DONNELLY CORP
10-K/A, 1994-09-28
GLASS PRODUCTS, MADE OF PURCHASED GLASS
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
__________
FORM 10-K
(Mark One)

X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES

   EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the Fiscal Year ended July 2, 1994
                                OR
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE      
  
   SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from __________ to __________

                Commission File Number    1-9716   

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

       Michigan
  (State or other jurisdiction        38-0493110
  of incorporation or organization)(IRS Employer Identification No.) 

 414 East Fortieth Street, Holland, Michigan        49423
  (Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code   (616) 786-7000

Securities registered pursuant to Section 12(b) of the Act:

  Title of each class     Name of each exchange on which registered
  Class A Common Stock           American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

    Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.  Yes    X      No      

    Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.[X]

    The aggregate market value of voting stock held by non-af-
filiates of the registrant was $87,584,085 as of August 31, 1994.

    Number of shares outstanding of each of the registrant's classes
of common stock, as of August 31, 1994.

    4,147,266 shares of Class A Common Stock par value, $.10 per share
    3,582,915 shares of Class B Common Stock par value, $.10 per share

                 DOCUMENT INCORPORATED BY REFERENCE

    Portions of the registrant's proxy statement for its annual
meeting of shareholders to be held October 21, 1994, are
incorporated by reference into Part III of this report.

                              PART I.

ITEM 1.  BUSINESS

(a)  General Development of Business

    The Company is engaged primarily in the design, manufacture,
marketing and sale of glass related and plastic molded products for
the automotive industry.  The Company also supplies glass coatings for
the transportation, electronics, and computer industries (either
solely or through several joint ventures) and supplies plastic molded
products for the appliance industry. 

       On August 15, 1994, the Company announced an agreement to sell
its appliance products business to Gemtron Corporation.  This segment
represented approximately 1% of combined consolidated net sales of the
Company in fiscal 1994.  Closing of the sale is expected to occur on or 
about October 1, 1994.  While final proceeds have not yet been determined,
it is expected that the transaction will include a cash price payable
at closing resulting in a net gain and a royalty payment over each of
the next two years.
    
    The Company was incorporated in Michigan in 1936.  The Company's
corporate offices are located at 414 East Fortieth Street, Holland,
Michigan, 49423, and its telephone number is (616) 786-7000. Unless
otherwise noted or indicated by the context, the term "Company"
includes Donnelly Corporation, its wholly owned subsidiaries and
Donnelly Export Corporation, a shareholder Domestic International
Sales Corporation under the Internal Revenue Code owned entirely by
the holders of the Company's Class B Common Stock.

ITEM 1(b)  Financial Information About Industry Segments

    The Company is primarily engaged in the research, design,
development, manufacture, marketing and sale of interior and exterior
rearview mirrors, interior lighting and interior trim products, and
modular windows for world automotive markets.  Prior to 1993, the
Company  was also engaged in the research, design, development,
manufacture, marketing and sale of highly technical solid-state glass
coatings for products used primarily in the electronic and computer
industries worldwide.  This segment represented approximately 11% of
combined consolidated net sales of the Company in fiscal 1992. 
Effective May 3, 1992, the liquid crystal display products aspect of
the coated products business was transferred to Donnelly Applied Films
Corporation, a 50% owned joint venture accounted for on the equity
method of accounting.  As a result, this segment is no longer reported
separatly.  Excluding the contributions of various coatings related
joint ventures, the Company's market focus is nearly exclusively
automotive in fiscal 1994.  

ITEM 1(c)  Narrative Description of Business

Products, Services, Markets and Methods of Distribution

  Automotive Products

    Automotive Vision.  The Company manufactures a wide range of
interior and exterior rearview mirror products.

    Interior Rearview Mirrors.  The Company began producing prismatic
day/night mirror glass in 1939 and has been a leading innovator of
interior rearview mirrors in the United States since that time.  The
Company now supplies interior rearview mirror assemblies to General
Motors Corporation, Ford Motor Company and Chrysler Corporation (the
"Big Three" automakers), the North American facilities of foreign
owned automakers (the "New Automotive Manufacturers") and North
American joint ventures between the Big Three automakers and foreign
automakers.  Through DML, its Irish subsidiary, the Company supplies
interior rearview mirror assemblies to French automotive
manufacturers.  DML also manufactures and sells prismatic interior
rearview mirror glass to foreign producers of interior rearview
mirrors.

