<PAGE>   1
                                 SCHEDULE 14A
                                (RULE 14a-101)

                   INFORMATION REQUIRED IN PROXY STATEMENT

                           SCHEDULE 14A INFORMATION
         PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                    EXCHANGE ACT OF 1934 (AMENDMENT NO.  )
                 
 
    Filed by the registrant [X]

    Filed by a party other than the registrant [ ]

    Check the appropriate box:

    [ ] Preliminary proxy statement    [ ] Confidential, for Use of the 
                                           Commission Only (as permitted by
                                           Rule 14a-6(e)(2))
    [X] Definitive proxy statement

    [ ] Definitive additional materials

    [ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

                               LEAR CORPORATION
- -------------------------------------------------------------------------------
              (Name of Registrant as Specified in Its Charter)


- -------------------------------------------------------------------------------
  (Name of Person(s) Filing Proxy Statement, if other than the Registrant)


Payment of filing fee (Check the appropriate box):

    [X] No fee required.

    [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

    (1) Title of each class of securities to which transaction applies:

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

    (2) Aggregate number of securities to which transaction applies:

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

    (3) Per unit price or other underlying value of transaction computed 
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing 
fee is calculated and state how it was determined):

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

    (4) Proposed maximum aggregate value of transaction:

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

    (5) Total fee paid:

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

    [ ] Fee paid previously with preliminary materials.

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

    [ ] Check box if any part of the fee is offset as provided by Exchange Act 
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was 
paid previously. Identify the previous filing by registration statement 
number, or the form or schedule and the date of its filing.

    (1) Amount previously paid:

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

    (2) Form, schedule or registration statement no.:

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

    (3) Filing party:

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

    (4) Date filed:

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


<PAGE>   2
 
                                LEAR CORPORATION
 
                               ------------------
 

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                                  MAY 15, 1997
 
                               ------------------
 
     The Annual Meeting of Stockholders (the "Meeting") of Lear Corporation
("Lear" or the "Company") will be held at the Novi Hilton, 21111 Haggerty Road,
Novi, Michigan 48086 on Thursday, May 15, 1997, at 10:00 a.m., Eastern Time, for
the following purposes:
 
        1. To elect four directors to hold office until the 2000 Annual Meeting
           of Stockholders;
 
        2. To approve the Lear Corporation Long-Term Stock Incentive Plan;
 
        3. To ratify the appointment of Arthur Andersen LLP as independent
           auditors of the Company for the 1997 fiscal year; and
 
        4. To transact such other business as may properly come before the
           meeting or any adjournment or postponement thereof.
 
     The foregoing items are fully discussed in the Proxy Statement accompanying
this Notice of Annual Meeting. A copy of the Company's Annual Report to
Stockholders is also enclosed.
 
     The close of business on March 18, 1997 has been fixed as the record date
for the Meeting. Only stockholders of record at that time are entitled to notice
of and to vote at the Meeting and any adjournment or postponement thereof.
 
     In accordance with Delaware law, a list of Lear stockholders entitled to
vote at the Meeting will be available for examination at the offices of the
Company, 21557 Telegraph Road, Southfield, Michigan for ten days prior to the
Meeting, between the hours of 9:00 a.m. and 5:00 p.m., and at the Meeting.
 
     All stockholders are cordially invited to attend the Meeting. However, to
assure your representation at the Meeting, the Board of Directors of Lear urges
you to date, execute and return promptly the enclosed proxy to give voting
instructions with respect to your shares of common stock. The return of the
proxy will not affect your right to vote in person if you do attend the Meeting.
 
                                          Joseph F. McCarthy
                                          Vice President, Secretary
                                          and General Counsel
 
Southfield, Michigan
M
arch 21, 1997

<PAGE>   3
 
                               TABLE OF CONTENTS
 

<TABLE>
<S>                                                             <C>
INTRODUCTION................................................      1
RECORD DATE, OUTSTANDING SHARES AND REQUIRED VOTE...........      2
  Record Date and Outstanding Shares........................      2
  Required Vote.............................................      2
ELECTION OF DIRECTORS (PROPOSAL NO. 1)......................      2
MANAGEMENT AND DIRECTORS....................................      4
  Directors and Executive Officers..........................      4
  Security Ownership of Certain Beneficial Owners and
     Management.............................................      7
  Section 16(a) Beneficial Ownership Reporting Compliance...      8
  Meetings of the Board of Directors and Committees.........      8
  Compensation of Directors.................................      9
EXECUTIVE COMPENSATION......................................     10
  Summary Compensation Table................................     10
  Option Grants and Exercises and Long-Term Incentive Awards
     in Last Fiscal Year....................................     11
  Pension Plan and Benefits.................................     12
  Supplemental Executive Retirement Plan....................     13
  401(k) Savings Plan.......................................     14
  1988 Stock Option Plan....................................     15
  1992 Stock Option Plan....................................     15
  1994 Stock Option Plan....................................     15
  1996 Stock Option Plan....................................     15
  Long-Term Stock Incentive Plan............................     16
  Employment and Other Agreements...........................     17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
  PARTICIPATION.............................................     18
COMPENSATION COMMITTEE REPORT...............................     18
  Introduction..............................................     18
  Executive Compensation Policy.............................     18
  Base Salary...............................................     19
  Annual Incentives.........................................     19
  Long-Term Incentives......................................     19
  Management Stock Ownership Requirements...................     19
  Stock Options.............................................     20
  Performance Share Awards..................................     20
  Management Stock Purchase Program.........................     20
  401(k) Plan...............................................     20
  Executive Supplemental Savings Plan.......................     21
  Chief Executive Officer Compensation......................     21
  Tax Treatment of Executive Compensation...................     21
PERFORMANCE GRAPH...........................................     22
CERTAIN TRANSACTIONS........................................     23
  Acquisition of Masland Corporation........................     23
  Common Stock Offering.....................................     23
  Credit Agreement..........................................     23
  Management Equity Participation...........................     23
</TABLE>


<PAGE>   4
APPROVAL OF THE LEAR CORPORATION LONG-TERM STOCK INCENTIVE
  PLAN (PROPOSAL NO. 2).....................................     23
  Eligibility, Duration and Objectives......................     24
  Administration............................................     25
  Shares Subject to the Long-Term Incentive Plan and Maximum
     Awards.................................................     25
  Stock Options.............................................     25
  Stock Appreciation Rights ("SARs")........................     26
  Restricted Stock, Restricted Stock Units and Restricted
     Units..................................................     26
  Performance Units and Performance Shares..................     26
  Amendment, Modification and Termination...................     27
  Assignment of Interests...................................     27
  Change In Control.........................................     27
  Federal Income Tax Consequences...........................     28
  Nonqualified Stock Options................................     28
  Incentive Stock Options...................................     28
  Other Awards..............................................     29
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

  (PROPOSAL NO. 3)..........................................     29
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING OF
  STOCKHOLDERS..............................................     30
OTHER MATTERS...............................................     30
APPENDIX A..................................................    A-1

<PAGE>   5
 
                                LEAR CORPORATION
 
                              21557 TELEGRAPH ROAD
                           SOUTHFIELD, MICHIGAN 48034
                               ------------------
 
                                PROXY STATEMENT
                               ------------------
 
                                  INTRODUCTION
 
     This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Lear Corporation ("Lear" or the "Company")
for use in voting at the Annual Meeting of Stockholders (the "Meeting") to be
held at the Novi Hilton, 21111 Haggerty Road, Novi, Michigan 48086 on Thursday,
May 15, 1997, at 10:00 a.m. Eastern Time, and at any postponement or adjournment
thereof, for the purposes set forth in the attached Notice of Annual Meeting.
This proxy statement, the attached Notice of Annual Meeting and the enclosed
proxy are being sent to stockholders on or about March 21, 1997.
 
     The Board of Directors does not intend to bring any matters before the
Meeting except those indicated in the Notice of Annual Meeting and does not know
of any matter which anyone else proposes to present for action at the Meeting.
If any other matters properly come before the Meeting, however, the persons
named in the enclosed proxy, or their duly constituted substitutes acting at the
Meeting, will be authorized to vote or otherwise act thereon in accordance with
their judgment on such matters.
 
     If proxies are properly dated, executed and returned, the shares they
represent will be voted at the Meeting in accordance with the instructions of
the stockholder. If no specific instructions are given, the shares will be voted
FOR the election of the nominees for director set forth herein, FOR the approval
of the Lear Corporation Long-Term Stock Incentive Plan (the "Long-Term Incentive
Plan") and FOR the ratification of the appointment of Arthur Andersen LLP as
independent auditors for the Company in 1997.
 
     A stockholder giving a proxy has the power to revoke it at any time prior
to its exercise by voting in person at the Meeting, by giving written notice to
the Secretary of the Company prior to the Meeting, or by giving a later dated
proxy. Attendance at the Meeting will not automatically revoke a proxy, but a
stockholder in attendance may request a ballot and vote in person, thereby
revoking a previously granted proxy.
 
     The solicitation of proxies from the stockholders is being made by the
Board of Directors and management of the Company, and the cost of solicitation,
including the cost of preparing and mailing the Proxy Statement, Proxy, Notice
of Annual Meeting and Annual Report to Stockholders, is being paid for by the
Company. Proxies also may be solicited personally and by telephone by certain
officers and employees of the Company. In addition, Corporate Investor
Communications, Inc. has been retained for solicitation of all brokers and
nominees at a cost of approximately $5,000, plus customary fees and expenses. In
addition, the Company will request banks, brokers and other custodian nominees
and fiduciaries to supply proxy material to the beneficial owners of the
Company's common stock, par value $.01 per share ("Common Stock") of whom they
have knowledge, and may reimburse them for their expenses in so doing.
 
                                        1

<PAGE>   6
 
               RECORD DATE, OUTSTANDING SHARES AND REQUIRED VOTE
 
RECORD DATE AND OUTSTANDING SHARES
 
     At the close of business on March 18, 1997, the record date fixed for the
determination of stockholders entitled to notice of and to vote at the Meeting,
there were outstanding 65,974,596 shares of the Company's Common Stock, the only
class of voting securities outstanding. All record holders of Common Stock as of
the close of business on March 18, 1997 shall be entitled to vote. The presence
at the Meeting, in person or by proxy, of a majority of shares entitled to vote
shall constitute a quorum. Abstentions and broker non-votes shall be counted for
purposes of determining whether a quorum is present. Each share of Common Stock
is entitled to one vote, without cumulation, on each matter to be voted upon at
the Meeting.
 
REQUIRED VOTE
 
     Directors shall be elected by a plurality of the votes cast by the holders
of the Company's Common Stock. "Plurality" means that the four individuals who
receive the largest number of the votes of shares present in person or
represented by proxy at the Meeting and entitled to vote, shall be elected as
directors. Consequently, any shares not voted (whether by abstention, broker
non-vote or otherwise) have no impact in the election of directors except to the
extent that the failure to vote for an individual results in another individual
receiving a larger number of votes.
 
     The approval of the Long-Term Incentive Plan and the ratification of the
appointment of the Company's independent auditors will become effective upon the
affirmative vote of the majority of shares present in person or represented by
proxy at the Meeting and entitled to vote. Any shares not voted (whether by
abstention, broker non-vote or otherwise) with respect to the Long-Term
Incentive Plan and the appointment of independent auditors will have no effect
on the outcome of the vote.
 
     Under the rules of the New York Stock Exchange, brokers who hold shares in
street name have the authority to vote on certain routine matters on which they
have not received instructions from beneficial owners. Brokers holding shares of
Common Stock in street name who do not receive instructions from beneficial
owners by the date specified in the statement accompanying this proxy material
are entitled to vote on the election of directors, the Long-Term Incentive Plan
and the ratification of the appointment of independent auditors.
 
                             ELECTION OF DIRECTORS
 
 
                               (PROPOSAL NO. 1)
 
     The Company has a classified Board of Directors consisting of three
classes. At each annual meeting of stockholders, directors are elected for a
full term of three years to succeed those directors whose terms are expiring.
 
     At the Meeting, the stockholders will elect four directors to hold office,
subject to the provisions of the Company's by-laws, until the Annual Meeting of
Stockholders in 2000 and until their successors shall have been duly elected and
qualified. In accordance with Delaware law and the Company's by-laws, Lear's
Board of Directors, upon the recommendation of Lear's Nominating Committee, has
nominated Gian Andrea Botta, David P. Spalding, James A. Stern and Irma B. Elder
to stand for election to the Board of Directors. Unless contrary instructions
are given, the shares represented by the enclosed proxy will be voted FOR the
election of Messrs. Botta, Spalding and Stern and Ms. Elder, the nominees set
forth below. Proxies cannot be voted for a greater number of directors than the
number of nominees named.
 
     Messrs. Botta, Spalding and Stern and Ms. Elder have consented to being
named in this proxy statement and to serve if elected. However, if any nominee
at the time of his election is unable or unwilling to serve or is otherwise
unavailable for election and, as a result, another nominee is designated by the
Board of Directors, the persons named in the enclosed proxy, or their
substitutes, will have discretion and authority to vote or refrain from voting
for such nominee in accordance with their judgment.
 
                                        2

<PAGE>   7
 
     The nominees for election as director, together with certain information
about them, are set forth below.
 

<TABLE>
<CAPTION>
                                                                  DIRECTOR
                        NAME                             AGE       SINCE        POSITION
                        ----                             ---      --------      --------
<S>                                                      <C>      <C>           <C>
Gian Andrea Botta....................................    43         1993        Director
Irma B. Elder........................................    66         1997        Director
David P. Spalding....................................    42         1991        Director
James A. Stern.......................................    46         1993        Director
</TABLE>

 
     Gian Andrea Botta. Mr. Botta became a director of the Company on December
31, 1993, upon consummation of the merger of Lear Holdings Corporation
("Holdings"), Lear's former parent, into Lear (the "Holdings Merger"). Prior to
the Holdings Merger, Mr. Botta was a director of Holdings since 1993. Mr. Botta
has been President of EXOR America Inc., the international investment holding
company of IFI, S.p.A. and the sole owner of all the issued and outstanding
capital stock of FIMA Finance Management Inc. ("FIMA"), since February 1994.
Previously, Mr. Botta was President of IFINT-USA Inc., the predecessor of FIMA,
since 1993 and was Vice President of Acquisitions of IFINT-USA Inc. for more
than five years prior thereto. Mr. Botta also serves as a director of
Constitution Re Inc., Western Industries Inc., and Riverwood International
Corporation.
 
