the grant. For purposes hereof, "Independent Director"
shall mean any member of the Company's Board of Directors who during his or her
entire term as a director was not employed by Lehman Brothers Inc. or the
Company or any of their respective affiliates.

-12-
<PAGE> 13

7. Transferability of Option and Stock Acquired Upon Exercise of
Option.
a. Except as provided in paragraph (b), an Option shall be
transferable only by will or the laws of descent and distribution, or
pursuant to a domestic relations order (as defined in Code Section 414(p)).
b. Notwithstanding anything contained herein to the contrary,
the Committee may grant an Option pursuant to an Agreement that permits
transfer of any portion of that Option by the Grantee to (i) the Grantee's
spouse, children, step-children, grandchildren or step-grandchildren
("Immediate Family Members"), (ii) a trust or trusts for the exclusive
benefit of Immediate Family Members, (iii) a partnership in which Immediate
Family Members are the only partners or (iv) any other person as determined
by the Committee. Such a transfer shall only be permitted if there is no
consideration for the transfer, or the transfer is to a partnership in
which Immediate Family Members are the only partners and the Grantee's sole
consideration for the transfer was an interest in the partnership. Such a
transfer shall only become effective upon written notice to the Committee
of the transfer. Following the transfer of an Option, it shall remain
subject to the same terms and conditions that were applicable immediately
prior to the transfer and the term "Grantee" shall be deemed to refer to
the transferee except for the events described in paragraphs (d) and (g) in
Section 6 which shall continue to apply with respect to the original
Grantee not the transferee. A transferee of an Option may not transfer the
Option except as provided in paragraph (a).
c. Options shall be exercisable during the Grantee's lifetime
only by the Grantee or a transferee pursuant to paragraph (b) hereof, or by
the guardian or legal

-13-
<PAGE> 14

representative of the same. The Committee may, in its discretion, require
a guardian or legal representative to supply it with such evidence as the
Committee deems necessary to establish the authority of the guardian or
legal representative to exercise the Option on behalf of the Grantee or
transferee, as the case may be.
d. Except as limited by applicable securities laws and the
provisions of Section 8 hereof, shares of Common Stock acquired upon
exercise of Options hereunder shall be freely transferable.
8. Securities Law Requirements. If required by the Company, the notice
of exercise of an Option shall be accompanied by the Grantee's written
representation: (i) that the stock being acquired is purchased for investment
and not for resale or with a view to the distribution thereof; (ii)
acknowledging that such stock has not been registered under the Securities Act
of 1933, as amended (the "1933 Act"); and (iii) agreeing that such stock may not
be sold or transferred unless either there is an effective Registration
Statement for it under the 1933 Act, or in the opinion of counsel for the
Company, such sale or transfer is not in violation of the 1933 Act.
No Option granted pursuant to this Plan shall be exercisable in whole
or in part, nor shall the Company be obligated to sell any shares of Common
Stock subject to any such Option, if such exercise and sale may, in the opinion
of counsel for the Company, violate the 1933 Act (or other federal or state
statutes having similar requirements), as it may be in effect at that time.
Each Option shall be subject to the further requirement that, if at
any time the Committee shall determine in its discretion that the listing or
qualification of the shares of

-14-
<PAGE> 15

Common Stock subject to such Option under any securities exchange requirements
or under any applicable law, or the consent or approval of any governmental
regulatory body, is necessary as a condition of, or in connection with, the
granting of such Option or the issuance of shares thereunder, such Option may
not be exercised in whole or in part, unless such listing, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
No person who acquires shares of Common Stock under the Plan may,
during any period of time that such person is an affiliate of the Company,
within the meaning of the rules and regulations of the Securities and Exchange
Commission under the 1933 Act, sell such shares of Common Stock, unless such
offer and sale is made pursuant to (i) an effective registration statement under
the 1933 Act, which is current and includes the shares to be sold, or (ii) an
appropriate exemption from the registration requirements of the 1933 Act, such
as that set forth in Rule 144 promulgated under the 1933 Act.
With respect to individuals subject to Section 16 of the Securities
Exchange Act of 1934 ("1934 Act"), transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3, or its successors under the
1934 Act. To the extent any provision of the Plan or action by the Committee
fails to so comply, the Committee may determine, to the extent permitted by law,
that such provision or action shall be null and void.
9. Amendment of the Plan. The Committee may amend the Plan at any
time; provided, however, that approval of the holders of a majority of the
outstanding voting stock of the Company is required for amendments which:
(i) decrease the minimum exercise price for Options;

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<PAGE> 16

(ii) extend the term of the Plan beyond ten years;
(iii) extend the maximum terms of the Options granted
hereunder beyond ten years;
(iv) change the class of eligible employees, officers,
directors and other Grantees; or
(v) increase the aggregate number of shares of Common
Stock which may be issued pursuant to the provisions
of the Plan.
Notwithstanding the foregoing, the Committee may, without the
need for stockholders' approval, amend the Plan in any respect necessary to
qualify ISOs as incentive stock options under Code Section 422.
Notwithstanding the foregoing, Section 6(k) may only be
amended once every six months, unless the amendment is necessary to conform to
changes in the Code, or regulations thereunder.
10. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Grantee (or upon a transferee of a Grantee) to
exercise such Option.
11. No Limitation on Rights of the Company. The grant of any Option
shall not in any way affect the right or power of the Company to make
adjustments, reclassification, or changes in its capital or business structure
or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part
of its business or assets.
12. Plan Not a Contract of Employment. The Plan is not a contract of
employment, and the terms of employment of any Grantee shall not be affected in
any way by the Plan or related instruments except as specifically provided
therein. The establishment of the Plan shall not be construed as conferring any
legal rights upon any Grantee for a continuation of

-16-
<PAGE> 17

employment, nor shall it interfere with the right of the Company or an Affiliate
to discharge any Grantee and to treat him or her without regard to the effect
which such treatment might have upon him or her as a Grantee.
13. Expenses of the Plan. All of the expenses of the Plan shall be
paid by the Company.
14. Effect Upon Other Compensation. Nothing contained herein shall
prevent the Company or any Affiliate from adopting other or additional
compensation arrangements for its employees or directors.
15. Grantee to Have No Rights as a Stockholder. No Grantee of any
Option shall have any rights as a stockholder with respect to any shares subject
to his or her Option prior to the date on which he or she is recorded as the
holder of such shares on the records of the Company. No Grantee of any Option
shall have the rights of a stockholder until he or she has paid in full the
exercise price.
16. Notice. Notice to the Committee shall be deemed given if in
writing, and delivered personally or mailed to the Secretary of the Company at
its principal executive offices by certified, registered or express mail at the
then principal office of the Company.
17. Governing Law. This Plan and all Option agreements entered into
pursuant thereto shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware, determined without regard to its
conflicts of law rules.

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<PAGE> 1
EXHIBIT 10.2

LEAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)

<PAGE> 2

CONFORMED COPY

LEAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)

<PAGE> 3

LEAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article 1. Establishment, Objectives and Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Article 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Article 3. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Article 4. Shares Subject to the Plan and Maximum Awards . . . . . . . . . . . . . . . . . . . . . . . . 7

Article 5. Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Article 6. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Article 7. Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Article 8. Restricted Stock, Restricted Stock Units and Restricted Units . . . . . . . . . . . . . . . . 13

Article 9. Performance Units and Performance Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Article 10. Performance Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Article 11. Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Article 12. Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Article 13. Rights of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Article 14. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Article 15. Amendment, Modification and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Article 16. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Article 17. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Article 18. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Article 19. Legal Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>

<PAGE> 4

LEAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN

ARTICLE 1 ESTABLISHMENT, OBJECTIVES AND DURATION

1.1 ESTABLISHMENT OF THE PLAN. Lear Corporation, a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes a
long-term incentive compensation plan to be known as the "Lear Corporation
Long-Term Stock Incentive Plan" (hereinafter referred to as the "Plan"), as set
forth in this document. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Units, Performance Shares and Performance Units. In addition, the
Plan provides the opportunity for the deferral of the payment of salary,
bonuses and other forms of incentive compensation.

Subject to the approval of the Company's stockholders, the Plan shall
become effective as of January 1, 1996 (the " Effective Date") and shall remain
in effect as provided in Section 1.3 hereof.

1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to
optimize the profitability and growth of the Company through long- term
incentives which are consistent with the Company's objectives and which link
the interests of Participants to those of the Company's stockholders; to
provide Participants with an incentive for excellence in individual
performance; and to promote teamwork among Participants; and to give the
Company a significant advantage in attracting and retaining officers, key
employees and directors.

The Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract and retain the services of Participants who
make significant contributions to the Company's success and to allow
Participants to share in the success of the Company.

1.3 DURATION OF THE PLAN. The Plan shall commence on the
Effective Date, as described in Section 1.1 hereof, and shall remain in effect,
subject to the right of the Board of Directors to amend or terminate the Plan
at any time pursuant to Article 15 hereof, until all Shares subject to it
pursuant to Article 4 shall have been purchased or acquired according to the
Plan's provisions. However, in no event may an Award be granted under the Plan
on or after December 31, 2006.

1
<PAGE> 5

ARTICLE 2 DEFINITIONS

Whenever used in the Plan, the following terms shall have the meanings
set forth below, and when the meaning is intended, the initial letter of the
word shall be capitalized:

2.1 "AFFILIATES" means the Company's subsidiaries within the
meaning of Code Section 424(f) and, if any, the Company's parent within the
meaning of Code Section 424(e).

2.2 "AWARD" means, individually or collectively, a grant under
this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Units, Performance Shares or
Performance Units.

2.3 "AWARD AGREEMENT" means an agreement entered into by the
Company and a Participant setting forth the terms and provisions applicable to
an Award or Awards granted under this Plan to such Participant or the terms and
provisions applicable to an election to defer compensation under Section 8.2.

2.4 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the
meaning ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.

2.5 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors
of the Company.

2.6 "CAUSE" shall have the meaning set forth in any unexpired
employment or severance agreement between the Participant and the Company
and/or an Affiliate, and, in the absence of any such agreement, shall mean (i)
the willful and continued failure of the Participant to substantially perform
his or her duties with or for the Company or an Affiliate, (ii) the engaging by
the Participant in conduct which is significantly injurious to the Company or
an Affiliate, monetarily or otherwise, (iii) the Participant's conviction of a
felony, (iv) the Participant's abuse of illegal drugs or other controlled
substances or (v) the Participant's habitual intoxication. Unless otherwise
defined in the Participant's employment or severance agreement, an act or
omission is "willful" for this purpose if such act or omission was knowingly
done, or knowingly omitted to be done, by the Participant not in good faith and
without reasonable belief that such act or omission was in the best interest of
the Company or an Affiliate.

2.7 "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred (as of a particular day, as specified by the Board) as of the first
day any one or more of the following paragraphs shall have been satisfied:

2
<PAGE> 6

(a) Any Person (other than the Company or a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company, representing more than twenty
percent of the combined voting power of the Company's then
outstanding securities; or

(b) During any period of twenty-six consecutive months
(not including any period prior to the Effective
Date), individuals who at the beginning of such
period constitute the Board (and any new Directors,
whose election by the Board or nomination for
election by the company's stockholders was approved
by a vote of at least two-thirds of the Directors
then still in office who either were Directors at the
beginning of the period or whose election or
nomination for election was so approved) cease for
any reason (except for death, Disability or voluntary
Retirement) to constitute a majority thereof; or

(c) The stockholders of the Company approve: (i) a plan
of complete liquidation or dissolution of the
Company; or (ii) an agreement for the sale or
disposition of all or substantially all the Company's
assets; or (iii) a merger, consolidation or
reorganization of the Company with or involving any
other corporation, other than a merger, consolidation
or reorganization that would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) at least
eighty percent of the combined voting power of the
voting securities of the Company (or such surviving
entity) outstanding immediately after such merger,
consolidation, or reorganization.

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

2.9 "COMMITTEE" means, as specified in Article 3 herein, the
Compensation Committee of the Board or such other committee as may be appointed
by the Board to administer the Plan.

2.10 "COMPANY" means Lear Corporation, a Delaware corporation, and
any successor thereto as provided in Article 18 herein.

2.11 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.

3
<PAGE> 7

2.12 "DISABILITY" shall mean (a) long-term disability as defined
under the Company's long-term disability plan covering that individual, or (b)
if the individual is not covered by such a long-term disability plan,
disability as defined for purposes eligibility for a disability award under the
Social Security Act.

2.13 "EFFECTIVE DATE" shall have the meaning ascribed to such term
in Section 1.1 hereof.

2.14 "ELIGIBLE EMPLOYEE" means any officer or key employee of the
Company or any of its Affiliates. Directors who are not employed by the
Company or its Affiliates shall not be considered Eligible Employees under this
Plan.

2.15 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.

2.16 "EXERCISE PRICE" means the price at which a Share may be
purchased by a Participant pursuant to an Option.

2.17 "FAIR MARKET VALUE" means:

(a) the average of the high and low prices of publicly
traded Shares on the national securities exchange on
which the Shares as listed (if the Shares are so
listed) or on the NASDAQ National Market System (if
the Shares are regularly quoted on the NASDAQ
National Market System);

(b) if not so listed or regularly quoted, the mean between
the closing bid and asked prices of publicly traded Shares in
the over-the-counter market; and

(c) if such bid and asked prices are not available, as
reported by any nationally recognized quotation service
selected by the Committee or as determined by the Committee.

2.18 "FREESTANDING SAR" means an SAR that is granted independently
of any Options, as described in Article 7 herein.

2.19 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase
Shares granted under Article 6 herein which is designated as an Incentive Stock
Option and that is intended to meet the requirements of Code Section 422.

4
<PAGE> 8

2.20 "NONEMPLOYEE DIRECTOR" means an individual who is a member of
the Board of Directors of the Company but who is not an employee of the Company
or any of its Affiliates.

2.21 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to
purchase Shares granted under Article 6 herein that is not intended to meet the
requirements of Code Section 422.

2.22 "OPTION" means an Incentive Stock Option or a Nonqualified
Stock Option, as described in Article 6 herein.

2.23 "PARTICIPANT" means an Eligible Employee who has been selected
by the Committee to participate in the Plan pursuant to Section 5.2 and who has
outstanding an Award granted under the Plan. The term "Participant" shall not
include Nonemployee Directors.

2.24 "PERFORMANCE-BASED EXCEPTION" means the performance-based
exception from the tax deductibility limitations of Code Section 162(m) and any
regulations promulgated thereunder.

2.25 "PERFORMANCE SHARE" means an Award granted to a Participant,
as described in Article 9 herein.

2.26 "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 9 herein.

2.27 "PERSON" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.

2.28 "RESTRICTION PERIOD" means the period during which the
transfer of Shares of Restricted Stock/Units is limited in some way (based on
the passage of time, the achievement of performance objectives, or upon the
occurrence of other events as determined by the Committee, at its discretion),
and/or the Restricted Stock/Units are not vested.

2.29 "RESTRICTED STOCK" means a contingent grant of stock awarded
to a Participant pursuant to Article 8 herein.

2.30 "RESTRICTED STOCK UNIT" means a Restricted Unit granted to a
Participant, as described in Article 8 herein, which is payable in Shares.

5
<PAGE> 9

2.31 "RESTRICTED UNIT" means a notional account established
pursuant to an Award granted to a Participant, as described in Article 8
herein, which is (a) credited with amounts equal to Shares, or some other unit
of measurement specified in the Award Agreement, (b) subject to restrictions
and (c) payable in cash or Shares.

2.32 "RETIREMENT" shall mean termination of employment on or after
(a) attaining the age established by the Company as the normal retirement age
in any unexpired employment agreement between the Participant and the Company
and/or an Affiliate, or, in the absence of such an agreement, the normal
retirement age under the tax-qualified defined benefit retirement plan or, if
none, the tax-qualified defined contribution retirement plan, sponsored by the
Company or an Affiliate in which the Participant participates, or (b) attaining
age sixty-two with ten years of service with the Company and/or an Affiliate
provided the retirement is approved by the Chief Executive Officer of the
Company unless the Participant is an officer subject to Section 16 of the
Exchange Act in which case the retirement must be approved by the Committee.

2.33 "SHARES" means the shares of common stock, $.01 par value, of
the Company.

2.34 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted
alone or in connection with a related Option, designated as an SAR, pursuant to
the terms of Article 7 herein.

2.35 "TANDEM SAR" means an SAR that is granted in connection with a
related Option pursuant to Article 7 herein, the exercise of which requires
forfeiture of the right to purchase a Share under the related Option (and when
a Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).

ARTICLE 3 ADMINISTRATION

3.1 THE COMMITTEE. The Plan shall be administered by the
Compensation Committee of the Board, or by any other Committee appointed by the
Board, which Committee (unless otherwise determined by the Board) shall satisfy
the "nonemployee director" requirements of Rule 16 b-3 under the Exchange Act
and the regulations of Rule 16b-3 under the Exchange Act and the "outside
director" provisions of Code Section 162(m), or any successor regulations or
provisions. The members of the Committee shall be appointed from time to time
by, and shall serve at the discretion of, the Board of Directors. The
Committee shall act by a majority of its members at the time in office and
eligible to vote on any particular matter, and such action may be taken either
by a vote at a meeting or in writing without a meeting.

6
<PAGE> 10

3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law and
subject to the provisions herein, the Committee shall have full power to:
select Eligible Employees who shall participate in the Plan; select Nonemployee
Directors to receive Awards under Article 6; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent
with the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend or waive rules and regulations
for the Plan's administration; and (subject to the provisions of Article 15
herein) amend the terms and conditions of any outstanding Award to the extent
such terms and conditions are within the discretion of the Committee as
provided in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of
the Plan. As permitted by law and consistent with Section 3.1, the Committee
may delegate its authority as identified herein.

3.3 DECISIONS BINDING. All determinations and decisions made by
the Committee pursuant to the provisions of the Plan shall be final, conclusive
and binding on all persons, including the Company, its Board of Directors, its
stockholders, all Affiliates, employees, Participants and their estates and
beneficiaries.

ARTICLE 4 SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment
as provided in Section 4.3 herein, the number of Shares that may be issued or
transferred to Participants under the Plan shall be 2,200,000 Shares. The
maximum numbers of Shares that may be issued or transferred to the Participants
under Restricted Stock Units and Performance Units shall be 700,000.

The maximum number of Shares and Share equivalent units that may be
granted during any calendar year to any one Participant, under Options,
Freestanding SARs, Restricted Stock, Restricted Units or Performance Shares,
shall be 50,000 Shares (on an aggregate basis for all such types of Awards),
which limit shall apply regardless of whether such compensation is paid in
Shares or in cash.

4.2 LAPSED AWARDS. If any Award granted under this Plan is
canceled, terminates, expires or lapses for any reason, any Shares subject to
such Award again shall be available for the grant of an Award under the Plan
(other than for purposes of Subsection 4.1 above).

