DATED            July 29          1997
                  --------------------------------------








             (1)  LUCAS LIMITED

             (2)  ASSEMBLY TECHNOLOGY & TEST LIMITED

             (3)  LUCAS INDUSTRIES PLC

             (4)  LUCAS AUTOMATION & CONTROL ENGINEERING LIMITED






                             A G R E E M E N T

                              relating to the

                 Sale and Purchase of the English Assets of

                       Lucas Assembly & Test Systems








Eversheds
10 Newhall Street
Birmingham B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583
BIRCORP/53010



<PAGE>


                                  CONTENTS


1.   Definitions
2.   Sale and Purchase of the Activity
3.   Consideration
4.   Completion
5.   Further Assurance and the Contracts
6.   Debtors
7.   The Transferring Employees
8.   Costs and Expenses
9.   Indemnity and Liabilities
10.  Product Liability and Product Warranty
11.  Post Completion Covenants
12.  Licence of Licensed Intellectual Property
13.  Risk Property and Title
14.  Exclusions
15.  Inspection of Documents
16.  Assignment Prohibited
17.  Survival of Certain Provisions
18.  Governing Law
19.  Counterparts
20.  Severability
21.  Notices and other Communications
22.  No Third Party Beneficiary
23.  Modification
24.  Waiver of Provisions


<PAGE>


SCHEDULE 1        The Leased Assets
SCHEDULE 2        The Plant, Machinery and Equipment
SCHEDULE 3        The Property
SCHEDULE 4        Transferring Employees
SCHEDULE 5        Intellectual Property Agreements
SCHEDULE 6        Assignment of Debtors
SCHEDULE 7        Pensions
SCHEDULE 8        Registered Intellectual Property
SCHEDULE 9        Part 1: Trade Mark Assignment by Lucas
                  Part 2: Trade Mark Assignment by LACE
                  Part 3: Patent Assignment by Lucas
                  Part 4: Patent Assignment by LACE
                  Part 5: Assignment of Patent Application by Lucas into
                          joint names
                  Part 6: Assignment of Unregistered Intellectual Property
SCHEDULE 10       Forward Exchange Currency Contracts
SCHEDULE 11       Bills of Exchange
SCHEDULE 12       Bonds, Guarantees and Indemnities
SCHEDULE 13       Memoranda of Understanding
SCHEDULE 14       Expired Patents
SCHEDULE 15       Competing Activities



<PAGE>

THIS AGREEMENT is made on July 29, 1997

BETWEEN

(1)  THE VENDOR Lucas  Limited  whose  registered  office is at  Stratford  Road
     Solihull B90 4LA England

(2)  THE PURCHASER Assembly Technology & Test Limited whose registered office is
     at 15 St Botolph Street, London EC3A 7NJ

(3)  LUCAS Lucas  Industries  plc whose  registered  office is at Stratford Road
     Solihull B90 4LA England

(4)  LACE Lucas Automation & Control Engineering Limited whose registered office
     is at Stratford Road, Solihull B90 4LA England

RECITALS

(A)  The Vendor carries on the Activity at the Property (as each such expression
     is defined below).

(B)  Members of the Lucas Group (as defined  below) carry on businesses  similar
     to that of the Activity in Germany and the United States of America.

(C)  Members of the Lucas  Group are to sell the  businesses  referred to in (B)
     above to the  Purchaser  or members of the  Purchaser's  Group (as  defined
     below) on terms similar to those contained in this Agreement.

(D)  The  Vendor  has agreed to sell the  Activity  and the  Assets (as  defined
     below) to the Purchaser on the terms and conditions  hereinafter  appearing
     and in the Umbrella Agreement (as defined below).

(E)  Lucas enters into this  Agreement  for the purposes of selling the Property
     and part of the Registered  Intellectual Property and LACE enters into this
     Agreement  for the purpose of selling part of the  Registered  Intellectual
     Property.

(F)  The Umbrella  Agreement  regulates  the terms and  conditions  on which the
     Activity and the businesses referred to in (B) above are to be sold.


                                       1
<PAGE>

NOW THIS AGREEMENT WITNESSES as follows:-

1.   DEFINITIONS

     In this  Agreement  (which  expression  shall  include the  Recitals of and
     Schedules to this  Agreement)  except where  inconsistent  with the subject
     matter or context:-

     1.1       The  following  words and  expressions  shall bear the  following
               meanings respectively:-

               "the Accruals"            Any   liability   of  the   Vendor
                                         relating  to  the  Activity  which
                                         falls  to  be  settled  after  the
                                         Completion  Date in the  course of
                                         carrying   on  the   Activity   in
                                         respect  of a period of time which
                                         commences  before  the  Completion
                                         Date and ends after such date

               "the Activity"            The   business   of   the   design
                                         manufacture and  implementation of
                                         assembly    line    and    testing
                                         equipment     with      associated
                                         materials  handling and production
                                         control systems (and the provision
                                         of   services   related   thereto)
                                         primarily   for   the   automotive
                                         components  industry carried on by
                                         the Vendor at or from the Property

               "the Amounts Recoverable  The  amounts  recoverable  by  the
                on Contracts"            Vendor on the  Customer  Contracts
                                         in    accordance     with    their
                                         respective terms together with the
                                         work-in-progress   which   is  the
                                         subject of


                                     2
<PAGE>


                                         the Customer  Contract in question
                                         in  respect of which the amount is
                                         recoverable,  as at the Completion
                                         Date

               "the Asnu Licence"        The Asnu Licence  Agreement  dated
                                         25 May 1993 made between High-Tech
                                         Auto Tools Pty Limited and Lucas

               "the Assets"              The  assets  specified  in  clause
                                         2.1,  the  Property to be sold and
                                         purchased  hereunder  or otherwise
                                         dealt with in accordance with this
                                         Agreement  and  the   Intellectual
                                         Property  and the  Know  How to be
                                         dealt with in accordance with this
                                         Agreement

               "Assumed Liabilities"     The obligations and liabilities to
                                         be  assumed  by the  Purchaser  as
                                         described in clause 9.1

               "Bids"                    Any and all  bids or  tenders  for
                                         the sale of goods or  services  of
                                         the Activity  which are open as at
                                         the Completion Date

               "Business Unit"           Any part of a member  of the Lucas
                                         Group or the  activities of such a
                                         member in either  case in  respect
                                         of   which   separate   management
                                         accounts have customarily been



                                     3
<PAGE>

                                         prepared by the Lucas Group or the
                                         relevant member

               "Competitor"              Any of the following  companies or
                                         any Subsidiary or Holding  Company
                                         of  any  of  them  or  any   other
                                         Subsidiary    of   such    Holding
                                         Company, namely:-

                                         Aixin  Seiki  Co  Limited,  Robert
                                         Bosch GmbH, GM's Delphi Automotive
                                         Systems,      ITT      Industries,
                                         Nippondenso,  Siemens,  Stanadyne,
                                         Zexel,     Sundstrand,      Parker
                                         Hannifin,   Allied  Signal,  Moog,
                                         Hamilton  Standard,   Rolls-Royce,
                                         Valeo, Delco, Motorola and Denso

               "Completed Contract"      Any  contract or  arrangement  for
                                         the supply of goods or services by
                                         the Vendor or any  previous  owner
                                         of the Activity in relation to the
                                         Activity:-

                                         (i)  pursuant  to which the supply
                                              of  the  relevant   goods  or
                                              services was completed within
                                              the  two  years   immediately
                                              preceding the Completion Date
                                              and in  respect  of which any
                                              warranty, guarantee,


                                     4
<PAGE>

                                              maintenance     or    similar
                                              obligation,    liability   or
                                              commitment   (a   "Warranty")
                                              given by the  Vendor (or such
                                              previous    owner)    remains
                                              outstanding   and   has   not
                                              expired  by  the   Completion
                                              Date; or

                                        (ii)  pursuant  to which the supply
                                              of  the  relevant   goods  or
                                              services  has been  completed
                                              and under which the  customer
                                              has  prior to the  Completion
                                              Date  made a claim  under any
                                              Warranty   relating  to  such
                                              goods or services

               "Completion"             Completion of the sale and purchase
                                        hereby  agreed in  accordance  with
                                        clause 4 and "the Completion  Date"
                                        shall be  construed  as the opening
                                        of  business  on the  date on which
                                        completion takes place

               "the Consideration"      The  consideration  for the  Assets
                                        hereby   agreed   to  be   sold  as
                                        determined in  accordance  with the
                                        Umbrella Agreement

               "the Contracts"          Any and all current  contracts  and
                                        arrangements  of  the Vendor or any


                                     5
<PAGE>

                                        member   of   the    Lucas    Group
                                        (including,   without   limitation,
                                        current  contracts  assumed  by the
                                        Vendor or any  other  member of the
                                        Lucas  Group to which any  previous
                                        owner  of the  Activity  is  party)
                                        relating wholly to the Activity (or
                                        where  any  current  contracts  and
                                        arrangements  of the  Vendor or any
                                        other  member  of the  Lucas  Group
                                        relate in part only to the Activity
                                        then such  part  shall be deemed to
                                        be included  within the definition)
                                        entered into before the  Completion
                                        Date      (including,       without
                                        limitation, the Customer Contracts,
                                        the   Supplier    Contracts,    the
                                        agreements  relating  to the Leased
                                        Assets  and  the  forward  exchange
                                        currency  contracts  referred to in
                                        Schedule  10) and which then remain
                                        (in   whole   or  in  part)  to  be
                                        performed  by  the  Vendor  or  any
                                        other  member of the  Lucas  Group,
                                        including,  without limitation, the
                                        Completed   Contracts   and   those
                                        current    contracts    where   any
                                        warranty, guarantee, maintenance or
                                        other similar obligation, liability
                                        or commitment remains to be carried
                                        out by  any  member  of  the  Lucas
                                        

                                     6
<PAGE>

                                        Group   or   where   any    payment
                                        obligations  of any  member  of the
                                        Lucas    Group    have   not   been
                                        satisfied;   provided  always  that
                                        this definition excludes:-

                                        (i)    contracts or arrangements to
                                               the  extent  they  relate to
                                               the  Excluded  Assets  or to
                                               the   Excluded   Liabilities
                                               (other     than     Excluded
                                               Liabilities  referred  to in
                                               clauses 9.2.9 and 9.2.10);

                                        (ii)   Group Sharing Arrangements;

                                        (iii)  the Asnu Licence; and

                                        (iv)   contracts of  employment  of
                                               any  employees of any member
                                               of the Lucas Group

               "control"                The possession, direct or indirect,
                                        of the power to direct or cause the
                                        direction  of  the  management  and
                                        policies  of  a  company,   whether
                                        through  the  ownership  of  voting
                                        securities,    by    contract    or
                                        otherwise

               "the Creditors"          The book and other  debts  owing by
                                        the Vendor in  connection  with the
                                        Activity  to or in respect of trade
                                        creditors,  trade bills payable and
                                        any other amounts owing to



                                     7
<PAGE>

                                        creditors  of the Vendor in respect
                                        of the  Activity at the  Completion
                                        Date (and  whether  or not then due
                                        and  payable)   including   without
                                        limitation:

                                        (i)   the Accruals;

                                        (ii)  any   amounts   owed  by  the
                                              Vendor  to any  member of the
                                              Lucas Group in respect of the
                                              Activity  or by the  Activity
                                              to another  Business Unit (in
                                              each  and  any  such  case on
                                              current      account)     but
                                              excluding  (for the avoidance
                                              of doubt) any Lucas  Internal
                                              Funding; and

                                        (iii) any    amounts    owing    to
                                              creditors   under  the  Group
                                              Sharing  Arrangements  to the
                                              extent  they  relate  to  the
                                              Activity

               "the Customer            Any  and all  uncompleted  purchase
                Contracts"              orders  from  customers  which were
                                        accepted by the Vendor prior to the
                                        Completion Date which relate to the
                                        Activity  and which then  remain to
                                        be performed in whole or in part

               "the Debtors"            The book  and  other debts owing to




                                     8
<PAGE>

                                        the Vendor in  connection  with the
                                        Activity  by or in respect of trade
                                        debtors,   trade  bills  receivable
                                        (including without limitation those
                                        bills   of   exchange   listed   in
                                        Schedule 11) and any other  amounts
                                        owing to the  Vendor by  debtors in
                                        connection with the Activity at the
                                        Completion  Date  (whether  or  not
                                        then  due and  payable),  including
                                        (without  limitation)  any  amounts
                                        owed  by any  member  of the  Lucas
                                        Group to the  Vendor in  respect of
                                        the   Activity   or   owed  to  the
                                        Activity by another  Business  Unit
                                        (in  each  and  any  such  case  on
                                        current account) but excluding (for
                                        the  avoidance  of doubt) any Lucas
                                        Internal Funding

               "the Disclosure Letter"  has  the  meaning   given  to  that
                                        expression    in    the    Umbrella
                                        Agreement

               "DTI Competitor"         Any of the  following  companies or
                                        any  Subsidiary or Holding  Company
                                        of  any  of  them   or  any   other
                                        Subsidiary of such Holding Company,
                                        namely:-

                                        Giddings & Lewis,  Thyssen,  Bosch,
                                        Western Atlas, B&K,
                               

                                     9
<PAGE>


                                        Elcon,    ABB,    Ingersoll   Rand,
                                        Mohwald,    Meidenscha,    Mecelec,
                                        Stiwa, Teim Techneck and Knoell

               "Economic Value Added    The bonus  scheme  operated  by the
                Bonus Scheme"           Vendor in respect of the  Activity,
                                        details of which are  contained  in
                                        section   2  of   Annex  3  to  the
                                        Disclosure Letter

               "the Excluded Assets"    The  assets,   rights,  claims  and
                                        benefits  excluded from the sale to
                                        the  Purchaser as set out in clause
                                        2.5

               "the Excluded            The  liabilities  to be retained by
                Liabilities"            the Vendor as set out in clause 9.2

               "Expired Patent"         A granted  patent  (a) which at the
                                        Completion   Date  has  lapsed  and
                                        cannot be  revived  or (b) of which
                                        at the Completion Date the term has
                                        expired and cannot be extended, and
                                        which in  either  case is listed as
                                        an expired patent in Schedule 14

               "Final Completion        shall  have  the  meaning  given to
                Statement"              that  expression  in  the  Umbrella
                                        Agreement

               "the First Property"     The freehold property  described in
                                        Part 1 of Schedule 3

               "the Goodwill"           The   goodwill  of  the  Vendor  in


                                    10
<PAGE>

                                        connection with the Activity

              "Group Sharing            Any    and   all    contracts    or
               Arrangements"            arrangements relating to the supply
                                        of goods or  services to the Vendor
                                        in respect of the  Activity and the
                                        supply of the same or similar goods
                                        or  services  to another  member of
                                        the Lucas Group or another Business
                                        Unit  from the same  supplier,  but
                                        excluding the Master Lease

               "the Guarantor"          DT  Industries,  Inc. of  Corporate
                                        Centre,   Suite  2-300,  1949  East
                                        Sunshine, Springfield, MO 65804

               "Holding Company"        holding   company   as  defined  in
                                        Section  736 of the  Companies  Act
                                        1985

               "Intellectual Property"  The     Registered     Intellectual
                                        Property   and   the   Unregistered
                                        Intellectual Property

               "Intellectual Property   The licences  briefly  described in
                Agreements"             Schedule  5  in  the  Agreed  Terms
                                        which  are to be  entered  into  on
                                        Completion

               "Intellectual Property   Assignments  of  the   Intellectual
                Assignments"            Property  and the  Know  How in the
                                        form or forms set out in Parts 1 to
                                        6 of Schedule 9


                                    11
<PAGE>

               "Know How"               All      inventions,       designs,
                                        techniques,   formulas,   technical
                                        drawings and specifications, market
                                        studies,    consultants'   reports,
                                        competitive  samples,   engineering
                                        prototypes,  trade secrets,  secret
                                        processes  and  other  confidential
                                        information  which are owned by the
                                        Lucas Group and which:-

                                        (i)  relate   exclusively   to  the
                                             Activity  and  which  are  not
                                             used by any  other  member  of
                                             the   Lucas   Group   or   any
                                             Business  Unit  other than the
                                             Activity; or

                                        (ii) are  to  be  licensed  to  the
                                             Lucas  Group  at or  following
                                             Completion   pursuant  to  the
                                             terms   of  the   Intellectual
                                             Property Agreements,

                                        but excluding any of the same which
                                        are   expressly   retained  by  any
                                        member of the Lucas Group under the
                                        LAO  Agreement or the  Intellectual
                                        Property  Agreements  and excluding
                                        the    Unregistered    Intellectual
                                        Property

               "the LAO Agreement"      The  agreement  in the Agreed Terms
                                        between      Lucas      Aftermarket


                                    12
<PAGE>

                                        Operations    and   the   Purchaser
                                        relating to the relationship  which
                                        will exist  between  those  parties
                                        after Completion

               "the Leased Assets"      Those   assets  not  owned  by  the
                                        Vendor   which   are  used  in  the
                                        Activity  which are the  subject of
                                        hire or hire  purchase  or  leasing
                                        agreements  brief   particulars  of
                                        which  assets  and  agreements  are
                                        listed in Schedule 1