     Irma B. Elder. Ms. Elder, who has been a director of the Company since
February 1997, has owned and operated various Detroit area automobile
dealerships since 1983. Businesses presently owned and operated by Ms. Elder had
gross revenues of over $400 million in 1996. In addition, Ms. Elder serves on
the Board of Directors of the Federal Reserve Bank of Chicago (Detroit Branch).
Ms. Elder is also a board member of the Detroit Chamber of Commerce and a member
of the Michigan Hispanic Chamber of Commerce.
 
     David P. Spalding. Mr. Spalding became a director of the Company in
September 1991. Mr. Spalding has been a Vice Chairman of The Cypress Group
L.L.C. (the "Cypress Group") since 1994. Prior to this time, he was a Managing
Director of Lehman Brothers Inc. since February 1991. Previously, he held the
position of Senior Vice President of Lehman Brothers Inc. from September 1988 to
February 1991. From April 1987 to September 1988, he was Senior Vice President
of General Electric Capital Corporation Corporate Finance Group, Inc. Prior to
1987 he was a Vice President of The First National Bank of Chicago. Mr. Spalding
is also a director of AMTROL, Inc.
 
     James A. Stern. Mr. Stern became a director of the Company on December 31,
1993, upon consummation of the Holdings Merger. From September 1991 until the
Holdings Merger, Mr. Stern was a director of Holdings. Mr. Stern is Chairman of
The Cypress Group, a position he has held since 1994. Prior to this time, he was
a Managing Director of Lehman Brothers Inc. for more than five years. He is also
a director of K&F Industries Inc., R.P. Scherer Corporation, Noel Group, Inc.,
Cinemark U.S.A., Inc. and AMTROL, Inc.
 
                                 RECOMMENDATION
 
 
              THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
                ELECTION OF EACH OF ITS NOMINEES TO SERVE ON THE
                         COMPANY'S BOARD OF DIRECTORS.
 
                                        3

<PAGE>   8
 
                            MANAGEMENT AND DIRECTORS
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table sets forth the names, ages and positions with the
Company of the Company's directors and executive officers. Each executive
officer is elected annually by the Board of Directors of the Company and serves
at the pleasure of the Board of Directors.
 

<TABLE>
<CAPTION>
                   NAME                     AGE                        POSITION
                   ----                     ---                        --------
<S>                                         <C>   <C>
Kenneth L. Way(a).........................  57    Chairman of the Board and Chief Executive Officer
Robert E. Rossiter(b).....................  51    President, Chief Operating Officer and Director
James H. Vandenberghe(b)..................  47    Executive Vice President, Chief Financial Officer
                                                  and Director
Gerald G. Harris..........................  63    Senior Vice President and President -- GM Division
James A. Hollars..........................  52    Senior Vice President and President -- BMW Division
Roger A. Jackson..........................  50    Senior Vice President -- Human Resources
Robert G. Lawrie..........................  52    Senior Vice President -- Global Mergers,
                                                  Acquisitions and Strategic Alliances
Terrence E. O'Rourke......................  50    Senior Vice President and President -- Ford
                                                  Division
Frank J. Preston..........................  54    Senior Vice President and President -- Interior
                                                  Systems Group
Joseph F. McCarthy........................  53    Vice President, Secretary and General Counsel
Donald J. Stebbins........................  39    Vice President, Treasurer and Assistant Secretary
Gian Andrea Botta.........................  43    Director
Irma B. Elder.............................  66    Director
Larry W. McCurdy(a).......................  61    Director
Roy E. Parrott(a).........................  56    Director
Robert W. Shower(b).......................  59    Director
David P. Spalding.........................  42    Director
James A. Stern............................  46    Director
Alan H. Washkowitz(b).....................  56    Director
</TABLE>

 
- -------------------------
(a) Term as a director expires in 1998.
 
(b) Term as a director expires in 1999.
 
     Set forth below is a description of the business experience of each
director and executive officer of the Company other than Messrs. Botta, Spalding
and Stern and Ms. Elder, whose biographies are set out in the section entitled
"Election of Directors."
 
     Kenneth L. Way. Mr. Way was elected to and has held the position of
Chairman of the Board and Chief Executive Officer of the Company since 1988.
Prior to this time he served as Corporate Vice President, Automotive Group for
Lear Siegler, Inc. ("LSI") since October 1984. During the previous six years,
Mr. Way was President of LSI's General Seating Division. Before this position,
he was President of LSI's Metal Products Division in Detroit for three years.
Other positions held by Mr. Way during his 31 years with LSI include
Manufacturing Manager of the Metal Products Division and Manager of Production
Control for the Automotive Division in Detroit. Mr. Way also serves as a
director of Hayes Wheels International, Inc., Comerica, Inc. and R.P. Scherer
Corporation.
 
     Robert E. Rossiter. Mr. Rossiter became President of LSI's General Seating
Division in 1984 and a director and the President and Chief Operating Officer of
the Company in 1988. He joined LSI in 1971 in the Material Control Department of
the Automotive Division, then joined the Metal Products Division of LSI as
Production Control Manager, and subsequently moved into sales and sales
management. In 1979, he joined the General Seating Division as Vice President of
Sales and worked in that position, as well as Vice President of Operations,
until 1984.
 
     James H. Vandenberghe. Mr. Vandenberghe is Executive Vice President, Chief
Financial Officer and a director of the Company. He was appointed Executive Vice
President of the Company in 1993 and became a
 
                                        4

<PAGE>   9
 
director in November 1995. Mr. Vandenberghe also served as a director of the
Company from 1988 until the consummation of the Holdings Merger. Mr.
Vandenberghe previously served as Senior Vice President -- Finance, Secretary
and Chief Financial Officer of the Company since 1988. Mr. Vandenberghe has held
a variety of managerial positions with the Company and LSI since 1973.
 
     Gerald G. Harris. Mr. Harris is Senior Vice President and President -- GM
Division of the Company, a position he has held since July 1996. Prior to
serving in that position, he was Vice President and President -- GM Division
from November 1994 to July 1996. Previously, Mr. Harris served as Vice President
and General Manager -- GM Operations from March 1994 to November 1994, Director
- -- Ford Business Unit from March 1992 to March 1994, Director of Sales from
August 1990 to March 1992 and Sales Manager from January 1989 to August 1990.
Mr. Harris has held a variety of managerial positions with the Company and LSI
since 1962.
 
     James A. Hollars. Mr. Hollars is Senior Vice President and President -- BMW
Division of the Company. He was appointed to this position in November 1995.
Previously he served as Senior Vice President and President -- International
Operations from November 1994 to November 1995. Prior to serving in that
position, he was Senior Vice President -- International Operations of the
Company since 1993. He was previously promoted to Vice President --
International upon the sale of LSI's Power Equipment Division to Lucas
Industries in 1988. Mr. Hollars has held a variety of managerial positions with
the Company and LSI since 1973.
 
     Roger A. Jackson. Mr. Jackson was elected as Senior Vice President -- Human
Resources in October 1995. Previously he served as Vice President -- Human
Resources for Allen Bradley, a wholly-owned subsidiary of Rockwell International
Corporation. Mr. Jackson was employed by Rockwell International Corporation or
its subsidiaries from December 1977 to September 1995.
 
     Robert G. Lawrie. Mr. Lawrie was elected Senior Vice President -- Global
Mergers, Acquisitions and Strategic Alliances in June 1996. Prior to joining the
Company, Mr. Lawrie served as Vice President and Special Counsel to the Chairman
of Magna International Inc. since December 1992. Prior to his tenure with Magna
International, Inc., Mr. Lawrie was an International Consultant to Consolidated
Hydro Inc., an operator of hydroelectric plants, from July 1992 until December
1992. From 1991 to July 1992, Mr. Lawrie was Senior Vice President, General
Counsel and Secretary of Abitibi-Price Inc., an international paper
manufacturer. From 1988 to 1991, Mr. Lawrie was the managing partner of the Los
Angeles office of Broad Schulz Larson & Wineberg, a law firm.
 
     Terrence E. O'Rourke. Mr. O'Rourke is Senior Vice President and President
- -- Ford Division of the Company. He was promoted to this position in July 1996.
Previously he served as Vice President and President -- Ford Division since
November 1995. Prior to serving in this position, he was Vice President and
President -- Chrysler Division from November 1994 to November 1995 and Director
- -- Strategic Planning from October 1994 to November 1994. Prior to joining Lear,
Mr. O'Rourke was employed by Ford Motor Company as Supply Manager -- Climate
Control Department from 1992 and Procurement Operations Manager from 1988.
 
     Frank J. Preston. Dr. Preston was elected Senior Vice President and
President -- Interior Systems Group of the Company in July 1996. Previously, Dr.
Preston served as Senior Vice President and President -- Masland Division of the
Company since the consummation of Lear's acquisition of Masland Corporation
("Masland") in June 1996. Prior to the Masland acquisition, he served as
President of Masland since January 1995 and Chief Executive Officer of Masland
since January 1996. During 1995, Dr. Preston also served as Chief Operating
Officer of Masland. Prior to joining Masland, Dr. Preston held various positions
with Textron, Inc., a diversified manufacturing company, most recently President
of Textron Automotive Interiors.
 
     Joseph F. McCarthy. Mr. McCarthy was elected Vice President, Secretary and
General Counsel of Lear in April 1994. Prior to joining Lear, Mr. McCarthy
served as Vice President -- Legal and Secretary for both Hayes Wheels
International, Inc. and Kelsey-Hayes Company. Prior to joining Hayes Wheels
International, Inc. and Kelsey-Hayes Company, Mr. McCarthy was a partner in the
law firm of Kreckman & McCarthy from 1973 to 1983.
 
                                        5

<PAGE>   10
 
     Donald J. Stebbins. Mr. Stebbins is Vice President, Treasurer and Assistant
Secretary of the Company. He joined the Company in June 1992 from Bankers Trust
Company, New York, where he was a Vice President for four years. Prior to his
tenure at Bankers Trust Company, Mr. Stebbins held positions at Citibank, N.A.
and The First National Bank of Chicago.
 
     Larry W. McCurdy. Mr. McCurdy became a director of the Company in 1988. Mr.
McCurdy is the President, Chief Executive Officer and a director of Echlin, Inc.
("Echlin"), a worldwide manufacturer of motor vehicle parts, a position he has
held since March 1997. Prior to this time, he was Executive Vice President,
Operations of Cooper Industries, Inc., a diversified manufacturing company, from
April 1994 to March 1997, President and Chief Executive Officer of Moog
Automotive, Inc. since November 1985 and President and Chief Operating Officer
of Echlin since August 1983, after serving as Vice President of Finance from
February 1983. Prior to joining Echlin, he served in various managerial
positions with Tenneco, Inc. He was formerly Chairman of the Board of Directors
of the Motor and Equipment Manufacturing Association. Mr. McCurdy also serves as
a director of Mohawk Industries, Inc., Breed Technologies, Inc. and as a trustee
of Millikin University.
 
     Roy E. Parrott. Mr. Parrott, who has been a director of the Company since
February 1997, has been President and a director of Simpson Industries Inc.
since 1989 and Chief Executive Officer of Simpson Industries Inc. since 1994.
Simpson Industries Inc. is a manufacturer of precision machined products used
mainly in automobiles.
 
     Robert W. Shower. Mr. Shower became a director of the Company on December
31, 1993, upon consummation of the Holdings Merger. From November 1991 until the
Holdings Merger, Mr. Shower was a Director of Holdings. Mr. Shower was appointed
Senior Vice President and Chief Financial Officer of Seagull Energy Corporation
in March 1992, elected a director in May 1992 and named Executive Vice President
in 1994. Mr. Shower retired from his positions with Seagull Energy Corporation,
a processor and distributer of natural gas and petrochemicals, in April 1996.
Prior thereto, he served as Senior Vice President of Finance and Chief Financial
Officer at AmeriServ in 1990 and 1991 and as a Managing Director of Corporate
Finance with Lehman Brothers Inc. from 1986 to 1990. From 1964 to 1986, Mr.
Shower served in a variety of financial executive positions with The Williams
Companies, where he was a member of the Board of Directors and Executive Vice
President of Finance and Administration from 1977 to 1986. Mr. Shower also
serves as a director of Highlands Insurance Group, Inc. and Edge Petroleum
Corporation.
 
     Alan H. Washkowitz. Mr. Washkowitz became a director of the Company in
1994. Mr. Washkowitz has been a Managing Director of Lehman Brothers Inc. or its
predecessors since 1978. Mr. Washkowitz also serves as a director of K & F
Industries, Inc., Illinois Central Corporation and McBride plc.
 
                                        6

<PAGE>   11
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The following table sets forth, as of the close of business on March 18,
1997 (except as set forth below), certain information with respect to the
beneficial ownership of Common Stock by (i) each director of the Company who
owns Common Stock; (ii) the Chief Executive Officer and the four other most
highly compensated executive officers of Lear whose compensation exceeded
$100,000 in the Company's last completed fiscal year (collectively, the "named
executive officers"); (iii) all executive officers and directors as a group; and
(iv) each stockholder who is known to the Company to be the beneficial owner, as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of more than 5% of the outstanding Common Stock. Each of the
persons listed below has sole voting and investment power with respect to such
shares, unless otherwise indicated.
 