7
<PAGE> 11

4.3 ADJUSTMENTS IN AUTHORIZED SHARES.

(a) In the event the Shares, as presently constituted,
shall be changed into or exchanged for a different
number or kind of shares of stock or other securities
of the Company or of another corporation (whether by
reason of merger, consolidation, recapitalization,
reclassification, split, reverse split, combination
of shares, or otherwise) or if the number of such
Shares shall be increased through the payment of a
stock dividend, then there shall be substituted for
or added to each Share theretofore appropriated or
thereafter subject or which may become subject to an
Award under this Plan, the number and kind of shares
of stock or other securities into which each
outstanding Share shall be so changed, or for which
each such Share shall be exchanged, or to which each
such Share shall be entitled, as the case may be.
Outstanding Awards shall also be appropriately
amended as to price and other terms as may be
necessary to reflect the foregoing events. In the
event there shall be any other change in the number
or kind of the outstanding Shares, or of any stock or
other securities into which such Shares shall have
been changed, or for which it shall have been
exchanged, then, if the Committee shall, in its sole
discretion, determine that such change equitably
requires an adjustment in any Award therefore granted
or which may be granted under the Plan, such
adjustments shall be made in accordance with such
determination.

(b) Fractional Shares resulting from any adjustment in
Awards pursuant to this section may be settled in
cash or otherwise as the Committee shall determine.
Notice of any adjustment shall be given by the
Company to each Participant who holds an Award which
has been so adjusted and such adjustment (whether or
not such notice is given) shall be effective and
binding for all purposes of the Plan.

ARTICLE 5 ELIGIBILITY AND PARTICIPATION

5.1 ELIGIBILITY. Persons eligible to participate in this Plan
consist of all Eligible Employees, including Eligible Employees who are members
of the Board, and Nonemployee Directors but only to the extent provided herein.

5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan,
the Committee may, from time to time, select from all Eligible Employees, those
to whom Awards shall be granted and shall determine the nature and amount of
each Award.

8
<PAGE> 12
ARTICLE 6 STOCK OPTIONS

6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the
Plan, Options may be granted to Eligible Employees in such number, and upon
such terms, and at any time and from time to time as shall be determined by the
Committee. In addition, NQSO may be granted to Nonemployee Directors in such
number, and upon such terms, and at any time and from time to time as shall be
determined by the Committee.

6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an
Award Agreement that shall specify the Exercise Price, the duration of the
Option, the number of Shares to which the Option pertains, the manner, time and
rate of exercise or vesting of the Option, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422 or an
NQSO which is not intended to qualify under the provisions of Code Section 422.

6.3 EXERCISE PRICE. The Exercise Price for each share subject to
an Option granted under this Plan shall be at least equal to one hundred
percent of the Fair Market Value of a Share on the date the Option is granted.

6.4 DURATION OF OPTIONS. Each Option granted to an Eligible
Employee or a Nonemployee Director shall expire at such time as the Committee
shall determine at the time of grant; provided, however, that no Option shall
be exercisable later than the tenth anniversary of the date of its grant.

6.5 DIVIDEND EQUIVALENTS. The Committee may grant dividend
equivalents in connection with Options granted under this Plan. Such dividend
equivalents may be payable in cash or in Shares, upon such terms as the
Committee, in its sole discretion, deems appropriate.

6.6 EXERCISE OF OPTIONS. Options granted under this Article 6
shall be exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve, which need not be
the same for each Award or for each Participant.

6.7 PAYMENT. Options granted under this Article 6 shall be
exercised by the delivery of a written notice of exercise to the Company,
setting forth the number of Shares with respect to which the Option is to be
exercised accompanied by full payment for the Shares and any withholding
tax-relating to the exercise of the Option.

9
<PAGE> 13

The Exercise Price, and any related withholding taxes, upon exercise
of any Option shall be payable to the Company in full either: (a) in cash, or
its equivalent, in United States dollars, or (b) if permitted in the governing
Award Agreement, by tendering previously acquired Shares having an aggregate
Fair Market Value at the time of exercise equal to the total Exercise Price, or
(c) if permitted in the governing Award Agreement, by a combination of (a) and
(b). The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.

6.8 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may
impose such restrictions on any Shares acquired pursuant to the exercise of an
Option granted under this Article 6 as the Committee deems necessary or
advisable, including, without limitation, restrictions under applicable federal
securities laws, under the requirements of any stock exchange or market upon
which such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares.

6.9 TERMINATION OF EMPLOYMENT. Each Option Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the Option following termination of the Participant's employment with the
Company and all Affiliates. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with each Participant or Nonemployee Director, need not be uniform among
all Options issued pursuant to this Article 6, and may reflect distinctions
based on the reasons for termination of employment.

6.10 TRANSFERABILITY OF OPTIONS.

(a) Except as provided in paragraph (b), an Option shall
be transferable only by will or the laws of descent and distribution,
or pursuant to a domestic relations order (as defined in Code Section
414(p)).

(b) Notwithstanding anything contained herein to the
contrary, the Committee may grant an Option pursuant to an Agreement
that permits transfer of any portion of that Option by the Participant
to (i) the Participant's spouse, children, step-children,
grandchildren or step-grandchildren ("Immediate Family Members"), (ii)
a trust or trusts for the exclusive benefit of Immediate Family
Members, (iii) a partnership in which Immediate Family Members are the
only partners or (iv) any other person as determined by the Committee.
Such a transfer shall only be permitted if there is no consideration

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<PAGE> 14

for the transfer, or the transfer is to a partnership in which
Immediate Family Members are the only partners and the Participant's
sole consideration for the transfer was an interest in the
partnership. Such a transfer shall only become effective upon written
notice to the Committee of the transfer. Following the transfer of an
Option, it shall remain subject to the same terms and conditions that
were applicable immediately prior to the transfer and the term
"Participant" shall be deemed to refer to the transferee except that
events concerning the continuation of employment shall continue to
apply with respect to the original Participant not the transferee. A
transferee of an Option may not transfer the Option except as provided
in paragraph (a).

(c) Options shall be exercisable during the Participant's
lifetime only by the Participant or a transferee pursuant to paragraph
(b) hereof, or by the guardian or legal representative of the same.
The Committee may, in its discretion, require a guardian or legal
representative to supply it with such evidence as the Committee deems
necessary to establish the authority of the guardian or legal
representative to exercise the Option on behalf of the Participant or
transferee, as the case may be.

(d) Except as limited by applicable securities laws and
the provisions of Section 6.8 hereof, shares of Common Stock acquired
upon exercise of Options hereunder shall be freely transferable.

ARTICLE 7 STOCK APPRECIATION RIGHTS

7.1 GRANT OF SARS. Subject to the terms and conditions of the
Plan. SARs may be granted to Participants at any time and from time to time as
shall be determined by the Committee. The Committee may grant Freestanding
SARs, Tandem SARs or any combination of these forms of SAR.

The Committee shall have sole discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.

The grant price of a Freestanding SAR shall equal the Fair Market
Value of a Share on the date of grant of the SAR. The grant price of Tandem
SARs shall equal the Exercise Price of the related Option.

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<PAGE> 15

7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all
or part of the Shares subject to the related Option upon the surrender of the
right to exercise the equivalent portion of the related Option. A Tandem SAR
may be exercised only with respect to the Shares for which its related Option
is then exercisable.

7.3 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be
exercised upon whatever terms and conditions the Committee, in its sole
discretion, imposes upon them.

7.4 AWARD AGREEMENT. Each SAR grant shall be evidenced by an
Award Agreement that shall specify the grant price, the term of the SAR and
such other provisions as the Committee shall determine.

7.5 TERM OF SARS. The term of an SAR granted under the Plan shall
be determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten years.

7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from the Company in an amount determined
by multiplying:

(a) The excess (or some portion of such excess as
determined at the time of the grant by the
Committee) if any, of the Fair Market Value
of a Share on the date of exercise of the SAR
over the grant price specified in the Award
Agreement; by

(b) The number of Shares with respect to which the SAR is
exercised.

At the sole discretion of the Committee, the payment upon SAR exercise
may be in cash, in Shares of equivalent Fair Market Value or in some
combination thereof.

7.7 TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall set
forth the extent to which the Participant shall have the right to exercise the
SAR following termination of the Participant's employment with the Company and
all Affiliates. Such provisions shall be determined in the sole discretion of
the Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of
employment.

7.8 NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise

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<PAGE> 16

alienated or hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's Award
Agreement, all SARs granted to a Participant under the Plan shall be
exercisable during the Participant's lifetime only by such Participant or the
Participant's guardian or legal representative. The Committee may, in its
discretion, require a Participant's guardian or legal representative to supply
it with such evidence as the Committee deems necessary to establish the
authority of the guardian or legal representative to act on behalf of the
Participant.

ARTICLE 8 RESTRICTED STOCK, RESTRICTED STOCK UNITS AND RESTRICTED UNITS

8.1 GRANT OF RESTRICTED STOCK/UNITS. Subject to the terms and
provisions of the Plan, the Committee may, at any time and from time to time,
grant Restricted Stock and/or Restricted Units to Participants in such amounts
as the Committee shall determine. Each grant of Restricted Stock shall be
represented by the number of Shares to which the Award relates. Each grant of
restricted Units shall be represented by the number of Share equivalent units
to which the Award relates.

8.2 DEFERRAL OF COMPENSATION INTO RESTRICTED STOCK UNITS.
Subject to the terms and provisions of the Plan, the Committee may, at any time
and from time to time, allow (or require with respect to bonuses) selected
Eligible Employees to defer the payment of any portion of their salary and/or
annual bonuses pursuant to this Section. A Participant's deferral under this
Section shall be credited to the Participant in the form of Restricted Stock
Units. The Committee shall establish rules and procedures for such deferrals
as it deems appropriate.

In consideration for forgoing compensation, the dollar amount so
deferred by a Participant shall be increased by twenty-five percent (or such
lesser percentage as the Committee may determine) for purposes of determining
the amount of Restricted Stock Units to credit to the Participant. If a
Participant's compensation is so deferred, there shall be credited to the
Participant as of the date specified in the Award Agreement a number of
Restricted Stock Units (determined to the nearest 100th of a unit) equal to the
amount of the deferral (increased as described above) divided by the Fair
Market Value of a Share on such date.

8.3 AWARD AGREEMENT. Each Restricted Stock/Unit grant shall be
evidenced by an Award Agreement that shall specify the Restriction Periods, the
number of Shares or Share equivalent units granted, and such other provisions
as the Committee shall determine.

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<PAGE> 17

8.4 NONTRANSFERABILITY. Except as provided in this Article 8, the
Restricted Stock/Units granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Restriction Period established by the Committee and as specified in
the Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and as set forth in the Award
Agreement. All rights with respect to Restricted Stock/Units granted to a
Participant under the Plan shall be available during the Participant's lifetime
only to such Participant or the Participant's guardian or legal representative.
The Committee may, in its discretion, require a Participant's guardian or legal
representative to supply it with such evidence as the Committee deems necessary
to establish the authority of the guardian or legal representative to act on
behalf of the Participant.

8.5 OTHER RESTRICTIONS. Subject to Article 11 herein, the
Committee may impose such other conditions and/or restrictions on any
restricted Stock/Units granted pursuant to the Plan as it deems advisable
including, without limitation, restrictions based upon the achievement of
specific performance objectives (Company-wide, business unit, and/or
individual), time-based restrictions on vesting following the attainment of the
performance objectives, and/or restrictions under applicable federal or state
securities laws.

The Company shall retain the certificates representing Shares of
restricted Stock in the Company's possession until such time as all conditions
and/or restrictions applicable to such Shares have been satisfied.

8.6 PAYMENT OF AWARDS. Except as otherwise provided in this
Article 8, (i) Shares covered by each Restricted Stock grant made under the
Plan shall become freely transferable by the Participant after the last day of
the applicable Restriction Period and (ii) Share equivalent units covered by
each Restricted Unit under Section 8.1 or 8.2 shall be paid out in cash or
Shares to the Participant following the last day of the applicable Restriction
Period or such later date as provided in the Award Agreement.

8.7 VOTING RIGHTS. During the Restriction Period, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.

8.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Restriction
Period, Participants holding Shares of Restricted Stock/Units hereunder shall
be credited with regular cash dividends or dividend equivalents paid with
respect to the underlying Shares or Share equivalent units while they are so
held. Such dividends may be paid currently, accrued as contingent cash
obligations, or

14
<PAGE> 18

converted into additional Shares or units of Restricted Stock/Units, upon such
terms as the Committee establishes.

The Committee may apply any restrictions to the crediting and payment
of dividends and other distributions that the Committee deems advisable.
Without limiting the generality of the preceding sentence, if the grant or
vesting of Restricted Stock/Units is designed to qualify for the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such
Restricted Stock/Units, such that the dividends and/or the Restricted
Stock/Units maintain eligibility for the Performance- Based Exception.

8.9 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set
forth the extent to which the Participant shall have the right to retain
unvested Restricted Stock/Units following termination of the Participant's
employment with the Company or an Affiliate. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with each Participant, need not be uniform among
all Awards of Restricted Stock/Units issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of employment.

ARTICLE 9 PERFORMANCE UNITS AND PERFORMANCE SHARES

9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of
the Plan, Performance Units and/or Performance Shares may be granted to
Participants in such amounts and upon such terms, and at any time and from time
to time, as shall be determined by the Committee.

9.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit
shall have an initial value that is established by the Committee at the time of
grant. Each Performance Share shall have an initial value equal to the Fair
Market Value of a Share on the date of grant. The Committee shall set
performance objectives in its discretion which, depending on the extent to
which they are met, will determine the number and/or value of Performance
Units/Shares that will be paid out to the Participant. For purposes of this
Article 9, the time period during which the performance objectives must be met
shall be called a "Performance Period" and shall be set by the Committee in its
discretion.

9.3 EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of
this Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant

15
<PAGE> 19

over the Performance Period, to be determined as a function of the extent to
which the corresponding performance objectives have been achieved.

9.4 AWARD AGREEMENT. Each grant of Performance Units and/or
Performance Shares shall be evidenced by an Award Agreement which shall specify
the material terms and conditions of the Award, and such other provisions as
the Committee shall determine.

9.5 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES.
Except as provided in Article 12, payment of earned Performance Units/Shares
shall be made within seventy-five calendar days following the close of the
applicable Performance Period in a manner determined by the Committee, in its
sole discretion. Subject to the terms of this Plan, the Committee, in its sole
discretion, may pay earned Performance Units/Shares in the form of cash or in
Shares (or in a combination thereof). Such Shares may be paid subject to any
restrictions deemed appropriate by the Committee.

9.6 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR
RETIREMENT. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment of a Participant is
terminated by reason of death, Disability or Retirement during a Performance
Period, the Participant shall receive a payout of the Performance Units/Shares
which is prorated, as specified by the Committee in its discretion in the Award
Agreement. Payment of earned Performance Units/Shares shall be made at a time
specified by the Committee in its sole discretion and set forth in the
Participant's Award Agreement.

9.7 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event
that a Participant's employment terminates during a Performance Period for any
reason other than those reasons set forth in Section 9.6 herein, all
Performance Units/Shares shall be forfeited by the Participant to the Company,
unless determined otherwise by the Committee in the Participant's Award
Agreement.

9.8 NONTRANSFERABILITY. Except as otherwise provided in a
Participant's Award Agreement, Performance Units/Shares may not be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, a Participant's rights
under the Plan shall be exercisable during the Participant's lifetime only by
such Participant or Participant's guardian or legal representative. The
Committee may, in its discretion, require a Participant's guardian or legal
representative to supply it with such evidence as the Committee deems necessary
to establish the authority of the guardian or legal representative to act on
behalf of the Participant.

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<PAGE> 20

ARTICLE 10 PERFORMANCE MEASURES

Unless and until the Committee proposes for shareholder approval and
the Company's shareholders approve a change in the general performance measures
set forth in this Article 10, the attainment of which may determine the degree
of payout and/or vesting with respect to Awards which are designed to qualify
for the Performance-Based Exception, the performance measure(s) to be used for
purposes of such awards shall be chosen from among the following alternatives:

(a) return to shareholders (absolute or peer-group comparative);

(b) stock price increase (absolute or peer-group comparative);

(d) return on equity;

(e) return on capital;

(f) cash flow, including operating cash flow, free cash
flow, discounted cash flow return on investment, and
cash flow in excess of cost of capital;

(g) economic value added (income in excess of capital costs); or

(h) market share.

The Committee shall have the discretion to adjust the determinations
of the degree of attainment of the preestablished performance objectives;
provided, however, that Awards which are designed to qualify for the
Performance-Based Exception may not be adjusted upward (the Committee shall
retain the discretion to adjust such Awards downward), except to the extent
permitted under Code Section 162(m) to reflect accounting changes or other
events.

In the event that Code Section 162(m) or applicable tax and/or
securities laws change to permit Committee discretion to alter the governing
performance measures without obtaining shareholder approval of such changes,
the Committee shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Committee determines
that it is advisable to grant Awards which shall not qualify for the
Performance-Based

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<PAGE> 21

Exception, the Committee may make such grants without satisfying the
requirements of Code Section 162(m).

ARTICLE 11 BENEFICIARY DESIGNATION

Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of the death of the
Participant before he or she receives any or all of such benefit. Each such
designation shall revoke all prior designations by the same Participant, shall
be in a form prescribed by the Committee during the Participant's lifetime. If
the Participant's designated beneficiary predeceases the Participant or no
beneficiary has been designated, benefits remaining unpaid at the Participant's
death shall be paid to the Participant's spouse or if none, the Participant's
estate.

ARTICLE 12 DEFERRALS

The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock/Units, or the satisfaction of any requirements or objectives with respect
to Performance Units/Shares. If any such deferral election is permitted or
required, the Committee shall, in its sole discretion, establish rules and
procedures for such deferrals. Notwithstanding the foregoing, the Committee in
its sole discretion may defer payment of cash or the delivery of Shares that
would otherwise be due to a Participant under the Plan if such payment or
delivery would result in compensation not deductible by the Company or an
Affiliate by virtue of Code Section 162(m). Such a deferral may continue until
the payment or delivery would result in compensation deductible by the Company
under Code Section 162 (m).

ARTICLE 13 RIGHTS OF EMPLOYEES

13.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit
in any way the right of the Company or any Affiliate to terminate any
Participant's employment at any time, or confer upon any Participant any right
to continue in the employ of the Company or any Affiliate.

13.2 PARTICIPATION. No Eligible Employee shall have the right to
be selected to receive an Award under this Plan, or, having been so selected,
to be selected to receive a future Award.

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<PAGE> 22

ARTICLE 14 CHANGE IN CONTROL

14.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a
Change in Control, unless otherwise specifically prohibited under applicable
laws, or by the rules and regulations of any governing governmental agencies or
national securities exchanges:

(a) Any and all outstanding Options and SARs granted
hereunder shall become immediately exercisable, and
shall remain exercisable throughout their entire
term.