               "Licence"                The   licence   of   the   Licensed
                                        Intellectual  Property  granted  by
                                        the  Vendor  to  the  Purchaser  on
                                        Completion pursuant to clause 12

               "Licensed Intellectual   The   unregistered   trade   marks,
                Property"               design rights,  copyright, know how
                                        and  other  intellectual   property
                                        rights which are owned by the Lucas
                                        Group and which:

                                        (i)    do not relate exclusively to
                                               the  Activity  in that  they
                                               are used by  another  member
                                               of the  Lucas  Group  or any
                                               Business       Unit      but
                                               immediately     prior     to
                                               Completion   have   to  some
                                               extent also been used by the
                                               Vendor  in  connection  with


                                    13
<PAGE>

                                               the Activity; and

                                        (ii)   the  Purchaser  will require
                                               use of in  order to carry on
                                               the  Activity  in  the  same
                                               manner after  Completion  as
                                               that   carried   on  by  the
                                               Vendor  immediately prior to
                                               Completion; and

                                        (iii)  which  are not  the  subject
                                               matter  of the  Intellectual
                                               Property  Agreements  or the
                                               LAO Agreement

               "Lucas Aftermarket       Lucas  Limited  trading  as  "Lucas
                Operations"             Aftermarket Operations"

               "the Lucas Central       The LucasVarity Treasury Department
                Treasury"               presently  based  at  Larden  Road,
                                        Acton, England

               "the Lucas Group"        LucasVarity  and any company  which
                                        is  a  Subsidiary   or   Subsidiary
                                        Undertaking of Lucas Varity for the
                                        time being and from time to time

               "Lucas Internal Funding" All  monies  due  to  or  from  the
                                        Activity   from  or  to  the  Lucas
                                        Central  Treasury  which is  either
                                        quasi capital or otherwise  owed on
                                        capital  account  or  which had the




                                    14
<PAGE>

                                        Lucas Central  Treasury been a bank
                                        would have amounted to an overdraft

               "LucasVarity"            LucasVarity plc,  registered number
                                        3207774

               "Magasa Action"          Legal proceedings between Lucas and
                                        Construcciones    Magasa,   SL   in
                                        relation to Patent No. 502112

               "Master Lease"           The Master Hiring Agreement (Number
                                        51986)  dated  26th  July  1993 and
                                        made  between (1) Lucas and (2) Lex
                                        Vehicle Leasing Limited relating to
                                        (inter alia) the vehicles listed in
                                        Schedule 1

               "MOUs"                   The   memoranda  of   understanding
                                        entered  into by the  Vendor or any
                                        other  member of the Lucas Group in
                                        respect of the  Activity  including
                                        without  limitation those listed in
                                        Schedule 13

               "Net Current Assets      shall  have  the  meaning  given to
                Value"                  that  expression  in  the  Umbrella
                                        Agreement


               "the Plant, Machinery    The  fixed and  moveable  plant and
                and Equipment"          machinery,     tooling,    computer
                                        equipment and equipment  (including
                                        vehicles) owned by the


                                    15
<PAGE>

                                        Vendor  with an  original  cost per
                                        item  in  excess  of   (pound)5,000
                                        which are used in the  Activity and
                                        which are listed in  Schedule 2 and
                                        such   other   machinery    tooling
                                        furniture  and  equipment  owned by
                                        the Vendor  located at the Property
                                        and used  exclusively  or primarily
                                        in the Activity

               "the Prepayments"        Each  of  the   payments   made  in
                                        advance  by or  on  behalf  of  the
                                        Vendor prior to the Completion Date
                                        in the  course of  carrying  on the
                                        Activity  in respect of a period of
                                        time  which  commences  before  the
                                        Completion Date and ends after such
                                        date  but  excluding  (a) any  such
                                        payment to the extent the Purchaser
                                        does  not   acquire   the   benefit
                                        thereof or  otherwise  benefit from
                                        such payment  following  Completion
                                        and (b)  any  such  payment  to the
                                        extent it is not  reflected  in the
                                        Net Current Assets Value

               "the Project             Any advance payments or deposits on
                Prepayments"            any  Contracts  made  or  paid by a
                                        customer to the Vendor
                                      
               "the Property"           The First  Property  and the Second
                                        Property


                                    16
<PAGE>

               "the Purchaser's UK      Barlow  Lyde & Gilbert of  Beaufort
                Solicitors"             House,   15  St.  Botolph   Street,
                                        London EC3A 7NJ

               "the Purchaser's Group"  The Guarantor and any company:-

                                        (i)  which is a  Subsidiary  of the
                                             Guarantor; or

                                        (ii) over which the  Guarantor  has
                                             control   within  the  meaning
                                             defined in this Agreement

                                        for the time being and from time to
                                        time

               "the Records"            All   such   records,    lists   of
                                        customers and  suppliers,  accounts
                                        and   other   documents    relating
                                        exclusively   to  the  Activity  to
                                        enable the Purchaser effectively to
                                        carry on the same in  succession to
                                        the Vendor

               "Registered              All    registered    patents    and
                Intellectual Property"  registered    trade    marks    and
                                        applications for the same specified
                                        in  Schedule  8 and  owned  by  the
                                        Lucas Group

               "the Regulations"        The   Transfer   of    Undertakings
                                        (Protection      of     Employment)
                                        Regulations 1981 as amended


                                    17
<PAGE>

               "the Second Property"    The freehold property  described in
                                        Part 2 of Schedule 3

               "the Specified Shared    All management manuals, instruction
                IP"                     manuals, Health and Safety manuals,
                                        disaster    recovery    procedures,
                                        Project   Introduction   Management
                                        systems and other  similar  manuals
                                        and  the  copyright  and  know  how
                                        therein  owned by the  Lucas  Group
                                        and used in the Activity and by any
                                        other  Business  Unit or  member of
                                        the Lucas Group,  but  specifically
                                        excluding any technical information
                                        contained   therein   used  in  the
                                        design,        manufacture       or
                                        implementation of assembly line and
                                        testing equipment

               "the Stock"              All stocks, including raw materials
                                        and   components,    spare   parts,
                                        operating supplies, maintenance and
                                        non product stock,  finished goods,
                                        bought-in-goods,          packaging
                                        materials, packages and products in
                                        intermediate  stages of  completion
                                        (save  where  the same  constitutes
                                        Amounts      Recoverable      under
                                        Contracts)  owned by the Vendor for
                                        use or sale in connection  with the
                                        Activity  and any of the same which
                                        are or
                                         

                                    18
<PAGE>

                                        incorporate   goods  or   materials
                                        supplied  by a supplier  subject to
                                        reservation  of title in each  case
                                        at the Completion Date

               "Subsidiary"             subsidiary  as  defined  in section
                                        736 of the Companies Act 1985

               "Subsidiary Undertaking" subsidiary  undertaking  as defined
                                        in section 258 Companies Act 1985

               "the Supplier Contracts" Any   and   all    contracts    and
                                        arrangements   which  were  entered
                                        into before the Completion  Date by
                                        or on  behalf  of the  Vendor  with
                                        suppliers  for  the  supply  to the
                                        Vendor  of  goods  or  services  in
                                        connection  with the Activity which
                                        then  remain  to be  performed,  in
                                        whole or in part, but excluding the
                                        Group Sharing Arrangements

               "Taxation"               Any tax and any duty, impost,  levy
                                        or   governmental   charge  in  the
                                        nature of tax  whether  domestic or
                                        foreign  and any fine,  penalty  or
                                        interest    connected     therewith
                                        including  corporation tax, advance
                                        corporation    tax,   income   tax,
                                        capital gains tax, inheritance tax,
                                        capital  transfer tax,  development
                                        land tax, value added tax, customs,


                                    19
<PAGE>

                                        excise  and  import  duties,  stamp
                                        duty and stamp duty reserve tax and
                                        any other payment  whatsoever which
                                        the  Vendor  is or may be or become
                                        bound  to make to any  person  as a
                                        result of any enactment relating to
                                        any of the foregoing

               "the Transferring        Those  employees  of the Vendor who
                Employees"              are employed in connection with the
                                        Activity  at close of  business  on
                                        the Completion Date whose names and
                                        positions are set out in Schedule 4
                                        and  any   other   person   who  is
                                        actively  engaged as an employee of
                                        the Vendor and working  exclusively
                                        in the Activity at  Completion  and
                                        whose  remuneration was paid by the
                                        Activity   in  the   period  up  to
                                        Completion  (but  excluding for the
                                        avoidance  of doubt any person whom
                                        the  Vendor or any other  member of
                                        the Lucas  Group has  treated  as a
                                        consultant,    agency   worker   or
                                        contractor)

               "the Umbrella Agreement" An  agreement  in the Agreed  Terms
                                        entered  into on the  same  date as
                                        this Agreement  between the parties
                                        hereto and certain other members of
                                        the Lucas Group and


                                    20
<PAGE>

                                        the Purchaser's Group

               "Unregistered            The   unregistered   trade   marks,
                Intellectual Property"  service   marks,   design   rights,
                                        copyright  and  other  intellectual
                                        property  rights which are owned by
                                        the Lucas Group and which:-

                                        (i)   are  to be  licensed  to  the
                                              Lucas  Group at or  following
                                              Completion  pursuant  to  the
                                              terms  of  the   Intellectual
                                              Property Agreements; or

                                        (ii)  relate   exclusively  to  the
                                              Activity  and are not used by
                                              any other member of the Lucas
                                              Group  or any  Business  Unit
                                              other than the Activity,

                                        but excluding any such intellectual
                                        property rights which are expressly
                                        retained by any member of the Lucas
                                        Group  under the LAO  Agreement  or
                                        the      Intellectual      Property
                                        Agreements  and  excluding the Know
                                        How

               "the Vendor's           Eversheds  of  10  Newhall   Street,
                Solicitors"            Birmingham

     1.2       References  in  this  Agreement  to  statutes  or  any  statutory
               provision shall include any statutory modification,  re-enactment
               or extension thereof and any orders, regulations,  instruments or
               other  subordinate  legislation made thereunder,  in each case in
               force at the date of this Agreement.


                                       21
<PAGE>

     1.3       In this Agreement:-

               1.3.1     the  masculine  gender  shall  include the feminine and
                         neuter and the singular number shall include the plural
                         and vice versa

               1.3.2     references to persons shall include  bodies  corporate,
                         unincorporated associations and partnerships

               1.3.3     the   expression   "the  Vendor"   shall   include  its
                         successors in title

               1.3.4     the headings  contained  in this  document are inserted
                         for   convenience   only  and  shall  not   affect  its
                         construction

     1.4       Whenever a document is referred to as being "in the Agreed Terms"
               it shall be in the form agreed and  initialled by or on behalf of
               the Vendor and the Purchaser

     1.5       Except where the contrary is stated,  any  reference  herein to a
               clause  or  Schedule  or party is to a clause of or  Schedule  or
               party to this  Agreement  and any  reference  within a clause  or
               Schedule to a sub-clause,  paragraph or other  sub-division  is a
               reference to such sub-clause,  paragraph or other sub-division so
               numbered or lettered in that clause or  Schedule.  The  Schedules
               form part of this  Agreement  and shall  have the same  force and
               effect as if expressly set out in the body of this Agreement

2.   SALE AND PURCHASE OF THE ACTIVITY

     2.1       The  Vendor  shall  sell  free  from all  charges,  liens,  other
               encumbrances  or third party claims (except  reservation of title
               claims by suppliers)  and the Purchaser  shall purchase as at and
               with effect from Completion the Activity on a going concern basis
               comprising (in addition to the assets  referred to in clause 2.2)
               only:-

               2.1.1     the  benefit of the  Contracts  (subject  to the burden
                         attaching thereto);


                                       22
<PAGE>

               2.1.2     the benefit of the Amounts Recoverable under Contracts;

               2.1.3     the Goodwill;

               2.1.4     the Plant, Machinery and Equipment;

               2.1.5     the Records;

               2.1.6     the Stock;

               2.1.7     the Debtors and the benefit of the Prepayments;

               2.1.8     all  sales  data,  catalogues,  brochures,  literature,
                         forms,   mailing  lists,  art  work,   photographs  and
                         advertising  material, in whatever form or media, owned
                         by the Vendor and relating  exclusively to the Activity
                         (but  subject  to the  provisions  of  clause  6 of the
                         Umbrella Agreement);

               2.1.9     all telephone,  facsimile,  telex, e-mail, Internet and
                         post  office box  numbers  and  addresses  owned by the
                         Vendor and relating  exclusively  to the Activity  (but
                         only to the extent that the same are  assignable by the
                         Vendor without any third party's consent and subject to
                         the provisions of clause 6 of the Umbrella Agreement);

               2.1.10    all permits,  approvals,  and qualifications  issued by
                         any  governmental   unit,   agency,   board,   body  or
                         instrumentality   held  by  the  Vendor  and   relating
                         exclusively  to the  Activity  (but only to the  extent
                         that the same are  assignable by the Vendor without any
                         third party's consent);

               2.1.11    all other tangible and intangible  assets of whatsoever
                         nature  owned by the Vendor  and which are  exclusively
                         employed in the Activity at Completion  and not used by
                         any  member of the  Lucas  Group or any  Business  Unit
                         other than the  Activity  and which do not form part of
                         the Excluded Assets and all other




                                       23
<PAGE>

                         assets  owned by the Vendor to the extent that they are
                         reflected  in the Final  Completion  Statement  and the
                         value  thereof is included  in the Net  Current  Assets
                         Value; and

               2.2.12    the benefit of all the Vendor's  rights  against  third
                         parties (including any claims, causes of action, choses
                         in action,  rights of  recovery  and rights of set-off)
                         (a) in connection with guarantees,  warranties (express
                         or implied),  covenants  and  representations  given by
                         such third parties  concerning  the Activity and any of
                         the Assets to the extent only that such  rights  relate
                         to  liabilities  assumed,  or the Plant  Machinery  and
                         Equipment  or the  Stock  acquired,  by  the  Purchaser
                         hereunder  (b)  under   completed  or  other  operative
                         contracts  save to the  extent  that  those  rights are
                         required in order to defend, mitigate or perform any of
                         the  Excluded  Liabilities  or any matter in respect of
                         which  the  Lucas  Group  has  retained   liability  or
                         responsibility  and (c) in respect of  infringement  of
                         the Expired  Patents before the date of expiry or lapse
                         of the same,  in each case in so far as such benefit is
                         capable of assignment

               save to the extent that any of the same are comprised  within the
               Excluded Assets.

     2.2       With regard to the Property,  the  Intellectual  Property and the
               Know How:-

               2.2.1     Lucas will sell and the Purchaser will buy the Property
                         upon the terms  hereof and the  conditions  of sale set
                         out in Schedule 3 Part 3; and

               2.2.2     the Vendor,  Lucas and LACE will sell and the Purchaser
                         will buy the Intellectual  Property and the Know How on
                         the terms of the Intellectual Property Assignments, but
                         without  prejudice to such rights as are granted to the
                         Purchaser  in  relation  thereto  under this  Agreement
                         and/or  the  Umbrella   Agreement,   including  without
                         limitation in respect of the English



                                       24
<PAGE>

                         Warranties and the General  Warranties  relating to the
                         English  Activity (as each expression is defined in the
                         Umbrella Agreement)

               and in case of any conflict between the conditions referred to in
               Schedule  3 and  the  other  provisions  of  this  Agreement  the
               provisions of Schedule 3 shall prevail.

     2.3       At  Completion  the  Vendor  shall  deliver   possession  to  the
               Purchaser  of any stocks held by the Vendor on  consignment  from
               others  solely for the purposes of, or which is used  exclusively
               in, the  Activity.  The  Purchaser  shall assume all the Vendor's
               obligations with respect to such consignment stock.

     2.4       The  Purchaser  shall pay the  Creditors in  accordance  with the
               Vendor's normal business practice in relation to the Activity and
               in any event  within  90 days  immediately  following  Completion
               without any deduction or set off for  whatsoever  reason,  unless
               the  Purchaser  has a bona fide and genuine  reason for disputing
               whether a particular debt is due or delaying  payment thereof and
               gives notice thereof and of the reasons for disputing or delaying
               payment  to the  Vendor as soon as  reasonably  practicable.  The
               Purchaser  shall  indemnify the Vendor against all expenses costs
               loss damage and  liability  incurred by the Vendor as a result of
               any failure or delay by the Purchaser in paying the Creditors.

