STAY BONUS AGREEMENT



     THIS AGREEMENT,  dated as of September 1, 1998, by and between JPE, Inc., a
Michigan corporation ("Corporation"),  and Donna L. Bacon, presently residing at
3909 Delhi-Overlook Drive, Ann Arbor, Michigan ("Executive").

                                   WITNESSETH:

     WHEREAS,  the  Executive  is  presently  employed  by  the  Corporation  as
President, General Counsel and Secretary; and

     WHEREAS, the Board of Directors ("Board") recognizes that the Executive has
contributed significantly to the business of the Corporation; and

     WHEREAS,  the Board  desires to retain the services of Executive and reward
her for the  performance  of her duties to the  Corporation,  without  Executive
being  influenced  by  uncertainties  of her own  situation  and further able to
assess and advise the Board during the  Corporation's  financial  restructuring;
and

     WHEREAS,  the Executive is willing to continue  serving the  Corporation on
the terms and conditions provided herein.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties agree as follows:

     1.  Operation  and  Termination  of  Agreement.  This  Agreement  shall  be
effective  immediately upon its execution by both parties.  This Agreement shall
terminate  upon the earlier of full  payment  being made  hereunder  pursuant to
Section 2,  voluntary  termination  by Executive  other than for Good Reason (as
defined in Section 2(g)),  the  termination of Executive's  employment for Cause
(as defined in Section 1(b) and following the expiration of the applicable  cure
periods), or the termination of the Executive's employment because of death.

For purposes of this Agreement:

     (a)  "Permanent  Disability"  shall  mean that by reason of a  physical  or
     mental  disability or infirmity for a continuous  period of six (6) months,
     the  Executive  is unable  to  perform  the  duties  of her  position.  The
     determination  of  Permanent  Disability  shall be made by a medical  board
     certified   physician  mutually  acceptable  to  the  Corporation  and  the
     Executive  (or  the  Executive's  legal  representative,  if one  has  been
     appointed).  The Executive agrees to submit to the Corporation such medical
     evidence  regarding  such  disability or infirmity as the  Corporation  may
     reasonably request.

     (b) "Termination For Cause" shall mean any termination of the employment of
     the  Executive  for  "Cause."  For  purposes  of this  Agreement,  only the
     following shall be deemed to constitute "Cause":

          (i) the  Executive's  willful  engaging  in  dishonest  or  fraudulent
          actions or  omissions  resulting  or  intended  to result  directly or
          indirectly in any demonstrable  material financial or economic harm to
          the Corporation, or

          (ii) if there has been a breach of the  Executive's  fiduciary duty to
          the Corporation resulting or intended to result directly or indirectly
          in personal profit to the Executive;

     provided that there shall have been delivered to the Executive at least ten
     (10) days prior to the effective date of Termination  for Cause a Notice of
     Termination  (as defined in Section  1(d)(iv)),  specifying the particulars
     thereof in detail.  For purposes of subsection (A) or (B) above,  no act or
     failure to act on the Executive's part shall be considered "willful" unless
     done or omitted to be done by her not in good faith and without  reasonable
     belief  that  her  action  or  omission  was in the best  interests  of the
     Corporation.

     If the  Executive's  employment  shall be terminated by the Corporation for
     Cause,  the Executive shall have the right to contest such termination only
     in accordance with the procedures set forth in Section 7.

<PAGE>

     (c)  "Termination   Without  Cause"  shall  mean  any  termination  of  the
     employment of the Executive by the Corporation  other than  termination (A)
     For Cause, (B) upon death, (C) upon voluntary retirement on or after age 65
     or (D) because of Permanent Disability.

     (d) Any termination of the Executive's  employment by the Corporation or by
     the  Executive  (other than upon death)  shall be  communicated  by written
     "Notice of Termination" to the other party hereto.  "Notice of Termination"
     shall mean a notice which shall indicate the specific termination provision
     relied upon in this Agreement and shall set forth in reasonable  detail the
     facts and  circumstances  claimed to provide a basis for termination of the
     Executive's employment under the provision so indicated.

     (e) The "Date of Termination" shall mean (A) if the Executive's  employment
     is terminated by her death,  the date of her death,  (B) if the Executive's
     employment is terminated due to her Permanent Disability,  the date that is
     thirty (30) calendar days after Notice of Termination is given,  (C) if the
     Executive's  employment is terminated  pursuant to a Termination For Cause,
     the date  specified in the Notice of  Termination,  (D) if by terminated by
     voluntary retirement on or after age 65, the date of retirement, and (E) if
     termination by the Executive's  employment is a Termination  Without Cause,
     the date  provided  by the Notice of  Termination  which,  in the case of a
     termination by the Corporation, shall not be less than thirty (30) calendar
     days and, in the case of a termination by the Executive,  shall not be less
     than ten  (10)  calendar  days nor more  than  sixty  (60)  calendar  days,
     respectively, after the date the Notice of Termination is given.