(b) Any Periods of Restriction and restrictions imposed
on Restricted Stock/Units shall lapse; provided,
however, that the degree of vesting associated with
Restricted Stock/Units which has been conditioned
upon the achievement of performance conditions
pursuant to Section 8.4 herein shall be determined in
the manner set forth in Section 14.1(c) herein.

(c) Except as otherwise provided in the Award Agreement,
the vesting of all Performance Units and Performance
Shares shall be accelerated as of the effective date
of the Change in Control, and there shall be paid out
in cash to Participants within thirty days following
the effective date of the Change in Control a pro
rata amount based upon an assumed achievement of all
relevant performance objectives at target levels, and
upon the length of time within the Performance Period
which has elapsed prior to the effective date of the
Change in Control; provided, however, that in the
event the Committee determines that actual
performance to the effective date of the Change in
Control exceeds target levels, the prorated payouts
shall be made at levels commensurate with such actual
performance (determined by extrapolating such actual
performance to the end of the Performance Period),
based upon the length of time within the Performance
Period which has elapsed prior to the effective date
of the Change in Control.

14.2 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the effective date of a Change in Control to
affect adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards.

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<PAGE> 23

ARTICLE 15 AMENDMENT, MODIFICATION AND TERMINATION

15.1 AMENDMENT, MODIFICATION AND TERMINATION. Subject to Section
14.2 herein, the Board may at any time and from time to time, alter, amend,
modify or terminate the Plan in whole or in part.

Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Awards granted
under the Plan. The Committee may not lower the exercise price of outstanding
Awards, or accept surrender of outstanding Awards (to the extent not
theretofore exercised) and grant new Awards in substitution therefor (to the
extent not theretofore exercised) without approval of the holders of a majority
of the outstanding voting stock of the Company. The Committee shall not,
however, modify any outstanding Incentive Stock Option so as to specify a lower
Exercise Price. Notwithstanding the foregoing, no modification of an Award
shall, without the consent of the Participant, alter or impair any rights or
obligations under any Award theretofore granted under the Plan.

15.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, subject to the
requirements of Code Section 162(m) for the Performance-Based Exception in the
case of Awards designed to qualify for the Performance-Based Exception.

15.3 AWARDS PREVIOUSLY GRANTED. No termination, amendment or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.

15.4 COMPLIANCE WITH CODE SECTION 162(M). Awards relating to
years after 1996, when Code Section 162(m) is applicable, shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes
are made to Code Section 162(m) to permit greater flexibility with respect to
any Award or Awards available under the Plan, the Committee may, subject to
this Article 15, make any adjustments it deems appropriate.

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<PAGE> 24

ARTICLE 16 WITHHOLDING

16.1 TAX WITHHOLDING. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the Company,
an amount (either in cash or Shares) sufficient to satisfy federal, state, and
local taxes, domestic or foreign, required by law or regulation to be withheld
with respect to any taxable event arising as a result of this Plan.

16.2 SHARE WITHHOLDING. With respect to withholding required upon
the exercise of Options or SARs, upon the lapse of restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards granted
hereunder, the Company may satisfy the minimum withholding requirement for
supplemental wages, in whole or in part, by withholding Shares having a Fair
Market Value (determined on the date the Participant recognizes taxable income
on the Award) equal to the withholding tax required to be collected on the
transaction. The Participant may elect, subject to the approval of the
Committee, to deliver the necessary funds to satisfy the withholding obligation
to the Company, in which case there will be no reduction in the Shares
otherwise distributable to the Participant.

Notwithstanding the foregoing, if an Option is transferred pursuant to
Section 6.10, any withholding obligation shall not be satisfied with Shares
issuable upon exercise of the Option and may be paid by the Participant (not
the transferee) with (i) cash or by certified or cashier's check; (ii) Share
acquired through the exercise of an Option granted by the Company which Shares
has been held by the Participant for at least one year, or any other Shares
already owned by, and in the possession of, the Participant; or (iii) any
combination of cash, certified or cashier's check, and Shares meeting the
requirements of clause (ii) above.

ARTICLE 17 INDEMNIFICATION

Each person who is or been a member of the Committee, or of the Board,
shall be indemnified and held harmless by the Company against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by such person in connection with or resulting from any claim, action,
suit, or proceeding to which such person may be a party or in which such person
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by such person in a settlement
approved by the Company, or paid by such person in satisfaction of any judgment
in any such action, suit, or proceeding against such person, provided such
person shall give the Company an opportunity, at its own expense, to handle and
defend the same before such person undertakes to handle and defend it. The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such persons

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<PAGE> 25

may be entitled under the Company's Articles of Incorporation or By-Laws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.

ARTICLE 18 SUCCESSORS

All obligations of the Company under the Plan or any Award Agreement
with respect to Awards granted hereunder shall be binding on any successor to
the Company, whether the existence of such successor is the result of a direct
or indirect purchase of all or substantially all of the business and/or assets
of the Company, or a merger, consolidation, or otherwise.

ARTICLE 19 LEGAL CONSTRUCTION

19.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.

19.2 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

19.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance
of Share and/or cash payouts under the Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.

19.4 SECURITIES LAW COMPLIANCE. With respect to any individual
who is, on the relevant date, an officer, director or ten percent beneficial
owner of any class of the Company's equity securities that is registered
pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of
the Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 under the Exchange Act, or any successor
rule. To the extent any provision of the Plan or action by the Committee fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee.

19.5 AWARDS TO FOREIGN NATIONALS AND EMPLOYEES OUTSIDE THE UNITED
STATES. To the extent the Committee deems it necessary, appropriate or
desirable to comply with foreign law of practice and to further the purposes of
this Plan, the Committee may, without amending the Plan, (i) establish rules
applicable to Awards granted to Participants who are foreign nationals, are

22
<PAGE> 26

employed outside the United States, or both, including rules that differ from
those set forth in this Plan, and (ii) grant Awards to such Participants in
accordance with those rules.

19.6 UNFUNDED STATUS OF THE PLAN. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments or deliveries of Shares not yet made to a Participant
by the Company, nothing contained herein shall give any rights that are greater
than those of a general creditor of the Company. The Committee may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Shares or payments hereunder consistent with the
foregoing.

19.7 GOVERNING LAW. To the extent not preempted by federal law,
the Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Delaware.

<PAGE> 1
EXHIBIT 10.3

LEAR CORPORATION
OUTSIDE DIRECTORS COMPENSATION PLAN

BENEFICIARY DESIGNATION

In accordance with the terms of the Lear Corporation Outside Directors
Compensation Plan (the "Plan"), the individual whose name appears below, who is
an Outside Director of the Lear Corporation (the "Company") hereby designates a
beneficiary or beneficiaries, with respect to his or her Accounts under the
Plan.

1. Primary Beneficiary. The following person, or persons, are hereby
designated as primary Beneficiary with respect to the percentage of the Outside
Director's unpaid Accounts indicated for each person:

Name:
- -------------------------------------------------------------------
Relationship:
- -------------------------------------------------------------------
Address:
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Percent:
- -------------------------------------------------------------------
Name:
- -------------------------------------------------------------------
Relationship:
- -------------------------------------------------------------------
Address:
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Percent:
- -------------------------------------------------------------------
Name:
- -------------------------------------------------------------------
Relationship:
- -------------------------------------------------------------------
Address:
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Percent:
- -------------------------------------------------------------------

2. Secondary Beneficiary. The following person, or persons, are hereby
designated as secondary Beneficiary with respect to the percentage of the
Outside Director's unpaid Accounts indicated for each person:

IN WITNESS WHEREOF, the Outside Director has duly executed this Beneficiary
Designation as of , 199 .

--------------------------------------
Outside Director's Signature

--------------------------------------
Outside Director's Name (please print)

<PAGE> 1
EXHIBIT 10.4

SECOND AMENDED AND RESTATED
SECURED PROMISSORY NOTE

March 29, 1997

FOR VALUE RECEIVED, the undersigned James A. Hollars, 1825 East Main
Street, Duncan, South Carolina 29334 ("Borrower"), hereby promises to pay to
Lear Corporation, a Delaware corporation ("Payee"), the principal sum of ONE
HUNDRED NINETY-ONE THOUSAND EIGHT HUNDRED NINETY-ONE AND 01/100 DOLLARS
($191,891.01) together with interest on the unpaid balance of such principal
amount from the date hereof at a rate equal to 4.46% per annum. The principal
of, and accrued interest on, this Second Amended and Restated Secured Promissory
Note (this "Note") shall be payable in full by Borrower to Payee on September
29, 1998 or upon acceleration of the maturity of this Note.

Payments of principal and interest on this Note shall be made (i) in legal
tender of the United States of America or (ii) with shares of the Payee's Common
Stock, par value $.01 per share, and shall be made at the principal office of
Payee at Southfield, Michigan or at such other place as Payee shall have
designated in writing to Borrower. If the date set for any payment of principal
or interest on this Note is a Saturday, Sunday or legal holiday, such payment
shall be due on the next succeeding business day.

Pursuant to that certain Stock Option Agreement dated September 29, 1988,
Borrower owns, as of the date hereof, options to purchase Common Stock $.01 par
value per share ("Common Stock") of Payee, which options ("Options") are
currently fully vested and exercisable. This Note shall be secured by Options
(the "Pledged Options") with respect to 23,000 shares (the "Shares"), of Common
Stock, as provided in that certain Amended and Restated Pledge Agreement dated
as of March 2, 1995 (the "Pledge Agreement") by and between Payee and Borrower.

The principal of and accrued interest on this Note may be prepaid at any
time, in whole or in part, without premium or penalty. In addition, in the
event of the sale by Borrower (or Permitted Transferees, as such term is defined
in the Amended and Restated Stockholders and Registration Rights Agreement dated
September 27, 1991, as amended (the "Stockholders Agreement"), of which Borrower
is a party) of the Pledged Options or the Shares to anyone, Borrower shall cause
the purchaser(s), to the extent of any principal or accrued but unpaid interest
then outstanding under this Note, to make payment for such Pledged Options or
Shares directly to Payee. Such proceeds shall be applied by Payee to the
prepayment of principal and accrued interest on this Note. Any such prepayment
shall be first applied to the payment of any accrued interest and then to the
unpaid balance of the principal amount.

In the event Borrower shall (i) fail to make complete payment of any
installment of principal or accrued interest when due under this Note, (ii) fail
to make the prepayment of principal and accrued interest on this Note as
required by the preceding paragraph hereof, or (iii) commit a breach of or
default under the Pledge Agreement, Payee may accelerate this Note and may, by
written notice to Borrower, declare the entire unpaid principal amount of this
Note and all accrued

<PAGE> 2

and unpaid interest thereon to be immediately due and payable and, thereupon,
the unpaid principal amount and all such accrued and unpaid interest shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by Borrower. The
failure of Payee to accelerate this Note shall not constitute a waiver of any of
Payee's rights under this Note as long as Borrower's default under this Note or
breach of or default under the Pledge Agreement continues.

Payee shall have the right of full recourse against Borrower for any
amounts owing hereunder, and all claims in respect of this Note, unpaid interest
on such amount, or for any claim in respect hereof, against Borrower.

In case this Note shall become mutilated, defaced or apparently destroyed,
lost or stolen, upon the written request of Payee, Borrower shall issue and
execute a new promissory note in exchange and substitution for the mutilated or
defaced Note or in lieu of and substitution for the Note so apparently
destroyed, lost or stolen. Thereafter, no amount shall be due and payable or
owing under the mutilated, defaced or apparently destroyed, lost or stolen Note.

This Note is made in substitution and replacement for, but not in payment
of, the Amended and Restated Secured Promissory Note, dated as of March 2, 1995,
made by Borrower to Payee.

THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW RULES THEREOF.

IN WITNESS WHEREOF, this Note has been duly executed and delivered by
Borrower as of the date first above written.

James A. Hollars

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

<PAGE> 1

EXHIBIT 10.5

PURCHASE AGREEMENT

between

1. KEIPER GmbH & Co., Remscheid, registered in the commercial register of
the local court in Remscheid under HR A 424,

- hereinafter "KRC" -

2. Putsch GmbH & Co. KG, Rockenhausen, registered in the commercial
register of the local court of Kaiserslautern for Rockenhausen under HR
A 1206,

- hereinafter "PKG" -

3. KEIPER RECARO GmbH, Kaiserslautern, registered in the commercial
register of the local court of Kaiserslautern under HR B 1388

- hereinafter "KRG" -

4. KEIPER Car Seating Verwaltungs-GmbH, Remscheid,
registered in the commercial register of the local court
of Remscheid under HR B 2024

- hereinafter "KV";

(KRC, PKG, KRG and KV are
hereinafter collectively
referred to as "Sellers" or
individually as "Seller")

5. KEIPER Car Seating GmbH & Co., Bremen, registered in the commercial
register of the local court of Bremen under HR A 21337

- hereinafter "KCS" -

6. LEAR Corporation GmbH & Co. Kommanditgesellschaft,
Ginsheim-Gustavsburg, registered in the commercial
register of the local court of GroB-Gerau under HR A
3091

- hereinafter the "Purchaser" -

7. LEAR Corporation, with its principle place of business
at 21557 Telegraph Road, Southfield, Michigan 48034

- hereinafter "LEAR" -
<PAGE> 2
-2-

Preamble

(A) KV is the sole general partner (Komplementar) and KRC is the sole
limited partner (Kommanditist) of KCS, a limited partnership under
German law which is registered in the commercial register of the local
court (Amtsgericht) of Bremen under HR A 21337.

(B) KCS was founded on December 20, 1996. By virtue of a contribution
agreement (Einbringungsvertrag) which was also entered into on
December 20, 1996 KRC contributed to KCS with effect as of January 1,
1997 KRC'S business of developing, producing and distributing complete
vehicle seats for the just-in-time production under the trademark
"KEIPER" or under other trademarks (the "Just-in-Time Business"). In
addition, also effective as of January 1, 1997 KRC contributed (i) to
a limited partnership named RECARO GmbH & Co., Kirchheim, its business
of developing, designing, producing and manufacturing seats under the
trademark "RECARO" and (ii) to a limited partnership named RECARO
Aircraft Seating GmbH & Co., Schwabisch Hall, its business named
AIRCOMFORT in which air passenger seats are developed, produced and
distributed. The business remaining within KRC is the business of
developing, producing and distributing hardware components; further,
via its so-called technical centre (Technisches Zentrum) in
Kaiserslatern KRC continues to develop but not to produce and/or
distribute vehicle seats after the Closing subject to the limitations
set forth in this Agreement.

(C) The Purchaser is a limited partnership under German law and is
engaged in the business of developing, producing and distributing
complete vehicle seats and other parts for the automotive industry.

LEAR, a corporation organised under the laws of Delaware, is the
ultimate parent company of the Purchaser.

(D) Sellers desire to sell to Purchaser in accordance with the terms
and conditions of this Agreement their respective interests in KCS and
the shares and/or interests in certain other companies.

Therefore, the parties enter into the following agreement:

<PAGE> 3
-3-

ARTICLE 1
OWNERSHIP OF KCS

1.1 KCS has a total capital (Kommanditkapital) in the amount of DM
33,000,000 which is held by KRC. The nominal value of KRC's
interest in KCS in the amount of DM 33,000,000 is credited to
the capital account (Kapitalkonto) kept by KCS as a fixed
account (Festkonto). KV does not hold any interest in the
capital of KCS.

1.2 An amount of DM 25,000,000 is registered in the commercial
register as the maximum amount of KRC's personal liability as
limited partner of KCS (Hafteinlage).

ARTICLE 2
PARTICIPATIONS HELD BY KCS AND
OTHER PARTICIPATIONS TO BE SOLD

2.1 KCS holds or will hold as of the Closing Date or, in the event
that a transfer must be registered, will have taken all actions
necessary for the registration of ownership of the following
participations which are all part of the sale pursuant to this
Agreement:

2.1.1 all issued and outstanding shares in KEIPER RECARO
Hungary KFT, Mester Utca 2, 8060 Mor, Hungary, ("KCS
Hungary") which has a fully paid in share capital of DM
3,337,122; on December 31, 1996 such share capital was
increased by an amount of DM 174,780, which capital
increase has been filed with the commercial register for
registration, but has not yet been registered; KRC has
subscribed to and has fully paid in the nominal value of
all newly issued shares;

2.1.2 65% of all issued and outstanding shares in KEIPER Car
Seating Italia S.p.A., Via Cristoforo Colombo 21, 20060
Pozzo d'Adda, Italy, ("KCS Italy") which has a fully
paid in share capital of Lire 4,000,000,000 divided into
80,000 shares with a nominal value of Lira 50,000 per
share; the other shareholder being Mr. A. Brizzolara,
Via Borgonuova 10, Milan, holding 28,000 shares or 35%
of all outstanding shares;

2.1.3 51% of all issued and outstanding shares or 102 shares
in KRC TRIM PRODUCTS (PTY) LTD, Greenfields, P.O. Box
5003, 5208 East London,

<PAGE> 4

-4-

South Africa, ("KCS TRIM") which has an authorized share
capital of Rand 1,000, of which 200 shares with a
nominal value of Rand 1 per share have been issued; the
other shareholder being Dorbyl Automotive Products, a
division of Dorbyl Ltd., Bedfordview, South Africa,
holding 98 shares or 49% of all issued and outstanding
shares;

2.1.4 51% of all issued and outstanding shares or 102 shares
in KRC SEWING COMPANY (PTY) LTD, Greenfields, P.O. Box
5402, 5208 East London, South Africa, ("KCS SEWING")
which has an authorized share capital of Rand 1,000, of
which 200 shares with a nominal value of Rand 1 per
share have been issued; the other shareholder being
Automotive Leather Company (PTY) LTD, 53 Hendrik van Eck
St., Rosslyn Pretoria, South Africa, holding 98 shares
or 49% of all issued and outstanding shares.

2.2 PKG holds the following participations which are also part of
the sale pursuant to this Agreement:

2.2.1 All shares in RR LEDER Verwaltungs GmbH,
Kaiserslautern, a company with limited liability
registered in the commercial register of the local
court (Amtsgericht) of Kaiserslautern under HR B 2817
and having a fully paid in share capital of DM 50.000
("RR-Leder GmbH");

2.2.2 100% of the capital (Kommanditkapital) in the amount of
DM 4,500,000 of RR LEDER GmbH & Co., Kaiserslautern, a
limited partnership which is registered in the
commercial register of the local court (Amtsgericht) of
Kaiserslautern under HR A 2294 ("RR-Leder"). The sole
general partner of such limited partnership without an
interest in the capital is RR LEDER Verwaltungs GmbH.

2.3 KRG holds 15% of all issued and outstanding shares in Johnson
Controls Automotive Mexico, Tlaxala, Mexico (hereinafter "JCA
Mexico"), the other shareholder being Johnson Controls Holding
Company, Inc. Plymouth, Michigan, USA. The shares held by KRG
in JCA Mexico are subject of the sale pursuant to this
Agreement.