<TABLE>
<CAPTION>
 
                                                                NUMBER OF SHARES
                                                                 OF COMMON STOCK      PERCENTAGE OF
                                                                OWNED BENEFICIALLY    COMMON STOCK
                                                                ------------------    -------------
<S>                                                             <C>                   <C>
Lehman Funds(1).............................................        10,284,854            15.6%
The TCW Group, Inc.(2)......................................         3,863,590             5.9
Kenneth L. Way(3)(4)........................................           551,249(5)        *
Robert E. Rossiter(3)(4)....................................           316,171(6)        *
James H. Vandenberghe(3)(4).................................           224,551(7)        *
Gerald G. Harris(4).........................................            25,081(8)        *
Terrence E. O'Rourke(4).....................................             1,000           *
Robert W. Shower(3).........................................            15,000(9)        *
Larry W. McCurdy(3).........................................            12,000(9)        *
Total Executive Officers and Directors as a group (19
  individuals)..............................................         1,493,645(10)         2.3
</TABLE>

 
- -------------------------
  *  Less than 1%
 
 (1) These shares of Common Stock are held by four merchant banking partnerships
     affiliated with Lehman Brothers Holdings Inc. (collectively, the "Lehman
     Funds"). The number of shares beneficially owned by the Lehman Funds
     includes 3,694,191 shares of Common Stock owned by Lehman Brothers Merchant
     Banking Portfolio Partnership L.P. and 2,510,953 shares of Common Stock
     owned by Lehman Brothers Capital Partners II, L.P. (each located at Three
     World Financial Center, New York, New York 10285) and 1,015,636 shares of
     Common Stock owned by Lehman Brothers Offshore Investment Partnership L.P.
     and 3,064,074 shares of Common Stock owned by Lehman Brothers Offshore
     Investment Partnership -- Japan L.P. (each located at Clarendon House,
     Church Street, Hamilton HMCX, Bermuda). LB I Group Inc. and Lehman Brothers
     Holdings Inc. are the general partners of Lehman Brothers Merchant Banking
     Portfolio Partnership L.P. and Lehman Brothers Capital Partners II, L.P.,
     and Lehman Brothers Offshore Partners Ltd. is the general partner of Lehman
     Brothers Offshore Investment Partnership L.P. and Lehman Brothers Offshore
     Investment Partnership - Japan L.P. Each such general partner may be deemed
     to own beneficially the shares directly owned by the entity of which it is
     the general partner. LB I Group Inc. and Lehman Brothers Offshore Partners
     Ltd. are indirect wholly-owned subsidiaries of Lehman Brothers Holdings
     Inc. Each of the partnerships may be deemed to share with Lehman Brothers
     Holdings Inc. the power to vote and the power to dispose of shares owned by
     such partnership. The address of Lehman Brothers Holdings Inc. and LB I
     Group Inc. is Three World Financial Center, New York, New York 10285.
 
 (2) The Company has been informed by The TCW Group, Inc. in a report on
     Schedule 13G dated February 12, 1997, that the shares beneficially owned by
     The TCW Group, Inc. are held by the following subsidiaries of The TCW
     Group, Inc.: Trust Company of the West; TCW Asset Management Company; and
     TCW Funds Management, Inc. The address of The TCW Group, Inc. is 865
     Figueroa Street, Los Angeles, CA 90017. In addition, Robert Day may be
     deemed to control The TCW Group, Inc. Consequently, Robert Day may be
     deemed to beneficially own the shares owned by The TCW Group, Inc. The
     address of Robert Day is 200 Park Avenue, Suite 2200, New York, New York
     10166.
 
 (3) The individual is a director of the Company.
 
                                        7

<PAGE>   12
 
 (4) The individual is a named executive officer of the Company.
 
 (5) Includes 319,525 shares of Common Stock issuable under currently
     exercisable options and 46,000 shares of Common Stock issuable under
     options that become exercisable within sixty days.
 
 (6) Includes 185,241 shares of Common Stock issuable under currently
     exercisable options and 27,000 shares of Common Stock issuable under
     options that become exercisable within sixty days.
 
 (7) Includes 134,888 shares of Common Stock issuable under currently
     exercisable options and 18,000 shares of Common Stock issuable under
     options that become exercisable within sixty days.
 
 (8) Includes 16,081 shares of Common Stock issuable under currently exercisable
     options and 9,000 shares of Common Stock issuable under options that become
     exercisable within sixty days.
 
 (9) Includes 10,000 shares of Common Stock issuable under options that become
     exercisable within sixty days.
 
(10) Includes 893,747 shares of Common Stock issuable under currently
     exercisable options and 166,381 shares of Common Stock issuable under
     options that become exercisable within sixty days.
 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities
(collectively, the "reporting persons") to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and to furnish the
Company with copies of these reports. Based on the Company's review of the
copies of these reports received by it, and written representations received
from reporting persons with respect to the filing of Form 5, the Company
believes that all filings required to be made by the reporting persons for the
fiscal year ended December 31, 1996 were made on a timely basis.
 
M
EETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
 
     The Board of Directors has established permanent Audit, Compensation,
Nominating and Executive Committees. The membership of each of these committees
is determined from time to time by the Board of Directors and, to date, only
non-management directors have served on the Audit Committee and the Compensation
Committee.
 
     The Audit Committee, which held four meetings during 1996, consists of
Messrs. Shower and McCurdy, with Mr. Shower serving as Chairman. The
responsibilities of the Audit Committee are: (i) to participate with management
of the Company in selecting and recommending to the Board of Directors the
independent auditors to be retained to conduct the annual audit of the Company;
(ii) to review with management and auditors annually the proposed scope of the
independent audit; (iii) to review the non-audit services performed by the
independent auditors to ensure that performance of such services does not impair
the independence of the auditors; (iv) to review with management the periodic
examinations made by regulatory authorities and any replies required in
connection with such examinations; (v) to review with management at least
annually the role and scope of the work performed by the Company's internal
auditors; (vi) to review the periodic summary reports of audits performed by the
internal auditors; and (vii) to advise the Board of Directors on any
developments which the Audit Committee believes should be considered by the
Board of Directors.
 
     The Compensation Committee, which held four meetings during 1996, currently
consists of Messrs. Parrott and McCurdy, with Mr. McCurdy serving as Chairman.
Jeffrey P. Hughes, who previously served on the Compensation Committee, resigned
from the Board of Directors on May 17, 1996. In addition, Mr. Spalding, who
served as a member of the Compensation Committee in 1996, resigned from that
position on February 28, 1997, but remains a director. The Compensation
Committee reviews and approves salaries, bonuses and other benefits relating to
compensation of the executive officers of the Company and administers the
Company's Long-Term Incentive Plan and stock option plans.
 
                                        8

<PAGE>   13
 
     The Nominating Committee, which was formed in and held no meetings in 1996,
consists of Messrs. Stern, Rossiter and Botta with Mr. Stern serving as
Chairman. The Nominating Committee has responsibility and authority to recommend
to the Board of Directors: (i) nominees for election to the Board of Directors;
(ii) candidates for membership on the various committees of the Board of
Directors; and (iii) in the event of a vacancy in the office of Chief Executive
Officer of the Company, a successor Chief Executive Officer. The Nominating
Committee will consider recommendations for director nominees made by
stockholders of the Company. Such recommendations shall be made in writing to
the Company's Secretary prior to December 31, 1997, and shall state the name,
age, address, principal occupation, background and qualifications of the person
recommended.
 
     The Executive Committee currently consists of Messrs. Way, Rossiter, Stern
and Spalding, with Mr. Stern serving as Chairman. In addition, Mr. Hughes served
on the Executive Committee until May 17, 1996. The Executive Committee, during
intervals of the meetings of the Board of Directors, may exercise certain powers
of the Board of Directors in the general supervision and control of the business
and affairs of the Company. The matters acted on by the Executive Committee are
typically of a routine nature. Thus, the Executive Committee meets infrequently.
During 1996, all actions of the Executive Committee were taken by unanimous
written consent after the Executive Committee's review of proposals circulated
to its members.
 
     The Company's Board of Directors met eight times during 1996. Each director
participated in at least 75% of the total number of meetings of the Board of
Directors and the committees on which he serves.
 

COMPENSATION OF DIRECTORS
 
     During 1996, directors who were not employees of the Company, Lehman
Brothers Inc. or The Cypress Group received a fee of $20,000 per annum (the
"Annual Retainer"). In addition, such directors received a fee of $1,000 for
each meeting of the Board of Directors that they attended and for each committee
meeting they attended which was not held on the same day as a meeting of the
Board of Directors. Such directors were also reimbursed for their expenses
incurred in attending meetings.
 
     In February 1997, the Company approved an Outside Directors Compensation
Plan. Effective July 1, 1997, the Annual Retainer for directors who are not
employees of the Company, Lehman Brothers Inc. or their respective affiliates
("Outside Directors") will be $24,000. One-half of the Annual Retainer will be
paid in shares of Common Stock and the remaining one-half will be paid, at the
election of each Outside Director, in either cash or shares of Common Stock. In
addition, Outside Directors will receive a fee of $1,000 for each meeting of the
Board of Directors they attend and for each committee meeting they attend which
is not held on the same day as a meeting of the Board of Directors. Outside
Directors will also reimbursed for their expenses incurred in attending
meetings.
 
     In addition, in February 1997, the Company implemented stock ownership
guidelines for Outside Directors, pursuant to which Outside Directors are
required, within five years, to have stock ownership levels equal to three times
the Annual Retainer. Outside Directors who have not made substantial progress
(as determined by the Board of Directors) towards this goal after three years
will have all of their Annual Retainer delivered in shares of Common Stock.
 
                                        9

<PAGE>   14
 
                             EXECUTIVE COMPENSATION
 
SUMMARY COMPENSATION TABLE
 
     The following table sets forth annual and long-term compensation for the
named executive officers in the fiscal year ended December 31, 1996, as well as
certain other compensation information for the named executive officers during
the fiscal periods indicated.
 
                           SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                                                             LONG-TERM
                                                                                                          COMPENSATION(1)
                                                                                                     -------------------------
                                                                     ANNUAL COMPENSATION               AWARDS       PAYOUTS
                                                              ---------------------------------      ----------   ------------
                                                                                                     SECURITIES
                                                                                                     UNDERLYING    ALL OTHER
                          NAME AND                                                      BONUS         OPTIONS/    COMPENSATION
                    PRINCIPAL POSITIONS                        PERIOD     SALARY($)      ($)          SARS(#)         ($)
                    -------------------                        ------     ---------     -----        ----------   ------------
<S>                                                           <C>         <C>          <C>           <C>          <C>
Kenneth L. Way..............................................    1996      $750,000     $768,750(3)     23,000       $32,400(4)
  Chairman of the Board and                                     1995       585,000      900,000(3)                   24,642(4)
  Chief Executive Officer                                       1994       502,000      830,000(3)     46,000        18,128(4)
Robert E. Rossiter..........................................    1996       525,000      472,500(3)     16,000        14,531(5)
  President, Chief Operating                                    1995       420,000      625,000(3)                   14,080(5)
  Officer and Director                                          1994       365,000      585,000(3)     27,000        21,163(5)
James H. Vandenberghe.......................................    1996       400,000      320,000(3)     14,000        12,490(6)
  Executive Vice President,                                     1995       304,000      450,000(3)                   12,851(6)
  Chief Financial Officer and                                   1994       261,000      375,000(3)     18,000        10,865(6)
  Director
Terrence E. O'Rourke........................................    1996       249,996      226,875(3)     11,000         6,449(7)
  Senior Vice President and                                     1995       175,000      150,000(3)                    5,886(7)
  President -- Ford Division                                    1994        43,750(2)    25,000(3)     11,000
Gerald G. Harris............................................    1996       239,579      226,875(3)     11,000         9,438(8)
  Senior Vice President and                                     1995       175,000      150,000(3)                    7,284(8)
  President -- GM Division                                      1994       145,000      120,000(3)      9,000         4,204(8)
</TABLE>

 
- -------------------------
(1) As of December 31, 1996, the Company has no restricted stock or restricted
    stock units outstanding.
 
(2) Represents Mr. O'Rourke's base salary from October 1994, when Mr. O'Rourke
    began his employment with the Company, through December 31, 1994.
 
(3) Pursuant to the Company's Senior Executive Incentive Compensation Plan, the
    Company awards annual bonuses to its executive officers based on the
    attainment of financial and nonfinancial objectives. All bonuses were earned
    pursuant to the Senior Executive Incentive Compensation Plan, except that
    Messrs. Way, Rossiter and Vandenberghe received additional bonuses for 1995
    of $150,000, $100,000 and $50,000, respectively, and for 1994 of $300,000,
    $200,000 and $103,000, respectively. Such additional bonuses were based on
    criteria similar to that considered under the Senior Executive Incentive
    Compensation Plan. For a description of the Senior Executive Incentive
    Compensation Plan and the criteria used for the determination of awards, see
    "Compensation Committee Report -- Annual Incentives."
 
(4) Represents: 401(k) plan matching contributions of $1,150 for each of 1996,
    1995 and 1994, respectively; life insurance premiums paid by the Company of
    $24,175, $14,215 and $8,798 in 1996, 1995 and 1994, respectively; and
    payments of $7,075, $9,277 and $8,180 for expenses related to financial
    planning in 1996, 1995 and 1994, respectively.
 
(5) Represents: 401(k) plan matching contributions of $1,150 for each of 1996,
    1995 and 1994, respectively; life insurance premiums paid by the Company of
    $6,306, $3,653 and $3,653 in 1996, 1995 and 1994, respectively; and payments
    of $7,075, $9,277 and $16,360 for expenses related to financial planning in
    1996, 1995 and 1994, respectively.
 
(6) Represents: 401(k) plan matching contributions of $1,150 for each of 1996,
    1995 and 1994, respectively; life insurance premiums paid by the Company of
    $4,265, $2,424 and $1,535 in 1996, 1995 and 1994, respectively; and payment
    of $7,075, $9,277 and $8,180 for expenses related to financial planning in
    1996, 1995 and 1994, respectively.
 