     2.5       It is agreed that this Agreement does not include the sale of any
               assets or rights of the  Vendor  nor any  assets or rights of any
               other  member of the Lucas  Group  other than those  specifically
               referred  to in  clauses  2.1 and 2.2 or those  assets  or rights
               expressly  referred to elsewhere in this  Agreement as being sold
               hereunder  and without  limiting the  generality of the foregoing
               there shall be expressly excluded and excepted from the said sale
               and purchase  (and  nothing in this  Agreement  shall  operate to
               transfer) any of the following:-


                                       25
<PAGE>

               2.5.1     the benefit to the Vendor of this Agreement;

               2.5.2     ownership of the Leased Assets;

               2.5.3     any trademarks,  trade names, products' names, patents,
                         copyrights,    registered   designs   and   any   other
                         intellectual property rights of the Vendor or any other
                         member of the Lucas Group or Business  Unit or (save as
                         expressly permitted by this Agreement, the Intellectual
                         Property Agreements,  the Umbrella Agreement or the LAO
                         Agreement)  any rights to use the same,  other than the
                         Intellectual Property and the Know How;

               2.5.4     any right to use the names "Lucas" or  "LucasVarity" or
                         the Lucas  Group  diagonal  flash or any other  similar
                         trade mark or other distinctive Lucas Group get-up save
                         as provided  herein,  in the Umbrella  Agreement or the
                         LAO Agreement;

               2.5.5     the cash received in respect of the Project Prepayments
                         and all cash and cash  equivalents in the Lucas Group's
                         hands or any cash in the Lucas Group's bank accounts at
                         Completion  and the benefit of any  payments in advance
                         made by the Vendor in  relation to the  Activity  which
                         are excluded from the Prepayments;

               2.5.6     all cheques and negotiable instruments issued in favour
                         of the Lucas  Group  prior to  Completion  (save to the
                         extent  that any such cheque or  negotiable  instrument
                         constitutes   payment  for  any  of  the  Debtors  sold
                         hereunder  which  appears  as an  asset  in  the  Final
                         Completion  Statement  and is  taken  into  account  in
                         calculating the Net Current Assets Value);

               2.5.7     any  insurance  claim made by or available to the Lucas
                         Group  and  all  unearned   premiums  under   insurance
                         policies   or  other   rights  to  refunds   thereunder
                         attributable to any period of time



                                       26
<PAGE>

                         except to the extent  reflected in the Final Completion
                         Statement and the Net Current Assets Value or reflected
                         in the values  agreed and allocated to the fixed assets
                         as  shown  in  Part 2 of  Schedule  3 to  the  Umbrella
                         Agreement;

               2.5.8     any other claim made by or available to the Lucas Group
                         in respect of an event  occurring  prior to  Completion
                         other  than  those the  benefit of which is sold to the
                         Purchaser by clause 2.1.12;

               2.5.9     corporation  tax losses  and the  benefit of any claims
                         made or to be made for repayment of any taxation or tax
                         allowance  of the  Vendor or any other  company  in the
                         Lucas Group in  relation to the  Activity in respect of
                         the  period  prior to  Completion  except to the extent
                         that the same are  reflected in the Net Current  Assets
                         Value;

               2.5.10    any Lucas Internal Funding;

               2.5.11    the benefit of all contracts or  arrangements  excluded
                         from the  definition  of "the  Contracts"  pursuant  to
                         clause  1.1  (other   than   those   relating   to  the
                         Transferring Employees); and

               2.5.12    the benefit of the Magasa  Action (and  notwithstanding
                         the terms of the Intellectual  Property Assignments the
                         Purchaser  acknowledges  that the Vendor may settle the
                         Magasa  Action on such terms as the Vendor shall in its
                         absolute  discretion  think fit provided  that any such
                         settlement  does not affect the  validity of the patent
                         the subject of the Magasa Action).

     2.6       If any of the Assets to be sold hereunder by the Vendor are owned
               by any other member of the Lucas Group or any of the Transferring
               Employees  is employed  by any such other  member or there is any
               other obligation of the Vendor hereunder which is only capable of
               being  satisfied  by or with the  assistance  of any  such  other
               member, the Vendor shall not be deemed to be


                                       27
<PAGE>

               in breach of this  Agreement so long as the Vendor  procures,  to
               the extent  necessary,  compliance  by such other member with the
               terms and  conditions of this  Agreement  which the Vendor hereby
               undertakes to do. Such other member and, where  appropriate,  its
               employees,  shall have the benefit of any exclusions of liability
               contained  herein in  relation  to the Assets  and any  indemnity
               given by the  Purchaser  herein to the Vendor in  relation to the
               Assets, the Activity or the Transferring Employees. If any member
               of the Lucas  Group  other than the Vendor is or was party to any
               of  the  Contracts,  the  Completed  Contracts  or the  MOUs  the
               relevant  provisions  of  clauses  5 and 9  shall  apply  to such
               Contract,  Completed  Contract  or MOU (as the case may be) as if
               the Vendor were party thereto and  references in those clauses to
               the Vendor shall, where  appropriate,  be construed as references
               to the  relevant  member of the  Lucas  Group.  Accordingly,  the
               relevant  member of the Lucas  Group shall be entitled to benefit
               from the  obligations  undertaken  and  indemnities  given by the
               Purchaser in relation to that Contract, Completed Contract or MOU
               under those clauses.

     2.7       Insofar as tooling used in the Activity is owned by a third party
               (and title to which  accordingly  does not pass to the  Purchaser
               hereunder)  the Vendor  assigns  to the  Purchaser  effective  at
               Completion  whatever right title or interest (if any) it may have
               in such tooling to the extent the same is assignable.  A complete
               and accurate list of all such third party tooling arrangements is
               set out in the Disclosure Letter

     2.8       Where any of the Assets (including packaging comprised within the
               Stock) to be sold hereunder by the Vendor  comprise  advertising,
               promotional and other written material bearing the "Lucas" and/or
               "LucasVarity"  name or the  Lucas  Group  diagonal  mark or other
               similar  trade mark or other  distinctive  Lucas Group get up the
               provisions the Umbrella Agreement regarding the same shall apply.

     2.9       The Vendor  agrees that the Purchaser may (to the extent that the
               Vendor can grant any such  right)  for a period of twelve  months
               after Completion  represent itself as carrying on the Activity in
               succession to the Vendor but


                                       28
<PAGE>

               this agreement  shall not grant or imply (and shall  specifically
               exclude)  any  right  on the part of the  Purchaser  (save to the
               extent  granted  herein,  in the  Umbrella  Agreement  or the LAO
               Agreement)  in the names or mark "Lucas" or  "LucasVarity"  or in
               the Lucas Group diagonal flash or any other similar  trademark or
               other distinctive Lucas Group get-up or in the goodwill attaching
               thereto.

3.   THE CONSIDERATION

     3.1       The  purchase  price  for  the  Assets  shall  be  determined  in
               accordance with the Umbrella Agreement.

     3.2       The parties  hereto  intend that Section 49(1) of the Value Added
               Tax Act 1994 and  paragraph  5 of the Value  Added  Tax  (Special
               Provisions)  Order 1995 S.I. No. 1268 shall apply to the transfer
               of the Activity and the Property hereunder and accordingly:-

               3.2.1     the Vendor and the Purchaser  shall each give notice of
                         such transfer to H.M. Customs & Excise;

               3.2.2     the Vendor shall at Completion deliver to the Purchaser
                         all  records  referred  to in the said  Section  49 and
                         shall not thereafter make any request to H.M. Customs &
                         Excise for such  records to be taken out of the custody
                         of the Purchaser and the Purchaser hereby undertakes to
                         preserve  such  records  for  such  periods  as  may be
                         required by law;

               3.2.3     the Vendor and the Purchaser  shall use all  reasonable
                         endeavours  to secure that  pursuant to the  provisions
                         referred  to  above  the sale of the  Activity  and the
                         Property  hereunder  is  treated as neither a supply of
                         goods  nor a supply of  services  for the  purposes  of
                         Value Added Tax;

               3.2.4     if Value Added Tax is chargeable on the sale  hereunder
                         or any part thereof then the Purchaser agrees that such
                         Value Added




                                       29
<PAGE>

                         Tax shall be in addition to the  Consideration  and the
                         Purchaser shall (against  production of tax invoices in
                         respect  thereof and a written ruling from HM Customs &
                         Excise that Value Added Tax is so  chargeable)  pay the
                         amount of any such Value  Added Tax and any  penalty or
                         interest  incurred  by  the  Vendor  for  late  payment
                         thereof  (provided  that in respect  of any  penalty or
                         interest  only the  reason  such  Value  Added  Tax was
                         payable was due to an act, omission or intention of, or
                         the circumstances  of, the Purchaser),  such payment by
                         the  Purchaser  to be made  forthwith on request by the
                         Vendor or if sooner on  delivery  by the  Vendor to the
                         Purchaser  of tax  invoices  in  respect  thereof.  The
                         Purchaser   shall  have  no  liability  in  respect  of
                         penalties  and interest  relating to Value Added Tax to
                         the extent they arise due to an unreasonable  delay (in
                         any case not  exceeding 2 Business  Days (as defined in
                         the Umbrella  Agreement)) in passing on to HM Customs &
                         Excise a payment  made by the  Purchaser  in respect of
                         Value Added Tax; and

               3.2.5     the  Purchaser  confirms  that  it has  validly  waived
                         exemption  from  Value  Added  Tax  under  paragraph  2
                         Schedule  10 VATA 1994 in respect of the  Property  and
                         has  validly  notified  HM  Customs  &  Excise  of such
                         election.

     3.3       With regard to the operation of the Activity by the Vendor:-

               3.3.1     all Value  Added Tax  payable  in  respect of goods and
                         services  supplied  or  deemed  to be  supplied  by the
                         Vendor  before  the  Completion  Date and all  interest
                         payable  thereon  and  penalties  attributable  thereto
                         shall be paid to H.M.  Customs & Excise  by the  Vendor
                         and the Vendor  shall be  entitled  to  receive  and to
                         retain for its own benefit all  reimbursement or credit
                         from H.M. Customs & Excise for Value Added Tax borne by
                         the Vendor on goods and services supplied to the Vendor
                         prior
                     

                                       30
<PAGE>

                         thereto and any  payments  received in respect of Value
                         Added  Tax  overpaid  to H.M.  Customs  & Excise  prior
                         thereto; and

               3.3.2     without  prejudice to the  provisions of this Agreement
                         as to discharge of the relevant liability the Purchaser
                         shall give to the Vendor all necessary  and  reasonable
                         co-operation  for the purposes of preparing  any VAT or
                         Customs Duty Relief return  relating to the Activity in
                         respect  of any  prescribed  accounting  period  of the
                         Vendor  beginning before the Completion Date or for the
                         purpose of  determining  the  Vendor's  liability to HM
                         Customs  and Excise in respect of the  Activity  or for
                         the purpose of  answering  any  questions  raised by HM
                         Customs  and  Excise  for  the  period   prior  to  the
                         Completion Date, such co-operation to include providing
                         reasonable  access  to or  (at  the  Vendor's  expense)
                         copies of  relevant  documentation  (which  the  Vendor
                         shall be  permitted  to use and  divulge  to the extent
                         that it is required so to do so as to enable the Vendor
                         to  comply  with  its  obligations  to HM  Customs  and
                         Excise)   and   allowing   reasonable   access  to  the
                         Transferring Employees. In the event that the Purchaser
                         should  transfer  the  Activity  to another  person the
                         Purchaser  shall  procure  (or, if the  transfer  takes
                         place  more  than  three  years  after the date of this
                         Agreement,  shall use reasonable endeavours to procure)
                         that the  person to whom the  Activity  is  transferred
                         enters into a similar  obligation to provide reasonable
                         co-operation  and  assistance  to  the  Vendor  (either
                         directly or indirectly through the Purchaser) as is set
                         out  in  this  clause.  The  Purchaser  shall  have  no
                         obligations   under   this   clause   after  the  sixth
                         anniversary  of this Agreement or in respect of records
                         which have not been retained because they are more than
                         six years old.


                                       31
<PAGE>
          
     3.4       The Purchaser  warrants to the Vendor that it is a taxable person
               for the purposes of Section 3 Value Added Tax Act 1994.

4.   COMPLETION

     Completion of this  Agreement  shall be  determined in accordance  with the
     Umbrella Agreement

5.   FURTHER ASSURANCE AND THE CONTRACTS

     5.1       The  Vendor  hereby  agrees and  declares  that it will after and
               notwithstanding   Completion   execute   and  deliver  any  other
               documents  and  take any  other  steps  as  shall  reasonably  be
               required from time to time by the Purchaser,  at the  Purchaser's
               expense,  to  vest in the  Purchaser,  or as it may  direct,  the
               Assets  (other  than  the  Property  which  is  governed  by  the
               provisions of Schedule 3, the Intellectual  Property and the Know
               How which is governed by the  Intellectual  Property  Assignments
               and the Debtors which are governed by clause 6.1) on the terms of
               this Agreement.

     5.2       Save to the  extent  otherwise  provided  in  clause  10.1.2  the
               Purchaser  will at and from  Completion at its own expense assume
               and undertake to perform and discharge  when due or when required
               to be performed the Vendor's  liabilities and  obligations  under
               the  Contracts  and shall be bound by all the terms,  conditions,
               obligations and  liabilities  arising from, in connection with or
               related to the Contracts  and the Purchaser  shall keep the Lucas
               Group indemnified against all expenses,  costs, loss, damage, and
               liability arising therefrom.  For the purposes of this Agreement,
               all Bids which are accepted by customers after  Completion  shall
               be deemed to be Contracts.

     5.3       Insofar as the benefit  (subject to the burden) of the  Contracts
               cannot  effectively be transferred by the Vendor to the Purchaser
               except by way of an agreement of novation  with or consent to the
               assignment from the person, firm or company concerned:-


                                       32
<PAGE>

               5.3.1     the Vendor and the Purchaser  shall  co-operate and use
                         their reasonable  efforts to procure that the Contracts
                         be  novated  or  assigned  as   aforesaid  as  soon  as
                         reasonably practicable;

               5.3.2     in  every  novation  or  assignment  as  aforesaid  the
                         Purchaser  shall  undertake  to  indemnify  the  Vendor
                         against all expenses, costs, loss, damage and liability
                         arising  by  reason  of  or  in  connection   with  the
                         non-performance   or   the   defective   or   negligent
                         performance by the Purchaser of the Contracts;

               5.3.3     unless and until all such Contracts shall be novated or
                         assigned as aforesaid:-

                         5.3.3.1   the  Vendor  shall   continue  its  corporate
                                   existence and shall hold the benefit of every
                                   such Contract which requires to be novated or
                                   assigned  but which has not been  novated  or
                                   assigned,  in trust for the Purchaser as from
                                   Completion and shall account to the Purchaser
                                   accordingly  (whether  in respect of any sums
                                   or other  benefits  received by it in respect
                                   thereof) and otherwise act at the  reasonable
                                   direction of the  Purchaser  and as its agent
                                   in all matters  relating  thereto  subject to
                                   the  Purchaser  securing  the  Vendor  to its
                                   reasonable satisfaction, and indemnifying and
                                   holding  the  Vendor  harmless  against,  any
                                   expenses,  costs, loss, damage, or liability,
                                   which  it  may  have  brought  against  it or
                                   suffer or incur as a consequence, but subject
                                   to clause 5.5; and

                         5.3.3.2   the  Purchaser  shall  at its  own  cost  and
                                   expense  with  effect  from  Completion carry



                                       33
<PAGE>

                                   out perform and  complete all of the Vendor's
                                   obligations  under every such Contract  which
                                   has  not  been   novated  or  assigned  as  a
                                   subcontractor  of the  Vendor  and  where sub
                                   contracting  is not  possible  the  Purchaser
                                   shall  perform the  contracts  in  accordance
                                   with their terms and  conditions as agent for
                                   the Vendor.

     5.4       If  the   Vendor  has  before   Completion   sub-contracted   the
               performance of any Contracts to any person,  the Purchaser  shall
               on Completion assume responsibility for the relevant sub-contract
               and on behalf of the relevant customer seek or accept delivery or
               performance  from such  person of the goods or other  products or
               services  in respect of which  such  contract  was made and shall
               make the same available for collection by such customer.

     5.5       Any fee,  charge or financial  penalty levied by a third party in
               respect  of a  novation  or  assignment  of  any  Contract  or in
               connection  with the  termination  of any  existing  Contract  to
               permit  novation  or  assignment  to take  place  will be  shared
               equally by the Vendor and the Purchaser provided that neither the
               Vendor nor the Purchaser  shall agree to pay any such fee, charge
               or financial  penalty  without the prior  written  consent of the
               other of them (such  consent not to be  unreasonably  withheld or
               delayed).  The  Purchaser  shall  procure  the  execution  of any
               guarantees  by any member of the  Purchaser's  Group  required by
               such  third  party  as  a  condition  of  any  such  novation  or
               assignment.  If any  other  party  to a  Contract  makes  a claim
               against the Vendor or the Purchaser alleging that the sale of the
               Activity to the  Purchaser or the  provisions  of this  Agreement
               constitute  a  breach  of  such  Contract,  the  Vendor  and  the
               Purchaser  shall consult with regard to such claim and neither of
               them shall accept the claim without the prior written  consent of
               the other  (not to be  unreasonably  withheld  or  delayed).  Any
               liability,  costs  and  expenses  incurred  by the  Vendor or the
               Purchaser as a result of any such claim shall be borne equally by
               the Vendor and the Purchaser.


                                       34
<PAGE>

     5.6       Lucas and the Purchaser shall co-operate and use their reasonable
               efforts  to  procure  that  as  soon  as  practicable   following
               Completion Lex Vehicle  Leasing Limited ("Lex") enters into a new
               lease directly with the Purchaser on the same or similar terms as
               the Master Lease in respect of the vehicles  listed in Schedule 1
               and that such  vehicles  are  thereby  excluded  from the  Master
               Lease.  If required by Lex, the Purchaser  shall procure that the
               Guarantor  and any other member of the  Purchaser's  Group enters
               into  an  agreement   with  Lex  to  guarantee  the   Purchaser's
               obligations  under such new lease.  Prior to such new lease being
               granted:-

               5.6.1     Lucas  shall hold the  benefit  of the Master  Lease in
                         trust for the Purchaser to the extent it relates to the
                         vehicles listed in Schedule 1; and

               5.6.2     the Purchaser shall at its own cost and expense perform
                         Lucas'  obligations under the Master Lease with respect
                         to  those   vehicles  as  agent  for  Lucas  and  shall
                         indemnify and hold Lucas harmless  against all charges,
                         payments,  penalties,  costs, expenses,  liabilities or
                         losses which Lucas may incur or suffer under the Master
                         Lease  following  the  Completion  Date with respect to
                         those vehicles, but subject to clause 5.5.