     2. Stay Bonus.

     (a)  Executive  shall be entitled to and shall  receive a stay bonus ("Stay
     Bonus") of Five Hundred Twenty-Five Thousand Dollars ($525,000.00), payable
     as provided in subsection (b) below.

     (b) Executive  shall receive  payment of the Stay Bonus upon the earlier to
     occur of:

          (1) The dates set forth in Section 2(c) below;

          (2)  The  completion  of  a  debt   restructuring  on  behalf  of  the
          Corporation:

          (3) The emergence of the Corporation from a bankruptcy proceeding; and

          (4) A Change in  Control  of the  Corporation,  as  defined in Section
          2(d).

     (c)  Payment  Dates.  Subject  to prior  payment  as  specified  in Section
     2(b)(2),  (3),  or (4),  payments  of the Stay Bonus shall be made in three
     equal   installments   of  One  Hundred   Seventy-Five   Thousand   Dollars
     ($175,000.00)  on each of December 31,  1998,  June 30, 1999 and January 1,
     2000.

<PAGE>

     (d) Change of Control.

          (1) For the  purpose  of this  Agreement,  a Change of  Control of the
          Corporation  ("Change of Control") shall be deemed to have occurred if
          any of the following events shall have occurred:

               (i) any Person (as defined below),  other than John Psarouthakis,
               is or  becomes  the  beneficial  owner (as  defined in Rule 13d-3
               under  the  Securities  Exchange  Act of 1934,  as  amended  (the
               "Exchange  Act")),  directly or indirectly,  of securities of the
               Corporation   representing   10%  or  more  of  either  the  then
               outstanding  shares of  common  stock of the  Corporation  or the
               combined  voting  power  of the  Corporation's  then  outstanding
               securities; or

               (ii) a change in the membership of the Board as it existed in the
               immediately  preceding calendar year (the "Incumbent Board") such
               that the directors of the Incumbent Board no longer  constitute a
               majority of the Board;  provided that any  individual  becoming a
               director in a subsequent year whose  election,  or nomination for
               election, by the Company's shareholders was approved by a vote of
               at  least  a  majority  of  the  directors  then  comprising  the
               Incumbent  Board  shall  be,  for  purposes  of  this  Agreement,
               considered  as  though  such  individual  were  a  member  of the
               Incumbent Board; or

               (iii)  the  shareholders  of the  Corporation  approve  a plan of
               complete  liquidation or dissolution of the  Corporation or there
               is  consummated  an agreement for the sale or  disposition by the
               Corporation  of all  or  substantially  all of the  Corporation's
               assets.

          (2) Person. For the purpose of this Agreement, "Person" shall have the
          meaning given in Section  3(a)(9) of the Exchange Act, as modified and
          used in Sections 13(d) and 14(d) thereof,  except that such term shall
          not include the Corporation or any of its subsidiaries.

     (e) Acceleration of Payments.  (i) In the event a transaction  described in
     Sections 2(b)(2), (3) or (4) occurs prior to the Executive's receipt of all
     of the Stay Bonus  provided  for in Section  2(c) above,  or (ii) if at any
     time during the period of this  Agreement  the  Executive's  employment  is
     terminated on account of her Permanent Disability,  or by the Executive for
     Good Reason (as defined in 2(g) below),  then the Corporation  shall pay to
     Executive,  in one lump sum, the unpaid  portion of the Stay Bonus promptly
     upon the  occurrence  of any such event,  but in no event more than fifteen
     (15) days following the occurrence of any such event.

     (f)  Termination  of Payments.  Payments of the Stay Bonus shall  terminate
     only in the event (i) of Executive's  death or (ii) Executive's  employment
     with the Corporation is terminated for "Cause" as provided in Section 1(b),
     following the expiration of all appropriate cure periods.