2.4 The following participations which are held by subsidiaries of
KRC will also be part of the sale pursuant to this Agreement:

<PAGE> 5

-5-

2.4.1 the interest in EURO American Seating, LLC, Wilmington,
USA, ("EAS") which is held by KEIPER RECARO Enterprises
Inc., Clawson, USA ("KRE"); the other shareholder in EAS
is Magna-Lomason Corporation, USA ("MLC");

2.4.2 100% of all issued and outstanding shares in KEIPER CAR
SEATING do Brasil LTDA, Cacapava, Brazil, held by KEIPER
RECARO do Brazil LTDA, Sao Paulo, Brazil ("KRB") which
company has a fully paid in share capital of RS
2.341.000 ("KCS Brazil").

2.5 The entities stated in Section 2.1, 2.2, and 2.4.2 are
hereinafter collectively referred to as the "Subsidiaries". The
shares and interests held by KRE in EAS and by KRB in KCS Brazil
in accordance with Section 2.4 are hereinafter collectively
referred to as the "Subsidiary Shares".

ARTICLE 3
SALE OF INTERESTS IN KCS

3.1 In accordance with the provisions set forth in this Agreement
KRC and KV hereby sell to Purchaser and Purchaser hereby
purchases the partnership interests of KRC and KV in KCS as
described in Article I together with all partners' accounts
(Gesellschafterkonten) with all amounts credited to the capital
account and the transaction account (Verrechnungskonto) as of
the Closing Date (the "Sold Interests"). The sale and purchase
in accordance with this Section 3.1 shall include all rights
for the issuance of the new shares and to the new shares in KCS
Hungary arising from the increase of the share capital which is
referred to in Section 2.1.1.

3.2 The Sold Interests will be transferred to Purchaser at the
Closing Date in accordance with the transfer agreement which is
attached to this Agreement in draft form as Annex 8.3.1.

ARTICLE 4
SALE OF OTHER PARTICIPATIONS

4.1 In accordance with the provisions set forth in this Agreement
PKG hereby sells to Purchaser and Purchaser hereby purchases the
share in RR-Leder GmbH including all dividend rights accruing
thereon through the Closing Date and a partnership interest with
anominal value of DM 4,500,000 equal to 100% of the capital in
RR-Leder

<PAGE> 6

-6-

including 100% of the amounts booked to the partners' accounts
(Gesellschafterkonten). The interests will be transferred in
accordance with the transfer agreement which is attached to this
Agreement in draft form as Annex 8.3.3.1.

4.2 In accordance with the provisions set forth in this Agreement
KRG hereby sells to Purchaser and Purchaser hereby purchases
the shares in JCA Mexico referred to in Section 2.3 including
all dividend rights accruing through the Closing Date. The
shares will be transferred as set forth in Section 8.3.4.

4.3 In accordance with the provisions set forth in this Agreement
Sellers hereby sell and Purchaser hereby purchases the
Subsidiary Shares including all dividend rights accruing through
the Closing Date. As regards EAS the sale shall include any
rights KRE may have for the transfer of MLC's interest in EAS
against payment of the purchase price payable therefor. Sellers
shall procure that the respective owner of the Subsidiary Shares
will take at the Closing (as defined in Section 8.1)
all actions which are required by the owner in order to
transfer the Subsidiary Shares to Purchaser or its nominee in
accordance with all requirements of applicable laws.

ARTICLE 5
PROFIT AND LOSSES FOR THE BUSINESS YEAR 1997

The consolidated profits and losses for the business year 1997 will be
allocated between Sellers and Purchaser on the basis of the Final Pro
Forma Consolidated Profit and Loss Statement and the Final Pro Forma
Consolidated Closing Balance Sheet as defined in Section 9.7 only by
adjusting the Purchase Price as provided for in Section 9.9 - 9.11.
Sellers shall not be entitled to withdraw (entnehmen) any monies from
KCS or the Subsidiaries and undertake to ensure that no dividend or any
other distribution of profits or assets is declared between the
execution of this Agreement and the Closing Date.

ARTICLE 6
REAL PROPERTY

6.1 PKG is the owner of the following real property (hereinafter the
"Real Property"):

6.1.1 The court of Besigheim, land register of Besigheim,
folio 9260, map of Ottmars-
<PAGE> 7
- 7 -

heim 4811, lot No. 586/31, Ferdinand-Porsche-StraBe 2, building
and land, size 28,798 square metres (the "Besigheim Property").

The land register shows the following encumbrances for the
Besigheim Property:

Section II easement for the benefit of the Zweckverband
Industriegebiet Besigheim, Besigheim, granting
the right to obtain a de-watering pipe.

Section III

Current No. 1 mortgage in the amount of DM 1,000,000 plus 16%
interest per annum and single supplementary
payment in the amount of 2% for the benefit of
Allianz-Versicherungs Aktiengesellschaft,
Munich

Current No. 2 mortgage over DM 4,000,000 plus 16% interest per
annum and a single supplementary payment in the
amount of 2% for the benefit of
Allianz-Versicherungs Aktiengesellschaft,
Munich, ranking equally with the mortgage
referred to under current No. 1

Current No. 3 mortgage over DM 1,000,000 plus 15% interest per
annum for the benefit of Dresdner Bank
Aktiengesellschaft, Remscheid branch

Current No. 4 mortgage over DM 4,000,000 plus 15% interest per
annum for the benefit of Dresdner Bank
Aktiengesellschaft, Remscheid branch

<PAGE> 8
- 8 -

6.1.2 Local Court Bremen, land register of Vorstadt
R 270, folio 2087, lot 275

<TABLE>
<CAPTION>
Current Lot Description Size in
Number Number square
metres
- --------------------------------------------------------
<S> <C> <C> <C>

8 53/134 Holzweide 5, 56,000
industrial
land

53/269 Bruchweide 3, 22,834
building and
land/commer-
cial and in-
dustrial

53/295 Bruchweide 3, 471
building and
land/commer-
cial and in-
dustrial
</TABLE>
(the "Bremen Property")

The land register shows the following encumbrances for the Bremen Property:

Section II: No encumbrances

Section III:

Current No. 1 mortgage over DM 1,000,000 plus 16% interest
p.a. and a single supplementary payment in the
amount of 2% for the benefit of Allianz Versicherungs-
Aktiengesellschaft, Munich

Current No. 2 mortgage over DM 6,000,000 plus 16% interest p.a. and
a single supplementary payment in the amount of 2% for
the benefit of Allianz Versicherungs-Aktienge-
sellschaft, Munich

Current No. 3 mortgage over DM 1,000,000 plus 16% interest for
benefit of IKB Deutsche Industriebank Aktiengesellschaft,
Dusseldorf and Berlin

<PAGE> 9
- 9 -

Current No 4 mortgage over DM 2,000,000 plus 16% interest
for the IKB Deutsche Industriebank
Aktiengesellschaft, Dusseldorf and Berlin

6.2 PKG and Purchaser hereby agree that the Real Property shall be
sold by PKG to Purchaser together with all fixtures
(Zubehor). PKG does not warrant the exact size of the Real
Property.

The encumbrances in Section III of the land registers
where the Real Property is registered shall not be taken over
by the Purchaser. For the purpose of having these encumbrances
deleted PKG shall provide Purchaser on the Closing Date (as
defined in Section 8.1) with a certified declaration from the
respective creditor in respect of each mortgage stating that
the relevant mortgage shall be deleted (cf. Section 8.3.6)
(notariell beglaubigte Loschungsbewilligungen)

6.3 PKG and Purchaser will enter on the Closing Date into a
separate transfer agreement (Auflassung) in which PKG
and Purchaser will agree upon the transfer of title to the Real
Property sold in accordance with this Article 6.

6.4 PKG grants and PKG and Purchaser apply for the registration of
priority notices (Auflassungsvormerkungen) with respect
to the Bremen and the Besigheim Property for the purpose of
securing Purchaser's claim to have title to the Real Property
transferred to it. The priority notice shall have in each case
the next rank after the encumbrances referred to in Section
6.1.1 and 6.1.2 or a better rank.

Purchaser grants in advance the deletion (Loschung) of
the priority notices which will be registered for its benefit
in the land register of the Besigheim Property and the Bremen
Property and applies for the registration of such deletion
provided, however, that the notary may file the application for
deletion with the land register only if PKG demands such
deletion because of the termination of this Agreement and
Purchaser has not moved for and obtained a preliminary
injunction against PKG's demand within a period of six weeks
after he was properly notified by the notary of such demand and
has evidenced to the notary the granting of such preliminary
injunction.

<PAGE> 10
-10-

6.5 To the extent, applications to the land register have been made jointly
by PKG and Purchaser, they shall be deemed to have been made
independent from each other.

The notary is instructed to obtain all governmental and other approvals
and permits and declarations required under statutory law which will
be useful in the context of implementing the sale of the Real Property
including, without limitation, the approvals, declaration or negative
certifications provided in the Construction Act (Baugesetzbuch) and in
the Law on the Transfer of Real Estate (Grundstucksverkehrsgesetz) and
to receive service of such approvals or, as the case may be, the
refusal to grant such approval, negative declarations or negative
certifications with effect for PKG and the Purchaser. PKG and
Purchaser grant power of attorney to the notary to represent them in
the land register proceedings, in particular they authorise the notary
to waive any rights to appeal against decisions of the land registry
and to file registrations with the land register in the name of one or
both.

6.6 PKG and Purchaser hereby irrevocably authorise the notarial clerks
Peter Volk and Jurgen Jungst, both having their main business address at
Kaiserstr 66, 60329 Frankfurt am Main, each of them acting alone
by waiving the restriction set forth in Section 181 of the German
Civil Code (Burgerliches Gesetzbuch) to make and to receive all
statements required for the implementation of the sale of the Real
Property as well as for any supplements and corrections of the provision
in this Agreement regarding the sale of the Real Property. Supplements,
however, to the extent that they affect the internal legal relationship
between PKG and Purchasers only be made if the notary has been
instructed accordingly by PKG and Purchaser. The proxies are authorised
to grant sub-power of attorney.

6.7 Attached hereto as Annex 6 is a German translation of Section 6.1 - 6.6
to be filed with the land registers for the purpose of having the
priority notices (Auflassungsvormerkungen) referred to in Section 6.4
registered. The Parties hereby agree that the German translation
shall be binding upon them and that in case of any conflict between
this English version of Article 6 and the German translation thereof
the German translation shall prevail.
<PAGE> 11
-11-

Article 7
Purchase Price

7.1 Amount of the Purchase Price

The purchase price payable by Purchaser for the Sold Interests,
the interests in RR-Leder, the shares in RR-Leder GmbH,
the Subsidiary Shares, the shares in JCA Mexico and for the
Real Property sold in accordance with Article 6 shall amount
to DM 400,000,000 (in words: Deutsche Mark four hundred
million) in total (hereinafter the "Purchase Price"). The
Purchase Price may be increased or decreased in accordance with
Section 9.9. The Purchase Price after such adjustment will be
hereinafter referred to as the "Adjusted Purchase Price".

LEAR agrees to be jointly and severally liable for the payment
of the Purchase Price, as adjusted in accordance with Section
9.9.

7.2 Allocation of Purchase Price

The Purchase Price payable pursuant to Section 7.1 will be
allocated as follows:

7.2.1 DM 312,873,214.69 to the sale of the Sold Interest by
KRC;

7.2.2 DM 1 to the sale of the Sold Interest by KV;

7.2.3 DM 66,784.31 to the sale of the shares in RR-LEDER GmbH
sold by PKG;

7.2.4 DM 5,000,000 to the sale of the interest in RR-Leder
sold by PKG;

7.2.5 DM 6,000,000 to the sale of the interest in EAS;

7.2.6 DM 32,500,000 to the sale of the shares in KCS Brazil;

7.2.7 DM 3,060,000 to the sale of the shares in JCA Mexico
sold by KRG;

7.2.8 DM 40,500,000 to the Real Property.

When the Purchase Price will be adjusted pursuant to
Section 9.9, the above amounts will be adjusted in
accordance with the Final Financial Statements.
<PAGE> 12

-12-

7.3 Maturity / Payment of the Purchase Price

7.3.1 The Purchase Price shall become due and payable as
follows:

(i) an amount of DM 355,000,000 (in words: Deutsche Mark
three hundred and fifty-five million) at the Closing Date;

(ii) an amount of DM 22,500,000 (in words: Deutsche Mark
twenty-two million five hundred thousand) one year after the
Closing Date;

(iii) an amount of further DM 22,500,000 (in words: Deutsche
Mark twenty-two million five hundred thousand) two years after
the Closing Date.

7.3.2 The Purchase Price shall be paid as follows:

(i) an amount of DM 32,500,000 (in words: Deutsche Mark
thirty-two million five hundred thousand) to KRB's account at
Dresdner Bank Lateinamerika, Rua Verbo Divino 1488, Sao Paulo,
bank no. 210, account-no. 0021930004, bank code (Agencia) 0940,
as such part of the Purchase Price which is allocable to KCS
Brazil in accordance with Section 7.2.6.;

(ii) an amount of DM 6,000,000 (in words: Deutsche Mark six
million) to KRE's account at National Bank of Detroit, 611
Woodward, Detroit, MI 48226, account-no. 0685223, routing no.
072000326, swift-code: NBDDUS33xxx, as such part of the
Purchase Price which is allocable to EAS in accordance with
Section 7.2.5.

(iii) the remaining part of the Purchase Price to PKG's
account at Deutsche Bank Filiale Remscheid, account-no.
573104702, bank code 340 700 93,

unless PKG notifies Purchaser in accordance with Section 23.6
that the Purchase Price shall be paid in total or in part to a
different bank account stated in the notice. Purchaser will be
discharged in full from its obligation to pay the Purchase
Price once the Purchase Price has been credited to the
aforementioned accounts. Purchaser is not responsible for the
allocation of the Purchase Price among Sellers.

7.3.3 Purchaser shall deliver to Sellers at Closing two notes
(Wechsel) in proper form each over an amount of DM 22,500,000
(in words: Deutsche Mark twenty-two million five hundred
thousand) issued by Purchaser and
<PAGE> 13
-13-

signed on the front by LEAR (cf. Art. 31 (3) of the
German Code on Notes - Wechselgesetz) which are due and payable
at the order of Sellers on the due dates which are specified
under Section 7.3.1 (ii) and (iii) (the "Notes"). The Notes
must be honoured in accordance with normal market conditions as
eligible paper (diskontfahiger Wechsel) by any major credit
institution in Germany. For the avoidance of doubt it is
hereby expressly agreed that the Notes shall not affect
Purchaser's obligation to pay the Purchase Price as provided in
Section 7.1 through Section 7.3.2 (Zahlung erfullungshalber).
However, Purchaser and LEAR shall only be obliged to pay the
instalments of the Purchase Price referred to under Section
7.3.1 (ii) and (iii) against return of the Notes.

7.4 No set-off

Purchaser shall not be entitled to exercise any
right of retention or set-off against Sellers' claim for
payment of the Purchase Price, unless the legal basis and the
amount of any counter-claim which Purchaser intends to
set-off against Sellers' claim for payment of the Purchase
Price are not disputed by Sellers.

ARTICLE 8

CLOSING

8.1 Closing Date / Closing

After the date on which the conditions set forth in
Section 8.2 below have been satisfied and Sellers and
Purchaser hereto are informed thereof they will meet at the
offices of Hengeler Mueller Weitzel Wirtz, Bockenheimer
Landstr. 51-53, Frankfurt am Main (or at any other place agreed
between Sellers and Purchaser after this Agreement has been
signed), to close the transactions contemplated in this
Agreement (the "Closing"). The Closing shall take place within
a period of 10 Banking Days after the date referred to in the
preceding sentence on a date (the "Closing Date") specified by
Sellers by giving Purchaser at least five Banking Days' prior
written notice, but in no event prior to July 5, 1997.
"Banking Day" shall mean a day on which banks at the place
where the Closing will take place are open during regular
business hours.

<PAGE> 14
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8.2 Conditions to Closing

8.2.1 Closing shall not take place before the sale and
transfer of the Sold Interests has been
declared to be or is deemed to be in compliance with
the rules set forth in the EU Merger Control Regulation
No. 4064/89 (the "Regulation") by the Commission of the
European Union (the "Commission"). If the Commission
issues its declaration of compliance subject to certain
modifications as set forth in Article 8 of the
Regulation the condition to Closing stated in this
Section 8.2 shall be deemed to be satisfied only if
(i) Sellers and Purchaser agree that the modifications
imposed by the Commission shall be implemented in order
to proceed with the Closing, or (ii) Sellers agree to
fully indemnify Purchaser against any financial
disadvantages arising from the implementation of such
modifications. Should none of the alternatives
referred to in (i) or (ii) be applicable, Section
8.4.2 shall apply mutatis mutandis.

If the Commission issues its declaration of compliance
with respect to the sale and transfer of the
Sold Interests, but requires with respect to Article 16
of this Agreement an exemption from or a negative
certificate with respect to Article 85 of the EEC
Treaty, the Parties shall nevertheless proceed with the
Closing without amending any other provisions of this
Agreement including Article 7 (Purchase Price). If
Article 16 is deemed to be inconsistent with Article 85
of the EEC Treaty, Sellers and Purchaser shall in good
faith negotiate a valid and enforceable provision in
accordance with the principles laid down in
Section 23.7 second sentence.

8.2.2 Closing shall only take place if

(i) the representations and warranties stated in
Section 10.1.1 and - limited, however,
to circumstances warranted in respect of KCS -
the representations and warranties set forth in
Section 10.1.2, Section 10.1.3 with Section
1.1 and Section 10.1.4 are true and correct;

(ii) neither KCS's plant in Besigheim nor its plant
in Bremen has been fully destroyed

<PAGE> 15
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by an act of God, e.g. fire or explosion.

8.3 Actions on Closing Date

On the Closing Date Sellers and Purchaser shall take the
following actions. All actions are deemed to take place
simultaneously.