     5.7       The Vendor  agrees to assign to the Purchaser all right title and
               interest which the Vendor has (if any) in respect of the MOUs and
               the Purchaser agrees to perform and discharge all obligations and
               liabilities which the Vendor has (if any) in respect of the MOUs.
               Accordingly,  the Purchaser agrees that the provisions of clauses
               5.2 to 5.5 shall mutatis  mutandis  apply in respect of such MOUs
               as if they were Contracts.

6.   DEBTORS

     6.1       The Vendor shall when the Consideration has been paid pursuant to
               the terms of the Umbrella Agreement if requested by the Purchaser
               and at the  Purchaser's  cost assign to the Purchaser the benefit
               of the Debtors (or any of them) in the form of the assignment set
               out in Schedule 6.


                                       35
<PAGE>

     6.2       The  Purchaser  will  collect the Debtors in a manner  consistent
               with the way in which debts of the Activity were collected by the
               Vendor prior to  Completion  and will not issue  proceedings  for
               recovery of any of the Debtors  without first giving the Vendor 7
               days prior  written  notice and,  if required by the Vendor,  the
               Purchaser  will  re-assign to the Vendor at the Vendor's  expense
               the  benefit of any Debtor for an amount  equal to the face value
               of such Debtor (less any specific  provision or reserve  included
               in the Final Completion Statement in respect of such Debtor).

     6.3       Any sums  received  by the Vendor  after the  Completion  Date in
               relation  to  any  of  the   Debtors   (other  than  any  Debtors
               re-assigned to the Vendor pursuant to clause 6.2) shall belong to
               the  Purchaser and the Vendor shall pay the same to the Purchaser
               as soon as practicable  and in any event within 7 days of receipt
               of the same by the Vendor.

7.   THE TRANSFERRING EMPLOYEES

     7.1       With regard to the Transferring Employees:-

               7.1.1     the parties  acknowledge and agree that pursuant to the
                         Regulations,   the   contracts  of  employment  of  the
                         Transferring  Employees (save insofar as such contracts
                         relate to any  occupational  pension  scheme) will have
                         and be deemed to have had effect after Completion as if
                         originally   made   between  the   Purchaser   and  the
                         Transferring Employees; and

               7.1.2     upon or as soon as  practicable  after  Completion  the
                         Vendor and the Purchaser will make a joint announcement
                         to  the  Transferring  Employees  in the  Agreed  Terms
                         regarding the transfer of their contracts of employment
                         as referred to in clause 7.1.1
    
      7.2      The Vendor shall  indemnify  and keep  indemnified  the Purchaser
               against any liability or claim (whether for redundancy  payments,
               protective awards, damages for wrongful dismissal or compensation
               for unfair dismissal or

                                       36
<PAGE>

               otherwise howsoever) against the Purchaser in connection with any
               act or  omission  of the Vendor or any other  member of the Lucas
               Group  relating  to the  employment  of  any of the  Transferring
               Employees  prior to the Completion Date or the termination of the
               employment of any of the Transferring  Employees by the Vendor or
               any other member of the Lucas Group prior to the Completion  Date
               and  for  which  the   Purchaser  is  liable  by  virtue  of  the
               Regulations and for all costs and expenses reasonably incurred by
               the  Purchaser in settling,  contesting  or dealing with any such
               liability or claim PROVIDED THAT such  indemnity  shall not apply
               to any such  liability,  claim,  costs or  expenses to the extent
               that they are provided for in the Net Current Assets Value.

     7.3       Save as provided in clause 7.2 the Purchaser  shall indemnify and
               keep  indemnified the Vendor and every company in the Lucas Group
               against:-

               7.3.1     any  liability  or  claim  by a  Transferring  Employee
                         (whether for redundancy  payments,  protective  awards,
                         damages for  wrongful  dismissal  or  compensation  for
                         unfair dismissal or otherwise  howsoever) in connection
                         with the  employment of the  Transferring  Employees or
                         the  termination  of their  employment by the Purchaser
                         following the Completion Date;

               7.3.2     all  liabilities and claims incurred by the Lucas Group
                         or made against the Lucas Group in connection  with the
                         termination  of  the  employment  of  any  Transferring
                         Employee  who refuses to transfer  with the Activity to
                         the  Purchaser on  Completion or arising as a result of
                         any   constructive   dismissal  claim  by  any  of  the
                         Transferring  Employees  following  an objection by any
                         such employee to the identity of the Purchaser; and

               7.3.3     all  costs  and  expenses  reasonably  incurred  by the
                         Vendor in settling, contesting or dealing with any such
                         claim.

     7.4       The provisions of Schedule 7 relating to Pensions shall apply and
               have effect as part of this Agreement.


                                       37
<PAGE>

     7.5       The Purchaser  shall for a period of 12 months from Completion at
               the Vendor's  request make  available to the Vendor and allow the
               Vendor to take copies of those of the Records which relate to the
               Transferring  Employees'  employment  prior  to  Completion.  The
               Vendor will for a period of 12 months  after  Completion  provide
               the Purchaser with copies of such  information  and documents not
               comprised  within the  Records as the  Purchaser  may  reasonably
               require in relation  to the  Transferring  Employees'  employment
               prior to Completion  (but excluding any  information or documents
               relating to any pension,  retirement and/or death benefits of the
               Transferring Employees which are dealt with in Schedule 7).

     7.6       The Purchaser covenants with the Vendor for itself and as trustee
               for each Transferring  Employee that should the Purchaser dismiss
               any of the  Transferring  Employees  for  reasons  of  redundancy
               within  12  months  after  Completion,  the  Purchaser  will make
               payments to each of the Transferring Employees so dismissed which
               are no less favourable to such employee than those set out in the
               Severance  Policy  section of the pack of employment  particulars
               annexed to the Disclosure Letter.

     7.7       The Vendor  confirms that it has complied with the  provisions of
               the  Regulations as to  notification  and  consultation  with the
               Transferring  Employees  and the  Purchaser  confirms that it has
               complied  with  the   provisions  of  Regulation   10(3)  of  the
               Regulations.

     7.8       The Vendor shall  indemnify  the  Purchaser  from and against any
               claims, demands, liabilities,  damages, awards, costs, losses and
               expenses  brought or made against or incurred by the Purchaser as
               a result of the Regulations  applying to the employment contracts
               of any  employees  of the Vendor or any other member of the Lucas
               Group who are not Transferring  Employees or otherwise  howsoever
               arising in respect of such employees.

8.   COSTS AND EXPENSES

     Each  party to this  Agreement  shall  bear its own costs and  expenses  in
     connection with this Agreement and the negotiations  leading  thereto.  For
     the avoidance of doubt the


                                       38
<PAGE>


     Purchaser  shall  pay all  stamp  duty  payable  in  connection  with  this
     Agreement,  any  instrument  executed  pursuant  hereto or to the  Umbrella
     Agreement  and the  purchase by it of the Assets and the  Activity and will
     indemnify  the Vendor  against  any stamp duty and  related  penalties  and
     interest (if any) it has to pay in  connection  with this  Agreement or any
     instrument executed pursuant hereto before enforcing its rights thereunder.

9.   INDEMNITY AND LIABILITIES
     
     9.1       The Purchaser  agrees that it will assume and  undertakes to pay,
               perform and discharge when due or required to be performed:-

               9.1.1     the Creditors in accordance with clause 2.4;

               9.1.2     the  Contracts,  the Bids and the  MOU's in  accordance
                         with clause 5 and any liabilities or obligations of the
                         Vendor   arising   out   of  any   Completed   Contract
                         (including,  without  limitation,  any  obligations  or
                         liabilities arising out of a breach by the Vendor prior
                         to Completion of any of its obligations  under any such
                         Contracts, MOU's or Completed Contracts);

               9.1.3     all the  Vendor's  obligations  to return  any  Project
                         Prepayments to customers of the Activity;

               9.1.4     the  Vendor's  obligations  in respect  of goods  sold,
                         leased or  otherwise  disposed of or  manufactured  (in
                         whole or in part only) by the  Vendor (or any  previous
                         owner of the  Activity)  or services  performed  by the
                         Vendor  (or any  previous  owner  of the  Activity)  in
                         relation  to  the  Activity   prior  to  Completion  in
                         accordance with clause 10;

               9.1.5     the Vendor's obligations in respect of the Transferring
                         Employees  in  accordance   with  clause  7,  including
                         (without  limitation) the liabilities of the Vendor for
                         unpaid   accrued   holiday  pay  to  the   Transferring
                         Employees and any and all of


                                       39
<PAGE>

                         the Vendor's  obligations for the financial year of the
                         Vendor in which  Completion  occurs with respect to the
                         Economic Value Added Bonus Scheme;

               9.1.6     any  liabilities of the Vendor relating to the Activity
                         (including,  without limitation, any liability relating
                         to  Taxation)  to the  extent  that  (a)  provision  or
                         reserve  therefor has been made and is reflected in the
                         Net  Current  Assets  Value or (b) the  subject  matter
                         thereof is otherwise taken account of, or reflected, in
                         the calculation of the Net Current Assets Value;

               9.1.7     any obligations,  liabilities, losses, damages, claims,
                         costs and  expenses  arising  from or  relating  to the
                         matters referred to in the following  paragraphs of the
                         Disclosure Letter:-

                         9.1.7.1   Part A  paragraph  9  (Litigation)  regarding
                                   only   the   problems   encountered   in  the
                                   Philippines with Hartridge smoke meters; and

                         9.1.7.2   Part A paragraph 10.2 (Action by Robert Bosch
                                   GmbH); and

              9.1.8      any other  liabilities  or obligations of the Vendor or
                         any other  member of the Lucas  Group  relating  to the
                         Activity  agreed to be assumed by the  Purchaser  under
                         this Agreement or the Umbrella Agreement

     9.2       The  Purchaser  shall not  assume,  and the Vendor  shall  remain
               responsible  for, the  following  liabilities  arising out of the
               conduct of the  Activity by the Vendor or any other member of the
               Lucas Group before Completion:-

               9.2.1     any  liability of the Vendor for borrowed  money (other
                         than in respect of the Leased Assets);

               9.2.2     any Lucas Internal Funding;


                                       40
<PAGE>

               9.2.3     any  liability  of the Vendor to Taxation in respect of
                         the  Activity  save to the extent the same is  included
                         within the Assumed  Liabilities or is otherwise  agreed
                         to be discharged by the Purchaser  under this Agreement
                         or the Umbrella Agreement;

               9.2.4     any liability of the Vendor arising under clause 7.2 in
                         respect of the Transferring Employees and the liability
                         of the Lucas Group to pay any  divestment  bonus to any
                         Transferring  Employees in connection  with the sale of
                         the Activity hereunder;

               9.2.5     any  liability  of the Vendor in  respect of  defective
                         goods sold or services  supplied by the Vendor which is
                         to be retained by the Vendor in accordance  with clause
                         10.1.2;

               9.2.6     any criminal  liability of the Vendor  arising out of a
                         breach  of  statutory  duty or laws  applicable  to the
                         Activity by the Vendor prior to the Completion Date;

               9.2.7     any liabilities relating to the Magasa Action;

               9.2.8     any liabilities arising under the Asnu Licence;

               9.2.9     any   liabilities   arising   from  a  breach  of  laws
                         applicable  to the  Activity  by the  Vendor  or  other
                         members of the Lucas Group prior to Completion which:-

                         (a)  automatically attach to the Purchaser by operation
                              of law; and

                         (b)  are material in the context of the  Activities (as
                              defined  in the  Umbrella  Agreement)  taken  as a
                              whole; and

                         (c)  are not Assumed Liabilities; and


                                       41
<PAGE>

                         (d)  do not relate to the  Transferring  Employees (who
                              are dealt  with in  clause 7) or to  environmental
                              matters (which are dealt with in clause 9.3),

                         but  excluding  (for the  avoidance  of doubt) any such
                         liabilities incurred by the Purchaser as a result of or
                         relating  to any act or  omission  of any member of the
                         Purchaser's Group following Completion; and

               9.2.10    any other liabilities of the Vendor or any other member
                         of the Lucas  Group  arising  out of the conduct of the
                         Activity by the Vendor or any other member of the Lucas
                         Group before Completion and which:-

                         (a)  are not comprised within the Assumed  Liabilities;
                              and

                         (b)  do not  relate to any breach of laws to the extent
                              such  liabilities  are dealt with in clause 9.2.9;
                              and

                         (c)  do not relate to environmental  matters (which are
                              dealt with in clause 9.3)

     9.3       The Purchaser  shall not assume,  and the Vendor shall  indemnify
               the Purchaser against, any and all expenses, costs, loss, damages
               and liability (excluding  consequential or economic loss) arising
               out of any claims made by any  unaffiliated  third party  seeking
               damages or injunctive  relief relating to  environmental  matters
               affecting the Property under the common law or any  notifications
               or notices made by any government authority regarding correction,
               removal,  abatement,  remediation  or  clean-up in respect of the
               Property under environmental  laws,  including Section IIA of the
               Environmental Protection Act 1990 ("EPA") or Sections 161 to 161D
               of  the  Water   Resources   Act  1991  ("WRA")  and  all  rules,
               regulations,   orders  or  statutory   guidance  made  thereunder
               relating  to the  environment  (as defined in the EPA ) if and to
               the extent only that such claims, notifications or notices result
               from  and  relate  to  the  conduct  of  the  Activity  prior  to
              

                                       42
<PAGE>

               Completion  or the  condition of the  Property at the  Completion
               Date PROVIDED THAT:-

               9.3.1     the total  amount  payable  by the  Vendor  under  this
                         clause  in  respect  of any  such  claims,  notices  or
                         notifications  to the extent they result from or relate
                         to the condition of the Property before it was acquired
                         by the Lucas  Group or arise  from or relate to any act
                         or  omission  of any  previous  owner  of the  Activity
                         before the Lucas  Group (a  "Predecessor's  Liability")
                         shall  (when  aggregated  with  any  payments  made for
                         breach of the  Warranties  (as defined in the  Umbrella
                         Agreement) and any payments made pursuant to equivalent
                         clauses in the other Sale Agreements (as defined in the
                         Umbrella  Agreement))  not exceed fifty per cent of the
                         Consideration; and

               9.3.2     the  Vendor  shall  not  be  liable  to  the  Purchaser
                         pursuant  to this  Agreement  in  respect  of any  such
                         claims,   notices  or  notifications   relating  to  or
                         resulting from a Predecessor's Liability unless written
                         notice of the claim,  notice or notification  (together
                         with reasonable details thereof) is given to the Vendor
                         within  the  three  years  immediately   following  the
                         Completion Date and any proceedings  against the Vendor
                         in respect  thereof are issued and served on the Vendor
                         within 9 months  after  such  notice has been so given;
                         and

               9.3.3     the liability of the Vendor under this clause shall not
                         be  increased  as a result  of any  change in law or in
                         practice of any  federal,  state or other  governmental
                         body or authority  occurring  after the Completion Date
                         provided that:-

                         (a)  the subsequent coming into force of Section IIA of
                              the EPA and Sections 161A to 161D of the WRA shall
                              not be  regarded  as a  change  in law  for  these
                              purposes; and


                                       43
<PAGE>

                         (b)  the  coming   into  force  after   Completion   of
                              statutory  guidance and  regulations  issued under
                              the EPA which are  substantially  in the same form
                              as the statutory  guidance and regulations  issued
                              under  the  EPA in  draft  form in  September  and
                              November 1996 shall not be regarded as a change in
                              law for these purposes; and

                         (c)  the coming  into  force  after  Completion  of the
                              regulations under the WRA shall not be regarded as
                              a change in law for these  purposes  provided that
                              they do not  increase  the  scope or extent of the
                              liability of the Vendor under this clause; and

               9.34      the Vendor  shall not be liable in respect of any claim
                         brought by the  Purchaser  under this clause 9.3 unless
                         the  liability of the Vendor in relation  thereto shall
                         (when  added to the  liability  of Lucas  Automation  &
                         Control Engineering Inc in respect of claims made under
                         the equivalent  provisions of the US Sale Agreement (as
                         defined   in   the    Umbrella    Agreement))    exceed
                         (pound)25,000.