(7) Represents: 401(k) plan matching contributions of $1,150 for 1996; life
    insurance premiums paid by the Company of $1,174 and $1,761 in 1996 and
    1995, respectively; and payments of $4,125 for expenses related to financial
    planning in each of 1996 and 1995, respectively.
 
(8) Represents: 401(k) plan matching contributions of $1,150 for each of 1996,
    1995 and 1994, respectively; life insurance premiums paid by the Company of
    $3,563, $3,299 and $3,054 in 1996, 1995 and 1994, respectively; and payments
    of $4,725 and $2,835 for expenses related to financial planning in 1996 and
    1995, respectively.
 
                                       10

<PAGE>   15
 
OPTION GRANTS AND EXERCISES AND LONG-TERM INCENTIVE AWARDS IN LAST FISCAL YEAR
 
     The following table provides information, with respect to the named
executive officers of the Company, concerning the grant of options during the
fiscal year ended December 31, 1996, and the potential value of unexercised
options on an aggregated basis.
 
                     OPTIONS GRANTS IN THE LAST FISCAL YEAR
 

<TABLE>
<CAPTION>
                                                                                          POTENTIAL REALIZABLE VALUE
                                  NUMBER OF                                                AT ASSUMED ANNUAL RATES
                                  SECURITIES    % OF TOTAL                                      OF STOCK PRICE
                                  UNDERLYING      OPTIONS                                        APPRECIATION
                                   OPTIONS      GRANTED TO     EXERCISE                        FOR OPTION TERM
                                   GRANTED      EMPLOYEE IN      PRICE      EXPIRATION    --------------------------
             NAME                   (#)(1)      FISCAL YEAR    ($/SHARE)       DATE         5%($)          10%($)
             ----                 ----------    -----------    ---------    ----------      -----          ------
<S>                               <C>           <C>            <C>          <C>           <C>           <C>
Kenneth L. Way................      23,000          4.1%        $33.00       5/9/2006       $477,331      $1,209,651
Robert E. Rossiter............      16,000          2.9         $33.00       5/9/2006        322,056         841,496
James H. Vandenberghe.........      14,000          2.5         $33.00       5/9/2006        290,549         736,309
Terrence E. O'Rourke..........      11,000          2.0         $33.00       5/9/2006        228,289         578,529
Gerald G. Harris..............      11,000          2.0         $33.00       5/9/2006        228,289         578,529
</TABLE>

 
- -------------------------
(1) For a discussion of the terms of the options granted, see "Executive
    Compensation -- 1996 Stock Option Plan" below.
 
     The following table provides information, with respect to the named
executive officers, concerning the exercise of stock options during the fiscal
year ended December 31, 1996, and unexercised stock options held as of December
31, 1996.
 
                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES
 

<TABLE>
<CAPTION>
                                                                NUMBER OF UNEXERCISED        VALUE OF UNEXERCISED
                                                                     OPTIONS AT              IN-THE-MONEY OPTIONS
                             SHARES ACQUIRED      VALUE           DECEMBER 31, 1996         AT DECEMBER 31, 1996(1)
                               ON EXERCISE       REALIZED     -------------------------    -------------------------
          NAME                     (#)             ($)        EXERCISABLE/UNEXERCISABLE    EXERCISABLE/UNEXERCISABLE
          ----               ---------------     --------     -------------------------    -------------------------
<S>                          <C>                <C>           <C>                          <C>
Kenneth L. Way...........        250,220        $8,116,536         319,525/69,000             $9,818,790/$882,625
Robert E. Rossiter.......        163,206         5,326,600         185,241/43,000              5,653,883/ 520,875
James H. Vandenberghe....         98,455         3,187,598         134,888/32,000              4,110,729/ 351,000
Terrence E. O'Rourke.....              0                 0              0/ 22,000                      0/ 171,875
Gerald G. Harris.........         65,462         2,022,176          16,081/20,000                468,359/ 180,000
</TABLE>

 
- -------------------------
(1) Based on a closing price of $34.125 per share on December 31, 1996 as
    reported by the New York Stock Exchange.
 
                                       11

<PAGE>   16
 
     The following table provides information, with respect to the named
executive officers, concerning the grants of performance share awards under the
Long-Term Incentive Plan.
 
    LONG-TERM INCENTIVE PLAN -- PERFORMANCE SHARE AWARDS IN LAST FISCAL YEAR
 

<TABLE>
<CAPTION>
                                                               ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
                                           PERFORMANCE OR                PRICE-BASED PLANS(1)
                                         OTHER PERIOD UNTIL    -----------------------------------------
                                           MATURATION OR        THRESHOLD       TARGET         MAXIMUM
                NAME                           PAYOUT              (#)            (#)            (#)
                ----                     ------------------    -----------    -----------    -----------
<S>                                      <C>                   <C>            <C>            <C>
Kenneth L. Way.......................     1/1/96-12/31/98      1,622/1,622    3,244/3,244    4,866/4,866
Robert E. Rossiter...................     1/1/96-12/31/98      1,135/1,135    2,270/2,270    3,405/3,405
James H. Vandenberghe................     1/1/96-12/31/98         865/ 865    1,730/1,730    2,595/2,595
Terrence E. O'Rourke.................     1/1/96-12/31/98         486/ 486       973/ 973    1,459/1,459
Gerald G. Harris.....................     1/1/96-12/31/98         378/ 378       757/ 757    1,135/1,135
</TABLE>

 
- -------------------------
(1) Represents performance share awards under the Company's Long-Term Stock
    Incentive Plan. See "Executive Compensation -- Long-Term Stock Incentive
    Plan." The first number represents the number of shares under the
    performance share awards that a named executive officer may receive based
    upon the cumulative net income performance criteria and the second number
    represents the number of shares under the performance share award that a
    named executive officer may receive based upon the relative return to
    shareholders performance criteria.
 
PENSION PLAN AND BENEFITS
 
Qualified Pension Plan
 
     The named executive officers (as well as other employees of Lear)
participate in the Lear Corporation Pension Plan (the "Pension Plan"). The
Pension Plan is a qualified pension plan under the Internal Revenue Code of
1986, as amended (the "Code"), which is integrated with Social Security
benefits. Any active employee of Lear who was a participant in the Lear Siegler
Diversified Holding Corp. Pension Plan on September 29, 1988, is eligible to
participate, and each other eligible employee (certain non-union employees not
covered by another pension plan or hourly 401(k) plan and certain union
employees) becomes a participant on the July 1st or January 1st following
completion of one year of service. The benefits are funded by employer
contributions that are determined under accepted actuarial principals and
applicable United States federal tax laws.
 
     The Pension Plan contains four sets of benefit provisions: the Lear
provisions, the Fabricated Products Operations ("FPO") provisions, the Progress
Pattern provisions and the FAVESA provisions. The Lear provisions are the
principal provisions of the Pension Plan (see below). The FPO and Progress
Pattern provisions are grandfathering provisions carried forward from the Lear
Siegler Diversified Holdings Corp. Pension Plan, and apply to those participants
who were covered by such provisions of that plan. The FAVESA provisions are
grandfathering provisions carried forward from the Ford General Retirement Plan,
and apply to those participants who were covered by such provisions when Lear
purchased from Ford Motor Company its North American seat cover and seat systems
business. All named executive officers are covered by either the Lear or FPO
provisions.
 
     Under the Lear provisions, pension benefits are based on a participant's
"final average earnings," which is the average of the participant's compensation
for the highest five consecutive calendar year earnings of the last 15 years of
employment. Compensation includes all cash compensation reported for federal
income tax purposes excluding sales incentive bonuses. The annual retirement
benefit (payable as a life annuity at age 65) is equal to the greater of:
 
          a. 1.10% times final average earnings times years of credited service
             (to a maximum of 30 years) plus 0.65% times final average earnings
             in excess of covered compensation times credited service (to a
             maximum of 30 years); or
 
          b. $177.00 times years of credited service.
 
                                       12

<PAGE>   17
 
     Covered compensation as defined in I.R.S. Notice 89-70.
 
     The Pension Plan was amended effective January 1, 1997 to provide an annual
retirement benefit (payable as a life annuity at age 65) equal to the greater
of:
 
          a. the sum of the benefit determined under the old formula (as
             described above) for years of credited service before 1997 plus
             1.00% times final average earnings times years of credited service
             after 1996 (with a maximum of 30 years) plus 0.65% times final
             average earnings in excess of covered compensation times years of
             credited service after 1996 (with a maximum of 30 years); or
 
          b. $360.00 times years of credited service.
 
The amendment to the Pension Plan included grandfathering provisions retaining
the old formula for five years. These grandfathering provisions apply to any
active employee of the Company on January 1, 1997 who was age 50 or above. Such
a participant will earn benefits under the new formula (as described above) for
years of credited service after 2001.
 
     Participants who are former FPO employees (as of December 31, 1985), or are
former employees of Progress Pattern Corporation (as of November 30, 1984), are
eligible to have their pension determined through the application of a floor
provision, which guarantees a minimum pension benefit. Pension benefits will be
calculated in two ways, using first the Lear formula, and then using the floor
provision. If the floor provides a greater benefit, then the participants will
receive benefits under the floor provision.
 
     The floor provision benefit (payable as a life annuity at age 65) will be:
 
          a. 0.8% times final average earnings times years of credit service,
     plus
 
          b. 0.65% times final average earnings in excess of $10,000 times years
             of credited service (to a maximum of 35 years).
 
     The benefits under the Pension Plan become vested if (a) a participant was
fully vested in the Lear Siegler Diversified Holdings Corp. Pension Plan, (b) a
participant has at least five years of combined vesting service under the Lear
Siegler Diversified Holdings Corp. Pension Plan, and the Pension Plan or (c) a
participant completes five or more years of service.
 
Supplemental Executive Retirement Plan
 
     In addition to the Pension Plan, Lear established the Lear Corporation
Supplemental Executive Retirement Plan (the "Supplemental Executive Retirement
Plan") as part of a Pension Equalization Program. Lear's Pension Plan is subject
to rules in the Code that restrict the level of retirement income that can be
provided to, and the amount of compensation that can be considered for, highly
paid executives under the Pension Plan. The purpose of the Supplemental
Executive Retirement Plan is to supplement the pensions under the Pension Plan
of selected highly paid executives in order to provide them with a relative
level of retirement income comparable to that of other employees. The benefits
under the Supplemental Executive Retirement Plan are equal to the difference
between the executive's actual vested accrued pension benefit under the Pension
Plan and the benefit under the Lear provisions of Pension Plan the executive
would have accrued if the Code limits on the amount of compensation that can be
considered and the total amount of benefits that can be provided under qualified
pension plans were disregarded. Highly compensated executives selected by the
Compensation Committee are eligible to participate in the Supplemental Executive
Retirement Plan. Each of Messrs. Way, Rossiter, Vandenberghe, Harris and
O'Rourke participates in the Supplemental Executive Retirement Plan.
 
                                       13

<PAGE>   18
 
     The following table indicates estimated total annual benefits payable as a
single life annuity beginning at age 65 for various compensation levels and
years of service under the Pension Plan and the Supplemental Executive
Retirement Plan.
 
                               PENSION PLAN TABLE
 

<TABLE>
<CAPTION>
                                                                                 YEARS OF SERVICE
                                              COVERED       ----------------------------------------------------------
ANNUAL COMPENSATION                        COMPENSATION*       10          15          20          25           30
- -------------------                        -------------       --          --          --          --           --
<S>                   <C>                  <C>              <C>         <C>         <C>         <C>         <C>
$ 400,000             .................       $31,032       $ 67,983    $101,974    $135,966    $169,957    $  203,949
   500,000            .................        31,032         85,483     128,224     170,966     213,707       256,449
   600,000            .................        31,032        102,983     154,474     205,966     257,457       308,949
   700,000            .................        31,032        120,483     180,724     240,966     301,207       361,449
   800,000            .................        31,032        137,983     206,974     275,966     344,957       413,949
   900,000            .................        31,032        155,483     233,224     310,966     388,707       466,449
 1,000,000            .................        31,032        172,983     259,474     345,966     432,457       518,949
 1,200,000            .................        31,032        207,983     311,974     415,966     519,957       623,949
 1,400,000            .................        31,032        242,983     364,474     485,966     607,457       728,949
 1,600,000            .................        31,032        277,983     416,974     555,966     694,957       833,949
 1,800,000            .................        31,032        312,983     469,474     625,966     782,457       938,949
 2,000,000            .................        31,032        347,983     521,974     695,966     869,957     1,043,949
</TABLE>

 
- -------------------------
* Indicates the covered compensation for Mr. Harris who has the lowest covered
  compensation of all the named executive officers. The covered compensation for
  the other named executive officers will be a higher amount, resulting in a
  slightly lower payout amount for comparable compensation levels and years of
  service. Such differences are not expected to be material.
 
     The plans grant credit for all years of pension service with Lear Siegler
Diversified Holdings Corp. and with Lear, and offset the retirement benefit
payable by the Lear Siegler Diversified Holdings Corp. Pension Plan against the
benefit payable by the plans. At age 65, it is estimated that under the plans
Kenneth L. Way will have 30 years of service, Mr. Rossiter will have 30 years of
service, James H. Vandenberghe will have 30 years of service, Mr. Harris will
have 30 years of service and Mr. O'Rourke will have 16 years of service.
 
401(K) SAVINGS PLAN
 
     During 1996, Lear had a plan pursuant to Section 401(k) of the Code (the
"Old 401(k) Plan") for non-union employees who have completed a three month
period of service and attained the age of twenty-one. Under the Old 401(k) Plan,
each eligible employee may elect to defer, on a pre-tax basis, a portion of his
or her salary each year. The portion deferred will be paid by the Company to the
trustee under the Old 401(k) Plan. Lear made a matching contribution to the plan
each month on behalf of each participant in an amount equal to 50% of such
participant's salary deferral contributions which are not in excess of 4% of
such participant's compensation; provided, however, that the matching
contribution for a participant in any year may not exceed $1,150. Matching
contributions become vested under the Old 401(k) Plan at a rate of 20% for each
full year of service. For the year ended December 31, 1996, each of Messrs. Way,
Rossiter, Vandenberghe, Harris and O'Rourke received the maximum matching
contribution under the Old 401(k) Plan of $1,150.
 