8.3.1 KRC, KV and Purchaser sign a transfer agreement
regarding the transfer of the Sold Interests
substantially in the form attached hereto as Annex
8.3.1.;

8.3.2 KRC and KV deliver to Purchaser (i) an application to
the commercial register of the local court in
Bremen substantially in the form attached hereto as
Annex 8.3.2 for the registration of Purchaser as the
legal successor of KRC and KV into the Sold Interests
such application being duly executed by KRC and KV in
notarial form and (ii) a letter undersigned by KRC and
KV in which they irrevocably instruct the notary who
has certified the signatures under the application or
any other notary denominated by Purchaser to submit the
application to the commercial register of KCS;

8.3.3 PKG and Purchaser or its nominee have notarized a
transfer agreement regarding the transfer of
the share in RR-Leder GmbH and the partnership interest
in RR-Leder substantially in the form attached hereto
as Annex 8.3.3.1, and PKG and RR-Leder GmbH deliver to
Purchaser (i) an application to the commercial register
of the local court in Kaiserslautern substantially
in the form attached hereto as Annex 8.3.3.2 for the
registration of Purchaser as the legal successor of PKG
into the partnership interest sold in accordance with
Section 4.1 such application being duly executed by PKG
an RR-Leder GmbH in notarial form and (ii) a letter
undersigned by PKG and RR-Leder GmbH in which they
irrevocably instruct the notary who has certified the
signatures under the application or any other notary
denominated by Purchaser to submit the application to
the commercial register of RR-Leder;

<PAGE> 16
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8.3.4 KRG hands over to Purchaser or its nominee the share
certificates representing the shares in JCA
Mexico sold in accordance with this Agreement and takes
all actions which Purchaser reasonably asks Sellers to
take in order to transfer title thereto to Purchaser;

8.3.5 the respective owners of the Subsidiary Shares take all
actions required by the respective owner in
order to transfer the Subsidiary Shares to Purchaser or
its nominee in accordance with all requirements of
applicable laws;

8.3.6 PKG and Purchaser sign and have notarized a transfer
agreement regarding the transfer of the Real
Property sold in accordance with Article 6
substantially in the form attached hereto as Annex
8.3.6;

PKG provides Purchaser with a certified declaration
(notariell beglaubigte Loschungsbewilligung)
from the respective creditor in respect of each
mortgage which is provided in Section III of the land
registers where the Real Property is registered stating
that the relevant mortgage shall be deleted or,
alternatively PKG provides Purchaser with a bank
guarantee from a bank of national standing which can be
called if and to the extent any mortgages listed in
Section 6.1.1 and Section 6.1.2 are foreclosed;

8.3.7 Purchaser pays an amount equal to the aggregate amount
of all loans granted through the Closing Date
by KEIPER RECARO Verwaltungsgesellschaft mbH,
Kaiserslaugtern, ("KRV") to KCS, by PKG to RR Leder and
by KRE to EAS as stated in Annex 8.3.7 hereto plus
interest accrued thereon in accordance with the loan
agreements between the respective Seller and borrower.
Purchaser shall pay such amount so that it will be
credited in full as at the Closing Date to the German
bank account stated in Section 7.3.2. To the extent
any amounts payable by Purchaser hereunder in respect
of loans granted by KRV to KCS cannot be finally
determined as of the Closing Date for bookkeeping or
similar reasons such amounts will not be paid as of the
Closing Date but as soon as Sellers can finally

<PAGE> 17
-17-

determine such amounts and prove them to Purchaser.

8.3.8 Purchaser shall take all actions necessary to substitute
the security which KRC and PKG have granted to secure
loans taken out by Subsidiaries prior to the date when
this Agreement is notarized with effect from the
Closing Date or, if the respective lender does not
consent to such substitution, repay to the respective
lender the full amount of the loans not assumed plus
interest accrued thereon; a list of such loans is
attached to this Agreement as Annex 8.3.8;

8.3.9 Purchase pays the first instalment of the Purchase
Price as provided in Section 7.3.1 (i) so that the full
amount of DM 355,000,000 (in words: Deutsche Mark three
hundred and fifty-five million) is credited as of
the Closing Date to the bank accounts stated in Section
7.3.2 (i) through (iii).

In the event that the priority notices referred to in
Section 6.4 and/or the necessary approvals,
certifications or negative notifications provided
for in the Construction Act (Baugesetzbuch) and in
the Law on the Transfer of Real Estate
(Grundstuckverkehrsgesetz) should not have been
obtained by the Closing Date, Purchaser and PKG already
hereby instruct the recording notary to open a notarial
escrow account (Notaranderkonto) and Purchaser shall
pay the portion of the Purchase Price allocated to the
Real Property in accordance with Section 7.2.8 to such
escrow account so that the full amount of such portion
is credited as of the Closing Date to that account. In
respect of such event Purchaser and PKG already hereby
irrevocably instruct the recording notary to pay the
portion of the Purchase Price credited to the notarial
escrow account including all interest accrued thereon
to PKG as soon as the priority notices referred to in
Section 6.4 have been registered and the aforementioned
approvals, certifications or negative certifications
have been obtained. The costs arising in connection
with the opening and maintaining the notarial escrow
account shall be borne by Purchaser.
<PAGE> 18
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8.10 Purchaser delivers to Sellers the Notes duly executed by
Purchaser and LEAR as provided in Section 7.3.3.

8.4 Best Efforts / Withdrawal from Contract

8.4.1 Sellers and Purchaser will use their best efforts to have the
condition to Closing stated in Section 8.2.1 satisfied as
soon as practicable after the date of this Agreement. If,
however, this condition to Closing should not have been
satisfied by November 3, 1997 or earlier or if the competent
authority prohibits the acquisition of the Sold Interests
Sellers shall have the right to withdraw (zurucktreten) from
this Agreement. Sellers may only jointly exercise the
aforementioned right by notifying Purchaser accordingly. If
Sellers withdraw from this Agreement they shall not be liable
to Purchaser for any damages or for the fulfilment of any
other obligations under this Agreement or in connection
therewith irrespective of the legal basis on which any claim
of Purchaser is based.

8.4.2 Purchaser shall have the right to withdraw from this Agreement
if the competent antitrust authority prohibits the acquisition
of the Sold Interests for reasons other than those described
in Section 8.2.1., 2nd paragraph, or if the conditions
described in Section 8.2.2 have occurred; unless Purchaser has
failed to use its best efforts to have the condition to
Closing stated in Section 8.2.1 satisfied, Purchaser shall
not be liable to Sellers for any damage or for the fulfilment
of any other obligations under this Agreement or in
connection therewith irrespective of the legal basis of
Sellers' claim.

ARTICLE 9
FINANCIAL STATEMENTS

9.1 Sellers undertake to deliver to Purchaser within ten weeks
after the Closing Date:

A balance sheet for KCS as of January 1, 1997 ( the "KCS Opening
Balance Sheet") and for each of the Subsidiaries (collectively
the "Subsidiaries' Balance Sheets" and individually a
"Subsidiary Balance Sheet") all as of
<PAGE> 19
-19-

December 31, 1996. The KCS Opening Balance Sheet shall be in
accordance with the generally accepted accounting principles
(Grundsatze ordnungsgemaser Buchfuhrung - "German GAAP") under
the German Commercial Code (HGB) as consistently applied for KRC
as the former owner of the Just-in-Time Business. The
Subsidiaries' Balance Sheets shall be in accordance with the
accounting principles which are generally accepted under the
jurisdiction of the respective Subsidiary as consistently
applied by such Subsidiary. Consistent application shall mean
that similar circumstances have been accounted for in the same
manner as in the balance sheet as of December 31, 1995. For the
avoidance of doubt the correct application of the aforesaid
accounting principles shall not be over-ruled by principles of
consistency.

Sellers further undertake to conduct a physical inventory
(Vorratsvermogen) count and prepare and to have their auditors
audit within a period of 10 weeks after the Closing Date;

(i) A pro forma balance sheet on a consolidated basis
including KCS and the Subsidiaries as of January 1, 1997
(the "Pro Forma Consolidated Opening Balance Sheet");

(ii) a pro forma consolidated balance sheet including KCS and
the Subsidiaries as of the Closing Date (the "Pro Forma
Consolidated Closing Balance Sheet") together with a pro
forma consolidated profit and loss statement for the
period between January 1, 1997 and the Closing Date (the
"Pro Forma Consolidated Profit and Loss Statement").

The two aforementioned balance sheets shall hereinafter be
collectively referred to as the "Consolidated Balance Sheets".
The parties agree that consolidation shall be carried out in
accordance with the pro forma consolidation and the evaluation
principles which are set forth in Annex 9.1 to this Agreement
and in accordance with German GAAP as specified by Annex 9.1.
The neutral auditor which may be appointed in accordance with
Section 9.5 shall also be bound by such principles. Sellers'
auditors and the neutral auditor shall only audit whether the
Consolidated Balance Sheets and the Pro Forma Consolidated
Profit and Loss Statement were prepared in accordance with this
Section 9.1 and Annex 9.1 hereto. For the avoidance of doubt,
the Real Property shall not be included in the consolidation.

Moreover, Sellers undertake to deliver to Purchaser within ten
weeks after the Closing Date a statement
<PAGE> 20
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showing the pro forma net debt of KCS and of the Subsidiaries on a
consolidated basis (the "Pro Forma Consolidated Net Debt") as
of January 1, 1997 (the "Pro Forma Consolidated Net Debt Statement").
The Pro Forma Consolidated Net Debt shall be equal to the consolidated
amount of all bank debt (Verbindlichkeiten gegenuber Kreditinstituten),
promissory notes (Eigenwechsel) and of all inter company debt of KCS
and the Subsidiaries including interest accrued thereon to be paid-off
at the Closing by Purchaser in accordance with Section 8.3.7 minus the
consolidated amount of all cash and cash equivalents in the meaning of
Section 266 (2) B.IV of the German Commercial Code (HGB), all as shown
in the Pro Forma Consolidated Opening Balance Sheet.

The KCS Opening Balance Sheet, the Subsidiaries' Balance Sheets, the
Consolidated Balance Sheets, Pro Forma Consolidated Profit and Loss Statement
and the Pro Forma Consolidated Net Debt Statement shall hereinafter be
collectively referred to as the "Financial Statements".

9.2 Purchaser undertakes to give Sellers and the auditors of Sellers all
assistance necessary to prepare and to audit the Financial Statements,
respectively.

9.3 Purchaser is entitled to have its own auditors audit the Financial
Statements and review the working papers of Sellers' auditors
in the presence of Sellers' auditors. Purchaser's auditors shall
attend the physical inventory count referred to in Section 9.1. Within
six weeks after Purchaser has received the Financial Statements
Purchaser's auditors may raise objections against the Financial
Statements by stating that any of the Financial Statements were not set
up in accordance with Section 9.1 including Annex 9.1. Any objection
by Purchaser's auditors shall only be deemed valid and to be raised in
time if Sellers are notified thereof in accordance with Section 23.6
within the aforementioned period and if the notification specifies any
item of any Financial Statement as to which the objection is raised and
the amount by which the assessment of Purchaser's auditors deviates
from the amount for the particular item which is stated on the
respective Financial Statement.

9.4 If Purchaser raises objections in accordance with Section 9.3 and if
Purchaser and Sellers do not agree on the merit of the objections
within a period of two weeks after Sellers have been notified of
Purchaser's objections, the outstanding issues will be decided with

<PAGE> 21
-21-

binding effect for both parties by a neutral auditor to be appointed
in accordance with Section 9.5.

9.5 Within a period of further two weeks after Purchaser and Sellers have
failed to reach agreement on Purchaser's objections in accordance
with Section 9.4 the parties will appoint a neutral auditor.
If the Parties cannot agree on the appointment of a neutral auditor
within the aforementioned period each party may apply for the
appointment of a neutral auditor by the Institut der Wirtschaftsprufer
e.V. in Dusseldorf; the Institut der Wirtschaftsprufer e.V. in
Dusseldorf shall select as neutral auditor only an audit firm of
international reputation with offices in the jurisdiction where KCS and
the Subsidiaries are registered.

9.6 The neutral auditor appointed in accordance with Section 9.5 shall audit
the specific items against which Purchaser has raised objections in
accordance with Section 9.3 and shall determine the amount
attributable to the relevant disputed item provided, however,
that the amount fixed by the neutral auditor in respect of any such
item must be in the range of the deviating opinions of Purchaser and
Sellers. The neutral auditor shall not take any decision before the
Parties have been given the opportunity to present their views in
writing. In any event, however, the neutral auditor shall render a
written report including its decision within a period of six weeks after
it has been appointed. The neutral auditor shall act as arbitrary
(Schiedsgutachter) and its decisions shall be binding upon both
Parties. The costs of the neutral auditor shall be borne by the
parties in accordance with Section 91 et seq. of the German Code of
Civil Procedure (ZPO).

9.7 If Purchaser does not raise any objections in accordance with Section
9.3 the Financial Statements will be binding upon all Parties. If
Purchaser raises objections in accordance with Section 9.3 the
Financial Statements as adjusted by mutual agreement between the Parties
or by the neutral auditor will be binding upon both Parties.

As soon as the Financial Statements have become binding upon
both parties they shall become the "Final Financial Statements" and,
further, the Pro Forma Consolidated Opening Balance Sheet shall become
the "Final Pro Forma Opening Consolidated Balance Sheet", the Pro Forma
Consolidated Closing Balance Sheet shall become the "Final Pro Forma
Consolidated Closing Balance Sheet" and the Pro Forma Consolidated
Profit and Loss Statement appertaining thereto the "Final Pro Forma
Consolidated Profit and Loss Statement", the KCS Opening Balance

<PAGE> 22
-22-

Sheet shall become the "Final KCS Opening Balance Sheet", the
Subsidiaries' Balance Sheet shall become the "Final
Subsidiaries' Balance Sheet", and the Net Debt Statement shall
become the "Final Net Debt Statement" within the meaning of this
Agreement.

9.8 For the purposes of the Financial Statements circumstances
which already existed on the Closing Date but become known
thereafter (valuation enlightening circumstances -
wertaufhellende Tatsachen) shall be taken into account by the
Parties and their auditors as well as by the neutral auditor in
accordance with German GAAP. However, valuation enlightening
circumstances becoming known after the period during which
Purchaser may have raised objections in accordance with Section
9.3 may only be taken into account by the neutral auditor to the
extent the valuation enlightening circumstance affects the
valuation of any items which are subject to the neutral
auditor's review in accordance with Section 9.6 and refer to
circumstances which are not under the control of Sellers or
Purchaser.

9.9 The Purchase Price will be adjusted in accordance with the
following provisions:

9.9.1 If the Final Pro Forma Consolidated Profit and Loss
Statement and the Final Pro Forma Consolidated Closing
Balance Sheet show a profit (JahresuberschuB - within
the meaning of Sections 275(2), 307(2), 266(3) German
Commercial Code - HGB) for the period between the
balance sheet date of the Final Consolidated Opening
Balance Sheet (i.e. January 1, 1997) and the Closing
Date, the Purchase Price will be increased by an amount
equal to the profit after deduction of such portion of
the profit which is allocable to minority shareholders
or partners.

9.9.2 If the Final Pro Forma Consolidated Closing Profit
and Loss Statement and the Final Pro Forma
Consolidated Closing Balance Sheet show a loss
(Jahresfehlbetrag within the meaning of Sections
275(2), 307(2), 266(3) German Commercial Code - HGB)
the Purchase Price will be decreased by such amount
after deduction of such portion of the loss which is
allocable to minority shareholders or partners.

9.10 If the Purchase Price is increased in accordance with Section
9.9.1, the balance between the Purchase Price
<PAGE> 23
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and the Adjusted Purchase Price will become due and payable to PKG's
account specified in Section 7.3.2(iii) five Banking Days after the
date on which the Pro Forma Consolidated Closing Balance Sheet has
become the Final Pro Forma Consolidated Closing Balance Sheet in
accordance with Section 9.7.

9.11 If the Purchase Price is decreased in accordance with Section
9.9.2, Sellers shall pay within five Banking Days the amount by which
the Purchase Price exceeds the Adjusted Purchase Price to an account
specified by Purchaser after the date on which Purchaser notified
Sellers of such account in accordance with Section 23.6.

ARTICLE 10
REPRESENTATIONS AND WARRANTIES

Each of the Sellers hereby gives the following warranties (Garantien)
to Purchaser and represents that the statements set forth below are
true and correct as of the date when this Agreement is executed and,
unless expressly provided otherwise in this Article 10, as of the
Closing Date:

10.1 Organizational Matters

10.1.1 Sellers have all necessary authority to enter into
this Agreement and implement the transactions
contemplated herein.

10.1.2 KCS, the Subsidiaries, JCA Mexico and EAS are legal
entities duly organized and validly existing under
the laws of their respective jurisdiction.

10.1.3 Subject to Annex 10.1.3 the statements set forth in
Article 1 and 2 are correct. It is, however,
understood between the parties that KRG's
shareholding in JCA Mexico may be diluted or
reduced before the Closing Date below 15% if KRG
does not participate in a capital increase or in
an additional financing of capital investments
approved by the Board of Directors of JCA Mexico.
Any such dilution or reduction of the shareholding
shall not be deemed to constitute a breach of this
warranty.

10.1.4 KCS, the Subsidiaries, JCA Mexico and EAS are
qualified to transact business in all locations in
which they transact business and have the power to
carry on their business as now being conducted.
<PAGE> 24

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10.1.5 Subject to Annex 10.1.5 the Sold Interests, as well
as the shares in the Subsidiaries, JCA Mexico and EAS
which are sold by Sellers in accordance with this
Agreement are fully paid in and have not been repaid and
no obligation to repay exists.

10.1.6 KCS and the Subsidiaries are not a party to any
joint-venture agreements or silent partnership
agreements nor to a contract between business
enterprises within the meaning of Sections 291 and 292
Stock Corporation Act or similar agreements, including
but not limited to control agreements, agreements to
transfer profits, profit pool agreements, agreements to
transfer a portion of profit, company lease agreements
and operational leases except as set forth in Annex
10.1.6.

10.1.7 Except as set forth in Annex 10.1.7 KCS and the
Subsidiaries do not directly or indirectly own or hold
any shares or interests in any companies other than the
Subsidiaries.

10.1.8 In respect of JCA Mexico, except as provided in the
stock purchase agreement dated February 8, 1996, there
are no obligations being transferred to Purchaser
regarding the shares in this company other than those
provided under applicable law.

10.2 Contributions by KRC

KRC made a contribution (Einlage) to KCS the value of which
exceeds the amount which is registered for KRC in the commercial
register as the maximum amount for which they can be held
personally liable (cf. Section 1.2). The contributions made by
KRC have not been repaid or withdrawn (entnommen) in total or in
part and no obligation to repay exists.

10.3 Ownership

10.3.1 Each of the Sellers is the sole owner of the respective
Sold Interest sold by it in accordance with Section 3.1,
and the Sold Interests together constitute all interests
in KCS. The Sold Interests are freely transferable and
not subject to any option or preemptive rights, liens or
encumbrances or any other rights
<PAGE> 25
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restricting the transfer or the ownership of
the Sold Interests.

10.3.2 KCS is the owner of the shares and interests referred
to in Section 2.1. Unless provided otherwise in Annex
10.3.2, such shares and interests are freely
transferable and are not subject to any option or
pre-emptive rights, liens, encumbrances or any other
rights restricting the transfer or the ownership of
such shares and interests.

10.3.3 The respective Seller is the sole owner of the shares
and interests sold by it in accordance with Section 4.1
or, as the case may be, Section 4.2. Unless provided
otherwise in Annex 10.3.3., the shares are freely
transferable and are not subject to any option
or pre-emptive rights, liens or encumbrances and are
free of any other rights or claims of third parties.

10.3.4 The respective company which shall transfer the
Subsidiary Shares at Closing in accordance with Section
4.3 is the sole owner of the respective shares. Unless
provided otherwise in Annex 10.3.4, the Subsidiary
Shares are freely transferable and are not subject to
any option or pre-emptive rights, liens or encumbrances
and are free of any other rights or claims of third
parties.