     9.4       The  Purchaser  hereby  undertakes to indemnify and hold harmless
               the Lucas  Group from and against  any and all  expenses,  costs,
               loss,  damage and  liability  which the Lucas Group may suffer or
               incur directly or indirectly in respect of or arising out of:-

               9.4.1     the Assumed  Liabilities or the failure or delay by the
                         Purchaser  in paying,  performing  or  discharging  the
                         Assumed Liabilities; or

               9.4.2     the  operation of the Activity by the  Purchaser  after
                         the Completion Date

     9.5       The  Purchaser  will  use all  reasonable  endeavours  (including
               procuring  the  giving  of  guarantees  by  the  Guarantor  where
               required) to procure that on or

                                       44
<PAGE>

               


               as soon as practical  after  Completion  each member of the Lucas
               Group  is  released  from  its  liability   (whether   actual  or
               contingent) in respect of those bonds, guarantees and indemnities
               given by any of them before Completion in respect of the Activity
               which are listed in  Schedule 12 or which are  identified  in the
               Disclosure  Letter.  The Purchaser will indemnify the Lucas Group
               against any and all expenses,  costs,  loss, damage and liability
               which the Lucas Group may suffer or incur  directly or indirectly
               in  respect  of or  otherwise  arising  out of any claim or other
               demand  made on the Lucas  Group  (whether  made  before or after
               Completion)  in respect of the bonds,  guarantees or  indemnities
               given by any  member  of the Lucas  Group  before  Completion  in
               respect of the Activity  and listed in Schedule 12 or  identified
               in the  Disclosure  Letter  or in  respect  of any  other  bonds,
               guarantees or  indemnities  given by the Lucas Group but in their
               case  only  to  the  extent   that  the   underlying   obligation
               constitutes an Assumed Liability.

     9.6       The Vendor  hereby  undertakes to indemnify and hold harmless the
               Purchaser against any and all expenses,  costs,  loss, damage and
               liability  which the  Purchaser  may suffer or incur  directly or
               indirectly   in  respect  of  or  arising  out  of  the  Excluded
               Liabilities  or the  failure  or delay by the  Vendor in  paying,
               performing or discharging the Excluded  Liabilities in accordance
               with clause 9.2

     9.7       Before any party makes any payment or offers any other  remedy to
               a third party or takes any other remedial or corrective action in
               respect of matters for which it is entitled to an indemnity  from
               any  other  party  hereto  under  the  terms of this  clause 9 or
               otherwise  under  this  Agreement  it  shall  give  a  reasonable
               opportunity  to such other party to verify  and, if  appropriate,
               remedy the default,  defect, omission or other matter giving rise
               to the claim in  question,  subject  always to such  third  party
               allowing the same.

     9.8       In the event that this  Agreement  requires or entitles any party
               to pay or receive a payment of or in respect of Taxation  and the
               relevant  legislation provides that payment must be made to or by
               another party to this  Agreement the relevant  parties shall make
               such adjusting payments between


                                       45
<PAGE>

               themselves  and at such times as are  necessary to give effect to
               the intention expressed in this Agreement.

10.  PRODUCT LIABILITY AND PRODUCT WARRANTY

     10.1      Without  prejudice to the  generality  of any other  provision of
               this Agreement the Purchaser shall be liable:-

               10.1.1    (save in relation  to  products  the subject of the LAO
                         Agreement  which shall be governed by the terms of that
                         agreement)  to carry out in  accordance  with its terms
                         any warranty,  guarantee or other similar obligation or
                         commitment  ("Warranty Work" which expression  includes
                         any materials  supplied,  labour involved and any costs
                         or other expenses incurred):-

                         10.1.1.1  given or  undertaken  by the  Vendor  (or any
                                   previous owner of the Activity) in respect of
                                   any goods sold, leased or otherwise  disposed
                                   of, or in respect of any services  performed,
                                   under any contract entered into or assumed by
                                   the  Vendor  (or any  previous  owner  of the
                                   Activity)  prior  to the  Completion  Date in
                                   relation  to  or  in   contemplation  of  the
                                   Activity; or

                         10.1.1.2  given  or  undertaken  by  the  Purchaser  in
                                   respect of goods  sold,  leased or  otherwise
                                   disposed   of,  or  in  respect  of  services
                                   performed,  by the  Purchaser  following  the
                                   Completion  Date which  incorporate  products
                                   manufactured  or  purchased by the Vendor (or
                                   any  previous  owner of the  Activity)  prior
                                   thereto or work in  progress of the Vendor at
                                   Completion; and


                                       46
<PAGE>
               10.1.2    for all loss damage or liability  (other than  Warranty
                         Work) arising out of any defective goods sold leased or
                         otherwise   disposed  of  or   defective  or  negligent
                         services  provided by the Vendor (or any previous owner
                         of the  Activity) in respect of the  Activity  prior to
                         Completion  whether  under  any  Contract  or any other
                         contract entered into by the Vendor prior to Completion
                         in relation to or in  contemplation  of the Activity or
                         arising   out  of   defective   goods   bought   in  or
                         manufactured  (in whole or in part) by the  Vendor  (or
                         any   previous   owner  of  the   Activity)   and  sold
                         subsequently  by the  Purchaser  and whether or not the
                         claim is made against the Lucas Group or the Purchaser,
                         unless the event or incident  (which for the  avoidance
                         of doubt  shall not  include  the actual  sale,  lease,
                         disposal  or  provision  of  goods or  services  by the
                         Vendor (or any previous owner of the Activity))  giving
                         rise  to  any  such  liability   occurred   before  the
                         Completion Date in which event such loss,  liability or
                         damage shall be borne by the Vendor.

     10.2      The Purchaser  shall indemnify the Lucas Group against all costs,
               expenses,  loss, damage or liability arising out of any breach by
               the Purchaser of the  provisions of clause 10.1. The Vendor shall
               indemnify  the  Purchaser's  Group  against all costs,  expenses,
               loss,  damage or liability arising out of a failure by the Vendor
               to discharge its obligations under clause 10.1.2.

11.  POST COMPLETION COVENANTS

     11.1      For the purposes of assuring to the Purchaser the full benefit of
               the  Activity  and  the  Goodwill  and  in  consideration  of the
               agreement of the Purchaser to buy the Assets on the terms of this
               Agreement and the Umbrella  Agreement Lucas hereby  undertakes to
               the  Purchaser  that it will not and it agrees to procure that no
               other  member  of  the  Lucas  Group  will,  either  alone  or in
               conjunction with or on behalf of any other person:-


                                       47
<PAGE>

               11.1.1    anywhere in the world for the period from Completion to
                         31  December  2000 be engaged or (save as the holder of
                         shares or other  securities  in any  company  which are
                         quoted,  listed or  otherwise  dealt in on a recognised
                         stock exchange or other securities  market which confer
                         not more than 5% of the votes  which could be cast at a
                         general meeting of the company  concerned)  directly or
                         indirectly  be concerned or  interested in any trade or
                         business  which  involves the sale or  distribution  of
                         goods which are competitive as specified in clause 11.7
                         or the provision of services in relation to the design,
                         installation   or  use  of   such   competitive   goods
                         ("Competing  Services") to a person who is not a member
                         of the Lucas Group and which in any such case  actually
                         competes  with  the  Activity  as it is  carried  on at
                         Completion;

               11.1.2    for a period of one year from  Completion  without  the
                         prior written  consent of the Guarantor  make any offer
                         of employment to any engineer,  designer,  assembler or
                         other senior employee  included within the Transferring
                         Employees while such employee  remains  employed by any
                         member of the Purchaser's Group;

               11.1.3    for a period of three years from Completion without the
                         prior  written  consent of the  Guarantor  solicit  the
                         services of (whether  as an employee or  otherwise)  or
                         attempt  to  entice   away  any   engineer,   designer,
                         assembler or other senior employee  included within the
                         Transferring  Employees  while  such  employee  remains
                         employed by any member of the Purchaser's Group;

               11.1.4    for the period  from  Completion  to 31  December  2000
                         either   personally   or  by  any  agent   directly  or
                         indirectly  either on its own  account or for any other
                         person  solicit in  competition  with the  Activity the
                         custom   of   any   person  who  is  not  a  member  of

                                       48
<PAGE>

                         the  Lucas   Group  in  respect  of  goods   which  are
                         competitive  as  specified in clause 11.7 or in respect
                         of Competing  Services if such person was within twelve
                         months prior to or at the Completion Date a customer of
                         the Vendor in respect of the Activity;

               11.1.5    for the period  from  Completion  to 31  December  2000
                         interfere or seek to interfere with the  continuance of
                         supplies to the Purchaser (or in the terms  relating to
                         such  supplies) from any persons who had been supplying
                         materials  or  services to the Vendor in respect of the
                         Activity   within  the  twelve   months  prior  to  the
                         Completion Date; or

               11.1.6    save as may be  required by law or the  regulations  of
                         the  New  York  Stock  Exchange  or  the  London  Stock
                         Exchange  Limited  for a  period  of  five  years  from
                         Completion  reveal  to any  person  any  of  the  trade
                         secrets, secret or confidential  operations,  processes
                         or  dealings  or  any  other  confidential  information
                         concerning   the  Assets  or  the  Activity   including
                         (without  limitation)  customer lists and names,  sales
                         targets  and  statistics,   market  share   statistics,
                         surveys and reports so far as the same have come to the
                         Vendor's  knowledge  before the Completion  Date but so
                         that  this   restriction   shall   cease  to  apply  to
                         information which otherwise than through default of any
                         member  of the Lucas  Group  becomes  available  to the
                         public generally.

     11.2      Nothing  in clause  11.1  shall  prevent  the Lucas  Group or any
               member of it:-

               11.2.1    from  continuing to carry on or developing its business
                         known as the Lake Center Model Shop or from  continuing
                         or  developing  any of its  other  existing  businesses
                         provided   they  do  not  actually   compete  with  the
                         Activities as they are carried


                                       49
<PAGE>

                         on at Completion or from operating in-house engineering
                         and  testing  facilities  for any  member  of the Lucas
                         Group;

               11.2.2    from  providing   consultancy  and  other  services  in
                         relation  to  the  design,  manufacture  and/or  use of
                         engine or  engine  fuel  systems  testing  or  assembly
                         equipment  to  its  own   customers  or  third  parties
                         licensed by the Lucas Group  (excluding the Activities)
                         to manufacture product;

               11.2.3    from selling or supplying assembly or testing equipment
                         in  support  of   products   designed,   developed   or
                         distributed  by the  Lucas  Group  to any  customer  in
                         connection  with an agreement for the supply of product
                         by the Lucas  Group or to a  licensed  manufacturer  of
                         Lucas  Group  products  to whom any member of the Lucas
                         Group is providing technical assistance;

               11.2.4    from  acquiring,  holding or operating  any business or
                         the  shares  or  other   securities   of  any   company
                         (including,   without  limitation,   shares  which  are
                         quoted,  listed or  otherwise  dealt in on a recognised
                         stock exchange or other securities  market) or group of
                         companies or participating in any joint venture:-

                         11.2.4.1  where an incidental part of the activities of
                                   such business, company, group of companies or
                                   joint  venture  comprises  a  business  which
                                   either   supplies   competitive   goods   (as
                                   described in clause  11.7) or which  provides
                                   Competing   Services   and   which   actually
                                   competes  with  the  Activity  as it  is  are
                                   carried on at Completion; and

                         11.2.4.2  where   the   principal   purpose   of   such
                                   acquisition  or   participation   is  not  to
                                   acquire or participate in a business which is
                                   competitive as so described,


                                       50
<PAGE>

                         provided  that the  relevant  member of the Lucas Group
                         shall  within  12  months  after   acquiring  any  such
                         business,  company or group of companies  offer to sell
                         to the Guarantor  such  incidental  part which competes
                         with the Activity and the  Guarantor and such member of
                         the Lucas  Group shall  negotiate  in good faith with a
                         view to agreeing  terms for such sale (but shall not be
                         obliged to conclude  such sale if  mutually  acceptable
                         terms cannot be agreed); or

               11.2.5    from carrying on any of the activities  contemplated by
                         the  LAO  Agreement  or by  the  Intellectual  Property
                         Agreements or from enjoying or exercising  any benefits
                         or rights  granted  to any  member  of the Lucas  Group
                         pursuant thereto.

     11.3      Nothing in clause 11.1 shall prevent:-

               11.3.1    Lucas  Electrical and Electronic  Systems AVSD facility
                         or any  successor  to its  business  or Varity  Perkins
                         Limited or any successor to its business from providing
                         testing services to third parties in relation to engine
                         or engine fuel systems; or

               11.3.2    Lucas TVS  Limited  or any  member  of the Lucas  Group
                         (other  than the  Activity)  from  operating  under any
                         licences or  agreements  which have been  entered  into
                         before  the  date  hereof  and are  referred  to in the
                         Disclosure Letter; or

               11.3.3    the  companies or Business  Units listed in column 1 of
                         Schedule 15 from  distributing  the products  listed in
                         column  2 of  Schedule  15 on  behalf  of the  entities
                         listed in column 3 of Schedule 15.

     11.4      Lucas hereby  agrees that each of the  restrictions  contained in
               clause 11.1 above is reasonable but if any such restriction shall
               be found to be void but would be valid if some part  thereof were
               deleted or the period or the area of




                                       51
<PAGE>

               application  reduced  such  restriction  shall  apply  with  such
               modification as may be necessary to make it valid and effective.

     11.5      Each undertaking contained in clause 11.1 shall be construed as a
               separate  undertaking and if any one or more of such undertakings
               is held to be against  the public  interest or unlawful or in any
               way an unreasonable restraint of trade the remaining undertakings
               shall continue in full force and effect and shall bind Lucas.

     11.6      Any provision of this  Agreement or any agreement or  arrangement
               of which it forms part which is subject to registration under the
               Restrictive  Trade Practices Act 1976 shall not take effect until
               48 hours after  particulars  thereof  have been  furnished to the
               Director General of Fair Trading pursuant to the terms of section
               24 of the Restrictive Trade Practices Act 1976.

     11.7      For the purposes of the  foregoing  provisions  of this clause 11
               goods  referred  to as being  competitive  shall  mean  equipment
               designed to carry out any of the following:  internal  combustion
               engine assembly or testing,  motor vehicle transmission assembly,
               motor vehicle  transmission  testing,  internal combustion engine
               fuel  systems  assembly  or testing  and  assembly  or testing of
               automotive  brake  components  and  automotive  air  conditioning
               compressors.

12.  LICENCE OF LICENSED INTELLECTUAL PROPERTY

     12.1      On Completion the Vendor grants to the Purchaser (so far as it is
               able to grant the same and subject to clause  12.3) a  perpetual,
               irrevocable,  non-exclusive,  worldwide licence, free of royalty,
               to use the Licensed  Intellectual  Property  (including,  without
               limitation,  the Specified Shared IP) for the purpose of enabling
               the Purchaser to continue with the Activity  after  Completion in
               the same manner as carried on by the Vendor  immediately prior to
               Completion.


                                       52
<PAGE>

     12.2      Subject to clause 12.3,  the Purchaser may assign or  sub-licence
               any of the  rights  granted  under  this  clause 12 to any person
               PROVIDED  THAT any assignee  first enters into a direct  covenant
               with the Vendor  agreeing to be bound by the  provisions  of this
               clause 12 in respect of the Licence.  Accordingly,  references in
               this  clause  to  the  Purchaser  shall  be  construed  as  being
               references to any such assignee following any such assignment.

     12.3      The Licence shall immediately  terminate with respect only to the
               Specified  Shared  IP  if  within  the  three  years  immediately
               following Completion:-

               12.3.1    there is a change of  control of the  Purchaser  or any
                         Holding Company of the Purchaser to a Competitor; or

               12.3.2    the Purchaser or any receiver, manager,  administrator,
                         administrative  receiver or liquidator of the Purchaser
                         sells  the  whole  or  substantially  the  whole of the
                         Activity to a Competitor; or

               12.3.3    the Purchaser  purports to assign or sub-licence any of
                         the rights granted under the Licence to a Competitor.

     12.4      Upon  termination  of the Licence with  respect to the  Specified
               Shared IP the Purchaser or any relevant  assignee  shall cease to
               be authorised to use the Specified  Shared IP and shall forthwith
               return to the Vendor all  originals  and copies of all  documents
               and other information (in whatever form) comprising,  relating to
               or recording the Specified Shared IP.

     12.5      The  Purchaser   shall  notify  the  Vendor  in  writing   before
               commencing any proceedings  against any infringer of the Licensed
               Intellectual  Property  but shall not be  required  to obtain the
               Vendor's consent to the issue of any such  proceedings  except to
               the extent that under applicable law the Vendor is required to be
               joined  as a party to such  proceedings  and if the  Vendor is so
               required the following provisions will apply:-


                                       53
<PAGE>

               12.5.1    the Vendor's prior written consent to being joined as a
                         party  shall be  required  which  consent  shall not be
                         unreasonably withheld or delayed;

               12.5.2    the  Purchaser  shall  have  the full  conduct  of such
                         proceedings  at its own  expense  and  shall  keep  the
                         Vendor   informed  of  all  material   developments  in
                         relation thereto;

               12.5.3    the Purchaser  shall  indemnify the Vendor  against all
                         costs, expenses, damages or other liability incurred or
                         suffered  by or awarded  against the Vendor as a result
                         of or in connection with such proceedings; and

               12.5.4    subject  to  compliance  by  the  Purchaser   with  the
                         provisions  of  clause  12.5.3,  all  damages  or other
                         relief obtained from such  proceedings  shall belong to
                         or be for the benefit of the Purchaser.