    The Company has also developed complex modular interior mirror
assemblies, including mirrors with added features such as lights. 
Lighted mirrors direct light down to the laps of the driver and
passenger for reading or general lighting.  Sales of lighted mirrors
have increased significantly since their introduction in fiscal
1985.

       The Company is developing and offering for sale, various
electrochromic technologies for use in day/night automotive mirror
systems which automatically dim when headlights approach from the
rear.  Some of these electrochromic technologies have been the subject of
litigation.  See Item 3.  The Company is also developing electronic
vision systems for vehicles which make use of advanced sensors and
video microchip technology to control dimmable interior and exterior
mirror systems.
    
    Exterior Rearview Mirrors.  In 1987, the Company began
manufacturing exterior rearview mirror assemblies for cars and trucks. 
Exterior mirror assemblies are more complex than base interior
rearview mirror assemblies given that, among other things, they
contain  either manual or motorized actuators for remote adjustment. 
In addition, most new vehicles are equipped with two exterior mirrors. 
Accordingly, the per vehicle sales price of exterior mirror assemblies
substantially exceeds that of interior rearview mirror assemblies. 
The Company supplies exterior rearview mirror assemblies to Honda of
America, Ford and Mazda.  The Company also supplies Kenworth Truck
Company ("Kenworth"), a major manufacturer of large trucks.  

    A new area of growth for the Company arising out of established
skills in automotive paint and plastic molding is the manufacture of
exterior trim components.  While still a small product line for the
Company, the Company is now producing exterior door handles for Honda
and Ford.

    The Company manufactures and supplies flat and convex chrome-
coated mirror glass to other manufacturers of exterior mirror
assemblies.  This product line supplies mirror components to other
complete mirror manufacturors and to the Company's own internal
complete mirror operation.  This is a small product line that is being
relocated to Monterrey, Mexico in fiscal 1995.

    The Company introduced a new mirror system innovation during the
1993 fiscal year.  Trademarked INTELLIGENT VISION, this system
combines a unique new electrochromic material with a video microchip
which operates as a "smart sensor".  This system permits the user to
monitor light levels from behind the vehicle and automatically adjusts
all three rearview mirrors independently to compensate for glare. It
is expected that the INTELLIGENT VISION system will be available
sometime in fiscal 1998.  

    The Company has made significant investments in the development
of solid-state, thin-film electrochromic technology that has potential
for mirror and window applications.  This technology allows the user
to control the reflection of light off glass through the application
of an electrical current to a solid-state coating applied to the
glass.  Using this technology, the Company has developed and markets
GLARESTOPPER solid-state electrochromic mirrors for large trucks. 
This mirror permits truck drivers to manually adjust the glare of
their mirrors by a range of up to ten times.  

    Interior Lighting and Trim.  The Company manufactures various
interior trim products including dome lights, interior door lights,
lighted and non-lighted grab handles and coat hooks.  The Company's
interior lighting products are based on both plastic molding and 
optics technology.  While the Company entered this market relatively
recently, it believes the market will expand due to automakers' desire
to add value to their cars and the trend toward modularization of
components.  The Company believes automakers will increasingly seek
suppliers who can provide complete interior lighting and trim systems. 
The Company currently supplies these products to the Big Three
automakers and has orders from Honda and Toyota.  

       Modular Windows.  Modular windows consist of window glass and a
plastic molding that encapsulates various components, such as the
frame, grommet, trim and hardware.  These windows, offer improved
quality, aerodynamics, and performance at a competitive price to
conventional window systems.  Recent product additions include hinged
windows, "flush surface" windows that involve single sided
encapsulation, bonding of hardware directly to glass, and the
incorporation of color matched body hardware into the window system. 
Its windows are used for rear & liftgate windows, quarter windows,
aperture windows, fixed vent windows and windshields on over 40
current models, including vehicles produced by each of the Big Three
automakers and certain of the New Automotive Manufacturers. 
Increasing use of modular windows by the Big Three automakers reflects
trends in the industry towards outsourcing, modularization and
reliance on suppliers for design.  Based upon the number of modular
windows that have been specified and are being designed for future
models, the Company expects continued expansion of the market for
modular windows sold to the Big Three automakers and New Automotive
Manufacturers.  Through its joint venture with Asatri Glass Company, D&A 
Technology, Inc. ("D&A"), the Company, will provide substantially all the 
modular windows for General Motors' Saturn cars through the 1995 model year.  
Replacement business for D&A has not been booked and an evaluation regarding 
the future of this business is being made.  The Company also has another window
manufacturing facility in Mt. Sterling, Kentucky, which will focus on
customers in this geographic area.
    