<PAGE>

     (g) Good Reason. For the purpose of this Section 2 of the Agreement,  "Good
     Reason" shall mean the occurrence (without the Executive's written consent)
     of any one of the following events:

          (i) either (1) a significant  alteration,  as reasonably determined by
          the   Executive,   in  the   nature  of  the   Executive's   reporting
          responsibilities,  title other than "President,"  duties or offices as
          in effect immediately prior to the Change of Control or Pending Change
          of  Control,  provided,  that  during any  Pending  Change of Control,
          Executive's  duties and offices may be changed by the  Corporation  to
          address  the  needs  of  the  Corporation  taking  into  consideration
          Executive's   capabilities  and  level  of  experience;   or  (2)  any
          diminution  of  Executive's  Base Salary in effect on the date of this
          Agreement;

          (ii) the requirement by the Corporation that the Executive's principal
          place of  employment  be  relocated  more than ten (10) miles from her
          place of employment on the date of this Agreement;

          (iii)  either  (1) the  discontinuance  of, or any  amendment  to, any
          compensation  plan which is adverse to the  Executive and in which the
          Executive  participated on the date of this  Agreement,  including but
          not limited to the  Corporation's  1993 Stock  Incentive Plan unless a
          substantially  equivalent substitute or alternative plan has been made
          available to the Executive,  or (2) the failure by the  Corporation to
          continue the Executive's  participation therein (or in such substitute
          or alternative plan(s)) on a basis not materially less favorable, both
          in terms of the  amount  of  benefits  provided  and the  level of the
          Executive's  participation relative to other participants,  as existed
          at the date of this Agreement; or

          (iv) the discontinuance of any benefits enjoyed by the Executive under
          any of the Corporation's pension, life insurance,  medical, health and
          accident, or disability plans in which the Executive was participating
          at the  date  of this  Agreement,  the  taking  of any  action  by the
          Corporation that would directly or indirectly materially reduce any of
          such benefits  enjoyed by the Executive at the date of this Agreement,
          or the failure by the  Corporation  to provide the Executive  with the
          number of paid  vacation days to which she is entitled on the basis of
          years  of  service  with  the   Corporation  in  accordance  with  the
          Corporation's  normal  vacation  policy  in effect at the date of this
          Agreement.

     3. Successors; Binding Agreement.

     (a)  The  Corporation  shall  require  any  successor  (whether  direct  or
     indirect,  by  purchase,  merger,  consolidation  or  otherwise)  to all or
     substantially  all of the business  and/or  assets of the  Corporation,  by
     agreement in form and substance satisfactory to the Executive, to expressly
     assume and agree to perform  this  Agreement  in the same manner and to the
     same  extent  that  the  Corporation  would be  required  to  perform  this
     Agreement if no such succession had taken place. Failure of the Corporation
     to obtain such  agreement  prior to a date that is on or before the date of
     the Change of Control shall be a breach of this Agreement and shall entitle
     the Executive to  compensation  from the Corporation in the same amount and
     on the same terms as she would  receive  hereunder if she were to terminate
     her  employment for Good Reason,  except that for purposes of  implementing
     the foregoing,  the date on which such Change of Control becomes  effective
     shall  be  deemed  the  Date of  Termination.  As  used in this  Agreement,
     "Corporation"  shall mean the  Corporation  as  previously  defined and any
     successor to its  business  and/or  assets as  aforesaid,  which  successor
     executes and delivers the agreement provided for in this Section 3 or which
     otherwise  becomes bound by all the terms and  provisions of this Agreement
     by operation of law.

<PAGE>

     (b) This Agreement and all rights of the Executive hereunder shall inure to
     the  benefit of and be  enforceable  by the  Executive's  personal or legal
     representatives,     executors,    administrators,    successors,    heirs,
     distributees,  devisees and legatees. If the Executive should die after her
     termination  while any amounts  would still be payable to her  hereunder if
     she had continued to live,  all such  amounts,  unless  otherwise  provided
     herein, shall be paid in accordance with the terms of this Agreement to the
     Executive's  devisee,  legatee,  or  other  designee  or,  if  there  be no
     designee, to the Executive's estate.

     4. Notices.  Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested, or by a
national overnight delivery service,  addressed to the Board and the Corporation
at the  Corporation's  then principal office, or to the Executive at the address
set forth in the  preamble,  or to such other  address or addresses as any party
hereto  may from time to time  specify in  writing  for the  purpose in a notice
given to the other parties in  compliance  with this Section 4. Notices shall be
deemed given when received.

     5.  Indemnification  and Insurance;  Legal Expenses.  The Corporation shall
indemnify  and hold  harmless the Executive  (and her legal  representatives  or
other  successors) if she is a party, or is threatened to be made a party to any
threatened,  pending or completed  action,  suit,  proceeding or claim,  whether
civil, criminal,  administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that the Executive is or was
a director, officer or employee of the Corporation,  against expenses (including
reasonable attorney's fees), costs,  judgments,  fines and other amounts paid in
settlement (if such  settlement is approved by the Board of Directors)  actually
and  reasonably  incurred  by  her in  connection  with  such  action,  suit  or
proceeding to the fullest extent permitted by law. The Corporation shall provide
the Executive (including her heirs,  executors and administrators) with coverage
under a standard  directors' and officer's  liability  insurance  policy,  which
shall be in an  amount  not less than the  directors'  and  officers'  insurance
available to the Executive on the date hereof.