     12.6      If at any time after  Completion  the Vendor  grants a licence of
               any Licensed Intellectual Property to a DTI Competitor which will
               enable  such DTI  Competitor  to compete  with the  Purchaser  in
               respect of the Activity and such DTI Competitor  does so compete,
               the  Vendor  and the  Purchaser  will  negotiate  in good faith a
               reasonable  royalty  to be paid by the  Vendor  to the  Purchaser
               having  regard  (inter  alia) to the  extent  to  which  such DTI
               Competitor does so compete and to the contribution which prior to
               Completion  the Business  Unit known as LATS made to the creation
               of the Licensed Intellectual Property in question.

13.  RISK PROPERTY AND TITLE

     At  Completion  the Vendor shall cease to hold  insurance  coverage for the
     Assets,  the Leased  Assets and the Activity and risk in the Assets and the
     Leased  Assets shall pass to the  Purchaser  at the  Completion  Date.  The
     property in and title to the Assets (save for the  Property  which is dealt
     with in  Schedule  3)  shall  pass to the  Purchaser  on the  terms of this
     Agreement at the Completion Date.


                                       54
<PAGE>

14.  EXCLUSIONS

     Except as otherwise specifically provided in this Agreement or the Umbrella
     Agreement  the Lucas Group will not be liable under this  Agreement for any
     personal injury,  death,  loss or damage of any kind whatsoever (other than
     death  or  personal   injury   resulting  from  its   negligence)   whether
     consequential  or otherwise  (including but not limited to loss of profits)
     arising  from any defect in the Assets and save as provided in the Umbrella
     Agreement  the Vendor  hereby  excludes  in  relation to the Assets and the
     Activity  all  conditions,  warranties,  representations,   guarantees  and
     stipulations  express or implied,  statutory,  customary or otherwise which
     but for such  exclusion  would or might  subsist in favour of the Purchaser
     except that such exclusion will not apply to any implied condition that the
     Vendor  has or will  have the  right to sell any  goods  being  sold by the
     Vendor when the property is to pass,  subject to any  retention of title in
     favour of a third party or to any statements made fraudulently.

15.  INSPECTION OF DOCUMENTS

     The Vendor shall for a period of three years after Completion afford to the
     authorised  representatives  of the Purchaser all reasonable  facilities to
     inspect records held or retained by the Vendor or its professional advisers
     (which are not privileged) relating exclusively to the Activity and to make
     copies  of the  same or  extracts  therefrom  at the  Purchaser's  cost and
     expense.  The Purchaser agrees to maintain at one of its offices within the
     United  Kingdom  and  allow  the  Vendor  at its  cost and  expense  at all
     reasonable  times  access to and to take copies of, the Records  insofar as
     they relate to the period prior to Completion  for a period of 6 years from
     Completion.

16.  ASSIGNMENT PROHIBITED

     The benefit of this Agreement may not be assigned by the Vendor without the
     prior  written  consent of the  Purchaser or by the  Purchaser  without the
     prior  written  consent  of the  Vendor  save that any party may assign the
     benefit of this Agreement to any Subsidiary or Holding  Company of it or to
     any other  Subsidiary  of its Holding  Company if any  assignment  does not
     increase the  liability of any party under this  Agreement.  If at any time
     thereafter   such   assignee   shall   cease   to   be  so  connected  with


                                       55
<PAGE>


     such  assignor,  it shall prior to so ceasing  re-assign the benefit of the
     Agreement to such assignor.

17.  SURVIVAL OF CERTAIN PROVISIONS

     This Agreement  shall remain in force and effect after the Completion  Date
     in respect of any matters covenants or conditions which shall not have been
     done observed or performed prior thereto and all representations warranties
     obligations of and  indemnities  given by the parties shall (except for any
     obligations   fully   performed)   continue   in  full   force  and  effect
     notwithstanding  Completion,  subject  to the  provisions  of the  Umbrella
     Agreement

18.  GOVERNING LAW

     This  Agreement  shall be governed  by English  law and the parties  hereby
     submit to the non-exclusive jurisdiction of the English courts

19.  COUNTERPARTS

     This  Agreement  may be executed in any number of  counterparts  and by the
     several  parties  hereto on  separate  counterparts  each of which  when so
     executed and delivered shall be an original but all the counterparts  shall
     together constitute one document.

20.  SEVERABILITY

     The parties  expressly  agree that it is not the  intention of any party to
     violate any public policy,  statutory or common laws,  rules,  regulations,
     treaties or decisions of any government or agency thereof. If any provision
     of  this  Agreement  is  judicially  or  administratively   interpreted  or
     constructed as being so in violation,  such provision  shall be inoperative
     and the remainder of this  Agreement  shall remain binding upon the parties
     hereto.


                                       56
<PAGE>

21.  NOTICES AND OTHER COMMUNICATIONS

     All  notices,  demands or requests  provided  for or  permitted to be given
     pursuant  to this  Agreement  must be in  writing  and  shall  be  given in
     accordance with the Umbrella Agreement.

22.  NO THIRD PARTY BENEFICIARY

     Except as otherwise provided in this Agreement and the Umbrella  Agreement,
     this  Agreement  is intended and agreed to be solely for the benefit of the
     parties hereto and their permitted  assigns and no third party shall accrue
     any benefit,  claim or right of any kind whatsoever  pursuant to, under, by
     or through this Agreement.

23.  MODIFICATION

     The parties to this Agreement may, by mutual  written  consent  executed by
     the  authorised  officers  of the  Purchaser  and  the  Vendor,  modify  or
     supplement  this Agreement in such manner as may be mutually agreed upon by
     them in writing.

24.  WAIVER OF PROVISIONS

     The terms,  covenants,  indemnities and conditions of this Agreement may be
     waived  only  by  a  written  instrument  executed  by  the  party  waiving
     compliance.  The failure of any party at any time to require performance of
     any  provisions  hereof shall in no manner affect the right at a later date
     to enforce the same. No waiver by any party of any condition, or the breach
     of any other  provision,  term,  covenant or  indemnity  of this  Agreement
     whether by conduct or  otherwise,  in any one or more  instances,  shall be
     deemed to be or  construed  as a further or  continuing  waiver of any such
     condition  or of the  breach  of any other  provision,  term,  covenant  or
     indemnity of this Agreement.

     AS WITNESS the hands of the duly authorised  representatives of the parties
     to this Agreement the day and year first above written.


                                       57
<PAGE>


                              SCHEDULE 1 (OMITTED)
                                THE LEASED ASSETS


                                 Pages 58 and 59

<PAGE>


                              SCHEDULE 2 (OMITTED)
                       THE PLANT, MACHINERY AND EQUIPMENT

                          

                                       60
<PAGE>



                                   SCHEDULE 3
                                  THE PROPERTY

                                     Part 1
                          Description of First Property

1.   The freehold land and premises on the east side of Buckingham  Road Gawcott
     Buckingham registered at HM Land Registry under title number BM107164

                                     Part 2
                       Description of the Second Property

     The freehold factory at Tingewick Road and Bath Lane Buckingham which is:-

     (i)    as to part comprised in a Conveyance dated 27th August 1954 and made
            between Leslie Hartridge (1) and Leslie Hartridge Limited (2);

     (ii)   as to a further part comprised in a Conveyance  dated 22nd July 1965
            and made between Charles Leslie Kibble and Mary Agnes Kibble (1) and
            Leslie Hartridge Limited (2) ("the 1965 Conveyance");

     (iii)  as to a further part comprised in a Conveyance  dated 12th July 1966
            and made between the same parties as the 1965 Conveyance;

     (iv)   as to the remainder  registered or in the course of  registration at
            HM Land Registry with Possessory Title under Title No. BM221542



                                       61
<PAGE>


                                     Part 3
                               Conditions of Sale

1.   In this Part of this Schedule the  following  words and  expressions  shall
     have the following meanings:-

     Words & Expressions                  Meanings
     -------------------                  --------
  
     1.1  "the Contract Rate"             4% per annum  above  the base  lending
                                          rate  from  time to  time of  Barclays
                                          Bank plc

     1.2  "the General Conditions"        the Standard Conditions of Sale (Third
                                          Edition)

     1.3  "the Possessory Title Land"     that  part  of  the  Second   Property
                                          referred to in paragraph  (iv) of Part
                                          2 of this Schedule

2.   Lucas agrees to sell and the Purchaser agrees to purchase:-

     2.1  the First Property for the sum of (pound)739,000;and

     2.2  the Second Property for the sum of (pound)3,074,000

3.   Completion  of the sale and purchase of the Property and the payment of the
     purchase prices and any other sums payable under this Part of this Schedule
     is to take place on the Completion Date

4.   Lucas sells with full title guarantee.

5.   With regard to title to the Property:-

     5.1  title to the Property  having been deduced to the  Purchaser  (save as
          mentioned in paragraph  5.2) the  Purchaser is deemed to purchase with
          full knowledge  thereof and is not entitled to raise any objections or
          requisitions in relation to it


                                       62
<PAGE>

     5.2  the  Purchaser  is  aware  that the  title  deeds  in  respect  of the
          Possessory Title Land have been lost

     5.3  without prejudice to the generality of the provisions of paragraph 5.1
          Lucas will procure that LACE will pursue the application  which it has
          submitted to HM Land Registry for the registration of possessory title
          to the  Possessory  Title  Land and shall use its best  endeavours  to
          supply  any  further  information   required  by  and  to  answer  any
          requisitions  raised  by HM Land  Registry  whether  before  or  after
          completion  of the sale to the  Purchaser  and will keep the Purchaser
          notified of progress with the  registration  and will supply copies of
          all  correspondence  with and requisitions  raised by HM Land Registry
          and any replies given as soon as possible

     5.4  Lucas will on Completion provide a Defective Title Indemnity Policy in
          respect  of the  Possessory  Title  Land  capable  of  benefiting  the
          Purchaser issued by Norwich Union in the sum of (pound)3,100,000.

6.   Matters affecting the First Property

     The Property is sold subject to:-

     6.1  any  registered  Local Land  Charge and matters  registerable  as such
          affecting  or  relating  to the  Property or to any part of it whether
          general or specific  and to any notice order  proposal or  requirement
          whatsoever  affecting or relating to the Property or to any part of it
          given or made by a  Government  Department  or by any  Public or Local
          Authority or statutory undertaker or other competent body or person

     6.2  all charges orders proposals restrictions  agreements notices or other
          matters  whatsoever  affecting  or relating to the  Property or to any
          part of it arising under the legislation  relating to Town and Country
          Planning  or under  any  order or  regulation  made  pursuant  to such
          legislation for the time being in force or any other legislation


                                       63
<PAGE>

     6.3  all public or private  rights of way water light air support  sewerage
          and  drainage and other rights and  easements or  quasi-easements  (if
          any) and to any  wayleaves  pipes cables wires stays and poles whether
          or not apparent and without  obligation on the part of Lucas to define
          any such

     6.4  all rates charges and other  outgoings  which affect or are charged on
          the Property except for any mortgage or legal charge relating to money
          secured on the Property

     6.5  any  overriding   interests  (or,  where  title  to  the  Property  is
          unregistered,  matters which would be overriding interests if title to
          the  Property  were  registered)  and all  matters  which  either  are
          revealed or would  reasonably be expected to be revealed by inspection
          and by the searches and enquiries usually made by a prudent purchaser

          and the First Property is also sold subject to:-

     6.6  the matters  contained or referred to on the Registers of title number
          BM107164

     6.7  a Wayleave  Consent  dated 4 June 1974 and made  between  (1)  Wagland
          Limited and (2) East Midlands Electricity Board

     6.8  a Wayleave Consent dated 6 June 1974 and made between (1) F A Tutt and
          Mr Wagland and (2) East Midlands Electricity Board

          insofar as the same are still subsisting and capable of taking effect

7.   The General Conditions

     This  Agreement  incorporates  the  General  Conditions  so far as they are
     applicable  to this sale and to the  extent  that they are not varied by or
     inconsistent  with the terms of this  Agreement  (including  these  special
     conditions)  or the terms of the  Umbrella  Agreement  but  subject  to the
     following amendments:

     7.1  GENERAL CONDITION 2.2 is deleted


                                       64
<PAGE>

     7.2  in GENERAL  CONDITION  4.2.3 the  obligation  on the Seller to produce
          documents extends only to documents in the possession of the Seller or
          the Seller's mortgagee

     7.3  GENERAL CONDITION 4.3.2 is deleted

     7.4  GENERAL  CONDITIONS  5.1.1  and  5.1.2  are  deleted  and  in  GENERAL
          CONDITION 5.2.2 the following is added:

          "(i)  must  not  change  the  use of the  Property  nor  infringe  any
          statutory provisions affecting the Property"

     7.5  GENERAL CONDITION 6.5.1 reads:

          "The  Seller is not to retain the  documents  of title after the Buyer
          has tendered the amount  payable under  condition 6.4 unless the Buyer
          is in  material  breach  of  this  agreement  and the  Seller  refuses
          completion for that reason"

     7.6  GENERAL CONDITION 6.7 (a) is deleted

     7.7  the final  sentence  of GENERAL  CONDITION  7.3.4 is deleted and a new
          GENERAL CONDITION 7.3.5 is added as follows:

          "7.3.5    if the  Buyer  is in  default  or,  both  parties  being  in
          default, the total period of the Buyer's default is greater the Seller
          is  entitled  to both  compensation  and income  from the  Property in
          respect of the same period"

8.   Insurance

     8.1  The Property is at the Purchaser's sole risk until completion

     8.2  If the Property is damaged or destroyed before actual completion,  and
          the proceeds of any insurance  policy effected by or for the Purchaser
          are reduced  because of the existence of any policy effected by or for
          Lucas  the  purchase  price  is to be  abated  by the  amount  of such
          reduction unless the


                                       65
<PAGE>

          proceeds of any such policy are applied towards the  reinstatement  of
          the Property under any contractual or statutory obligation.



                                       66
<PAGE>


                              SCHEDULE 4 (OMITTED)
                             TRANSFERRING EMPLOYEES


                                       67
<PAGE>
                           


                              SCHEDULE 5 (OMITTED)
                        INTELLECTUAL PROPERTY AGREEMENTS



                                       68
<PAGE>


                              SCHEDULE 6 (OMITTED)
                              ASSIGNMENT OF DEBTORS


                                       69
<PAGE>

                                   SCHEDULE 7
                                    PENSIONS

1.   This schedule is construed as follows:-

     "Actuary's  Letter"  means  the  letter  from  the  Lucas  Actuary  to  the
     Purchaser's Actuary dated 21 July 1997, a copy of which is appendix B.

     "Agreed  Rate"  means a rate per annum equal to Lloyds Bank plc's base rate
     from time to time compounded monthly.

     "AVCs"  means  additional  voluntary  contributions  paid by Members to the
     Lucas Scheme.

     "Consenting Member" means a Member:

     (a)  who is admitted to membership of the  Purchaser's  DB Scheme as of the
          Completion Date; and

     (b)  from whom the Lucas  Scheme  receives,  by the date  specified  in the
          notice given to the Member in accordance  with  paragraph 9, an option
          form properly completed requesting the Lucas Scheme to make a transfer
          payment to the  Purchaser's  DB Scheme in respect of his rights in the
          Lucas  Scheme and who does not  withdraw the request or lose his right
          to the cash  equivalent  in  accordance  with the Pension  Schemes Act
          1993.

     "Contracted-out  scheme" and  "contracting-out  certificate"  have the same
     meanings as in the Pension Schemes Act 1993.

     "Final  Transfer  Amount" means,  subject to paragraph 4(b), the Unadjusted
     Transfer  Amount  increased  or  decreased  by the  Investment  Return  and
     increased  by  interest  at the Agreed Rate from the last date on which the
     Investment  Return  applies to the  Payment  Date (both  dates  exclusive).
     References  to the  "estimated  Final  Transfer  Amount"  are to the amount
     calculated  under  paragraph 4(a) on the basis that the date of calculation
     is the



                                       70
<PAGE>

     Payment Date. In paragraphs 2 and 8(iii)  references to the Final  Transfer
     Amount exclude any amount deducted (if relevant) under paragraph 6(b)(i) in
     relation to the percentage  rate of corporation tax but include any further
     amount due under  paragraph  6(b)(iv) and any  adjustment by the Investment
     Return as mentioned in paragraph  6(b) in  determining  the amount  payable
     under that paragraph in circumstances where it comes into operation.

     "Investment  Return" means the proportionate  change between the Completion
     Date and the date which falls 7 days  before the  Payment  Date in an index
     comprising as at the Completion  Date as to 90 per cent.  the  FT-Actuaries
     All-Share Index  (assuming  notional gross dividend income is reinvested in
     the same  index at the end of each  calendar  month) and as to 10 per cent.
     the FT-Actuaries  index of prices for British  Government stocks of over 15
     years (assuming  notional gross interest is reinvested in the same index at
     the end of each calendar month). For this purpose such proportionate change
     is  calculated  by comparing the level of the index at close of business on
     the Completion Date with the level of the index at close of business on the
     date  which  falls 7 days  before the  Payment  Date or, if either of these
     dates is not a date in respect  of which the index is quoted,  the level of
     the  index at the  close of  business  on the next day for  which  they are
     quoted shall be used.

     "Lucas Actuary" means Hymans Robertson

     "Lucas Scheme" means the Lucas Pension Scheme.  Where the context  requires
     it includes the trustees thereof.