10.3.5 Unless provided otherwise in Annex 10.3.5, to the
extent KCS or the respective Subsidiary has not
disposed of its assets in the ordinary course of
business since January 1, 1997, KCS and the
Subsidiaries are the sole owner of all assets and
rights shown in the Contribution Balance Sheet
(Einbringungsbilanz) as of January 1, 1997 prepared in
connection with the transfer of the Just-in-Time
Business by KRC to KCS and audited by Sellers' auditors
(the "Contribution Balance Sheet") and in the
Subsidiaries' Balance Sheets, respectively. Such
assets and rights are not subject to any rights of
third parties with the exception of statutory landlord
liens (Vermieterpfandrechte), bankers' liens resulting
from general banking conditions (AGB-Pfandrecht der
Banken) and retention of title (Eigentumsvorbehalt)
imposed by suppliers within the ordinary course of
business or with respect to
<PAGE> 26
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Subsidiaries similar rights and are adequate and
sufficient for the continuing conduct of the business
as now conducted by KCS and the Subsidiaries.

10.4 Fixed Assets (Sachanlagen)/Inventory
(Vorratsvermogen)/Accounts Receivable (Forderungen)

10.4.1 The fixed assets owned or leased by KCS and the
Subsidiaries have been properly maintained and are in
good condition taking into account ordinary wear and
tear.

10.4.2 The quality of the inventory of KCS and the Subsidiaries
complies with the usual quality of the products which
are traded in the market in which KCS or the respective
Subsidiary does business except for any obsolete item of
the inventory which has been written off or written down
in accordance with the principles set forth in Annex
9.1.

10.4.3 Unless provided otherwise in Annex 10.4.3, all notes and
accounts receivable recorded on the Final Pro Forma
Consolidated Closing Balance Sheet (i) are bona fide
claims against debtors for sales or other charges and
(ii), to the Sellers' best knowledge, they are not
subject to any valid defences, set-offs, or
counterclaims, except to the extent of the reserves
therefor recorded on the Final Pro Forma Consolidated
Closing Balance Sheet.

10.5 Real Property

Sections 6.1.1 and 6.1.2 accurately reflect all encumbrances
existing in respect of the Real Property which are to be
registered in the land register in section (Abteilung) II and
III. There are no duties payable for the development of the
Real Property (ErschlieBungsbeitrage) which are due for payment
and no works have been carried out which entitle any authority
to impose any such duties upon the owner of the Real Property.

10.6 Financial Situation

10.6.1 Equity of KCS and Subsidiaries as of December 31, 1996/
January 1, 1997

The Final KCS Opening Balance Sheet and the Final
Subsidiaries' Balance Sheets will show
<PAGE> 27
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equity (as defined in accordance with applicable law) at least in the
following amounts:

Subsidiary total equity equity held by Sellers
("Sellers' Equity
Amount")
<S> <C> <C> <C> <C>
KCS DM 33,000,000 33,000,000 (100%)
KCS Hungary DM 3,444,709 3,444,709 (100%)
KCS Italy Lira 7,539,104,906 4,900,418,188.9 (65%)
KCS Trim Rand 5,684,355 2,899,021.1 (51%)
KCS Sewing Rand 2,232,299 1,138,472.4 (51%)
RR Leder DM 1,163,479 1,163,479 (100%)
KCS Brazil R$ 3,170,670 3,170,670 (100%)

</TABLE>

10.6.2 Consolidated Net Debt

The consolidated net debt as of the Closing Date calculated in
accordance with Section 9.1 will not exceed the amount set forth in
Annex 10.6.2 due to transactions outside the ordinary course of
business.

10.6.3 Contribution Balance Sheet

The Contribution Balance Sheet has been prepared in accordance
with generally accepted accounting principles under the German
Commercial Code (Sections 238 et seq., 243 German Commercial
Code - HGB) as consistently applied for KRC as the former owner
of the Just-in-Time Business and in accordance with the
evaluation principles set forth in Annex 9.1.

10.6.4 Subsidiaries' Balance Sheets

The Subsidiaries' Balance Sheets have been prepared in
accordance with generally accepted accounting principles in the
respective jurisdiction as consistently applied for the
respective Subsidiary, i.e. similar circumstances have been
accounted for in the same manner as in the balance sheets as of
December 31, 1995. For purposes of preparing the Pro Forma
Consolidated Balance Sheets the Subsidiaries' Balance Sheets
will be adjusted in accordance with the consolidation
principles set forth in Annex 9.1.

<PAGE> 28
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10.6.5 Intercompany Finance

As of the Closing Date KCS or any of the Subsidiaries is not
liable for any obligations of Sellers or those corporations
or entities affiliated with them within the meaning of Section
15 et seq. Stock Corporation Act (Aktiengesetz) (the
"Affiliates" or individually "Affiliate") and KCS Brazil
neither borrows nor lends any money to KRB, or to AUTO
COMERCIO E INDUSTRIA ACIL LTDA.

10.7 Employees / Shop Agreements, Collective Bargaining
Agreements / Pensions

10.7.1 The employment contracts of all employees listed in Annex
10.7.1 were transferred to KCS in connection with the
contribution of the Just-in-Time Business from KRC to KCS.
Unless stated otherwise in Annex 10.7.1(A), no employee has
objected to the assignment of his or her employment contract to
KCS and except for the employees listed in Annex 10.7.1 there
are no employees whose employment agreements have been
transferred from KRC to KCS.

10.7.2 Unless provided otherwise in Annex 10.7.2, KCS and the
Subsidiaries have not made any pension promises to its
employees and have neither with their employees nor with the
works council (Betriebsrat) of KCS or KRC as the former owner
of the Just-in-Time Business or any other body representing
employees' interests entered into any agreements providing for
profit sharing, Christmas gratification (Weihnachtsgeld),
holiday contributions (Urlaubsgeld), severance payments or
special remunerations (Sondervergutungen). Moreover KCS and
the Subsidiaries are not a party to a shop agreement
(Betriebsvereinbarung) or a collective bargaining agreement
(Tarifvertrag) which is not expressly listed in Annex 10.7.2.
To the best of Sellers' knowledge no working place guarantees
have been given other than those given in the shop agreements
or collective bargaining agreements listed in Annex 10.7.2.

The pension reserves (Pensionsruckstellungen) shown in
the Contribution Balance Sheet of KCS as of January 1, 1997
have been properly made

<PAGE> 29

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in accordance with Section 6a of the German Income Tax Code
(Einkommensteuergesetz); notwithstanding the foregoing in
respect of pensions granted to the employees of KCS and any of
the Subsidiaries KCS and the Subsidiaries have taken all
actions required under any pension promise and applicable law.

10.8 Environmental Law

10.8.1 The real property, plants and buildings owned by PKG, KCS, if
any, and the Subsidiaries are free from and do not cause
Environmental Damage. Environmental Damage shall mean any
pollution of or the condition of, air, ground, soil, ground-
and surface-water and buildings which violates any provision
of applicable private or public law or does not comply with
legal requirements, taking into account local standards.

10.8.2 None of KCS or the Subsidiaries have any actual or contingent
liability with respect to clean up, remediation, removal or
abatement of any facility into which any waste or by-product
of such company has been directly or indirectly sent for
storage, disposal or recycling.

10.8.3 The current business operations of KCS and the Subsidiaries
have not resulted in the commencement of proceedings against
KCS or KRC as its predecessor or any of the Subsidiaries for
violation of any legal provisions in respect of environmental
protection. KCS and the Subsidiaries have taken adequate
measures to comply in all material respects with the legal
provisions applicable to them in respect of environmental
protection laws.

10.9 Compliance with Law

KCS and the Subsidiaries do not materially violate any
administrative laws or regulations or rights of third parties
in a way which is likely to impair, taking into account local
standards, the ability to continue their respective business
as presently conducted.

10.10 Governmental Approvals, Licenses and Permits

KCS and the Subsidiaries are in possession of all governmental
approvals, licences and permits necessary for

<PAGE> 30
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the operation of their respective business as it is currently
conducted. These approvals, licences and permits are in full force and
effect. To the best of Sellers' knowledge the business of KCS and its
Subsidiaries have been conducted in all material respects in
compliance therewith.

10.11 Product Liability

All products manufactured and distributed by KCS and the Subsidiaries
were manufactured in a way which does and will not result in product
liability. Unless provided otherwise in Annex 10.11, third parties
have not asserted or threatened to assert any claims based on a
contractual or non-contractual product liability against KCS or
Sellers as partners of KCS or any of the Subsidiaries, and to the best
of Sellers' knowledge there are no circumstances which could lead to
any such claims.

10.12 Litigation

Except for the lawsuits listed in Annex 10.12 and except for lawsuits
with a value (Gegenstandswert) of less than DM 50,000 in any
individual case and no more than DM 500,000 in the aggregate, neither
KCS nor any of the Subsidiaries is as of the execution of this
Agreement involved in court proceedings (including arbitration) either
as plaintiff or defendant. Except for the proceedings listed in Annex
10.12 Sellers are not aware of any pending administration proceedings
or investigations of public authorities against KCS or any of the
Subsidiaries.

10.13 Intellectual Property Rights

10.13.1 To the best of Sellers' knowledge, neither KCS nor any
of the Subsidiaries infringes any intellectual property
rights of third parties and, to the best of Sellers'
knowledge, there is no unauthorised use by any person of any
intellectual property rights or confidential information
owned or used by any of the Subsidiaries. However, KCS Italy
has infringed in the past the trademark "RECARO". Sellers
will ensure that Purchaser will not be held liable by
Sellers or any of their Affiliates for any such infringement
which has accrued prior to the Closing Date.

10.13.2 Unless provided otherwise in Annex 10.13.2, the intellectual
property rights transferred
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in accordance with Article 18 are sufficient for the continuing
conduct of the business as now conducted by KCS and its
Subsidiaries and there are no licenses including sub-licenses
granted to third parties with regard to these intellectual
property rights.

10.13.3 The patents transferred in accordance with Section 18.1 by KRC
are:

(a) validly existing and registered or applied for
registration as set forth in Annex 18.1.1 and 18.1.2
hereto;

(b) owned by KRC which has full power to transfer or to
license them;

(c) to the best of Sellers' knowledge free of any legal
defects such as, e.g., the dependency on a patent owned
by a third party or a third party's right of prior use;

(d) to the best of Sellers' knowledge free of any technical
deficiencies of the inventions of which they are based;

(e) to the best of Sellers' knowledge free of any validly
existing patent protection obtained by a third party
for any of the inventions on which they are based;

(f) to the best of Sellers' knowledge free of
dependencies, i.e. overlapping in the scope of
protection, to other patents and patent applications
which are presently owned by KRC and which are not to
be transferred to KCS;

(g) to the best of Sellers' knowledge not infringed by any
third party.

10.13.4 Annex 10.13.4 contains full details of all licenses and other
agreements relating to intellectual property rights to which
KCS or any of the Subsidiaries is a party (whether as licensor
or licensee) or which relate to any intellectual property right
owned by any of the Subsidiaries and those licenses and
agreements are in full force and effect and are, to the best of
Sellers' knowledge, not in

<PAGE> 32
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jeopardy and sufficient for the continuing
conduct of the business as now conducted by the
Subsidiaries.

10.13.5 The current projects which are listed in Annex
1 to the Framework Services Supply Agreement in
the Areas of Research and Development (Annex
19.2 to this Agreement):

(i) constitute to the best of Sellers'
knowledge all research and development programs
which are necessary to satisfy all current
commitments to customers;

(ii) are based upon contracts the performance
of which has already commenced or upon
contracts which have been awarded by a
customer;

(iii) have been negotiated at arm's length and
in accordance with customary industry practice;

(iv) have been performed and administered in a
prudent and diligent manner.

10.13.6 Nothing contained in the agreements mentioned
in Article 19 shall be construed in such a
manner as to override the warranties given in
this Article 10.13.

10.14 INSURANCE

KRC, as the former owner of the Just-in-Time Business,
and the Subsidiaries have taken out insurance customary
in the business conducted by KCS or the Subsidiaries.
KCS and the Subsidiaries have been included in the
existing insurance policies which are adequate to meet
the risks insured and are customary for the business
conducted by KCS. The policies listed in Annex 10.14
which are material for the business of KCS and the
Subsidiaries are in full force and effect.

10.15 Changes Since January 1, 1997

None of the following events have occurred since January
1, 1997 until Closing Date (except for events listed in
Annexes 10.15.1 to 10.15.6):

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10.15.1 material adverse change in the financial situation
of KCS or the Subsidiaries;

10.15.2 extraordinary damages or losses outside the ordinary
course of business which exceed DM 500,000 in any
individual case or DM 1,000,000 in the aggregate;

10.15.3 subject to the reservation provided in Section 10.19,
2nd paragraph, extraordinary termination of a contract
having a material adverse effect on the business
or the financial situation of KCS or any of the
Subsidiaries;

10.15.4 transactions outside the ordinary course of business,
in particular

(a) KCS and each of the Subsidiaries have not paid
its creditors within the times agreed with them;

(b) no asset of a value or price in excess of DM
500,000 has been acquired or disposed of or
agreed to be acquired or disposed of by
KCS or any of the Subsidiaries, and no contract
involving expenditure by KCS or any of the
Subsidiaries in excess of DM 500,000 annually
has been entered into by KCS or any of the
Subsidiaries;

(c) no event has occurred which is likely to give
rise to a tax liability to KCS or any of the
Subsidiaries on deemed (as opposed to actual)
income, profits or gains or which results in
KCS or any of the Subsidiaries becoming
liable to pay or bear a tax liability directly
or primarily chargeable against or attributable
to another person disregarding events within
the ordinary course of business;

(d) no event has occurred which would entitle any
third party (with or without the giving of
notice) to call for the repayment of
indebtedness of KCS or any of the Subsidiaries
prior to its normal maturity date;
<PAGE> 34
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(e) KCS or any of the Subsidiaries has suffered
any labor dispute and there are not pending or
threatened labor disputes, strikes or work
stoppages or slowdowns;

10.15.5 No monies have been withdrawn (entnommen) from KCS or
RR-Leder. No dividend or other distribution of profits
or assets has been declared, made or paid or
agreed to be declared, made or paid by any Subsidiary
with respect to profits generated since January 1,
1997;

10.15.6 KCS has not granted employees who have been hired
since January 1, 1997 protection against termination in
excess of statutory law; further, any such newly hired
employees have not been granted a gross salary
(excluding social security contributions) in excess of
DM 100,000 (in words: Deutsche Mark one hundred
thousand).

10.16 Taxes and Social Security Contributions

KCS and the Subsidiaries have filed all necessary tax returns
in time and have paid all Taxes assessed by the competent
authorities in the past when due. All social security
contributions due and payable with respect to the period until
the Closing Date have been paid or have been sufficiently
provided for in the Final Financial Statements. "Taxes" shall
mean any direct and/or indirect charges by the governmental
authorities and/or any direct or indirect fiscal and/or
financial public burdens (i.e., Zolle, Steuern, Abgaben,
Gebuhren) on the respective company's business, respective
company's assets and respective company's income.

10.17 Material Contracts

Subject to Section 12.2 Annex 10.17 includes a complete and
correct list of all customers with which KCS or the
Subsidiaries have a customer relationship as of the date when
this Agreement is notarized and, further, a list of all
contracts with third parties other than customers and suppliers
(the "Material Contracts") with an annual value of DM 500,000
or an equivalent value in foreign currency or a total value of
DM 1,000,000 or an equivalent value in foreign currency. The
total value of a contract with an indefinite term shall be
determined under the assumption that the contract will be
terminated with effect to the next possible date by giving
notice in accordance with the terms and provi-
<PAGE> 35
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sions of the relevant Material Contract. To the extent any of the
Material Contracts have been concluded by KRC prior to January
1, 1997, the respective Material Contract has been effectively
transferred to KCS prior to the notarization of this Agreement. All
Material Contracts are in full force and effect. No counterparty to a
Material Contract has threatened as of the date when this Agreement is
notarized to terminate the Material Contract and no customer has
threatened as of the date when this Agreement is notarized to terminate
the existing customer relationship.

10.18 No Brokers and Finders

Except for Drueker & Co. whose fee shall be borne by Sellers in
accordance with Section 21.1 Sellers have not retained the services of
any broker or finder in connection with the transactions contemplated
herein.

10.19 No further Warranties

Sellers do not give any explicit or implied warranty in respect of KCS,
the Subsidiaries, EAS or JCA Mexico other than those given in Section
10.1 through Section 10.18. Purchaser has been given the opportunity
to inspect the business of KCS and the Subsidiaries, and the condition
of the assets which are owned by KCS.

For the avoidance of doubt nothing stated in Section 10.1 through
Section 10.18 or in any other provision of this Agreement shall be
construed to the effect that Sellers warrant the continuity of the
relationships of KCS and the Subsidiaries to any of its customers
beyond the date when this Agreement is notarized. Section 10.17 last
sentence shall remain unaffected.

ARTICLE 11
REMEDIES

11.1 Upon written demand of Purchaser, Sellers will hold Purchaser, subject
to the limitations provided in this Agreement, harmless from any damage
Purchaser suffers as a result of any incorrect or incomplete warranty
given by Sellers in Article 10 of this Agreement.

11.2 In case of a demand by Purchaser in accordance with Section 11.1
Sellers shall, at their option, either hold Purchaser harmless

<PAGE> 36
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11.2.1 by way of restitution in kind, i.e. by establishing
the situation corresponding to the warranty or the
provision which was breached, provided, however, that
such restitution in kind does not interfere with the
ordinary conduct of the business of KCS or, as the
case may be, any Subsidiary, or

11.2.2 by way of payment of damages.

If Sellers elect to pay damages in accordance with Section
11.2.2 such damages shall be determined and calculated on the
basis of the amount necessary to put Purchaser in the position
it would have been in had the warranty been correct and
complete.

In case of a breach of Section 10.8.1 the amount necessary to
remediate the Environmental Damage and in case of a breach of
Section 10.8.2 the amount necessary to hold KCS or any of the
Subsidiaries harmless against any liability referred to in such
Section shall be payable as damages. The aforementioned
obligations of Sellers exist irrespective of whether or not any
authority or other third party have required Purchaser to
remediate the Environmental Damage or to take any actions which
are described in Section 10.8.2.

Purchaser may not claim from Sellers damages for lost profit
(entgangener Gewinn).

Damages will not be paid to the extent that Purchaser or any
of its Affiliates (including KCS or any of the Subsidiaries)
is entitled to receive payment under an insurance policy or
indemnification from third parties. In addition, damages will
not be paid to the extent any circumstances which may otherwise
constitute a breach of a warranty are expressly reserved for or
otherwise provided for in the Final Pro Forma Consolidated
Closing Balance Sheet, or to the extent they are not reserved
for or otherwise provided for in the Final Pro Forma
Consolidated Closing Balance Sheet in accordance with the
principles set forth in Annex 9.1 if the lack of such reserve
or provision has been unsuccessfully raised by the Purchaser as
an objection in accordance with Section 9.3.