    Modular windows can be molded using polyvinyl chloride ("PVC") or
a urethane reaction injection molding process ("RIM").  The PVC
process is less expensive primarily because the material is less
costly and does not require painting.  PVC, however, is more difficult
to mold, particularly for large windows.  The Company believes that
its ability to design and mold windows in either process and its
expertise in PVC molding are significant competitive factors.

    The Company has licensed major automotive glass companies in
Europe and Japan to manufacture modular windows for sale in foreign
markets using the Company's technology.  

Non-Automotive Businesses
    
       The Company is heavily committed to its core automotive
businesses and it will remain the Company's central focus.  However,
the Company has developed a number of significant non-automotive
businesses and relationships over the years.  These activities
developed from core technologies that had applications outside of the
automotive industry.


    
     Each of the Company's non-automotive businesses are being structured to be
operated independently from the Company's core automotive businesses.
    
    Information Products.  The Company's various, electrically
conductive, transparent, thin-film, coated glass products are used in
computer applications such as touch screens, contrast enhancement
computer screens, computer face plates which shield the operator from
terminal emissions, and pen-interface electronic devices.

    Appliance Products.  A relatively new product line at the
Company, this group manufactures a variety of unique, attractive,
modular glass shelves for refrigerators.  These shelves make use of
Company's extensive plastic molding and glass fabrication technologies
and are designed to contain spills.  On August 15, 1994, the Company
announced its intent to sell the appliance products product line to
Gemtron Corporation. See Item 1a.

    Heavy Truck Mirrors.  These exterior mirror systems are designed
for aerodynamic efficiency and are available with electrochromic
dimming features as well.  The solid-state electochromic coatings used
in this product reduce glare during both day and night driving
conditions.

    Optics.  A new focus at Donnelly, this small group is working to
commercialize low cost, high quality, advanced diffractive optics in
both automotive and non-automotive areas.  This unique new optics
development dramatically improves lighting and imaging systems.

    Non-consolidated Joint Ventures    

    Donnelly Applied Films Corporation "DAFC".  DAFC is a major
manufacturer of thin-film glass coatings used in the production of
liquid crystal displays (LCDs).  LCDs are widely used in watches,
games, calculators, and instrumentation.  DAFC is located in Boulder,
Colorado.

    Donnelly Yantai Electronics Corporation, Ltd.  This venture
produces glass coatings similar to those of DAFC for use in the
domestic Chinese LCD market.  This operation is located in the Yantai
Peninsula of the People's Republic of China.  Ownership of the Joint
Venture will transfer to DAFC by the end of fiscal 1995.

    OSD Envizion Company.  OSD Envizion produces electronic lenses
for welding helmets using high speed, liquid crystal technology.  The
lense changes from light to dark in only millionths of a second to
protect the eyes of the user.  This product reduces fatigue, improving
quality and safety.  OSD Envizion is located in Menlo Park,
California.

    VLSI Vision Limited "VVL".  The Company is working in partnership
with VVL to produce electronic vision systems for the world automotive
industry using an innovative video microchip.  The Company and VVL
have been collaborating to produce "smart" chips which can perform a
variety of functions in a vehicle including control of advanced mirror
systems, video displays, lighting control, and even security devices. 
VVL is located in Edinburgh, Scotland.

Marketing Staff

    In the United States, the Company markets its automotive products
through a sales force of approximately 31 people, who with
approximately 91 members of the Company's engineering staff, work with
its customers' design teams early in the design process.  Sales of
interior and exterior mirror glass are generally to mirror 
manufacturers while sales of the Company's other automotive products
are generally to automakers.

    The Company's Irish subsidiary employs 9 sales people including
one based in Japan, and also sells through a trading company in
Japan.

    The Company markets its non-automotive products through a sales
force of 6 sales people and 15 engineers.  The Company works with
potential customers on the development of new applications for
electronic information display products.

New Product or Industry Segment Information

       On June 7, 1994, the Company announced that it has entered into
a joint venture with Happich Group of Germany to manufacture and
market new automotive interior sunscreen systems, grab handles and
other interior trim components for North American automotive
customers.  The companies also plan to expand their relationship to
supply new technology for the European automotive market.  The joint
venture, entitled Donnelly Happich Technologies, Inc., will initially
operate in a facility owned by the Company located in Holland,
Michigan.