     "Member" means a Transferring Employee who is an active member of the Lucas
     Scheme  immediately  before the Completion  Date.  "Active Member" for this
     purpose  means a member of the Lucas Scheme who is in  pensionable  service
     and is accruing  benefits  under the Lucas  Scheme and it includes a person
     who is a member  of the  Lucas  Scheme  under its  provisions  relating  to
     temporary  absence from duty or maternity  leave but it excludes any person
     whose membership is restricted to death in service benefits.

                                       71
<PAGE>

     "Payment Date" means the date which is the later of:-

     (a)  six months after the Completion Date; and

     (b)  30 days  after  the  later  of (i) the date on  which  the  Unadjusted
          Transfer  Amount and the Final Transfer Amount have been calculated by
          the Lucas  Actuary and checked and agreed by the  Purchaser's  Actuary
          (as mentioned in  paragraphs 4 and 5) or certified by the  independent
          actuary  under  paragraph  5(c) and (ii) the date on which  all of the
          Transfer Conditions have been and remain satisfied.

     "Purchaser's Actuary" means Buck Consultants.

     "Purchaser's  Associates" means (i) any company controlled by the Purchaser
     or by its parent company and (ii) the Purchaser's Scheme.

     "Purchaser's   DB  Scheme"  means  the  defined   benefit  section  of  the
     Purchaser's  Scheme referred to in paragraph 2. Where the context  requires
     it includes the trustees thereof.

     "Purchaser's  DC  Scheme"  means the  defined  contribution  section of the
     Purchaser's  Scheme referred to in paragraph 2. Where the context  requires
     it includes the trustees thereof.

     "Purchaser's Group" means the Guarantor and any company:-

     (i)   which is a Subsidiary of the Guarantor;

     (ii)  which is the Holding  Company of the  Guarantor or any  Subsidiary of
           such Holding Company; or

     (iii) over which the  Guarantor  or any such  Holding  Company  has control
           within the meaning defined in this Agreement

     for the time being and from time to time.

                                       72
<PAGE>

     "Purchaser's Scheme" means the Purchaser's DB Scheme and the Purchaser's DC
     Scheme.  References  to the  Purchaser's  Scheme refer to each such section
     separately and, where the context requires, includes the trustees thereof.

     "Transfer Conditions" means all of the following:

     (a)  The written  approval of the Inland  Revenue has been  received to the
          transfer of assets from the Lucas Scheme to the Purchaser's DB Scheme.

     (b)  Evidence  is  produced to the Lucas  Scheme  that the  Purchaser's  DB
          Scheme is a contracted-out  scheme with a contracting-out  certificate
          which can cover the employments of the Members.

     (c)  The Lucas Scheme receives an option form properly  completed from each
          of the Consenting Members.

     (d)  The written agreement of the Purchaser's DB Scheme in the form set out
          in appendix A (with the  information  and annexes to be  completed  as
          therein indicated) is given to the Lucas Scheme.

     (e)  The written  confirmation  of the Lucas  Actuary  (or the  independent
          actuary  under  paragraph  5(c) that,  having  reviewed the  documents
          governing  the  Purchaser's  DB  Scheme,  he  is  satisfied  that  the
          Purchaser's DB Scheme meets the requirements of paragraph 2.

     "Unadjusted   Transfer   Amount"  means  the  unadjusted   transfer  amount
     calculated in accordance with the Actuary's Letter.

     "the  Vendor's  Group"  means  LucasVarity  and  any  company  which  is  a
     Subsidiary or Subsidiary  Undertaking of LucasVarity for the time being and
     from time to time.


                                       73
<PAGE>

2.   Purchaser's Scheme

     (a)  On or before the  Completion  Date the  Purchaser  will  establish  or
          nominate an occupational  pension scheme  (incorporating two sections,
          the  Purchaser's  DB Scheme and the  Purchaser's  DC Scheme)  which is
          designed so as to be capable of being,  as of the  Completion  Date, a
          contracted-out  scheme and approved by the Board of Inland  Revenue as
          an exempt  approved  scheme under  Chapter 1 of Part XIV of the Income
          and Corporation Taxes Act 1988 and which is to be administered  wholly
          in the United Kingdom. The Purchaser will procure that:-

          (i)    each Member is offered  membership  of the  Purchaser's  Scheme
                 with  effect  from the  Completion  Date on the basis that only
                 those  Members  who  comply  with   sub-paragraph  (b)  of  the
                 definition of Consenting Member in paragraph 1 will be eligible
                 for membership of the Purchaser's DB Scheme.  All other Members
                 will be eligible  only for  membership  of the  Purchaser's  DC
                 Scheme;

          (ii)   subject to paragraph 2(c) the  Purchaser's  DB Scheme  provides
                 benefits  in  respect  of the  pensionable  service  after  the
                 Completion Date of each Consenting Member which,  overall,  are
                 of equivalent value to the benefits that such Member could have
                 accrued had he remained an active member of the Lucas Scheme in
                 accordance  with its terms  immediately  before the  Completion
                 Date;

          (iii)  subject  to  paragraph  2(c)  the  Purchaser's  DB  Scheme,  in
                 consideration  of and  subject  to the  transfer  of the  Final
                 Transfer Amount,  credits each Consenting  Member with a period
                 of  pensionable  service in the  Purchaser's DB Scheme which is
                 equal to that Consenting  Member's  pensionable  service in the
                


                                       74
<PAGE>

                 Lucas Scheme prior to the Completion Date and provides benefits
                 in  respect  of  each   Consenting   Member  for  his  credited
                 pensionable service which,  overall, are of equivalent value to
                 the benefits  that would have been  provided for and in respect
                 of him under the Lucas Scheme for such pensionable  service had
                 he remained an active  member of the Lucas  Scheme (and subject
                 to the terms of the Lucas Scheme in force  immediately prior to
                 the  Completion  Date)  until  his  active  membership  of  the
                 Purchaser's DB Scheme ceases;

          (iv)   the  Purchaser's  DB Scheme will include in its trust deeds and
                 rules as of the Completion Date (and in any  replacement  trust
                 deed or rules thereafter) the following  provisions which shall
                 be effective  only if the  Purchaser's  Scheme or the Purchaser
                 has received the Final Transfer Amount:-

                 (1)  a power of amendment which prohibits (without a Consenting
                      Member's  consent)  the  making  of any  amendment  to the
                      Purchaser's  DB Scheme that would  prejudice  the benefits
                      accrued  for that  Consenting  Member  in  respect  of the
                      pensionable   service  credited  to  him  under  paragraph
                      2(a)(iii)  above;  such  benefits  for this  purpose to be
                      calculated on the basis of the  Consenting  Member's final
                      pensionable  earnings at the date on which his pensionable
                      service   with   the   principal   employer   of  or   any
                      participating employer in the Purchaser's Scheme ends;

                 (2)  provisions  which  shall  prevent  the  transfer  into the
                      Purchaser's  DB  Scheme  of the  benefits  of a  group  of
                      members of any other  occupational  pension  scheme on any
                      basis that would result in the Purchaser's DB Scheme after
                      the  transfer  being  (in the  reasonable  opinion  of the
                      actuary


                                       75
<PAGE>

                      to that scheme)  insufficiently funded on an ongoing basis
                      to provide in full the  benefits in respect of  Consenting
                      Members that are referred to in paragraph  2(a)(iii) above
                      unless either:-

                      (aa)  the written  agreement of the Consenting  Members is
                            obtained; or

                      (bb)  the   Purchaser   and/or  any  other   participating
                            employer in the  Purchaser's DB Scheme agrees to pay
                            such additional  contributions to that scheme as its
                            trustees may  reasonably  require for the purpose of
                            providing  the said  benefits  in full on an ongoing
                            basis.

     (b)  The  Purchaser's  DB Scheme  will offer  facilities  for AVCs and will
          procure  that the  Purchaser's  DB  Scheme  will  provide  under  such
          facilities,  in respect of any Consenting Member's AVCs transferred to
          the Purchaser's Scheme as mentioned in paragraph 7, benefits which are
          at  least  equal in value  at the  date of  transfer  to the  value so
          transferred.

     (c)  Nothing  in this  paragraph  2 or  otherwise  in this  schedule  shall
          prevent the Purchaser from amending,  terminating or otherwise dealing
          with the  Purchaser's DB Scheme in any manner which does not prejudice
          the benefits  referred to in and calculated as specified in paragraphs
          2(a)(iv)(1) and 2(b) which is in accordance with the provisions of the
          Purchaser's   DB  Scheme  and  which   complies   with  any   relevant
          legislation.

     (d)  Subject to the receipt by the  Purchaser's  Scheme or the Purchaser of
          the Final Transfer Amount, the Purchaser undertakes that, in the event
         

                                       76
<PAGE>

          of the future  sale by the  Purchaser  of any company for which or any
          business in which  Consenting  Members work, and the purchaser of such
          company or business not offering the Consenting  Members membership of
          an  occupational  pension  scheme  which  will  provide  the  benefits
          described   in   paragraph   2(a)(iii)  in  respect  of  the  credited
          pensionable service referred to in that paragraph, the Purchaser shall
          procure that the Purchaser's Scheme provides benefits for that service
          in respect of any Consenting Member who chooses to retain his deferred
          benefits in the Purchaser's DB Scheme that are calculated on the basis
          of the Consenting  Members' final pensionable  earnings at the date on
          which his  pensionable  service with the principal  employer of or any
          participating employer in the Purchaser's Scheme ends.

3.   Production of information

     The Purchaser  shall  promptly  provide the Vendor with such  documents and
     information in the Purchaser's possession or control in connection with the
     calculation of the Unadjusted  Transfer  Amount as the Vendor (or the Lucas
     Actuary)  may  reasonably  require to  facilitate  the  calculation  of the
     Unadjusted  Transfer  Amount.  In particular,  the Purchaser shall promptly
     notify  the Vendor of any  Member  who,  having  completed  an option  form
     requesting the Lucas Scheme to make a transfer  payment to the  Purchaser's
     DB Scheme in respect of him,  leaves the  employment  of the  Purchaser  or
     withdraws  that  request or dies or  otherwise  loses his right to the cash
     equivalent before the Payment Date.

4.   Transfer Amount

     (a)  Within  30  days  after  the  latest  of (i)  four  months  after  the
          Completion  Date,  (ii) the date on which the Vendor has  received  an
          option form properly completed by and bearing the signature of each of
          the  Consenting  Members and (iii) the date on which the Vendor or the
          Lucas  Actuary  has  received  all  such  documents  and   information
        

                                       77
<PAGE>

          requested  as  mentioned  in  paragraph  3, the  Lucas  Actuary  shall
          calculate  the  Unadjusted  Transfer  Amount  and  (as if the  date of
          calculation was the Payment Date) the estimated Final Transfer Amount.

     (b)  If the Lucas Scheme  makes a payment on account of the Final  Transfer
          Amount before the Payment Date the adjustment mentioned in paragraph 5
          of the Actuary's  Letter and in the above definition of Final Transfer
          Amount by reference to the  Investment  Return shall apply to the full
          amount  of the  Unadjusted  Transfer  Amount  until the date of the on
          account  payment  and  thereafter  the  adjustment  is  applied to the
          balance and will be calculated by reference to the  Investment  Return
          until the last date on which it applies and thereafter by reference to
          interest at the Agreed Rate until Payment Date (both dates exclusive).

5.   Verification of Transfer Amount

     (a)  The Vendor will procure that (within the 30 days following the date on
          which the  Purchaser's  Actuary  is  notified  of the Lucas  Actuary's
          calculations of the Unadjusted Transfer Amount and the estimated Final
          Transfer Amount) the Lucas Actuary allows the Purchaser's Actuary such
          access to the  calculations and the data on which they are based as is
          reasonably  necessary to enable the Purchaser's  Actuary to check that
          the  calculations  are correctly made in accordance  with the terms of
          this schedule and the  Actuary's  Letter.  The Purchaser  will procure
          that the Purchaser's  Actuary shall,  within 30 days of receipt of the
          calculations  and the  data  reasonably  required  by him  under  this
          paragraph, notify the Lucas Actuary in writing of his agreement to the
          calculations (in which case the calculation of the Unadjusted Transfer
          Amount and the method of calculating  the Final Transfer  Amount shall
          become final and binding on the parties) or of the  particulars of his
          objection that any calculation is incorrect.


                                       78
<PAGE>

     (b)  Within 30 days of the Purchaser's  Actuary notifying the Lucas Actuary
          of any objection to the calculation of the Unadjusted  Transfer Amount
          and/or the estimated  Final Transfer  Amount,  the Lucas Actuary shall
          notify the Purchaser's  Actuary in writing either that he does or that
          he  does  not  accept  and  agree  with  the   Purchaser's   Actuary's
          objections. If the Lucas Actuary does not accept and agree with all of
          the Purchaser's  Actuary's  objections,  the dispute between the Lucas
          Actuary and the  Purchaser's  Actuary  shall be referred by either the
          Vendor or the  Purchaser  to an  independent  actuary as  described in
          sub-paragraph (c) below.

     (c)  The  independent  actuary  shall  be a  Fellow  of  the  Institute  of
          Actuaries or the Faculty of Actuaries in Scotland agreed by the Vendor
          and the Purchaser or, if they cannot agree, appointed by the President
          for the time being of the  Institute  of  Actuaries.  The  independent
          actuary shall:-

          (i)    determine  each issue which is the subject of the  disagreement
                 between the Lucas Actuary and the Purchaser's Actuary;

          (ii)   act as an expert and not as an arbitrator;

          (iii)  direct  whether  his costs are to be borne by the Vendor or the
                 Purchaser or how they are to be divided between them; and

          (iv)   sign a certificate  specifying the Unadjusted  Transfer  Amount
                 and the method of calculating the Final Transfer Amount.

6.   Payment of Transfer Amount

     (a)  The Vendor  will use all  reasonable  endeavours  to procure  that the
          Lucas  Scheme  transfers  by the Payment  Date to the  Purchaser's  DB
          Scheme in respect of the Consenting Members an amount in cash equal to
          the Final Transfer Amount.

                                       79
<PAGE>

     (b)  Payments by Vendor and Purchaser

          (i)    If the Final Transfer  Amount is not transferred in full to the
                 Purchaser's Scheme within one month after the Payment Date, the
                 Vendor shall,  subject to (ii), (iii) and (iv) below, not later
                 than one  month  after  receipt  of a written  demand  from the
                 Purchaser, pay to the Purchaser, by way of an adjustment of the
                 Consideration such percentage as equals, 100 percent,  less the
                 percentage rate of corporation tax applying to the Purchaser on
                 the  Payment  Date of the  amount by which  the Final  Transfer
                 Amount  (calculated  as at the Payment  Date or, if some assets
                 have been transferred after the Payment Date,  calculated as at
                 the date on which those assets were transferred as if that date
                 was the Payment Date for the purpose of the Investment  Return)
                 exceeds the greater of:-

                 (a)  the amount transferred (if any); and

                 (b)  the aggregate of the cash  equivalents  of the  Consenting
                      Members  having  a  statutory  right  (under  the  Pension
                      Schemes Act 1993) to a cash equivalent, plus the amount of
                      any refund of contributions from the Lucas Scheme to which
                      a Consenting Member not having the said statutory right is
                      entitled.

                      The  excess  so  determined   shall  be  adjusted  by  the
                      Investment  Return from (and  including)  the Payment Date
                      or, if some assets have been transferred after the Payment
                      Date, the date of that transfer up to (but  excluding) the
                      date  of   payment  by  the   Vendor   pursuant   to  this
                      sub-paragraph.

                 The amount  described  above (before the reduction by reference
                 to corporation tax) is referred to below as "the Shortfall".


                                       80
<PAGE>

                 If by the date that is one month  after  the  Payment  Date the
                 total amount that has been received by the  Purchaser's  Scheme
                 pursuant to this  Schedule is less than the amount  referred to
                 in (i)(b) of this paragraph 6(b) above the Purchaser can refuse
                 to accept any subsequent payments from the Vendor made pursuant
                 to (i) above,  in which  case the Vendor  shall have no further
                 liability under this paragraph 6(b).

          (ii)   If either of the  Transfer  Conditions  (a) or (b) ceases to be
                 fulfilled  or  effective at any time after the Payment Date and
                 before the full payment due under (i) above has been made,  the
                 Purchaser  shall not demand  payment  pursuant to (i) above and
                 the time limit  referred to in (i) above will not commence,  or
                 (if either of those Transfer  Conditions  cease to be fulfilled
                 or  effective  after the time limit has started to run) will be
                 suspended,  until the Transfer Condition is again fulfilled and
                 effective.

          (iii)  No payment shall be due from the Vendor pursuant to (i) above:-

                 (1)  if the  reason for the Final  Transfer  Amount (or part of
                      it) not having been transferred to the Purchaser's  Scheme
                      by the expiry of the time limit  referred  to above is the
                      failure of the  Purchaser's  Scheme for whatever reason to
                      accept the whole or any part of the Final Transfer  Amount
                      or if the reason is any other  reason  outside the control
                      of the Lucas  Scheme or the  Vendor  (save for any  reason
                      relating to the funding level of the Lucas Scheme) but, if
                      no  payment  is due from the  Vendor  because  of any such
                      other  reason  outside  the  control of the Lucas  Scheme,
                      payment will become due  (subject to the other  provisions
                      of this paragraph 6) if and when


                                       81
<PAGE>

                      such  reason  ceases to exist and the  amount due shall be
                      calculated in accordance with (i) above;

                 (2)  unless the  Purchaser  undertakes in writing to the Vendor
                      to pay any amount received pursuant to (i) above forthwith
                      to the Purchaser's  Scheme and to procure that such amount
                      be applied by the Purchaser's  Scheme to provide  benefits
                      for the Consenting Members in respect of their pensionable
                      service in the Lucas Scheme before Completion.