11.3 Purchaser shall only be entitled to assert claims under this
Article 11 if they exceed the amount of DM 50,000 in each
individual case. This de minimis exception does not apply to
claims referring to the same breach of warranty which are less
than DM 50,000 (in words: Deutsche Mark fifty thousand) in an
individual case, but

<PAGE> 37
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more than DM 50,000 in the aggregate provided that the
circumstances on which any such claims are based are similar in
nature. Purchaser shall furthermore only be entitled to assert
claims once the aggregate amount of all claims asserted by
Purchaser - de minimis claims of up to DM 50.000 only to be
included in accordance with the foregoing provision - exceeds DM
300.000 (in words: Deutsche Mark three hundred thousand). In
this case all claims including de minimis claims may be asserted
in full provided, however, that the maximum amount for which
Sellers may be held liable under this Agreement amounts to 40%
(in words: fourty percent) of the Purchase Price.

11.4 In addition to Section 11.3 the following limitations apply to
damages resulting from a breach of the warranties set forth in
Section 10.6.1 and 10.6.2:

11.4.1 Any amounts resulting from an excess or a shortfall of
the portion of the equity held by Sellers in KCS and/or
any of the Subsidiaries with respect to the Sellers'
Equity Amounts guaranteed in Section 10.6.1 shall be
converted into DM at the currency rates stated in Annex
11.4.1 ("Final exchange rates per 31.12.1996") and
subsequently set off against one another. If the
resulting net amount is positive, Purchaser shall not be
entitled to any damages, and Sellers shall not be
entitled to demand an increase of the Purchase Price.
If the net amount is negative, such amount shall be
payable as damages. If Sellers claim damages under this
Section 11.4.1 the equity shown in the KCS Opening
Balance and/or the Subsidiaries' Balance Sheet and the
consolidated equity in the Pro Forma Consolidated
Opening Balance Sheet shall be adjusted accordingly for
the purposes of adjusting the Purchase Price as provided
for in Sections 9.9.1 and 9.9.2.

11.4.2 In case of a breach of the warranty given in Section
10.6.2 Purchaser shall only be entitled to damages if it
is able to show that

(i) it has suffered a damage within the meaning of
Section 249 German Civil Code et.seq., in
particular that the disadvantages or detriments
resulting from the increase in debt are not
offset by benefits resulting from the
acquisition of assets financed with such

<PAGE> 38

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additional debt (Vorteilsausgleichung);
and

(ii) the damage resulting from such breach will not
be remedied under any other provisions of this
Agreement, in particular Section 9.9.2.

11.5 Purchaser is aware that Johnson Controls Holdings, Inc. as the
other shareholder in JCA Mexico (cf. Section 2.3) and the other
shareholders in KCS Trim and in KCS Sewing may acquire the
shares held by the respective Seller in such company by virtue
of exercising the preemptive right provided for it in the
respective agreement. In case any of the shareholders in any
of the aforementioned companies exercises its preemptive right
and is entitled to exercise such preemptive right in accordance
with applicable law, the damages which can be claimed by
Purchaser against Sellers shall be equal and limited

(i) in respect of JCA Mexico to the amount of such part of
the Purchase Price which is allocated to the sale of
the shares in JCA Mexico in accordance with Section
7.2.7,

(ii) in respect of KCS Trim and in respect of KCS Sewing to
the amount which the other shareholders must pay in
connection with the exercise of the aforementioned
preemptive right pursuant to the relevant joint venture
agreement as of the date of the notarization of this
Agreement.

Any amount owed by any of the shareholders in any of the
aforementioned companies to KCS in connection with or as result
of the exercise of the preemptive right shall be credited
against the relevant aforementioned amount.

Any damage suffered by Purchaser in connection with the above
shall not be included into the calculation of the maximum
amount for which Sellers may be held liable under this
Agreement in accordance with Section 11.3, last sentence.

11.6 If any competent antitrust authority interdicts the transfer of
any of the Subsidiary Shares to Purchaser by a final and
unappealable decision, the damages which Purchaser is entitled
to claim shall be equal to and limited to the amount of the
Purchase Price allocated to such Subsidiary Shares in Section
7.2. Such damages shall not be included into the calculation
of the maximum amount for which Sellers may be held liable
<PAGE> 39
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under this Agreement in accordance with Section 11.3, last
sentence.

11.7 With respect to circumstances which are known to
Purchaser at the date on which this Agreement is notarized,
all claims shall be excluded. The contents of all documents
which were available for inspection in the data room of KCS in
Kaiserslautern as well as all documents passed on to Purchaser,
its representatives and its advisors in form of a CD-Rom or
otherwise are deemed to be known to Purchaser. Purchaser was
given the opportunity to inspect such documents. The list of
documents which were available for inspection in the data room
and on the CD-Rom as well as a list of all other documents
which are deemed to be known to Purchaser are attached to this
Agreement as Annex 11.6. In addition to the documents forming
part of Annex 11.6, the two letters from Dorbyl Ltd. both dated
May 9, 1997, the letter of Automotive Leather Company Rosslyn
sent on May 5, 1997 (all of which letters were sent to Mr.
Konstantinou) as well as the list of documents attached as
Exhibit I to this agreement are deemed to be known by the
purchaser. At the date of execution of this Purchase Agreement
Purchaser is not aware of any matter or event which would give
rise to a claim because of a breach of warranty or untrue
representation of Sellers.

11.8 To the extent that representations and warranties are
qualified by reference to the best of Sellers' knowledge,
exclusively the Knowledge of Mr. Ulrich Putsch and G.
Konstantinou, and the Knowledge of the following persons,
however, limited to the area of competence specified in each
case in the parenthesis shall be attributed to the respective
Seller: Dr. Karl-Heinz Nattland (Finance), Dr. Volkmar Schneider
(Legal and Insurance), A. Schwarz (KCS Hungary), H.-S. Bull
(Personnel), H. Roschmann (Sourcing and Inventory), K. Ackermann
(Distribution and Marketing), J. Walerowski
(Controlling/Finance), KuBmann (Research and Development), J.
Kratzmann (Plant Bremen), F. Duck (Plant Besigheim). "Knowledge"
shall mean all circumstances which Sellers know or should have
known after due inquiry.

11.9 Sellers shall be jointly and severally liable for all claims
of Purchaser arising under this Agreement. Sellers can be held
liable exclusively for breaches of any obligation, warranty or
undertaking contained or given in this Agreement and, to the
extent explicitly provided for in this Agreement, exclusively in
accordance with the provisions of this Agreement. Any other
claims in accordance with statutory law and claims based upon
precontractual duties including, without limitation, claims for
rescission (Wandelung), reduction of the Purchase Price
(Miderung) as well as claims based on torts (unerlaubte
Handlung) or precontractual liability (culpa in contrahendo) are
excluded, unless
<PAGE> 40
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they are based on wilful (vorsatzlich) misconduct of Sellers.

11.10 The statute of limitations (Verjahrung) for claims under this
Article 11 shall run as follows:

11.10.1 claims for legal defects within the meaning of Section
434 German Civil Code (BGB) relating to the Sold
Interests shall be barred (verjahrt) 10 years from the
date of signing of this Agreement;

11.10.2 claims with respect to a breach of the warranty stated
in Section 10.16 (Taxes and Social Security
Contributions) or based on the indemnity given in
Section 13.2 shall be barred after a period of six
months beginning with the date on which the relevant
assessment of Taxes becomes final and unappealable;

11.10.3 claims with respect to a breach of the warranty stated
in Section 10.8 (Environmental Law) shall be barred six
months after the Closing Date;

11.10.4 claims with respect to a breach of the warranty stated
in Section 10.11 (Product Liability) shall be barred
five years after the Closing Date;

11.10.5 all other claims shall be barred on May 31, 1999;

11.10.6 the statute of limitations shall be interrupted
(unterbrochen) or extended (gehemmt) in accordance with
the applicable provisions of German law. If Purchaser
notifies Sellers in accordance with Section 23.6, the
statute of limitations applicable to the respective
claim in accordance with Sections 11.10.1 - 11.10.4
shall not continue to run until a period of six months
has expired beginning with the date when Sellers have
received the notification.

ARTICLE 12
UNDERTAKINGS OF SELLERS AND PURCHASER

12.1 Subject to applicable statutory and contractual provisions
Sellers undertake to ensure that the businesses of
<PAGE> 41
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KCS and of the Subsidiaries will be continued in the normal
course of business during the period between the date when
this Agreement is signed and the Closing Date, and that
Purchaser has appropriate access to the management of KCS
and the Subsidiaries during this period of time.

12.2 Sellers undertake that, during the period between the date when
the Agreement is signed and the Closing Date, without the prior
consent of Purchaser which shall, however, not unreasonably be
withheld:

12.2.1 None of the Subsidiaries shall (i) declare any dividend
or make any distribution with respect to its capital
stock or (ii) sell, lease, transfer, encumber or
dispose of any of its properties or assets, otherwise
than in the ordinary course of business;

12.2.2 neither KCS nor any Subsidiary shall enter into joint
venture, partnership or other similar agreements;

12.2.3 neither KCS nor any Subsidiary shall (i) enter into an
agreement with a term of more than three years and with
a value of more than DM 1 Mio. or (ii) change, amend,
terminate or otherwise modify any material contract
with a value of more than DM 10 Mio.;

12.2.4 neither the Sellers themselves nor KCS nor any of the
Subsidiaries shall take any action which would not
allow Sellers to make a representation set forth in
Article 10 at the Closing Date.

12.3 Sellers undertake to have KRV transfer the employment contract
of the person listed in Annex 12.3 to KCS with effect as from
the Closing Date together with all rights and obligations
outstanding thereunder as of the Closing Date; Purchaser hereby
agrees to such transfer.

12.4 Sellers undertake to submit to Purchaser on the Closing Date a
status report specifying which of the subsidiaries referred to
in Section 2.1.1 to 2.1.4 have been transferred to KCS and,
with respect to those which have not yet been transferred,
specifying the actions which still have to be taken. Sellers
undertake to take all actions necessary to complete such
transfers.

12.5 Sellers and their Affiliates will not reclaim tools of which
they are the owner but which were leased to KCS Italy by giving
less than six months' notice to the end
<PAGE> 42
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of twelve months after the Closing Date, unless KCS Italy
increases the prices charged to Sellers or any of their
Affiliates for products manufactured with the help of such tools
or unless KCS Italy repeatedly supplies to Sellers or their
Affiliates products which do not meet the standards customary in
the market. In the event that the tools are still needed for
the manufacturing of products sold by KCS Italy they may only be
reclaimed if KCS Italy is offered the supply of the components
which it used to manufacture with the help of the tools on terms
and conditions then prevailing in the market.

12.6 Purchaser undertakes to terminate the subcontract with RECARO
GmbH & Co., Kirchheim, ("REC") regarding the manufacturing of
the seats for the 986, 996 Porsche models in REC's plant in
Kirchheim only with six months' notice and not effective prior
to April 1, 1998. During the term of the subcontract REC and
KCS shall have reasonable access to all data and information
which are relevant for the performance of the subcontract and
are in the possession or known only to either of them.

12.7 Purchaser undertakes neither to move the registered office of
KCS from Bremen to Kaiserslautern nor to set up any office of a
company or a division which has "KEIPER" in its name in
Kaiserslautern or within 70 (seventy) kilometers of the city
limits of Kaiserslautern for a period of five years beginning
with the Closing Date provided, however, that

12.7.1 Purchaser is granted a period of six months beginning
with the Closing Date to have KCS's employees currently
working in the technical center of KCS in Kaiserslautern
move to new office premises in Kaiserslautern if
Purchaser elects to set up an office under a name not
containing "KEIPER" in Kaiserslautern;

12.7.2 Purchaser is granted a period of one year beginning with
the Closing Date to have KCS's employees currently
working in the technical center of KCS in Kaiserslautern
move to new office premises if Purchaser elects to set
up an office under a name containing "KEIPER" in an area
more than 70 (seventy) kilometers off the city limits of
Kaiserslautern.

12.8 Purchaser undertakes that either Purchaser itself or, as the
case may be, its nominee assumes all rights and obligations
under the stock purchase agreement with JCA Mexico.
<PAGE> 43
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12.9 Purchaser undertakes to take all actions required or useful to
have the name "RECARO" removed from the name of KCS Hungary and
KCS Italy, unless such name change has already been effected as
of the Closing Date.

12.10 Purchaser undertakes to cause KCS and any of the Subsidiaries
not to distribute without a licence any product under the
trademark "RECARO" or "KEIPER" after the Closing Date, unless
compliance with this undertaking would require the modification
or substitution of any tools used in the production of KCS or
any of the Subsidiaries in which case a grace period of six
months will be granted.

12.11 Purchaser shall grant Sellers and KRE free of charge for the
time period until the Closing Date all reasonable support which
is required to manage the business of EAS if such support is
necessary and requested by Sellers.

12.12 For a period of five years from the Closing Date KRC shall fill
orders from KCS for the supply of products of the kind offered
by KRC to its customers subject to KRC's production capacity for
prices to be negotiated between KRC and KCS from time to time.
However, KRC shall not arbitrarily (willkurlich) increase prices
or arbitrarily refuse to supply any products ordered by KCS.

12.13 Purchaser undertakes to procure insurance for product liability
risks arising in respect of products manufactured after the
Closing Date. Sellers shall have the right to inspect
Purchaser's insurance policy. If Sellers should come to the
conclusion that the insurance policy does not provide for
sufficient protection in respect of products manufactured
through the Closing Date Sellers and Purchaser shall
cooperate in good faith enabling Sellers to take out insurance
for such time period at their cost at a premium which is as low
as reasonably possible; this includes the transfer of Sellers'
existing insurance to Purchaser against reimbursement of
premiums payable under the insurance policy transferred.
<PAGE> 44
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ARTICLE 13
TAX AUDITS AND TAX INDEMNITY

13.1 Sellers and their auditors are entitled to participate in tax
audits of KCS and the Subsidiaries, to the extent that such tax
audits refer to fiscal years through December 31, 1997.
Purchaser will inform Sellers duly in advance of any tax audits
of the aforementioned kind. Purchaser shall assist Sellers in
filing remedies (Einspruch) with the tax authorities or in
filing an action against the tax authorities in the tax court
(Finanzgericht) in respect of tax assessments (Steuerbescheide)
referring to fiscal years through December 31, 1996 and the
period thereafter until the Closing Date. Sellers will pay the
costs and expenses accruing in connection with remedies and
actions of the aforementioned kind. Sellers shall make
available to Purchaser all documents or information which
Purchaser reasonably requires in order to file remedies with the
tax authorities or to file an action against the tax authorities
in the tax court in respect of tax assessments referring to
periods after the Closing Date.

13.2 In the event that Taxes including any interest or penalties
become due for and payable by KCS or any Subsidiary for fiscal
years through December 31, 1996 which have not been sufficiently
provided for in the Final Subsidiaries' Balance Sheets and/or in
the Final Pro Forma Consolidated Opening Balance Sheet Sellers
shall indemnify KCS and the relevant Subsidiary therefor,
however, where KCS does not hold 100% in any Subsidiary, limited
to the percentage held by KCS; the same shall apply to any Taxes
becoming due for and payable by KCS or any Subsidiary for the
period from January 1, 1997 up to the Closing Date to the extent
that such tax payment were not provided for in the Final Pro
Forma Consolidated Closing Balance Sheet.

For the avoidance of doubt it is hereby agreed that the
provisions of Section 11.3 shall not apply to claims under this
Section 13.2.

ARTICLE 14
INFORMATION, CONDUCT OF PROCEEDINGS,
ACCESS TO FILES

14.1 Purchaser shall ensure that Sellers will be promptly and fully
notified of any claim of Purchaser under this Agreement. A
failure to notify Sellers of such claim does not affect
Purchaser's right to damages to the extent that the damage has
not increased due to such
<PAGE> 45
-45-

failure. Purchaser shall make available to Sellers copies of all
relevant documents which Sellers may reasonably request in order to
defend themselves against such claim. Without Sellers' prior consent
which shall not be unreasonably withheld Purchaser may not enter into
a settlement (Vergleich), waiver (Verzicht) or acknowledgement
(Anerkenntnis) as a result of which Purchaser would be entitled to
indemnification under Article 11.

14.2 Purchaser shall ensure that Sellers are granted in accordance with
their reasonable request access to all files, documents and information
useful in the context of

14.2.1 the defence against potential claims of Purchaser against
Sellers under this Agreement, or

14.2.2 tax assessments against Sellers or any person or entity holding
an interest in any of the Sellers, or

14.2.3 other documents and information which are otherwise reasonably
required by Sellers.

ARTICLE 15
INDEMNIFICATION IN CASE OF
PERSONAL LIABILITY OF KRC

15.1 Purchaser undertakes that it will not take any action which may result
in a revival of personal liability of KRC for obligations of KCS
pursuant to Section 172 (4) of the German Commercial Code (HGB).

15.2 Purchaser will indemnify and hold harmless KRC or its partners from
and against any damage and any expenses (including legal costs and
expenses) which any of them may incur as a result of a personal
liability which has arisen due to actions referred to in Section 15.1.

ARTICLE 16
COVENANT NOT TO COMPETE

16.1 Basic Rule. For a period of five (5) years commencing as of the
Closing Date (the "Non-Compete Period"), Sellers and their Affiliates
shall not compete, either directly or indirectly, with KCS, the
Subsidiaries, EAS or any of their respective successors in the
rendering of research and development services for third parties,
production,

<PAGE> 46

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and supply of complete seats for the original equipment of non-commercial
vehicles (PKW) in the respective geographical markets in which the
production and distribution activities of KCS, the Subsidiaries and EAS are
conducted as of the Closing Date. This basic rule shall not apply to the
extent Section 16.2 through 16.7 provides for an exception.

16.2 Recaro Seats. Sellers and their Affiliates shall be permitted to develop,
produce and supply complete vehicle seats bearing exclusively the RECARO
trademark or characterized by typical RECARO styling elements so that the
end user identifies the seat as a RECARO seat (such seats hereinafter
referred to as "RECARO Seats"), provided that such RECARO Seats are not
used for Non-Qualifying Vehicles produced by original equipment
manufacturers ("OEMs") for which Section 16.3 shall apply. "Non-Qualifying
Vehicles" shall mean all vehicle models and their respective first
successor model (i) set forth in Annex 16.3.1 and, in addition thereto,
the BMW E53 (SVW), the Ford Mondeo, the SAAB 640 (9.5) and the Volvo
P066 (C90) and P2X (VNS 90) for which Purchaser or any of its Affiliates
(excluding KCS, the Subsidiaries, EAS and JCA Mexico) supplies or is
contracted to supply as of the Closing Date standard seating equipment in
the geographical markets of Western Europe (including, without limitation,
the Czech Republic and Poland) and (ii) for which KCS or any of its
Subsidiaries or EAS supplies or is contracted to supply as of the Closing
Date standard seating equipment in the geographical markets in which the
production and distribution activities of KCS, the Subsidiaries and EAS are
conducted; the car models supplied by KCS as of the Closing Date are set
forth in Annex 16.3.2.