     6. Disputes.

     (a)  The  administrator  for  purposes  of  this  Agreement  shall  be  the
     Corporation ("Administrator"), whose address is 775 Technology Drive, Suite
     200, Ann Arbor, MI 48108, and whose telephone number is (313) 662-2323. The
     "Named  Fiduciary" as defined in Section  402(a)(2) of ERISA, also shall be
     the Corporation.  The Corporation  shall have the right to designate one or
     more  employees  of the  Corporation  as the  Administrator  and the  Named
     Fiduciary at any time,  and to change the address and  telephone  number of
     the same. The  Corporation  shall give the Executive  written notice of any
     change in the  Administrator  and Named  Fiduciary,  or in the  address  or
     telephone number of the same.

<PAGE>

     (b) The Administrator  shall make all determinations as to the right of any
     person  to  receive  benefits  under  the  Agreement.  Any  denial  by  the
     Administrator  of a claim for benefits by the  Executive  ("the  claimant")
     shall be stated in writing by the  Administrator and delivered or mailed to
     the  claimant  within  ten (10) days after  receipt  of the  claim,  unless
     special  circumstances  require an  extension  of time for  processing  the
     claim.  If such an extension is required,  written  notice of the extension
     shall be furnished to the claimant prior to the  termination of the initial
     ten (10) day period.  In no event shall such  extension  exceed a period of
     ten (10) days from the end of the initial  ten (10) day period.  Any notice
     of denial  shall set forth the  specific  reasons for the denial,  specific
     reference to pertinent  provisions of this  Agreement upon which the denial
     is based, a description of any additional material or information necessary
     for the  claimant to perfect  his claim,  with an  explanation  of why such
     material or information is necessary,  and any  explanation of claim review
     procedures,  written to the best of the Administrator's ability in a manner
     that may be understood without legal or actuarial counsel.

     (c) A claimant whose claim for benefits has been wholly or partially denied
     by the  Administrator  may  request  on or before  the tenth  calendar  day
     following  the date of such  denial a review  of the  denial  in a  written
     notice to the Administrator.  The claimant shall be entitled to submit such
     issues or comments in writing or otherwise,  as she shall consider relevant
     to a  determination  of the  claim,  and she may  include a  request  for a
     personal hearing before the Administrator. Prior to submitting her request,
     the   claimant   shall  be  entitled  to  review  such   documents  as  the
     Administrator  shall agree are pertinent to the claim. The claimant may, at
     all stages of review,  including  arbitration provided for in Section 6, be
     represented  by  counsel  of  his  choice,  legal  or  otherwise,  and  the
     reasonable  fees  and  expenses  of  the  counsel  shall  be  borne  by the
     Corporation.  All  requests  for review  shall be  promptly  resolved.  The
     Administrator's decision with respect to any such review shall be set forth
     in writing and shall be mailed to the claimant not later than ten (10) days
     following receipt by the Administrator of the claimant's request for review
     unless special circumstances,  such as the need to hold a hearing,  require
     an  extension  of time for  processing,  in which case the  Administrator's
     decision  shall be so mailed not later than twenty (20) days after  receipt
     of such request.

     (d) A claimant who has followed the procedure in paragraphs  (b) and (c) of
     this  section,  but who has not  obtained  full  relief  on her  claim  for
     benefits,  may,  within  sixty  (60)  days  following  her  receipt  of the
     Administrator's  written  decision  on  review,  apply  in  writing  to the
     Administrator  for binding  arbitration  of the claim before an  arbitrator
     mutually  acceptable to both  parties,  the  arbitration  to be held in Ann
     Arbor, Michigan, in accordance with the commercial arbitration rules of the
     American  Arbitration  Association,  as then in effect.  If the parties are
     unable  to  mutually  agree  upon  an  arbitrator,   then  the  arbitration
     proceedings  shall be held before  three (3)  arbitrators,  one (1) of whom
     shall be designated by the Corporation, one (1) of whom shall be designated
     by the claimant and the third of whom shall be  designated  mutually by the
     first two (2)  arbitrators in accordance  with the  commercial  arbitration
     rules referenced above. The sole authority of the arbitrator(s) shall be to
     interpret and apply the provisions of this  Agreement;  not to change,  add
     to, or subtract from, any of its provisions.  The arbitrator(s)  shall have
     the power to compel  attendance  of  witnesses  at the  hearing.  Any court
     having jurisdiction may enter a judgment based upon the arbitration.