     Effective as of January 1, 1997, Lear amended the Old 401(k) Plan (as so
amended, the "401(k) Plan"). Under the 401(k) Plan, the Company matching
contribution will be invested in shares of Common Stock. In addition, under the
401(k) Plan, the Company match percentage for each participant varies from 50%
to 100%, depending on the number of years of service with the Company.
 
                                       14

<PAGE>   19
 
1988 STOCK OPTION PLAN
 
     Under stock options agreements, each dated September 29, 1988, as amended
(collectively, the "1988 Stock Option Plan"), the Company had outstanding, as of
March 18, 1997, options to purchase 669,132 shares of Common Stock, which are
held by certain current or former management personnel. All of these outstanding
options are fully vested and are exercisable at $1.29 per share. No additional
options may be granted under the 1988 Stock Option Plan.
 
1992 STOCK OPTION PLAN
 
     The Company has adopted the 1992 Stock Option Plan, as amended (the "1992
Stock Option Plan"), which is administered by the Compensation Committee. Under
the 1992 Stock Option Plan, as of March 18, 1997, the Company had outstanding
options to purchase 1,094,371 shares of Common Stock, all of which are held by
certain current or former management personnel. All of these outstanding options
are fully vested and are exercisable at $5 per share. No additional options may
be granted under the 1992 Stock Option Plan.
 
1994 STOCK OPTION PLAN
 
     The Company has adopted the 1994 Stock Option Plan, as amended (the "1994
Stock Option Plan"), which is administered by the Compensation Committee. Under
the 1994 Stock Option Plan, as of March 18, 1997, the Company had outstanding
options to purchase 505,750 shares of Common Stock. The exercise price of these
options ranges from $15.50 per share to $30.25 per share. Options granted under
the 1994 Stock Option Plan vest and become exercisable at various times, the
earliest of which is April 6, 1997.
 
1996 STOCK OPTION PLAN
 
     The Company has adopted the 1996 Stock Option Plan, as amended (the "1996
Stock Option Plan"), pursuant to which eligible directors, officers and
employees of the Company and other individuals who are primarily responsible for
the management and success of the Company are entitled to receive awards of
options. Each option granted pursuant to the 1996 Stock Option Plan is
designated at the time of grant as either an "incentive stock option" or as a
"non-qualified stock option".
 
     The 1996 Stock Option Plan is administered by the Compensation Committee.
Subject to the terms of the 1996 Stock Option Plan, the Compensation Committee
determines who among those eligible will be granted options, the time or times
at which options will be granted, the number of shares to be subject to options,
the duration of options, any conditions to the exercise of options, and the
manner in and price at which options may be exercised.
 
     Any key employee shall be eligible to receive incentive stock options or
non-qualified stock options granted under the 1996 Stock Option Plan. Generally,
any employee, any director of the Company, whether or not an employee, and
consultants and advisors who, in the judgment of the Compensation Committee,
perform valuable and important services for the Company shall be eligible to
receive non-qualified stock options.
 
     The exercise price of each option issued under the 1996 Stock Option Plan
is determined by the Compensation Committee, provided that in the case of
incentive stock options the exercise price may not be less than 100% of the
grant date fair market value of the shares of Common Stock covered by such
options. If any incentive stock option is granted to an employee who owns more
than 10% of the total combined voting power of all classes of the Company's
outstanding capital stock, then the exercise price thereof may not be less than
110% of the grant date fair market value of the Common Stock covered by such
option.
 
     Under the 1996 Stock Option Plan, the Company may grant options with
respect to a total of 1,000,000 shares of Common Stock. As of March 18, 1997,
the Company had outstanding options to purchase 530,500 shares of Common Stock
under the 1996 Stock Option Plan. The exercise price of these options was $33.00
per share. Outstanding options that were granted under the 1996 Stock Option
Plan vest and become exercisable on May 9, 1999.
 
                                       15

<PAGE>   20
 
LONG-TERM STOCK INCENTIVE PLAN
 
     The Company has adopted the Long-Term Incentive Plan, subject to
stockholder approval. The Long-Term Incentive Plan permits the grant of
nonqualified stock options, incentive stock options, stock appreciation rights
(SARs), restricted stock, restricted units, performance shares and performance
units to officers and other key employees of the Company and its subsidiaries
who are selected by the Compensation Committee to participate in the Long-Term
Incentive Plan. The Long-Term Incentive Plan also permits the grant of
nonqualified stock options to nonemployee directors who are selected to receive
such a grant.
 
     The Long-Term Incentive Plan is administered by the Compensation Committee.
Subject to the terms of the Long-Term Incentive Plan, the Compensation Committee
will select employees to participate in the Long-Term Incentive Plan, determine
the sizes and types of awards, determine the terms and conditions of awards in a
manner consistent with the Long-Term Incentive Plan, construe and interpret the
Long-Term Incentive Plan and any agreement or instrument entered into under the
Long-Term Incentive Plan, establish, amend or waive rules and regulations for
the plan's administration, and amend the terms and conditions of any outstanding
award to the extent such terms and conditions are within the discretion of the
Compensation Committee as provided in the Long-Term Incentive Plan. Further, the
Compensation Committee will make such other determinations as may be necessary
or advisable in the administration of the Long-Term Incentive Plan.
 
     Under the Long-Term Incentive Plan, up to 2,200,000 shares of Common Stock
may be issued or transferred to participants under the Long-Term Incentive Plan.
No more than 700,000 shares of Common Stock, however, will be issued or
delivered to participants under awards of restricted units and performance
shares. The maximum aggregate number of shares of Common Stock and common stock
equivalent units that may be granted during any fiscal year of the Company to
any one participant under the Long-Term Incentive Plan, regardless of the type
of awards, will be 50,000 shares of Common Stock. This limit will apply
regardless of whether such compensation is paid in shares of Common Stock or in
cash.
 
     In 1996, each selected participant received performance share awards
pursuant to the Long-Term Incentive Plan using a pre-established awards formula
based upon (i) cumulative net income over the three year period beginning
January 1, 1996 and ending December 31, 1998 (the "Performance Period") and (ii)
return to Company's shareholders over the Performance Period as compared to its
peer group of representative independent automotive suppliers. For a participant
to receive Common Stock under the Plan for performance share awards based on the
cumulative net income performance criteria, cumulative net income over the
Performance Period must exceed the minimum level established by the Compensation
Committee. Participants will receive additional shares of Common Stock to the
extent cumulative net income exceeds the minimum level, up to the maximum target
performance level. For a participant to receive Common Stock under the Plan for
performance share awards based on the relative return to shareholders
performance criteria, the relative return to shareholders must exceed the
minimum level established by the Compensation Committee. Participants will
receive additional shares of Common Stock to the extent that relative return to
shareholders exceeds the minimum level, up to the maximum target performance
level.
 
     In 1996, each selected executive officer was permitted to elect to defer a
portion of base salary during 1997 and annual incentive bonuses based on the
executive officer's performance in 1996 and awarded during the first quarter of
1997 under the Senior Executive Incentive Plan. This feature of the Long-Term
Incentive Plan is known as the Management Stock Purchase Program. In
consideration for the deferral of their salary and/or incentive bonus, an
officer who elects such deferral ("Deferral Participant") receives an amount of
restricted stock units under the Long Term Incentive Plan equal to the amount
deferred increased by 25% of such amount and divided by the fair market value of
the shares of Common Stock on the date the annual incentive bonuses are paid.
Generally, after March 31, 2000 a Deferral Participant is entitled to receive a
number of shares of Common Stock equal to the number of restricted stock units
held by such Deferral Participant and a cash payment equal to the amount of
dividends, if any, that would have been paid to such Deferral Participant if
such Deferral Participant had held shares of Common Stock rather than restricted
stock units.
 
                                       16

<PAGE>   21
 
     As of March 18, 1997, performance share awards to receive up to 49,017
shares of Common Stock and restricted stock units to receive up to 32,504 shares
of Common Stock have been awarded under the Long-Term Incentive Plan, subject to
shareholder approval. No stock options, SARs or shares of restricted stock have
been awarded under the Long-Term Incentive Plan.
 
EMPLOYMENT AND OTHER AGREEMENTS
 
     Lear has entered into employment agreements with each of the named
executive officers listed in the Summary Compensation Table. Each of Messrs.
Way, Rossiter and Vandenberghe has entered into a four-year employment agreement
dated March 20, 1995. Each employment agreement is renewable for one additional
year on the second anniversary of the agreement and each anniversary thereafter.
Messrs. Harris and O'Rourke have entered into a two-year employment agreement
dated as of March 20, 1995, which is renewable for one additional year on the
first anniversary of the agreement and each anniversary thereafter. The
employment agreements of Messrs. Way, Rossiter, Vandenberghe, Harris and
O'Rourke provide for an annual base salary which is currently $750,000,
$525,000, $400,000, $275,000 and $275,000, respectively, and may be increased at
the discretion of the Compensation Committee. In addition, under the terms of
their respective employment agreements, each of Messrs. Way, Rossiter,
Vandenberghe, Harris and O'Rourke are eligible for an annual incentive
compensation bonus at the discretion of the Compensation Committee.
 
     Each employment agreement provides that: (i) upon the death of the
employee, Lear will pay to his estate or designated beneficiary his full base
salary for an additional 12 months; (ii) upon termination for disability, the
employee will receive all compensation payable under Lear's disability and
medical plans and programs plus an additional payment from Lear so that the
aggregate amount of salary continuation from all sources equals his base salary
through the remaining term of the agreement; and (iii) upon termination by the
employee for good reason or by the Company without cause, the employee will
receive his full base salary to the end of the term of the agreement. If the
employment agreement is terminated for cause (as defined in such employment
agreement), the employee is only entitled to receive unpaid salary and benefits,
if any, accrued through the effective date of the employee's termination.
 
                                       17

<PAGE>   22
 
                       COMPENSATION COMMITTEE INTERLOCKS
 
                          AND INSIDER PARTICIPATION
 
     No member of the Compensation Committee was, during the fiscal year ended
December 31, 1996, an officer, former officer or employee of the Company or any
of its subsidiaries. No executive officer of the Company served as a member of
(i) the compensation committee of another entity in which one of the executive
officers of such entity served on the Compensation Committee; (ii) the Board of
Directors of another entity, one of whose executive officers served on the
Compensation Committee; or (iii) the compensation committee of another entity in
which one of the executive officers of such entity served as a member of the
Company's Board of Directors.
 
     During the fiscal year ended December 31, 1996, David P. Spalding and
Jeffrey P. Hughes served as members of the Compensation Committee. Messrs.
Spalding and Hughes are principals of The Cypress Group, which is a party to a
consulting agreement with Lehman Brothers Inc., an affiliate of the Lehman
Funds, pursuant to which it consults with Lehman Brothers Inc. with respect to
the management of the Lehman Funds' equity investment in Lear. As of March 18,
1996, the Lehman Funds beneficially own approximately 15.6% of the Common Stock
of the Company (assuming no outstanding options are exercised). Lehman Brothers
Inc. acted as an underwriter in connection with the Company's public offering of
its Common Stock which was consummated on July 9, 1996. The Cypress Group
received a fee for financial advisory services in connection with the
acquisition of Masland. In addition, Lehman Commercial Paper Inc. ("Lehman
Commercial Paper"), an affiliate of the Lehman Funds, is a lender under the
Company's revolving credit facility.
 
                         COMPENSATION COMMITTEE REPORT
 
     NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934 THAT MIGHT INCORPORATE THIS PROXY STATEMENT OR FUTURE
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, IN WHOLE OR IN PART, THE
FOLLOWING REPORT AND THE PERFORMANCE GRAPH WHICH FOLLOWS SHALL NOT BE DEEMED TO
BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
 
INTRODUCTION
 
     The Company's compensation policies are determined and executive officer
compensation decisions are made by the Compensation Committee. In 1996, Messrs.
McCurdy, Spalding and Hughes initially served on the Compensation Committee. Mr.
Hughes resigned from the Compensation Committee on May 17, 1996. Mr. Spalding
resigned from the Compensation Committee on February 28, 1997 and was replaced
by Mr. Parrott. The Compensation Committee is currently composed of two
non-employee directors: Messrs. McCurdy and Parrott.
 
     During the fiscal year ended December 31, 1996, the Compensation Committee
authorized the remuneration plans for senior management. In addition, the
Compensation Committee exercised administrative power with respect to the
Company's compensation plans. The Board of Directors has not rejected or
modified any action taken by the Compensation Committee.
 
EXECUTIVE COMPENSATION POLICY
 
     The Compensation Committee determines the salaries and other entitlements
of the executive officers of the Company and designs all of the Company's
compensation programs and policies. The objectives of the Company's compensation
policies are to optimize the profitability and growth of the Company, to link
the interests of the Company's management with those of the Company's
shareholders, to provide the Company's management with incentive for excellence
in individual performance, to promote teamwork among the Company's managers and
to give the Company an advantage in attracting and retaining officers, key
employees and directors. The Compensation Committee targets total renumeration
(i.e., base salary, annual incentives and long-term incentives) of its senior
executives at the 75th percentile of the Company's peer
 
                                       18

<PAGE>   23
 
group in return for comparable performance. A discussion of each component of
executive compensation follows.
 
BASE SALARY
 
     Base salaries for the Company's executive officers are established at
levels considered appropriate in light of the duties and scope of
responsibilities of each officer's position. In this regard, the Compensation
Committee considers the compensation practices and corporate financial
performance of similarly situated companies based on research provided by
independent consultants. The Compensation Committee focuses primarily on total
compensation, including incentive awards, rather than base salary alone as the
appropriate measure of executive officer remuneration.
 