    In June 1994, Donnelly acquired 100% of the outstanding stock of
an Irish company that primarily supplies complete exterior mirrors to
Honda of Europe and Range Rover.  The new company has been renamed Donnelly
Vision Systems Europe, Ltd.  This acquisition had no material effect
on the consolidated financial statements of the Company.
    
    The Company is committed to its Variable Light Control (VLC)
Technology.  These technologies allow the user to control the flow of
light through, or the reflection of, light from glass. 

    The Company has made significant investments in the development
of solid-state, thin-film electrochromic technology that has potential
for mirror and window applications.  Electrochromic coatings allow the
user to darken glass to the desired degree through the application of
an electrical current to the coating.  The initial application of
solid-state, thin-film coatings is being made in the production of
dimmable mirrors for the heavy truck industry.  

     The Company continues to market electrochromic day/night
automotive mirror systems which will automatically dim when headlights
approach from the rear.  This system has been the subject of
litigation between the Company and Gentex Corporation for over four years.
See Item 3.  In March, Gentex's final outstanding patent suit against the
Company was dismissed in Federal Court in Grand Rapids, Michigan.  In
its decision dismissing this suit, the Court found that the Company's
POLYCHROMIC(tm) electrochromic technology does not infringe the patent
asserted by Gentex's patents.  Apart from Gentex appeal of this ruling
there are no lawsuits outstanding by Gentex against the Company. 
However litigation by the Company against Gentex is scheduled for
trial in October, 1995.  See Item 3.  
    
    The Company has continued to actively develop newer and more
advanced electrochromic technologies for the automotive marketplace. 
We have developed or licensed a number of promising technologies and
several are already available for commercial use.   Electrochromic
mirror systems are electrically dimmable to reduce the glare from the
headlights of other cars (approaching from the rear). 

    The Company's GLAREFREE(tm) electrochromic mirror technology
offers several advantages over competing technology.   It has already
been purchased by Ford, Jaguar, Range Rover, and others.  The Company
believes that the recent court decision, combined with the Company's
new technology advances, has now opened this marketplace to
competition.

    The Company has not otherwise made any public announcements of,
or otherwise made public information about, a new product or industry
segment which would require the investment of a material amount of the
Company's assets or which otherwise would be material.

Sources and Availability of Raw Materials

    Generally, the Company has multiple sources of supply for the
important materials and components used in its products.  Where the
Company uses one source for an important material, it believes
alternative sources are available or could be readily developed.

Patents, Licenses, Etc.

    While the Company owns over 130 patents and considers them
important, the Company as a whole is not dependent to any material
extent upon any single patent or group of patents.  The Company
believes its manufacturing know-how, design of its own manufacturing
equipment and development of manufacturing processes are more
important than its patents.  Certain technology of the Company is the
subject of patent litigation.  See Item 3.

    The Company has licensed certain of its own patents and
technology and has licenses under certain third party patents and
technology.

Seasonal Nature of Business

    The Company's net sales and net income are subject to significant
quarterly fluctuations.  These fluctuations are attributable primarily
to customer shipment schedules which are tied to the production
schedules of the Company's major automotive customers.  The Company
generally reports lower net sales and net income in the first half of
its fiscal year than in the second half because domestic automotive
production is generally lower during the first two quarters of the
Company's fiscal year. 

Working Capital Practices

    The Company does not believe that it, or industries which it
serves in general, have any special practices or special conditions
affecting working capital items that are significant for an
understanding of the Company's business.

Importance of Limited Number of Customers

    In fiscal 1994 approximately 75% of the Company's net sales were
to the following major U.S. automobile manufacturers:

    Ford Motor Company                   24%
    General Motors Corporation           21%
    Chrysler Corporation                 18%
    Honda of America Mfg., Inc.          12%

    Total                                75% 
                                            
    The loss of any one of these customers would have a material
adverse effect on the Company.  

Backlog of Orders

    As of July 2, 1994, and July 3, 1993, the Company's backlog of
orders was approximately $73 million and $60 million respectively. 
The Company believes that all of its existing backlog will be
delivered during the current fiscal year.  The Company generally sells
to automakers on the basis of long-term purchase contracts or one-
year purchase orders, which generally provide for releases for
approximately 30 to 90 days of production.  Unshipped products under
these releases and short-term purchase orders constitute the Company's
backlog.