16.3 Non-Qualifying Vehicles. For each OEM, Sellers and their Affiliates
shall be permitted to develop, produce and supply RECARO Seats for
Non-Qualifying Vehicles up to an annual number equal to the Annual
Allowance (as defined below) for such OEM. If, during any 12 month period
beginning on the Closing Date, Sellers or any of their Affiliates supply
RECARO Seats for Non-Qualifying Vehicles in a number which exceeds the
Annual Allowance for any OEM (the "Excess RECARO Seats"), Sellers jointly
and severally shall pay Purchaser for each Excess RECARO Seat, an amount
equal to 80% of the incremental profit on such Excess RECARO Seat that
Sellers or any of their Affiliates are entitled to receive in accordance
with the applicable supply contract for the Non-Qualifying Vehicle. For
the purposes of this paragraph, "incremental profit" is defined as Sellers'
or their Affiliates' average earnings before taxes per RECARO Seat
multiplied by the number of Excess RECARO Seats.
<PAGE> 47

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For each OEM (other than Porsche), the "Annual Allowance" shall be the
higher of (i) the number of RECARO Seats supplied by Sellers and their
Affiliates (not including KCS, the Subsidiaries, EAS and JCA Mexico)
for Non-Qualifying Vehicles manufactured by such OEM during the last
12 months prior to the Closing Date and (ii) the number of RECARO
Seats for which Sellers or their Affiliates (not including KCS, the
Subsidiaries, EAS and JCA Mexico) have a contract to supply RECARO
Seats for Non-Qualifying Vehicles to be manufactured by such OEM
during the 12 months commencing on the Closing Date, provided that if
no specific amount of RECARO Seats is specified pursuant to a contract
referred to in this clause (ii), then the Annual Allowance shall be
the number of RECARO Seats supplied under the relevant supply contract
within twelve months following the Closing Date; the alternative
provided in (ii) shall, however, only be available to the extent it
does not lead to a supply of RECARO Seats for Non-Qualifying Vehicles
in respect of all OEMs which exceeds the total number of all RECARO
Seats supplied to all OEMs for Non-Qualifying Vehicles during the last
12 months prior to the Closing Date by more than 20% (the "120% Rule").
The Annual Allowance for Porsche shall be 4,000. Sellers shall
notify Purchaser on a quarterly basis of the number of RECARO Seats
supplied in accordance with Section 16.3 and shall have the burden of
proving that such sales are not in excess of the Annual Allowance.
Unless the 120% Rule provides otherwise, the Annual Allowance is
specific for each OEM and cannot be transferred among OEMs.

RECARO Seats supplied as follows shall not count towards the Annual
Allowance:

16.3.1 RECARO Seats supplied by Sellers or their Affiliates which have
been manufactured by Purchaser or its Affiliates (including
KCS, the Subsidiaries, EAS and JCA Mexico) on behalf of
Sellers or their Affiliates; or

16.3.2 RECARO Seats supplied as optional seating equipment
("Sonderausstattung") provided, however, that none of the
following alternatives is applicable: (1) An OEM offers the
RECARO Seats as optional seating equipment together with other
optional car equipment as part of a package at a reduced
price; (2) the number of cars of a certain car model sold
by an OEM vehicle manufacturer with the optional seating
equipment exceeds during any period of six calendar months the
number of cars of that certain car model sold with the
standard seating equipment; (3) an OEM offers a car model
with a standard
<PAGE> 48

-48-

equipment which includes RECARO Seats at a fixed price
and grants the customer the option to reduce the fixed
price by choosing a seating equipment which is cheaper
than the RECARO seats ("delete-option").

After 42 months from Closing Date, Sellers and their Affiliates
shall be entitled to develop, produce and supply an unlimited
amount of RECARO Seats for the Non-Qualifying Vehicles set
forth on Annex 16.2.1; the term of the Non-Compete Period
provided in Section 16.1 shall be modified thereby.

16.4 Hardware Seat Structures. For the term of the Non-Compete
Period, Sellers and their Affiliates shall not develop, produce
or supply either directly or indirectly, hardware structures to
be incorporated in non-commercial vehicle seats
(Sitzstrukturen) which were specifically designed for
non-commercial vehicle seats sold by KCS or its Subsidiaries or
structures with similar features ("SEAT STRUCTURES") to
competitors of KCS, its Subsidiaries or their respective
successors, if such Seat Structures will be incorporated into
seats to be offered or sold by that competitor to any OEM
vehicle manufacturer for installation in the same vehicle model
or its first successor model which constitutes the subject
matter of a supply relationship already existing or agreed upon
in a contract with KCS or its Subsidiaries as of the Closing
Date of this Purchase Agreement (such supply relationship is
hereinafter referred to as the "KCS CLOSING SUPPLY
RELATIONSHIP") or, in the case of the first successor model, of
a future supply relationship (such future supply relationship
is hereinafter referred to as the "KCS SUCCESSOR SUPPLY
RELATIONSHIP" or together with the KCS Closing Supply
Relationship the "KCS SUPPLY RELATIONSHIP"), provided, however,
that Sellers and their Affiliates may supply to competitors
Seat Structures to be incorporated into seats of models,

(i) with respect to which the KCS Supply
Relationship has been terminated or a notice of
termination has been given by the respective
OEM vehicle manufacturer; or

(ii) which are manufactured at a production facility
of the respective OEM vehicle manufacturer
which is not the subject matter of a KCS Supply
Relationship.
<PAGE> 49

-49-

Moreover, Sellers and their Affiliates as suppliers of Seat
Structures agree, for the term of the Non-Compete Period, not to
participate, either directly or indirectly, in the bidding of
any competitor of KCS, its Subsidiaries or any of their
respective successors for the supply of seats to an OEM vehicle
manufacturer when such bid shall be submitted in competition for
award of any KCS Successor Supply Relationship if KCS or any of
its Subsidiaries is participating in such bidding.

Sellers and their Affiliates shall not be bound by the
restrictions of this Section 16.4 if they are specifically and
in writing requested by any OEM vehicle manufacturer which is a
party to a KCS Supply Relationship and a customer of Sellers or
any of their Affiliates

(i) to supply Seat Structures for vehicle models
which are the subject matter of a KCS Supply
Relationship; or

(ii) to participate in a bidding of any competitor
for a KCS Successor Supply Relationship.

(iii) However, should Sellers or any of their
Affiliates so supply Seat Structures in
competition for any KCS Supply Relationship, it
will pay Purchaser 80% of the incremental profit
Sellers or any of their Affiliates receive in
accordance with the relevant supply contract.
The incremental profit shall be equal to
Sellers' or their Affiliates' average earnings
before taxes per Seat Structure supplied
multiplied by the Seat Structures supplied in
accordance with (i) and (ii) above.

Nothing contained in this Section 16.4 shall prevent Sellers and
their Affiliates from or limit them in supplying Seat Structures
to the Sindelfingen plant of Daimler Benz at Sindelfingen,
regardless of whether this plant is operated by Daimler Benz or
by any other party.

16.5 Research and Development. Sellers and their Affiliates may
develop vehicle seats for production, distribution and sale and
may transfer or grant any rights, including but not limited to
the grant of licenses to patents and know-how resulting from
such research and development activities, provided that

16.5.1 Sellers and their Affiliates shall not engage, either
directly or indirectly, in any development activities
with competitors of KCS, its
<PAGE> 50
-50-

Subsidiaries or any of their respective successors during the
Non-Compete Period, if the seat product in question is to be
installed in the models which constitute the subject matter of
a KCS Supply Relationship.

16.5.2 For the term of the Non-Compete Period, Sellers and their
Affiliates shall not, directly or indirectly, solicit
offers for, nor shall they bid to provide any research and
development services for competitors of KCS, its Subsidiaries or
their respective successors, if the development services in
question will be utilized for the purpose of competing for the
award of the KCS Successor Supply Relationship.

16.5.3 Sections 16.5.1 and 16.5.2 shall not apply if Sellers or any of
their Affiliates are specifically and in writing requested by
any OEM which is party to a KCS Supply Relationship and a
customer of Sellers or any of their Affiliates

(i) to engage in development activities prohibited under
Section 16.5.1 or

(ii) to solicit offers or bid for contracts to provide
research and development services excluded under Section 16.5.2.

(iii) However, should Sellers or any of their Affiliates so
provide research and development services in competition for
any KCS Supply Relationship, they will pay Purchaser 80% of the
incremental profit Sellers or any of their Affiliates receive
in accordance with the relevant research and development
contract. The incremental profit shall be equal to Sellers' or
their Affiliates' average earnings before taxes per research
and development contract entered into in accordance with (i)
and (ii) above.

16.6 Notwithstanding the terms of this covenant not to compete, KRB may
continue to manufacture under the agreement attached as Annex 19.5
the complete seats for the VW Santana, complete seats for the
Mercedes-Benz trucks and complete seats for the Fiat
Tempra.
<PAGE> 51
-51-

16.7 It shall not constitute a violation of this covenant not to
compete, if within the context of an acquisition of an
undertaking or group of undertakings, a business is acquired by
any of Sellers or any of their Affiliates which operates in the
product and geographical market described in Section 16.1 above,
provided, however, that (i) the gross sales of such acquired
business in the last preceding fiscal year amounted to no more
than 10% of the total gross sales of the undertaking or group of
undertakings acquired, and (ii) during the term of the
Non-Compete Period the gross sales deriving from all acquired
businesses, including any internal expansion does not exceed DM
25 million in the aggregate.

16.8 During the Non-Compete Period,

(i) neither Sellers nor any of their Affiliates will solicit
to hire any employee of Purchaser or its Affiliates, including
any employee of KCS or any of the Subsidiaries without the
express written consent of Purchaser;

(ii) neither Purchaser nor any of its Affiliates will solicit
to hire any employee of Sellers or their Affiliates without the
express written consent of Sellers.

Article 17
Merger Control Proceedings

17.1 The sale of the Sold Interests pursuant to Section 3.1 (the
"Notified Transaction") is subject to a pre-merger notification
to the Commission. KV, KRC and Purchaser shall cooperate and
provide each other with all necessary assistance to comply with
this requirement.

17.2 The notification shall be filed jointly by KV, KRC and
Purchaser. KRC and KV on the one hand and Purchaser on the
other hand shall keep each other fully informed of all contacts
which they may have with the Commission in the context of this
transaction.

Article 18
Intellectual Property Rights

18.1 KRC hereby assigns and transfers the patents set forth in Annex
18.1.1 and Annex 18.1.2 to KCS effective as of the Closing Date
together with all patents granted to
<PAGE> 52
-52-

KRC or applied for by KRC in other jurisdictions which have the
same subject matter as the patents set forth in Annex 18.1.1 and
Annex 18.1.2. The patents set forth in Annex 18.1.2 shall be
licensed back to KRC in accordance with the Grant Back Licence
Agreement attached as Annex 18.1.3. KRC undertakes to take all
actions necessary to have the patents registered in the name of
KCS. Purchaser shall bear the cost of such registration.

18.2 KRC shall hand over to KCS the complete files of all transferred
patents and/or patent application as well as all documents,
certificates, grants and other papers relating to the
transferred patents and all relevant correspondence and other
vouchers including renewal certificates and the like relevant to
the transferred patents promptly after the transfer of the
patents has become effective. KRC shall render KCS technical
assistance to the extent to which such assistance is necessary
in order to enable KCS to make proper use of the patents
transferred in accordance with Section 18.1 above. For such
purpose, KRC shall make available, within a reasonable time
frame and in a reasonable number, qualified personnel to KCS if
so requested by KCS. All costs arising in connection with the
technical assistance shall be borne by KCS.

ARTICLE 19
ANCILLARY AGREEMENTS

Sellers undertake that prior to the Closing Date

19.1 KRC and KCS sign the Grant Back Licence Agreement attached as
Annex 18.1.3;

19.2 KRC and KCS sign the Framework Services Supply Agreement in the
Areas of Research and Development attached as Annex 19.2;

19.3 KRB and KCS Brazil sign the Service Agreement attached as Annex
19.4;

19.4 KRB and KCS Brazil sign the Royalty Agreement attached as Annex
19.5.

19.5 KCS Brazil and AUTO COMERCIO E INDUSTRIA ACIL LTDA sign the
Supply Agreement attached as Annex 19.6.

Purchaser hereby irrevocably grants its consent to the signing of the
aforementioned agreements. The Agreements referred to in Section 19.3
thru 19.5 shall be signed in the Portuguese language. Prior to the
notarization of this
<PAGE> 53
-53-

Agreement, KRV and KCS signed a Service Agreement dated March 3, 1997
providing that KRV shall render certain services specified therein to
KCS which is attached as Annex 19.3.

ARTICLE 20
ASSIGNMENT

Neither any of the Sellers nor Purchaser are entitled to transfer rights
or obligations arising under this Agreement to a third party without the
consent of the other contracting parties, except that Purchaser may
assign this Agreement or any rights or obligations thereunder to any
entity affiliated with it within the meaning of Article 15 German Stock
Corporation Act (Aktiengest) provided that Purchaser shall continue to
be jointly and severally liable for any obligation under this Agreement
after the assignment.

ARTICLE 21
TAXES AND COSTS

21.1 Each party shall bear its own costs and expenses which it incurs
in connection with the preparation, execution and implementation
of this Agreement including, without limitation, all fees and
expenses of their respective advisers.

21.2 Taxes on income, profits and capital gains which may be assessed
against Sellers or the partners of PKG or Purchaser in
connection with this Agreement shall be borne by the respective
debtor in accordance with applicable tax laws.

21.3 All other taxes and costs in connection with the preparation,
execution and implementation of this Agreement including,
without limitation, notarial fees, public registration fees and
fees in connection with the clearance of the transactions
contemplated herein with the competent antitrust authority as
well as real property transfer tax (Grunderwerbsteuer) and
other transfer taxes, if any, shall be borne by Purchaser.

ARTICLE 22
CONFIDENTIALITY

22.1 The parties to this Agreement agree to keep confidential this
Agreement or any provisions thereof and not to disclose it to
third parties (including, without limitation, the press,
customers, suppliers or other persons or companies in the
market), except as far as they are
<PAGE> 54

-54-

obliged by law or applicable stock exchange regulations to
disclose and give notice of the same to any governmental or
administrative authority or otherwise. They will use their
best efforts even in such case to ensure that, notwithstanding
such mandatory disclosure and notice, confidentiality shall be
maintained to the maximum extent practicable.

22.2 The parties to this Agreement will mutually agree upon the
language of an official press release and additional
information to be released to the press, customers and the
business community relating to the transactions contemplated by
this Agreement.

22.3 Sellers agree to keep confidential and not to disclose to any
third party any business, trade, or technical secret or other
non public information concerning the business of KCS and the
Subsidiaries or non public information concerning the Purchaser
and its Affiliates made available to them prior to the Closing
Date.

ARTICLE 23
MISCELLANEOUS

23.1 This Agreement is subject to and shall be construed in
accordance with the laws of the Federal Republic of Germany.

23.2 All disputes other than those referred to in Article 9 arising
under or in connection with this Agreement shall be finally
decided by an arbitration tribunal. For this parties shall
execute on the Date when this Agreement is notarized a separate
Arbitration Agreement.

23.3 All amendments to this Agreement, including, without
limitation, a change of this clause itself, must be made in
writing and with the express reference to this Agreement,
unless notarisation or any other form is required.

23.4 Purchaser waives all rights and claims it might have against
Drueker & Co. GmbH, Frankfurt am Main, or any of its officers or
employees or Sellers' auditors' or legal counsel or other
consultants who acted as advisors to Sellers (collectively
referred to as the "Advisors") resulting from or in connection
with the transactions contemplated by this Agreement except for
claims based on wilful misconduct. This waiver vests rights in
the Advisors as third party beneficiaries ("Vertrag zugunsten
Dritter" within the meaning of Section 328 German Civil Code).

<PAGE> 55
-55-

23.5 Save as provided for in Section 23.4 this Agreement shall not
vest any rights in third parties.

23.6 All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if
personally delivered, sent by facsimile transmission (with
delivery confirmed and hard copy sent), sent by overnight
courier (with delivery confirmed) or mailed registered or
certified mail, postage prepaid

- if to Sellers, to:

KEIPER RECARO Verwaltungsgesellschaft mit
beschrankter Haftung
Managing Director Finance
Dr. Karl-Heinz Nattland
Buchelstrasse 54 - 58
42855 Remscheid

Telefax: 02191 - 144 440

with a required copy to:

Hengeler Mueller Weitzel Wirtz
Dr. Peter Weyland
Bockenheimer LandstraBe 51
60325 Frankfurt am Main
Germany

Telefax: 069-725773

- if to Purchaser or LEAR, to:

LEAR Corporation GmbH & Co. KG
c/o LEAR Corporation
Joseph F. McCarthy
21557 Telegraph Road,
Southfield, Michigan 48034

Telefax: 001-810 746 1677

with required copy to:

Schurmane & Faylor
Folian A. Faylor or
Dr. Werner Mielke, LL.M.
Postfach 11 16 33
Friedrich-Ebert-Anlage 2-14
60325 Frankfurt am Main
<PAGE> 56
-56-

Telefax: 069-741-1610
-----------------------

Winston & Strawn
Mr. John L. MacCarthy
35 West Wacker Drive
Chicago, Illinois 60601
USA

Telefax: 001-312-558-5700
-------------------------

or to such other addresses as may hereafter be
furnished by any party to the other.

23.7 If any of the provisions of this Agreement be or become invalid
or unenforceable (nichtig oder unwirksam), all other provisions
hereof shall remain in full force and effect. The invalid or
unenforceable provision shall be deemed to be automatically
amended and replaced without the necessity of further action by
the parties hereto by such valid and enforceable provision that
shall accomplish as far as possible the commercial purpose and
intent of the invalid or unenforceable provision. The aforesaid
shall apply mutatis mutandis should this Agreement be
incomplete.

If any agreement entered into in connection with this Purchase
Agreement including, without limitation, the ancillary
agreements referred to in Article 19 be or become invalid or
unenforceable in whole or in part, this Agreement shall remain
in full force and effect.

<ARTICLE> 5
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-28-1997
<CASH> 17
<SECURITIES> 0
<RECEIVABLES> 1,103
<ALLOWANCES> 12
<INVENTORY> 191
<CURRENT-ASSETS> 1,527
<PP&E> 1,228
<DEPRECIATION> 360
<TOTAL-ASSETS> 4,015
<CURRENT-LIABILITIES> 1,686
<BONDS> 994
0
0
<COMMON> 1
<OTHER-SE> 1,104
<TOTAL-LIABILITY-AND-EQUITY> 4,015
<SALES> 3,563
<TOTAL-REVENUES> 3,563
<CGS> 3,172
<TOTAL-COSTS> 3,172
<OTHER-EXPENSES> 13
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
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