     The base salaries of Messrs. Way, Rossiter and Vandenberghe were
established pursuant to employment agreements entered into in 1995. Under those
employment agreements, Mr. Way's current base salary is $750,000, Mr. Rossiter's
is $525,000, Mr. Vandenberghe's is $400,000, Mr. Harris' is $275,000 and Mr.
O'Rourke's is $275,000.
 
ANNUAL INCENTIVES
 
     The Company's executive officers participate in the Company's Senior
Executive Incentive Compensation Plan (the "Senior Executive Incentive Plan").
Pursuant to this plan, the Company makes annual incentive awards designed to
reward past financial performance and the achievement of goals considered
important to the Company's future. Awards are made in February or March of each
year based on the performance achieved in the previous year.
 
     The Senior Executive Incentive Plan provides for the assignment of target
annual awards expressed as a percentage of a participant's annual salary, and
the actual award, unless modified by the Compensation Committee, varies from the
target award opportunity based on attainment of financial objectives. The Annual
Incentive for each of Messrs. Way, Rossiter and Vandenberghe is based upon the
Company's earnings per share. Of the target award, 50% is based upon the
achievement of a target earnings per share. The other 50% of the target award is
based upon the achievement of a target growth in earnings per share over the
prior year. With respect to Messrs. O'Rourke and Harris, 50% of the Annual
Incentive is based on achievement of a targeted level of operating income for
that person's division based on an approved operating budget. Of the remaining
50% of the Annual Incentive, 25% is based upon the achievement of a target
earnings per share and 25% is based upon the achievement of a target growth in
earnings per share. Participants in Senior Executive Incentive Plan were
selected from executives who were in positions to materially influence the
Company's annual results in the targeted areas mentioned.
 
LONG-TERM INCENTIVES
 
     The long-term incentive component of the Company's executive compensation
program is designed to provide selected senior officers with substantial at-risk
components and to align the interests of such senior officers with those of its
stockholders. To achieve these goals, the Compensation Committee has implemented
stock ownership guidelines for its senior officers, granted stock options and
performance share awards to selected senior officers and permitted its officers
to defer a portion of their base salary and annual incentive bonus in restricted
stock units in lieu of cash.
 
Management Stock Ownership Requirements
 
     The Compensation Committee also believes that it is important that the
Company's executive and corporate officers have an important stake in the future
of the Company. Accordingly, the Compensation Committee has implemented stock
ownership requirements for 18 senior officers as of January 1, 1997. Stock
ownership levels to be achieved within five years range from one to five times
base salary. Shares of common stock owned and restricted stock units are counted
in satisfying these requirements. Unexercised stock options are not counted in
satisfying these requirements. Management personnel who have not made
substantial
 
                                       19

<PAGE>   24
 
progress towards these goals after three years will have up to 50% of their
annual incentives delivered in restricted stock units pursuant to the Management
Stock Purchase Program described below.
 
Stock Options
 
     Stock options granted under the Corporation's stock option plans, which
historically vest in three years from the date of grant, provide incentive for
officers by giving them a strong economic interest in remaining with the Company
and maximizing price appreciation of the Company's Common Stock. In May 1996,
each executive officer (other than Messrs. Lawrie and Preston who were not
employed by the Company at that time) received stock options pursuant to the
1996 Stock Option Plan. These options generally vest and become exercisable in
May 1999 and have an exercise price of $33.00 per share.
 
Performance Share Awards
 
     Performance share awards ensure that selected senior officers have a
significant component of their compensation contingent upon the achievement of
specified financial performance goals over a three year period. The performance
measures used to determine the level of payout under the performance share
awards may be chosen from one or more of the following: total shareholder return
(absolute or peer-group comparative); stock price (absolute or peer-group
comparative); cumulative net income (absolute or competitive growth rate
comparative); return on equity; return on capital; cash flow, including
operating cash flow, free cash flow, discounted cash flow return on investment
and cash flow in excess of capital; economic value added (income in excess of
capital costs); and market share. In 1996, the Compensation Committee granted
performance share awards under the Long-Term Incentive Plan with target
performance shares equal to 25% of the senior officer's base salary on January
1, 1997. The 1996 performance criteria for such performance share awards are the
Company's cumulative net income over a three year period and the relative return
to shareholders compared to the Company's peer group of representative
independent automotive suppliers at the end of a three year period. For a senior
officer to receive shares of Common Stock under the performance shares,
cumulative net income and/or relative return to shareholders must equal or
exceed the threshold goals. Additional shares of Common Stock under the
performance share awards may be earned if the Company has achieved the target or
maximum goals for cumulative net income and relative return to shareholders as
of the end of the performance period.
 
Management Stock Purchase Program
 
     In furtherance of its goal of aligning the interests of officers with those
of its shareholders, the Compensation Committee has permitted 16 senior officers
to participant in the Management Stock Purchase Program. The program is part of
the Long-Term Incentive Plan. Under this program, a selected officer can elect
to defer, a portion of base salary during 1997 and annual incentive bonuses
based upon the officer's 1996 performance and awarded during the first quarter
of 1997 under the Senior Executive Incentive Plan. In consideration for the
deferral of their salary and/or incentive bonus, Deferral Participants will
receive an amount of restricted stock units under the Long-Term Incentive Plan
equal to the amount deferred increased by 25% of such amount divided by the fair
market value of the shares of Common Stock on the date the annual incentive
bonuses are paid. Generally, a Deferral Participant must hold restricted stock
units and remain employed by the Company until after March 31, 2000, at which
time such Deferral Participant shall be entitled to receive a number of shares
of Common Stock equal to the number of restricted stock units held and a cash
payment equal to the amount of dividends, if any, that would have been earned by
such Deferral Participant if such Deferral Participant held shares of Common
Stock rather than restricted stock units.
 
401(K) PLAN
 
     Effective January 1, 1997, the Company's 401(k) Plan was amended to provide
that the Company matching contribution for each participant will be invested in
shares of Common Stock. Each participant who is at least age 57, however, may
elect to diversify the employer matching contributions. In addition, the
 
                                       20

<PAGE>   25
 
Company match percentage for each participant will be determined under the
following chart and will apply to the participant's contributions up to five
percent of base salary:
 

<TABLE>
<CAPTION>
                                               MATCHING CONTRIBUTION
              YEARS OF SERVICE                      PERCENTAGE
              ----------------                 ---------------------
<S>                                            <C>
less than 5..................................            50%
more than 5 but less than 8..................            75%
8 or more....................................           100%
</TABLE>

 
EXECUTIVE SUPPLEMENTAL SAVINGS PLAN
 
     Effective January 1, 1997, the Compensation Committee adopted the Lear
Corporation Executive Supplemental Savings Plan (the "Supplemental Savings
Plan"). The purpose of the Supplemental Savings Plan is to provide participants
and their beneficiaries with retirement benefits that could not be earned under
the 401(k) Plan due to limits on the amount of pre-tax contributions a
participant can make to the 401(k) Plan and/or the amount of compensation that
can be recognized under the 401(k) Plan. In addition, the Supplemental Savings
Plan also provides retirement benefits that would have been earned under the
401(k) Plan and/or the Pension Plan if the participant had not elected to defer
compensation under the Management Stock Purchase Program (as described above).
Selected senior officers are eligible to participate in the Supplemental Savings
Plan.
 
CHIEF EXECUTIVE OFFICER COMPENSATION
 
     During the fiscal year ended December 31, 1996, the compensation of Kenneth
L. Way, Chairman of the Board and Chief Executive Officer of the Company, was
established pursuant to an employment agreement entered into in March of 1995
and adjusted in October of 1995. Under the terms of the agreement, Mr. Way
received salary compensation of $750,000 in the fiscal year ending December 31,
1996 and was eligible to participate in the Company's Senior Executive Incentive
Plan, the Long-Term Incentive Plan, the Company's stock option plans and the
Executive Supplemental Savings Plan. The Compensation Committee awarded Mr. Way
an annual bonus of $768,750 for services performed in 1996, which was based upon
the attainment of targeted earnings per share and targeted growth in earnings
per share pursuant to the Company's Senior Executive Incentive Plan. In
addition, in order to provide substantial at-risk components and to align the
interests of Mr. Way with those of the Company's stockholders, the Compensation
Committee granted Mr. Way (i) options to purchase 23,000 shares of Common Stock
under the 1996 Stock Option Plan and (ii) performance share awards, the amount
of which, if any, is determined by the Company's cumulative net income and
relative return to shareholders over a three year period.
 
TAX TREATMENT OF EXECUTIVE COMPENSATION
 
     To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Compensation Committee considers the
anticipated tax treatment to the Company and to the executives of the various
payments and benefits. Some types of compensation payments and their
deductibility depend on the time of vesting or exercise of previously granted
rights (for example, the amount of compensation attributable to the exercise of
nonqualified stock options generally will depend upon the spread between the
fair market value of the shares purchased on the date of exercise and the
exercise price).
 
     In addition, Section 162(m) of the Code limits to $1 million per person the
Company's federal income tax deduction for compensation paid in any year to its
Chief Executive Officer and each of its four other highest paid executive
officers to the extent such compensation is not "performance based"
compensation. The Company has designed the 1996 Stock Option Plan and the
Long-Term Incentive Plan to preserve the deductibility of compensation to
executive officers under Section 162(m) of the Code. However, under certain
circumstances, compensation paid to an executive officer of the Company could
exceed the qualifying compensation limit for deductibility under Section 162(m)
of the Code. The Compensation Committee will consider ways to preserve the
deductibility of compensation payments and benefits in light of the limitation
on deductibility under Section 162(m) of the Code, while retaining the
discretion necessary to ensure that executive officers are compensated in a
manner consistent with the best interests of the Company and its stockholders.
 
     This report is submitted by Larry W. McCurdy and Roy E. Parrott, being all
of the members of the Compensation Committee.
 
                                          Larry W. McCurdy, Chairman
                                          Roy E. Parrott
 
                                       21

<PAGE>   26
 
                               PERFORMANCE GRAPH
 
     The following graph compares the cumulative total stockholder return from
April 6, 1994, the date of the Company's initial public offering, through
December 31, 1996 of the Company, the S&P 500, a peer group of companies (the
"New Peer Group")(1) selected by the Company for purposes of the comparison and
more fully described below and the peer group shown in last year's proxy
statement (the "Old Peer Group").(2) Dividend reinvestment has been assumed,
and, with respect to the companies in the New Peer Group and Old Peer Group, the
returns of each such company have been weighted to reflect relative stock market
capitalization. The graph assumes an investment of $100 on April 6, 1994 in each
of the Common Stock, the stocks comprising the S&P 500 Index, the stocks
comprising the New Peer Group and the stocks comprising the Old Peer Group.
 

<TABLE>
<CAPTION>
     MEASUREMENT PERIOD            LEAR          S&P 500        PEER GROUP      PEER GROUP
   (FISCAL YEAR COVERED)       CORPORATION                        (OLD)           (NEW)
<S>                           <C>             <C>             <C>             <C>
3/31/94                               100.00          100.00          100.00          100.00
6/30/94                               118.58           99.75           89.18           91.20
9/30/94                               118.58          106.54           85.76           90.28
12/31/94                              127.48          107.08           83.26           91.02
3/31/95                               116.18          117.31           84.43           97.05
6/30/95                               147.62          128.50           93.87          108.74
9/30/95                               189.57          136.52           92.06          110.14
12/31/95                              187.15          144.13           92.49          107.61
3/31/96                               210.55          152.94          102.71          118.64
6/30/96                               227.49          160.66          102.21          119.46
9/30/96                               212.97          164.88          106.83          123.08
12/31/96                              220.23          177.31          118.50          134.95
</TABLE>

 
- -------------------------
(1) The Company does not believe that there is a single published industry or
    line of business index that is appropriate for comparing stockholder return.
    The New Peer Group selected by the Company is made up of representative
    independent automobile suppliers of comparable size and products whose
    common stock is traded on domestic stock exchanges. The Company changed its
    Peer Group comparison from last year's proxy statement due to the Company's
    increased size, breadth of products and markets served. The New Peer Group
    includes Arvin Industries, Inc., Borg-Warner Automotive, Inc., Breed
    Technologies, Inc., Collins & Aikman, Dana Corp., Detroit Diesel, Donnelly
    Corp., Eaton Corp., Excel Industries, Inc., Genetex, ITT Industries, Johnson
    Controls, Inc., Magna International, Inc., Mascotech, Inc., Simpson
    Industries, Inc., A.O. Smith, Standard Products Co., Superior Industries
    International, Tower Automotive and Walbro.
 
(2) The Old Peer Group includes Arvin Industries, Inc., Automotive Industries
    Holding, Inc., Borg-Warner Automotive, Inc., Breed Technologies, Inc., Dana
    Corp., Donnelly Corp., Eaton Corp., Excel Industries, Inc., Hayes Wheels
    International, Inc., Johnson Controls, Inc., Magna International, Inc.,
    Masland Corporation, Mascotech, Inc., Simpson Industries, Inc., Standard
    Products Co., and Superior Industries International. The common stock of
    Masland Corporation ("Masland Common Stock") ceased to be publicly traded
    when Lear acquired all of the issued and outstanding Masland Common Stock in
    July 1996. The Class A common stock of Automotive Industries Holding, Inc.
    ("AIHI Common Stock") ceased to be publicly traded when Lear acquired all of
    the issued and outstanding AIHI Common Stock in August 1995.
 
                                       22

<PAGE>   27
 

                              CERTAIN TRANSACTIONS
 
ACQUISITION OF MASLAND CORPORATION
 
     On July 1, 1996, the Company consummated the acquisition (the "Masland
Acquisition") of Masland Corporation for an aggregate purchase price of
approximately $475.7 million (including the assumption of $80.7 million of
Masland's existing indebtedness and the payment of fees and expenses in
connection with the acquisition). The Cypress Group received a fee of $1.625
million for financial advisory services provided in connection with the Masland
Acquisition. In addition, the Company reimbursed The Cypress Group for its
reasonable out-of-pocket expenses incurred in providing such services. David P.
Spalding and James A. Stern are directors of the Company and controlling members
of The Cypress Group.
 