Government Contracts

    The Company does not believe that any portion of its business is
subject to renegotiation of profits or termination of contracts or
sub-contracts at the election of the government.

Competition

  Automotive Products

    Competition in the markets for the Company's automotive products
is based on manufacturing capabilities, design, quality and price. 
The Company believes that its historical emphasis on research and
development and on product design, as well as its high quality ratings
and close working relationships with its customers, are important
competitive factors for the Company.  Its international experience and
relationships are also significant competitive factors in the
increasingly globalized market.  A number of the Company's competitors
are divisions or subsidiaries of larger corporations, including
vertically integrated glass companies, with greater financial
resources than the Company and with well-established relationships
with automakers.  Changing technology and design, and modularization
capabilities to improve product function and lower costs will continue
to place pressure on the Company to be a cost competitive producer of
quality, functional automotive products, or lose market share and
growth opportunities to competitors who meet these demands.

    Automotive Vision.  The level and nature of competition involving
the Company's automotive vision products are varied.

    Interior Rearview Mirrors.  Competition in the U.S. market for
interior rearview mirror assemblies and rearview mirror glass is
limited.  The Company knows of three competitors in the U.S. market:
one in the market for base interior rearview mirror assemblies, and
two in the added-feature mirror market (electrochromic and lighted
mirrors).  The Company has developed extensive skills and know-how in
mirror glass and interior rearview mirror assembly manufacturing.  The
Company for many years has sold interior mirror glass to Japanese
rearview mirror suppliers and now supplies interior rearview mirror
assemblies to the U.S. facilities of Japanese automakers, a Korean
automaker, and joint ventures between Japanese and U.S. automakers.

The Company has several potential competitors for interior mirror
glass sales in Japan.

    The Company has one competitor in the U.S. market for automatic
interior electrochromic mirrors.  The Company and that competitor have
been involved in patent litigation with respect to certain aspects of
electrochromic technology.  The litigation has had an adverse impact
on the Company's ability to market interior electrochromic mirrors in
the United States and Europe.  See Item 3.

    Several other companies market interior mirror glass in Europe.

The Company believes each has a smaller market share than the Company. 
In Europe, the Company competes with several other manufacturers of
interior rearview mirror assemblies, including some companies with
greater financial resources.

    Exterior Rearview Mirrors.  Approximately twelve U.S. companies
manufacture exterior mirror assemblies for sale in the U.S. market,
although fewer companies compete in the market for the type of painted
assemblies currently made by the Company.  The Company entered the
exterior mirror assembly market in fiscal 1988.  The Company has many
competitors, both in the United States and worldwide, in the sale of
exterior mirror glass.

    The Company and one competitor in the U.S. market have been
involved in patent litigation with respect to certain aspects of
automatic exterior electrochromic mirrors.  The litigation has had an
adverse impact on the Company's ability to market exterior
electrochromic mirrors in the United States and Europe.  See Item
3.

    Interior Lighting and Trim.  There are many competitors in the
market for interior lighting and trim products.  The Company believes
its close customer relationships, program management, design
capabilities, basic materials knowledge and plastic injection molding
capabilities are significant competitive factors.

    Modular Windows.  The Company has many competitors in the
domestic modular window market. Three competitors are major automotive
glass manufacturers or are closely associated with automobile or glass
manufacturers.  The Company believes that other glass manufacturers
could vertically integrate into glass molding and that these companies
would be significant competitors due to their size.  

  Electronic Information Display Products

    The Company believes it is the world's leading producer of coated
bent glass for the CRT-based electronic display and interactive
systems market.  Competition in this segment is based on service,
quality and price.

Research and Development

    The Company engages in extensive research and development.  It
believes its technical capabilities have resulted in the development
of new and improved products.  

    In fiscal 1994, 1993, and 1992, research and development
expenditures were $21,362,000, $15,889,000, and $14,175,000,
respectively, or 6.3%, 5.3%, and 5.2% of the Company's total net sales
for those years.  While the Company has an active corporate research
and development group, approximately 80% of the Company's total
research and development expenditures is product specific and
conducted by the Company's product engineers.  Corporate research and
development work is facilitated by advanced technology labs located
in Holland, Michigan, and in Tucson, Arizona, where the Company
maintains a close linkage with the faculty and students of the
University of Arizona, and in Naas, Ireland.