          (iv)   If the Vendor pays to the  Purchaser an amount (the  "Payment")
                 equal  to  the  percentage  referred  to in  (i)  above  of the
                 Shortfall then:

                 (1)  forthwith  following the Vendor making payment pursuant to
                      (i)  above  an  amount  equal  to the  Shortfall  shall be
                      contributed to the Purchaser's Scheme; and

                 (2)  provided  that  the  Purchaser  and  all  members  of  the
                      Purchaser's   Group  have  taken  all   reasonable   steps
                      (including  the  claiming of any relevant  deduction  from
                      profits  and any  repayment  of tax and the  obtaining  of
                      approval of the  Purchaser's  Scheme as an Exempt Approved
                      Scheme) to maximise the Aggregate Tax Benefit,  the Vendor
                      shall,  on the  later  of  the  fifth  anniversary  of the
                      Completion Date and 2 days after receipt of written notice
                      from the Purchaser that the Aggregate Tax Benefit has been
                      finally  determined  by  the  Inland  Revenue,  pay to the
                      Purchaser,  by way of adjustment to the Consideration,  an
                      amount equal to the excess of the  Shortfall  over the sum
                      of the Payment and the Aggregate Tax Benefit,  adjusted by
                      the Investment


                                       82
<PAGE>

                      Return from (and  including) the date on which the Payment
                      was made up to (but excluding) the date of payment of that
                      excess;  however,  the  conditions  for  payment  in  this
                      proviso  shall not apply if the reason  for the  Shortfall
                      becoming payable is delay within the control of the Vendor
                      or the Lucas Scheme.

                      In this sub-paragraph:

                      "Tax  Benefit"  means the aggregate of the amount by which
                      the relevant company's liability to pay corporation tax is
                      reduced and the amount of any repayment of corporation tax
                      to which the  relevant  company  is  entitled,  which,  in
                      either  case,  arises  as a  result  of  the  contribution
                      referred to in (1) above  (including any such reduction or
                      right which is attributable to a surrender by way of group
                      relief or  consortium  relief  under  sections  402 to 413
                      Taxes Act 1988 of a loss  which  arises as a result of the
                      payment of the contribution); and

                      "Aggregate  Tax  Benefit"  means the  aggregate of any Tax
                      Benefits  arising  to the  Purchaser  and the  Purchaser's
                      Group in  respect of all  accounting  periods on or before
                      the fifth anniversary of the date of Completion.

          (v)    If, for a reason outside the Vendor's control, the value of the
                 aggregate of the assets  transferred by the Lucas Scheme to the
                 Purchaser's  Scheme and the assets transferred by the Vendor to
                 the Purchaser under this paragraph 6 exceeds the Final Transfer
                 Amount, the Purchaser shall, within one month of such an excess
                 having  been  transferred,  pay  to  the  Vendor,  by way of an
                 


                                       83
<PAGE>

                 adjustment  of the  Consideration,  a sum in cash equal to such
                 excess  adjusted by the Investment  Return from (and including)
                 the date of transfer of the excess to the Purchaser's Scheme up
                 to (but  excluding)  the date of  payment  of the excess by the
                 Purchaser to the Vendor.

          (vi)   In the event that the total  amount  received by the  Purchaser
                 and the  Purchaser's  Scheme  by the due  date for  payment  in
                 accordance  with paragraph 6(b) is less than the Final Transfer
                 Amount (less, if applicable, the amount deducted in relation to
                 the  percentage  rate of  corporation  tax as  mentioned in (i)
                 above but subject to payment of any further  amount if and when
                 due in accordance  with (iv) above),  the Vendor will indemnify
                 the Purchaser,  the  Purchaser's  Scheme and each member of the
                 Purchaser's   Group   against  any  liability  (as  defined  in
                 paragraph  8(i)) arising out of or in connection with any claim
                 brought against all or any of them by any Consenting  Member or
                 any spouse or dependant of the Consenting Member in relation to
                 that Consenting Member's service in the Lucas Scheme;  provided
                 that this indemnity shall not apply if:-

                 (a)  the Purchaser or the  Purchaser's  Scheme or any member of
                      the  Purchaser's  Group has  encouraged,  or  assisted  in
                      bringing, any such claim;

                 (b)  the Purchaser and the Purchaser's Scheme have not complied
                      with  paragraph 2  (conditionally  on receiving  the Final
                      Transfer Amount).

7.   Cash Accumulation AVCs

     The  Vendor  will use all  reasonable  endeavours  to  procure  that on the
     Payment Date the Lucas Scheme shall  transfer to the  Purchaser's DB Scheme
     any sums which relate to a Consenting  Member's cash  accumulation  AVCs or
     any


                                       84
<PAGE>

     
     amounts not included in the Final Transfer  Amount  representing a transfer
     payment  made to the Lucas  Scheme in  respect of a  Consenting  Member and
     which provide benefits on a money-purchase basis.

8.   Indemnity

     (i)    In this paragraph:-

            "liability"  includes any compensation,  damage, loss or requirement
            of any court or industrial  tribunal  order or award,  and costs and
            expenses properly incurred.

            "Claim"  means a claim  brought  against the Vendor or any member of
            the Vendor's Group or the Lucas Scheme  relating to the Claimant not
            being  provided  with the whole or any part of any benefit  under an
            occupational  pension  scheme  (whether in  relation  to  employment
            before or after  Completion)  or relating to the cost of the benefit
            but  excluding  (save to the extent that such claim  arises out of a
            breach by the  Purchaser of paragraph 2 of this  Schedule) any claim
            arising out of (i) a breach of contract by the Vendor (including any
            breach by the  Vendor of the terms of this  Schedule  but  otherwise
            excluding a breach of any other provision of this Agreement) or (ii)
            a breach of trust by the Lucas Scheme or (iii)  failure of the Lucas
            Scheme or the  Vendor to comply  with any  statutory  or  regulatory
            requirement.

            "Claimant" means a Transferring  Employee or any spouse or dependant
            of a Transferring Employee.

     (ii)   The Purchaser will indemnify the Vendor, each member of the Vendor's
            Group and the Lucas Scheme  against any liability  arising out of or
            in connection with a Claim by a Claimant save to the extent that the
            facts on which any claim is based are  inconsistent  with any of the
            Warranties.

                                       85
<PAGE>

     (iii)  To the extent that a Claim relates to a period of employment  before
            the  Completion  Date,  this  indemnity is subject to payment of the
            Final Transfer Amount.

     (iv)   The  Purchaser  agrees  that  neither  it  nor  any  member  of  the
            Purchaser's  Group will take any action or  provide  any  assistance
            (save as required by statute or by any  competent  authority) to any
            person  (direct or indirect)  which might or would result in a Claim
            or in the Lucas Scheme  transferring  a larger amount than the Final
            Transfer Amount to the Purchaser's DB Scheme.

     (v)    When the  Final  Transfer  Amount  has been  transferred  or paid as
            mentioned  in this  schedule  (whether  by the  Lucas  Scheme or the
            Vendor),  the Purchaser will indemnify the Lucas Scheme,  the Vendor
            and  any  member  of  the  Vendor's   Group  against  any  liability
            (including legal and other expenses)  arising out of a claim brought
            against any of them relating to the amount or nature of the benefits
            provided  by the  Purchaser's  Scheme as it  relates  to each of the
            Consenting  Members  save to the extent that such claim  arises from
            the failure to take  account in the  calculation  of the  Unadjusted
            Transfer  Amount of any  liability  to provide any benefit for or in
            respect of a Consenting  Member other than any liability which there
            may be in  respect  of any  difference  as between a man and a woman
            relating to the guaranteed minimum pension (any such liability to be
            met by the Purchaser or the Purchaser's Scheme).


     (vi)   To the extent that the  indemnities  in this  paragraph  relate to a
            member of the  Vendor's  Group  (other than the Vendor) or the Lucas
            Scheme,  the Vendor holds the benefit of an indemnity as trustee for
            that  member  or,  as the case may be,  the  Lucas  Scheme.  Without
            prejudice  to the ability of that  person to enforce the  indemnity,
            the  indemnity  may be enforced by the Vendor as trustee for him or,
            as the case may be, the Lucas Scheme.


                                       86
<PAGE>

9.   Notices

     (a)  Forthwith  after  Completion the Purchaser will issue a notice to each
          Member in the form set out in Appendix C.

     (b)  Within 15 days of the Lucas Actuary  confirming  under paragraph 10 or
          the independent  actuary  certifying that the Purchaser's Scheme meets
          the  requirements of paragraph 2, the Purchaser will issue a notice to
          each Member,  in terms  approved by the Lucas Scheme  (whose  approval
          shall not be unreasonably withheld or delayed), explaining the options
          available  to him in respect of his accrued  benefits  under the Lucas
          Scheme (including,  without limitation,  the option for each Member to
          request a transfer  payment from the Lucas  Scheme to the  Purchaser's
          Scheme  calculated on the basis described in this Schedule),  offering
          him membership of the Purchaser's Scheme and enclosing an option form,
          in  terms  approved  by the  Lucas  Scheme  (such  approval  not to be
          unreasonably withheld or delayed), for him to return notifying (within
          one month of the date of the issue of the notice) the Lucas Scheme and
          the Purchaser of his choice of option.  The Purchaser  will also cause
          to  be  issued  to  the  Member  notices  to  enable  them  to  become
          contracted-out  under the Purchaser's  Scheme. The Purchaser must also
          supply to the Vendor a copy of each notice issued to the Members.

          The Vendor  shall  procure  that the Lucas  Scheme  complies  with its
          obligations as regards the issue of a statement of  entitlement  under
          section  93A of the  Pension  Schemes  Act 1993 to each  Member who is
          entitled to receive one and, if the Member agrees,  provides a copy of
          each statement to the Purchaser or the Purchaser's Actuary. The Vendor
          shall not and shall  procure  that the Lucas Scheme does not issue any
          notices or make any statements to any Transferring  Employee about the
          benefits   to   be   provided   under   the  Purchaser's  Scheme  save


                                       87
<PAGE>

          with the  consent of the  Purchaser  which  shall not be  unreasonably
          withheld or delayed.

10.  Copies of Purchaser's Scheme's documents

     As soon after  Completion as is reasonably  practicable  the Purchaser will
     provide to the Vendor a copy of the deeds or other documents  governing the
     Purchaser's  DB Scheme.  The Purchaser  shall also provide to the Vendor or
     the Lucas  Actuary  all such  documents  and  information  relating  to the
     Purchaser's DB Scheme as the Lucas Actuary may reasonably  require in order
     to check that the Purchaser's DB Scheme meets the requirements of paragraph
     2 and the Purchaser  shall  immediately  notify the Vendor of any matter or
     circumstance  prior to the  Payment  Date  which  causes  any  document  or
     information  previously  provided to be altered or no longer  applicable in
     any material respect.

     The Lucas Actuary shall notify the  Purchaser's  Actuary  within 30 days of
     receiving  all of the deeds,  documents and other  information  referred to
     above whether the Purchaser's DB Scheme meets the requirements of paragraph
     2.  If  the  Lucas  Actuary  notifies  the  Purchaser's  Actuary  that  the
     Purchaser's DB Scheme does not meet any  requirement of paragraph 2 and the
     Purchaser's  Actuary  and the Lucas  Actuary  are  unable to  resolve  this
     dispute  within 30 days of the Lucas  Actuary's  notification,  the dispute
     shall be referred to the independent Actuary under paragraph 5(c).

11.  Provision of information

     The  Vendor and the  Purchaser  shall  promptly  provide to each other such
     documents and  information as are  reasonably  required to enable the Lucas
     Scheme and the Purchaser's DB Scheme to obtain the approval of the Board of
     Inland  Revenue to the  transfer  referred to in paragraph 6 and shall each
     use all reasonable endeavours to obtain such approval in writing as soon as
     reasonably practicable.


                                       88
<PAGE>

12.  Indemnities - General

     If the Vendor or the Purchaser becomes aware of any matter which might give
     rise to a claim for an  indemnity  under  paragraph 6 (b)(vi) or 8 from the
     other party, the following provisions shall apply:-

     (1)  The relevant party shall  immediately give written notice to the other
          party of the matter in respect of which the indemnity is being claimed
          (stating in reasonable  detail the nature of the matter and, so far as
          practicable,  the amount  claimed)  and shall  consult  with the other
          party with respect to the matter. If the matter has become the subject
          of any  proceedings  the relevant  party shall give the notice  within
          sufficient  time to enable the other party to contest the  proceedings
          before any first instance  judgment in respect of such  proceedings is
          given.

     (2)  The relevant party shall:-

          (a)  take such action and institute  such  proceedings,  and give such
               information  and  assistance,  as the other party or its insurers
               may reasonably request to dispute,  resist,  appeal,  compromise,
               defend,  remedy or  mitigate  the matter or enforce  against  any
               person  (other than the other  party) the rights of the  relevant
               party or its insurers in relation to the matter; and

          (b)  not admit  liability  in respect of or settle the matter  without
               the prior written  consent of the other party such consent not to
               be unreasonably withheld or delayed.




                                       89
<PAGE>


                              APPENDIX A (OMITTED)

                               TRANSFER AGREEMENT



                                  Pages 90 - 92
<PAGE>



                              APPENDIX B (OMITTED)

                                Actuary's Letter



                                       93
<PAGE>


                              APPENDIX C (OMITTED)

                             

                                       94
<PAGE>


                              SCHEDULE 8 (OMITTED)

                              INTELLECTUAL PROPERTY


                                  Pages 95 - 99
<PAGE>


                              SCHEDULE 9 (OMITTED)

                        INTELLECTUAL PROPERTY ASSIGNMENTS

                                 Pages 100 - 133
<PAGE>


                              SCHEDULE 10 (OMITTED)

                       FORWARD EXCHANGE CURRENCY CONTRACTS


                                Pages 134 - 135
<PAGE>


                              SCHEDULE 11 (OMITTED)

                                BILLS OF EXCHANGE


                                      136
<PAGE>



                              SCHEDULE 12 (OMITTED)
                        BONDS, GUARANTEES AND INDEMNITIES



                                      137
<PAGE>


                              SCHEDULE 13 (OMITTED)
                           MEMORANDA OF UNDERSTANDING



                                 Pages 138 - 139
<PAGE>



                              SCHEDULE 14 (OMITTED)

                                 EXPIRED PATENTS



                                       140
<PAGE>


                              SCHEDULE 15 (OMITTED)

                              COMPETING ACTIVITIES



                                 Pages 141 - 142
<PAGE>


SIGNED by /s/ James Zigel
          --------------------
for and on behalf of LUCAS LIMITED
in the presence of:- /s/ Mary K. Krigbaum



SIGNED by /s/ Bruce P. Erdel
          --------------------
for and on behalf of the ASSEMBLY TECHNOLOGY
& TEST LIMITED
in the presence of:- /s/ Rita Deckard



SIGNED by /s/ James Zigel
          --------------------
for and on behalf of LUCAS INDUSTRIES PLC
in the presence of:- /s/ Mary K. Krigbaum



SIGNED by /s/ James Zigel
          --------------------
for and on behalf of LUCAS AUTOMATION &
CONTROL ENGINEERING LIMITED
in the presence of:- /s/ Mary K. Krigbaum





                                      143
<PAGE>

     The following page contains a list of Schedules and  Appendices  which have
been  intentionally  omitted by the  Registrant  pursuant to Item  601(b)(2)  of
Regulation S-K.

     A  copy  of any  omitted  Exhibit  or  Appendix  will  be  provided  to the
Securities and Exchange Commission upon request.


<PAGE>

SCHEDULE 1        The Leased Assets
SCHEDULE 2        The Plant, Machinery and Equipment
SCHEDULE 4        Transferring Employees
SCHEDULE 5        Intellectual Property Agreements
SCHEDULE 6        Assignment of Debtors
SCHEDULE 8        Registered Intellectual Property
SCHEDULE 9        Part 1: Trade Mark Assignment by Lucas
                  Part 2: Trade Mark Assignment by LACE
                  Part 3: Patent Assignment by Lucas
                  Part 4: Patent Assignment by LACE
                  Part 5: Assignment of Patent Application by Lucas into
                          joint names
                  Part 6: Assignment of Unregistered Intellectual Property
SCHEDULE 10       Forward Exchange Currency Contracts
SCHEDULE 11       Bills of Exchange
SCHEDULE 12       Bonds, Guarantees and Indemnities
SCHEDULE 13       Memoranda of Understanding
SCHEDULE 14       Expired Patents
SCHEDULE 15       Competing Activities

                            APPENDICES TO SCHEDULE 7

APPENDIX A        Transfer Agreement
APPENDIX B        Actuary's Letter
APPENDIX C        Notice to Employees Concerning Pension Arrangements