C
OMMON STOCK OFFERING
 
     The Company consummated an underwritten public offering of its Common Stock
on July 9, 1996, pursuant to which 7,500,000 shares of Common Stock were issued
and sold by the Company and 7,500,000 shares of Common Stock were sold by the
Lehman Funds. Lehman Brothers Inc. served as managing underwriter for the
offering and received underwriting fees of approximately $1.1 million in such
capacity.
 
CREDIT AGREEMENT
 
     On December 20, 1996, the Company amended and restated its existing
revolving credit facilities (the "Restated Credit Agreement") with a syndicate
of lenders for which The Chase Manhattan Bank served as administrative agent.
Lehman Commercial Paper is a lender under the Restated Credit Agreement for
which it received and will continue to receive its proportionate share of
payments made by the Company under the Restated Credit Agreement.
 
MANAGEMENT EQUITY PARTICIPATION
 
     Certain current and former officers of the Company entered into a
Management Subscription Agreement with the Company dated as of September 29,
1988 (collectively, the "Management Equity Agreement") pursuant to which certain
current and former officers purchased Common Stock at $3.03 per share for
consideration consisting of cash and/or recourse or non-recourse promissory
notes (the "Management Notes"). Mr. Way prepaid the $567,475.98 outstanding
principal balance of his Management Note on November 30, 1996. As of December
31, 1996, the outstanding balance of Mr. Rossiter's Management Note was
approximately $569,548 and the outstanding balance of Mr. Vandenberghe's
Management Note was approximately $189,868. In March 1997, the Company extended
the maturity date of the remaining Management Notes to September 29, 1998. Each
of the Management Notes, including accrued interest, bears interest at a rate of
4.46% per annum.
 
                        APPROVAL OF THE LEAR CORPORATION
                         LONG-TERM STOCK INCENTIVE PLAN
 

                                (PROPOSAL NO. 2)
 
     The following is a description of the Lear Corporation Long-Term Stock
Incentive Plan, adopted by the Compensation Committee on November 12, 1996. If
approved by the stockholders, the Long-Term Incentive Plan will allow the
Compensation Committee or another committee appointed by the Board of Directors
to make various types of awards to directors, officers and other key employees
of the Company and its subsidiaries. The Long-Term Incentive Plan is designed to
provide competitive incentives intended to attract, retain, motivate and reward
these individuals.
 
     As of the date of this proxy statement, awards have been made to 18
recipients under the Long-Term Incentive Plan. Such awards are contingent upon
approval of the Long-Term Incentive Plan by a majority of the Company's
stockholders present in person or represented by proxy at the Meeting and
entitled to vote. The
 
                                       23

<PAGE>   28
 
number of persons eligible to participate in the Long-Term Incentive Plan and
the number of award recipients may vary from year to year.
 
     The Long-Term Incentive Plan is reproduced in its entirety in Appendix A of
this Proxy Statement. The following description is qualified in all respects by
reference to the full plan document. Terms capitalized herein but not defined
shall have the meaning assigned to them in the Long-Term Incentive Plan.
 
     Approval of this proposal requires the affirmative vote of a majority of
the Company's shares of Common Stock ("Shares"), present in person or
represented by proxy, and entitled to vote at the annual meeting.
 
ELIGIBILITY, DURATION AND OBJECTIVES
 
     The Long-Term Incentive Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Units, Performance Shares and Performance Units (as each term is
defined in the Long-Term Incentive Plan) to officers and other key employees of
the Company and its subsidiaries who are selected to participate in the
Long-Term Incentive Plan ("Participants"). The Long-Term Incentive Plan also
permits the grant of Nonqualified Stock Options to nonemployee directors who are
selected to receive such a grant. Although the Long-Term Incentive Plan permits
the Compensation Committee to grant a wide variety of awards, the Long-Term
Incentive Plan does not obligate the Compensation Committee to do so and the
Compensation Committee currently does not anticipate granting every type of
award available. The variety of awards authorized under the Long-Term Incentive
Plan is intended to give the Compensation Committee flexibility to adapt the
Company's compensation structure to changes in the business and regulatory
environment.
 
     Awards may be made under the Long-Term Incentive Plan until the earlier of
the date when all of the Shares reserved for issuance thereunder have been
exhausted, the tenth anniversary of the effective date of the Long-Term
Incentive Plan or the date as of which the Long-Term Incentive Plan is
terminated by the Board. The Board may amend the Long-Term Incentive Plan at any
time without stockholder approval except with respect to certain enumerated
matters.
 
     The objectives of the Long-Term Incentive Plan are to optimize the
profitability and growth of the Company through incentives that are consistent
with the Company's goals 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. The Long-Term Incentive 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 that success.
 
     The Long-Term Incentive Plan is designed to allow the Compensation
Committee to grant certain types of awards that are exempt from the limitations
of Code Section 162(m). Under Code Section 162(m), the Company is not entitled
to a federal income tax deduction for compensation in excess of $1 million paid
in any year to its chief executive officer and its four other most highly
compensated executive officers, subject to certain exceptions. Compensation that
qualifies as "performance-based" under Code Section 162(m) is exempt from this
limitation. The applicable conditions of this exemption include, among others, a
requirement that the stockholders of the Company approve the material terms of
the Long-Term Incentive Plan. Options and SARs granted under the Long-Term
Incentive Plan are designed to satisfy the requirements for the
performance-based exemption. Performance Shares and Performance Units, as well
as Restricted Stock and Restricted Units, that are based on the performance
measures described below may be granted by the Compensation Committee in a
manner that meets the requirements for the performance-based exemption, as the
Compensation Committee deems advisable. The Compensation Committee may, however,
grant awards or take other actions under the Long-Term Incentive Plan that would
not qualify for the performance-based exemption under Code Section 162(m).
 
                                       24

<PAGE>   29
 
ADMINISTRATION
 
     The Long-Term Incentive Plan will be administered by the Compensation
Committee, which (unless otherwise determined by the Board of Directors) is
intended to satisfy the "outside director" provisions of Code Section 162(m) and
Section 16(b) of the Securities and Exchange Act of 1934, as amended. The
members of the Compensation Committee will be appointed from time to time by,
and will serve at the discretion of, the Board of Directors.
 
     Except as limited by law and subject to the provisions of the Long-Term
Incentive Plan, the Compensation Committee will select employees to participate
in the Long-Term Incentive Plan; determine the sizes and types of awards;
determine the terms and conditions of awards in a manner consistent with the
Long-Term Incentive Plan; construe and interpret the Long-Term Incentive Plan
and any agreement or instrument entered into under the Long-Term Incentive Plan;
establish, amend or waive rules and regulations for the Plan's administration;
and amend the terms and conditions of any outstanding award to the extent such
terms and conditions are within the discretion of the Compensation Committee as
provided in the Long-Term Incentive Plan. Further, the Compensation Committee
will make such other determinations as may be necessary or advisable in the
administration of the Long-Term Incentive Plan.
 
     Except as described below, Participants under the Long-Term Incentive Plan
have no rights as a stockholder unless and until certificates for Shares are
issued to them. No employee or other person shall have any right to be granted
an award under the Long-Term Incentive Plan. The Long-Term Incentive Plan shall
not be construed as giving any employee any right to be retained in the employ
of the Company or any of its subsidiaries and shall not interfere with or
restrict in any way the rights of the Company or any of its subsidiaries to
discharge an employee at any time for any reason whatsoever, with or without
cause.
 
SHARES SUBJECT TO THE LONG-TERM INCENTIVE PLAN AND MAXIMUM AWARDS
 
     Subject to adjustment as described below, up to 2,200,000 Shares may be
issued or transferred to Participants under the Long-Term Incentive Plan. No
more than 700,000 Shares, however, will be issued or delivered to Participants
under awards of Restricted Units and Performance Shares. The maximum aggregate
number of Shares and Share equivalent units that may be granted during any
fiscal year of the Company to any one Participant under the Long-Term Incentive
Plan, regardless of the type of awards, will be 50,000 Shares. This limit will
apply regardless of whether such compensation is paid in Shares or in cash.
 
     Shares issued or transferred to Participants under the Long-Term Incentive
Plan may be either previously issued Shares purchased by the Company or Shares
newly issued by the Company.
 
     If any award is canceled, terminates, expires or lapses for any reason, any
Shares subject to such award will again be available for grant under the
Long-Term Incentive Plan, except that such Shares will still be counted for
purposes of the annual individual award limit described above. In the event of
any change in corporate capitalization, such as a stock split, or a corporate
transaction, such as a merger, consolidation, separation, or other distribution
of stock or property of the Company including a spin-off, or any reorganization,
or any partial or complete liquidation of the Company, an adjustment may be made
in the number and class of Shares that may be delivered under the Long-Term
Incentive Plan, in the number and class of and/or price of Shares subject to
outstanding awards, and in the annual individual award limit set forth above, as
may be determined to be appropriate and equitable by the Compensation Committee
to prevent dilution or enlargement of rights.
 
STOCK OPTIONS
 
     The Compensation Committee may grant Incentive Stock Options and/or
Nonqualified Stock Options under the Long-Term Incentive Plan; provided,
however, that nonemployee directors may only receive grants of Nonqualified
Stock Options. The exercise price of any option will be at least equal to 100%
of the fair market value of a Share on the date the option is granted. Each
option will expire no later than the tenth anniversary of the date of grant. The
Compensation Committee may provide for dividend equivalents in
 
                                       25

<PAGE>   30
 
conjunction with options granted. Any dividend equivalents granted may be paid
in cash or in Shares at the discretion of the Compensation Committee.
 
STOCK APPRECIATION RIGHTS ("SARs")
 
     The Compensation Committee may grant Freestanding SARs, Tandem SARs, and/or
any combination of these forms of SARs under the Long-Term Incentive Plan. The
grant price of a Freestanding SAR will equal the fair market value of a Share on
the date of grant of the SAR. The grant price of a Tandem SAR will equal the
exercise price of the related option. A Tandem SAR 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. The term of an SAR granted under the Long-Term Incentive Plan will
not exceed ten years.
 
RESTRICTED STOCK, RESTRICTED STOCK UNITS AND RESTRICTED UNITS
 
     The Compensation Committee may grant Restricted Stock and/or Restricted
Units under the Long-Term Incentive Plan. Except as provided in the Long-Term
Incentive Plan, Shares of Restricted Stock or Restricted Units may not be sold,
transferred, pledged, assigned, or otherwise alienated until the end of the
applicable Restriction Period or upon earlier satisfaction of other conditions
governing the award. Restricted Units may be settled in cash or Shares as
determined by the Compensation Committee. Restricted Units settled in Shares are
referred to as "Restricted Stock Units."
 
     Selected Participants may elect to defer a portion of their annual bonus
under the Company's Senior Executive Incentive Compensation Plan and/or their
base salary in the form of Restricted Stock Units. Each Participant who elects
to make a deferral will be credited under the Long-Term Incentive Plan with a
number of Restricted Stock Units equal to (i) the amount deferred increased by
such percentage as may be determined by the Compensation Committee, divided by
(ii) the fair market value of a Share on a date designated by the Compensation
Committee.
 
     During the Restriction Period, Participants holding Restricted Stock may
exercise full voting rights with respect to those Shares and Participants
holding Restricted Stock or Restricted Units may receive regular cash dividends
or dividend equivalents, as the case may be, paid with respect to the underlying
Shares or Share equivalent units while they are so held.
 
PERFORMANCE UNITS AND PERFORMANCE SHARES
 
     The Compensation Committee may grant Performance Units and/or Performance
Shares under the Long-Term Incentive Plan. Each Performance Unit will have an
initial value that is established by the Compensation Committee at the time of
grant. Each Performance Share will have an initial value equal to the fair
market value of a Share on the date of grant. The Compensation Committee will
set performance periods and performance objectives that, depending on the extent
to which they are met, will determine the number and/or value of Performance
Units or Performance Shares that will be paid out to the Participant. The
Compensation Committee may pay earned Performance Units or Performance Shares in
cash, Shares or a combination thereof. Shares may be paid subject to any
restrictions deemed appropriate by the Compensation Committee.
 
     Unless otherwise set forth in the 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 will receive a prorated
payout of Performance Units or Performance Shares. In the event that a
Participant's employment terminates during the applicable Performance Period for
any reason other than death, disability or retirement, all Performance Units or
Performance Shares will be forfeited, unless otherwise specified in the award
agreement.
 
     The performance measure(s) used to determine the level of payout or vesting
with respect to awards designed to qualify for the performance-based exception
under Code Section 162(m) will be chosen from among the following: total
shareholder return (absolute or peer-group comparative); stock price (absolute
or
 
                                       26

<PAGE>   31
 
peer-group comparative); cumulative net income (absolute or competitive growth
rate comparative); return on equity; return on capital; cash flow, including
operating cash flow, free cash flow, discounted cash flow return on investment,
and cash flow in excess of capital; economic value added (income in excess of
capital costs); and market share.
 
     The Compensation Committee may adjust determinations of the degree of
attainment of the pre-established performance objectives; provided, however,
that awards which are designed to qualify for the performance-based exception
under Code Section 162(m) may not be adjusted to increase the compensation
payable to a Participant.
 
AMENDMENT, MODIFICATION AND TERMINATION
 
     The Compensation Committee may amend, modify or terminate the Long-Term
Incentive Plan. No termination, amendment, or modification of the Long-Term
Incentive Plan may adversely affect in any material way any award previously
granted under the Long-Term Incentive Plan, without the written consent of the
Participant holding such award. In addition, the Compensation Committee may
grant new awards under the Long-Term Incentive Plan in exchange for the
surrender of outstanding awards.
 