Human Resources

    The Company believes its human resources is one of its
fundamental strengths.  The Company currently has approximately 2,750
employees in its Michigan, Arizona, Tennessee, Kentucky, Ireland, and
Mexico facilities.  Its domestic work force is non-union.  The Company
considers its relationship with its employees to be favorable.

    The Company's Irish work force is unionized, as are the work
forces of most companies in Ireland.  The Company has no collective
bargaining agreement in Ireland, where non-economic terms of
employment are governed by statute.  The Company negotiates wages and
benefits approximately annually with its Irish work force.

    The Company has operated for over forty years under a
participative management system.  The Company believes that this
approach has increased productivity by emphasizing individual employee
opportunity and participation both in the operating decisions and in
the Company's profitability.  Furthermore, the Company believes this
emphasis has resulted in enhanced long-term productivity, cost control
and product quality and has helped the Company attract and retain
capable employees.

ITEM 1(d) Information About Foreign Operations

    During the last fiscal year, approximately 5% of combined
consolidated net sales were derived from the operations of the
Company's wholly-owned Irish subsidiary, Donnelly Mirrors Limited
("DML").  (Sales of DML consisted entirely of automotive vision
products.)  Approximately 7% of combined consolidated net sales were
derived from export shipments from the Company's United States
operations to customers in foreign countries.  The Company has
licensed major automotive glass companies in Europe and Japan to
manufacture modular windows for sale in foreign markets using the
Company's technology. 

    Export revenues are foreign revenues produced by identifiable
assets located in the United States.  Foreign revenues are generated
by identifiable assets located at the Company's Irish subsidiaries
which produce automotive products.  A summary of the Company's
operations by geographic area follows:
<TABLE>
<CAPTION>
(in thousands)  Year ended         1994       1993       1992
<S>                               <C>       <C>        <C>
Revenues:
United States                     $296,226  $253,631   $207,724
Foreign                             18,367    23,065     20,960
Export:
Americas                            21,557    22,153     21,085
Asia                                   310       400     19,118
Europe                                 785       895      1,889
Other                                   17       783        623
Subtotal                          $337,262  $300,927   $271,399
</TABLE>

The Company's export shipments decreased substantially in fiscal 1993
due to the creation of the DAFC joint venture.  See item 1(b).  
<TABLE>
<CAPTION>
(in thousands) Year ended            1994      1993      1992
<S>                               <C>        <C>       <C>
Operating Income (Loss):
United States                      $16,397    $16,962   $13,634
Foreign                             (3,276)      (904)     (742)
Subtotal                           $13,121    $16,058   $12,892
Identifiable Assets:
United States                     $165,172   $125,465  $114,102
Foreign                             18,629     14,375    17,127
Total                             $183,801   $139,840  $131,229
</TABLE>
    Fluctuating exchange rates and other factors beyond the control
of the Company, such as tariff and foreign economic policies, may
affect future results of the Company's foreign operations.

ITEM 2.  PROPERTIES

    The company owns or leases facilities which are located
throughout the United States, Ireland, and Mexico.  The location,
square footage, and use of the most significant facilities at
August 31, 1994, were as follows: 

LOCATION
Owned Locations             Square Footage         Use
Holland, Michigan            1,043,000             Manufacturing,
                                                   Warehouse, and Office
Grand Haven, Michigan          127,000             Manufacturing,
                                                   Warehouse, and Office
Mt. Sterling, Kentucky          37,000             Manufacturing,
                                                   Warehouse, and Office
Naas, Ireland                   84,000             Manufacturing,
                                                   Warehouse, and Office
Manorhamilton, Ireland          21,600             Manufacturing,
                                                   Warehouse, and Office
Leased Locations 
Mt. Pleasant, Tennessee         50,000             Manufacturing,
                                                   Warehouse, and Office
Leased Office and Warehouses
(7) Holland and Detroit,
Michigan; Tucson, Arizona;
and Tokyo, Japan               105,000             Warehouse and Office

    The Company believes its facilities are modern, well-maintained
and adequately insured.  Because of its rapid growth in sales the
Company is continually evaluating the need for additional office,
manufacturing and warehouse space.

  As of July 2, 1994, the Company had capital expenditure purchase
commitments outstanding of approximately $15 million.