<PAGE>

     7. No  Mitigation.  The  Executive  shall not be required  to mitigate  the
amount of any payments  provided for by this Agreement by seeking  employment or
otherwise,  nor shall the  amount of any  payment or  benefit  provided  in this
Agreement  be reduced by any  compensation  or benefit  earned by the  Executive
after her termination.

     8. No Set-Off.  The Corporation's  obligation to make any payments provided
for by this Agreement are absolute and  unconditional  and shall not be affected
by any circumstances,  including, without limitation, any set-off, counterclaim,
recoupment,  defense,  claim of  breach of  contract  or other  right  which the
Corporation may have against the Executive or others.

     9. Nonalienation of Benefits.  Except as may be contrary to applicable law,
no  sale,  transfer,  alienation,   assignment,  pledge,   collateralization  or
attachment of any benefits under this Agreement  shall be valid or recognized by
the Corporation.

     10. ERISA.  This Agreement is an unfunded  compensation  arrangement  for a
member  of a select  group of the  Corporation's  management  employees  and any
applicable ERISA  exemptions for a "top hat" arrangement  shall be applicable to
this Agreement.

     11.  Reporting and Disclosure.  The  Corporation,  from time to time, shall
provide  government  agencies with reports  concerning  this Agreement as may be
required by law,  and the  Corporation  shall  provide the  Executive  with such
disclosure  concerning  this  Agreement  as  may  be  required  by law or as the
Corporation may deem appropriate.

     12. Effect on Prior Agreements and Existing  Benefits Plans. This Agreement
contains  the entire  agreement  of the parties  relating to the subject  matter
hereof,  and except  for that  certain  Indemnification  Agreement  between  the
Corporation  and Executive  dated  February 8, 1995,  which shall remain in full
force  and  effect,   supersedes  any  prior  written  or  oral   agreements  or
understandings  relating  to the same  subject  matter  including  that  certain
Executive  Severance  Agreement  dated  February  20,  1998,  except  that  this
Agreement  shall not affect or operate  to reduce  any  benefit or  compensation
inuring to the Executive of a type provided elsewhere including, but not limited
to, any pension benefits.

     13. Modification and Waiver. No modification or amendment of this Agreement
shall be valid  unless in  writing  and  signed  by or on behalf of the  parties
hereto.  A waiver of the breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition.

     14. Severability.  This Agreement is intended to be performed in accordance
with,  and only to the extent  permitted by, all  applicable  laws,  ordinances,
rules and  regulations.  If any provision of this Agreement,  or the application
thereof to any person or circumstance,  shall, for any reason and to any extent,
be held invalid or unenforceable, such invalidity and unenforceability shall not
affect the remaining provisions hereof and the application of such provisions to
other persons or  circumstances,  all of which shall be enforced to the greatest
extent permitted by law.

<PAGE>

     15.  Withholding.  The compensation  provided to the Executive  pursuant to
this Agreement shall be subject to any withholdings  and deductions  required by
any applicable income and employment  federal,  state and local tax laws. In the
event the Corporation fails to withhold such sums for any reason, it may require
the Executive to promptly remit to the  Corporation  sufficient  cash to satisfy
applicable income and employment withholding taxes.

     16.  Payment Upon Death.  Any amounts  payable to the  Executive  hereunder
after  the death of the  Executive  shall be paid to the  Executive's  estate or
legal representative.

     17.  Headings.  The headings in this Agreement are inserted for convenience
of reference only and shall not be a part of or control or affect the meaning of
any provision hereof.

     18.  Late  Payment of  Benefits.  If any amount  required to be paid by the
Corporation  to the  Executive  hereunder is not paid when due, the  Corporation
shall pay such amount to the Executive  together with interest at the prime rate
as  announced  from time to time by Comerica  Bank (or its  successor)  plus two
percentage  points, for the period from and after the tenth (10th) day following
the date on which payment was due to and including the date of payment.

     19. Attorney Consultation.  The Executive has had an opportunity to consult
with an attorney of her choosing prior to executing this Agreement.

     20.  Governing  Law.  To the  extent not  governed  by  Federal  law,  this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Michigan.

     IN WITNESS  WHEREOF,  the parties  have duly  executed and  delivered  this
Agreement as of the day and year first above written.


                                        JPE, INC.

     
                                        By:  /s/ John Psarouthakis
                                             -----------------------------
                                        Title: Chairman & CEO



                                        EXECUTIVE

                                        By:  /s/ Donna L. Bacon
                                             -----------------------------