     The Compensation Committee may make adjustments in the terms and conditions
of, and the criteria included in, awards in recognition of unusual or
nonrecurring events affecting the Company or of changes in applicable laws,
regulations or accounting principles, if the Compensation 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 Long-Term Incentive Plan.
 
ASSIGNMENT OF INTERESTS
 
     At the discretion of the Compensation Committee, options granted pursuant
to the Long-Term Incentive Plan may be transferred or assigned to a
Participant's (a) spouse, children or grandchildren (the "Immediate Family
Members"), (b) a trust or trusts for the exclusive benefit of such Immediate
Family Members or (c) a partnership in which such Immediate Family Members are
the only partners, provided that there may be no consideration for such
transfer. Other awards granted under the Long-Term Incentive Plan may not be
transferred or assigned other than by will or the law of descent and
distribution.
 
CHANGE IN CONTROL
 
     Upon the occurrence of a Change in Control (as defined below), unless
otherwise specifically prohibited under the applicable laws or by the rules and
regulations of any governing governmental agencies or national securities
exchanges:
 
          a. Outstanding options and SARs granted under the Long-Term Incentive
     Plan will become immediately exercisable and remain exercisable throughout
     their term.
 
          b. In most cases, any Restriction Period and any other restrictions
     imposed on Restricted Stock or Restricted Units will lapse.
 
          c. Generally, the vesting of all Performance Units and Performance
     Shares will be accelerated as of the effective date of the change in
     control, and there will be paid out in cash to Participants 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.
 
     A Change in Control of the Company shall be deemed to have occurred as of
the first day any one or more of the following paragraphs shall have been
satisfied:
 
          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, (as defined in the Long-Term
     Incentive Plan), directly or indirectly, of
 
                                       27

<PAGE>   32
 
     securities of the Company, representing more than 20% of the combined
     voting power of the Company's then outstanding securities; or
 
          b. During any period of 26 consecutive months (not including any
     period prior to January 1, 1996), individuals who at the beginning of such
     period constitute the Company's Board of Directors (and any new directors,
     whose election by the Company's Board of Directors 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 (expected 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 80% of the combined voting power of the voting
     securities of the Company (or such surviving entity) outstanding
     immediately after such merger, consolidation, or reorganization.
 
     Notwithstanding any other provision of the Long-Term Incentive Plan or of
any award agreement, the Change in Control provisions of the Long-Term Incentive
Plan may not be terminated, amended, or modified on or after the effective date
of a Change in Control to affect adversely any award previously granted under
the Long-Term Incentive Plan without the prior written consent of the
Participant with respect to the Participant's outstanding awards.
 
FEDERAL INCOME TAX CONSEQUENCES
 
     The following is a general description of federal income tax consequences
to Participants and the Company relating to options and other awards that may be
granted under the Plan. The Plan is not qualified under Code Section 401(a).
This discussion does not purport to cover all tax consequences relating to
options and other awards.
 
Nonqualified Stock Options
 
     A Participant will not recognize income at the time of grant of a
Nonqualified Stock Option and the Company will not be entitled to a deduction at
that time. When the option is exercised, the Participant will recognize ordinary
income equal to the difference, if any, between the aggregate exercise price
paid and the fair market value, as of the date the option is exercised, of the
Shares received. The Participant's tax basis in such Shares will equal the
exercise price paid plus the amount recognized by the Participant as ordinary
income. The Company will generally be entitled to a federal income tax
deduction, in the Company's tax year in which the option is exercised, equal to
the ordinary income recognized by the Participant as described above. If the
Participant holds the Shares acquired pursuant to the exercise of a Nonqualified
Stock Option for more than one year after the exercise of such option, the
capital gain or loss realized upon the sale of such Shares will be a long-term
capital gain or loss. The Participant's holding period for Shares acquired upon
the exercise of an option will begin on the date of exercise.
 
Incentive Stock Options
 
     A Participant will not recognize income at the time of grant of an
Incentive Stock Option and the Company will not be entitled to a deduction at
that time. If the option is exercised during employment, or within three months
thereafter (or one year in the case of a permanently and totally disabled
employee), the Participant will not recognize any income and the Company will
not be entitled to a deduction. However, the excess of the fair market value of
the Shares on the date of exercise over the option price is includible in
computing the Participant's alternative minimum taxable income.
 
                                       28

<PAGE>   33
 
     Generally, if the Participant disposes of Shares acquired by exercise of an
Incentive Stock Option within either two years of the date of grant or one year
of the date of exercise, the Participant will recognize ordinary income, and the
Company will be entitled to a deduction, equal to the excess of the fair market
value of the Shares on the date of exercise over the option price (limited
generally to the gain on the sale). The balance of any gain or loss will be
treated as a capital gain or loss to the Participant. If the Shares are disposed
of after the two year and one year periods described above expire, the Company
will not be entitled to any deduction, and the entire gain or loss for the
Participant will be treated as a long-term capital gain or loss.
 
Other Awards
 
     The current federal income tax consequences of other awards authorized
under the Long-Term Incentive Plan are generally in accordance with the
following: SARs are taxed and deductible by the Company in substantially the
same manner as Nonqualified Stock Options; Restricted Stock subject to a
substantial risk of forfeiture results in income recognition equal to the excess
of the fair market value of the Shares over the purchase price (if any) only at
the time the restrictions lapse (unless the Participant elects to accelerate
recognition as of the date of grant); Restricted Stock Units, Restricted Units,
Performance Shares, Performance Units and dividend equivalents generally are
subject to tax at the time of payment. In each of the foregoing cases, the
Company will generally have (at the time the Participant recognizes income) a
corresponding deduction.
 
                                 RECOMMENDATION
 
 
        THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
                LEAR CORPORATION LONG-TERM STOCK INCENTIVE PLAN.
 
              RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
 

                                (PROPOSAL NO. 3)
 
     The Board of Directors, upon recommendation of the Audit Committee, has
appointed Arthur Andersen LLP as the Company's independent auditors for the
current year ending December 31, 1997. A proposal will be presented at the
Meeting to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors. If the stockholders fail to ratify such selection by the
affirmative vote of a majority of the shares present in person or represented by
proxy at the Meeting, other independent auditors will be considered by the Board
of Directors upon recommendation of the Audit Committee. The Company has been
advised that a representative of Arthur Andersen LLP will be present at the
Meeting, will be available to respond to appropriate questions, and will be
given an opportunity to make a statement if he or she so desires.
 
                                 RECOMMENDATION
 
 
      THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
           APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
                                FOR THE COMPANY.
 
                                       29

<PAGE>   34
 
         STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
 
     Stockholder proposals intended to be presented at the 1998 Annual Meeting
of Stockholders of the Company must be received by the Company no sooner than
October 22, 1997 or later than November 21, 1997 for inclusion in the Company's
proxy statement relating to the 1998 Annual Meeting of Stockholders. Stockholder
proposals should be addressed to Joseph F. McCarthy, Lear Corporation, 21557
Telegraph Road, P.O. Box 5008, Southfield, Michigan 48086-5008.
 
                                 OTHER MATTERS
 
     The Company knows of no other matters to be submitted to the stockholders
at the Meeting. If any other matters properly come before the Meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent in accordance with the judgments of the persons voting the proxies.
 
     The Company's Annual Report to Stockholders for the year ending December
31, 1996, was mailed to stockholders together with this Proxy Statement.
 
     UPON WRITTEN REQUEST BY ANY STOCKHOLDER ENTITLED TO VOTE AT THE MEETING,
THE COMPANY WILL FURNISH THAT PERSON WITHOUT CHARGE A COPY OF THE FORM 10-K
ANNUAL REPORT FOR 1996 WHICH IT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES. IF THE PERSON
REQUESTING THE REPORT WAS NOT A STOCKHOLDER OF RECORD ON MARCH 18, 1997, THE
REQUEST MUST CONTAIN A GOOD FAITH REPRESENTATION THAT THE PERSON MAKING THE
REQUEST WAS A BENEFICIAL OWNER OF COMPANY'S COMMON STOCK AT THE CLOSE OF
BUSINESS ON THAT DATE. REQUESTS SHOULD BE ADDRESSED TO JOSEPH F. MCCARTHY, LEAR
CORPORATION, 21557 TELEGRAPH ROAD, P.O. BOX 5008, SOUTHFIELD, MICHIGAN
48086-5008.
 
                                          BY ORDER OF THE BOARD OF DIRECTORS
 
                                          /S/ JOSEPH F. MCCARTHY
                                          Joseph F. McCarthy
                                          Vice President, Secretary
                                          and General Counsel
 
                                       30

<PAGE>   35
 
                                                                      APPENDIX A
 
                                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.
 
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
 
                                       A-1

<PAGE>   36
 
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:
 
          (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.
 
     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.
 
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<PAGE>   37
 
     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.
 
     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.
 
     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.
 
                                       A-3

<PAGE>   38
 
     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 16b-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.
 
     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.
 
                                       A-4

<PAGE>   39
 
     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).
 
     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.
 
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.
 
                                       A-5

<PAGE>   40
 
     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.
 
     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 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).
 
                                       A-6

<PAGE>   41
 
          (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.
 
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.
 
     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 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
 
                                       A-7

<PAGE>   42
 
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.
 
     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.
 
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<PAGE>   43
 
     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
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 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
 
                                       A-9

<PAGE>   44
 
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.
 
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);
 
          (c) cumulative net income (absolute or competitive growth rates
              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
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
 
                                      A-10

<PAGE>   45
 
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.
 
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.
 
                                      A-11

<PAGE>   46
 
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 of the Plan, the Committee may modify,
extend or renew outstanding Awards under the Plan, or accept the surrender of
outstanding Awards (to the extent not theretofore exercised) and grant new
Awards in substitution therefor (to the extent not theretofore exercised). 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.
 
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.
 
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
 
                                      A-12

<PAGE>   47
 
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 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 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.
 
                                      A-13

<PAGE>   48




Dear Stockholder:



        The Annual Meeting of Stocholders (the "Meeting") of Lear Corporation
(the "Company") will be held at 10:00 a.m. on Thursday, May 15, 1997 at the
Novi Hilton, 21111 Haggerty Road, Novi, Michigan.


        To be sure that your vote is counted, we urge you to complete and sign
the proxy/voting instruction card below, detach it from this letter and return
it in the postage paid envelope enclosed in this package.  The giving of such
proxy does not affect your right to vote in person if you attend the meeting.
The prompt return of your signed proxy will aid the Company in reducing the
expense of additional proxy solicitation.


        In order to assist the Company in preparing for the Meeting, please
indicate on item 4 on the proxy whether you currently plan to attend the
Meeting. 


        If you attend the Meeting in person, detach and bring this letter to
the meeting as an admission ticket for you and your guests.


March 21, 1997




                             DETACH PROXY CARD HERE



        [  ]

<TABLE>
<S><C>                     
1. Election of Directors:        FOR all nominees        WITHHOLD AUTHORITY to vote           *EXCEPTIONS
                                 listed below     [ ]    for all nominees listed below   [ ]               [ ]

Nominees:  Gian Andrea Botta, Irma B. Elder, David P. Spalding and James A. Stern.
(INSTRUCTIONS:  TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE 
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)                                                             
*Exceptions __________________________________________________________________________________________________
2. To approve the Company's Long-Term Stock Incentive Plan.             3. To ratify the appointment of Arthur
                                                                           Andersen LLP as independent auditors 
                                                                           of the Company for the fiscal year 
                                                                           ending December 31, 1997.


FOR    [ ]              AGAINST    [ ]          ABSTAIN    [ ]            FOR    [ ]       AGAINST    [ ]    ABSTAIN   [ ]


In their discretion the Proxies are authorized to vote upon such         4. Do you plan to
other matters as may properly come before the meeting or any                attend the 
adjournment or postponement thereof.                                        Meeting?           YES    [ ]    NO     [ ]

                                                                                                      Change of Address
                                                                                                      Mark Here     [ ]

                                                                                           Please sign this proxy and return it 
                                                                                           promptly whether or not you expect to
                                                                                           attend the meeting.  You may nevertheless
                                                                                           vote in person if you attend.  Please
                                                                                           sign exactly as your name appears 
                                                                                           herein.  Give full title if an Attorney,
                                                                                           Executor, Administrator, Trustee,
                                                                                           Guardian, etc.  For an account in the
                                                                                           name of two or more persons each should
                                                                                           sign, or if one signs, he should attach
                                                                                           evidence of his authority.

                                                                                           Dated:_____________________________1997

                                                                                           _______________________________________  
                                                                                                           Signature

                                                                                           _______________________________________
                                                                                                           Signature
                                                                                           VOTES MUST BE INDICATED
                                                                                           ( ) IN BLACK OR BLUE INK.     [ ]

(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.)
</TABLE>
                              

      
                                                                            

<PAGE>   49




                                ADMISSION TICKET

                                LEAR CORPORATION

                         ANNUAL MEETING OF STOCKHOLDERS

                           MAY 15, 1997 AT 10:00 A.M.
                                THE NOVI HILTON
                              21111 HAGGERTY ROAD
                                 NOVI, MICHIGAN

                  ADMITS ONE STOCKHOLDER AND UP TO TWO GUESTS














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

                                LEAR CORPORATION

                         PROXY/VOTING INSTRUCTION CARD


     This proxy is solicited on behalf of the Board of Directors of Lear
Corporation for the Annual Meeting of Stockholders on May 15, 1997 or any
adjournment or postponement thereof (the "Meeting").

     The undersigned appoints Joseph F. McCarthy and Donald J. Stebbins, and
each of them, with full power of substitution in each of them, the proxies of
the undersigned, to vote for and on behalf of the undersigned all shares of Lear
Corporation Common Stock which the undersigned may be entitled to vote on all
matters properly coming before the Meeting, as set forth in related Notice of
Annual Meeting and Proxy Statement, both of which have been received by the
undersigned.

     THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER.  IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, AND 3.



                                                LEAR CORPORATION
                                                P.O. BOX 11211
                                                NEW YORK, N.Y. 10203-0211