ITEM 3  LEGAL PROCEEDINGS

    Patent Litigation.  Certain electrochromic mirror technology of
the Company has been the subject of patent litigation between the
Company and Gentex Corporation ("Gentex").  The Company entered into
a settlement agreement with Gentex on May 20, 1993.  Under this
agreement the Company paid a total of $3.6 million in satisfaction of
Gentex's claims for damages in the lawsuits.  Following this
settlement, Gentex filed another lawsuit against the Company on June
7, 1993.  In this suit, Gentex alleged that the Company's solid
polymer film electrochromic mirror infringed one of the Gentex patents
involved in the prior litigation and that the Company has violated the
injunction entered by the court in the previous litigation.  Gentex
sought unspecified damages and an injunction against further alleged
infringement by the Company.  On March 21, 1994, the Company's motion
for summary judgement of non-infringement was granted and the lawsuit
was dismissed.  Gentex has filed an appeal of this ruling, and no
decision is expected on this until 1995.  

    The Company's lawsuit against Gentex, filed on July 8, 1993,
remains outstanding.  In this suit, the Company has alleged that
Gentex's lighted electrochromic mirror infringes three of the
Company's patents and that all of Gentex's electrochromic mirrors
infringe a fourth patent owned by the Company.  The Company is seeking
unspecified damages and an injunction against further infringement by
Gentex.  Pretrial discovery is being conducted in this action, and a
trial has been scheduled to begin in October 1995.  The Company has
filed a motion seeking a preliminary injunction against further
infringement of one of its patents pending final resolution of the
lawsuit.  Gentex has filed a motion for summary judgement that the
patent in question is invalid.  Neither of these motions has yet been
decided by the court.

    Other Litigation.  The Company and its subsidiaries are involved
in certain other legal actions and claims, including environmental
claims, arising in  the ordinary course of business.  Management
believes (based on advice of legal counsel) that such litigation and
claims will be resolved without material effect on the Company's
financial position.

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of security holders during
the fourth quarter of the fiscal year ended July 2, 1994.

                             PART II.

ITEM 5  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS

    The Common Shares are traded on the American Stock Exchange under
the symbol DON.  The following table sets forth for the fiscal periods
indicated the high and low sale prices of the Common Shares, as
reported by the American Stock Exchange, and dividends declared per
share.
<TABLE>
<CAPTION>
                               
Fiscal     1994      1994    Dividends
Quarter    High       Low    Declared
<S>      <C>       <C>      <C>                     
First    $21 3/4   $18 3/4    $ .08  
Second    20 3/8    18 1/2      .08
Third     20 1/4    14 1/8      .08
Fourth    16 1/2    14 3/8      .08  
</TABLE>
<TABLE>
<CAPTION>                                     
Fiscal     1993      1993    Dividends
Quarter    High       Low    Declared                     
<S>      <C>        <C>     <C>
First    $20        $14 5/8   $ .07 
Second    17 3/4     13 1/4     .07
Third     20 3/4     16 3/4     .07
Fourth    20 5/8     15 7/8     .07     
</TABLE>
As of August 31, 1994, the Company had approximately 1,100 holders of
record.

ITEM 6  SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                   1994       1993       1992       1991       1990
<S>              <C>        <C>       <C>         <C>        <C>
Net sales        $337,262   $300,927  $271,399    $232,841  $213,086
Gross profit       73,632     68,910    60,752      48,812    42,411
Operating
income             13,121     16,058    12,892       7,615     5,851
Income before
taxes on income    11,008     10,936    10,805       5,746     1,895
Income from
continuing
operations          6,745      7,257     6,893       4,168     2,337
Income from
continuing
operations per
common share         0.87       0.94      0.98        0.59      0.33
Dividends
declared per
common share         0.32       0.28      0.24        0.22      0.22
Total assets      183,801    139,840   131,229     121,404   128,670
Debt including
current
maturities         53,485     33,765    24,882      41,343    48,685
Redeemable
preferred stock       531        531       531         531       531
Shareholders'
equity (total)     70,826     65,546    61,158      42,930    41,083
</TABLE>

ITEM 7  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND 
FINANCIAL CONDITION 

RESULTS OF OPERATIONS

General

    Donnelly's net sales and net income are subject to significant
quarterly fluctuations attributable primarily to production schedules
of the Company's major automotive customers.  These same factors cause
quarterly results to fluctuate from year to year.  

Comparison of 1994 to 1993

    Donnelly's sales increased 12.1% to $337.3 million in 1994, from
$300.9 million in 1993. North American automotive production increased
9% over the same period.  Sales growth occurred despite flat or
declining pricing.  A primary contributor of the sales growth was new
complete exterior mirror business for both Ford and Mazda which began
in the last half of 1994.  Strong demand for modular windows,
especially at Ford and Chrysler, is continuing to boost sales. 
Interior mirror sales increased in North America, helping to offset
the negative sales impact caused by the European recession.  Sales
increases  of interior systems, information products and appliance
products also helped the Company's sales increase outpace automotive
production.

    Gross profit margin decreased to 21.8% of sales in 1994, from
22.9% in 1993.  This decrease resulted from: the European recession's
impact on Donnelly Mirrors, Ltd. (DML) an Irish subsidiary; start-up
costs associated with new complete exterior mirror production
including a second shift paint operation; and business units
undergoing significant transition costs, including the exterior mirror
glass move to Mexico and the interior mirror consolidation into a new
facility in Western Michigan.  Improved operating results from the 
interior mirror and exterior mirror glass business transitions should
begin in 1995 and be completed by the end of 1996.  Customer price
pressure continues.  However, the Company is committed to a
company-wide continuous improvement program which is expected to
reduce its costs.

    Selling, administrative and general expenses were  $38.0 million
or 11.3% of sales in 1994, a decrease from 12.3% in 1993.  Patent
litigation costs were significantly lower than last year.

    Research and development expenses were 6.3% of sales in 1994
compared to 5.3% in 1993.  The increase is primarily the result of
significant development costs to support new business for Ford and
Mazda complete exterior mirror systems in model years 1995 and beyond,
along with the new Chrysler minivan modular window business slated for
start-up in late 1995.  The Company anticipates research and
development expenses as a percentage of sales will return to prior
ranges as revenues are generated from this new business.

    As a result of the European recession, a restructuring charge of
$1.2 million was recognized in the fourth quarter of 1994 to cover a
severance program and other expenses associated with the restructuring
of DML.

    Interest expense increased to $3.5 million in 1994, from $3.2
million in 1993.  Lower interest rates helped to offset the impact of
higher borrowing levels to support increased capital spending.

    Minority interest in net income of subsidiary was $0.8 million in
1994 compared to $0.7 million in 1993.  D&A Technology Inc. (D&A)
showed solid performance again this year and is expected to remain
strong in 1995.  However, replacement business for D&A, beginning in
1996, has not been booked and an evaluation regarding the future of
this business is being made.  D&A currently represents 6% of the
Company's combined consolidated sales.

    Equity in earnings of affiliated companies decreased to a $0.1
million loss in 1994, compared to $0.6 million of income in 1993. 
This was due to a downturn in the demand and price reductions for
coated glass used in liquid crystal displays, which is supplied by
Donnelly Applied Films Corporation (DAFC).  This market appears to be
improving.

    The Company had net income in 1994 of $7.3 million, compared to
$7.9 million last year.  Higher sales resulting from increased North
American automotive production and new complete exterior mirror
business, lower general and administrative expenses as a
percent-of-sales, tax benefits associated with adopting SFAS 109 and
retroactively reinstated research and development tax credits
resulting from the new tax act helped to offset a number of
unfavorable items, including:  1) a deep and prolonged recession in
Europe along with a restructuring charge which impacted DML; 2)
increased research and development expenditures to support new
complete exterior mirror and modular window programs and no offsetting
revenues; 3) increased competition, volatile pricing and a downturn
(apparently short-term) in the demand for coated glass used in liquid
crystal displays; and 4) increased postretirement health care costs
associated with the adoption of SFAS 106.  1993 also included the $3.6
million patent settlement.

Comparison of 1993 to 1992

    Donnelly's sales and earnings set records in 1993 in spite of
costly patent litigation and settlement charges.  Sales were $300.9
million in 1993, an increase of 10.9% over sales of $271.4 million in
1992.  The increase was reduced by the impact of the transfer of the
Company's display coatings business to DAFC, a joint venture formed
in May 1992.  Because DAFC's financial statements are not consolidated
with those of the Company, sales of DAFC were not included in the
Company's reported sales for 1993.  Sales increased 20.6% if display
coatings sales were also excluded from 1992 reported sales.  North
American automotive production increased 8.2% during this same period. 
The increase in sales resulted from the increase in automotive
production and strong sales of modular window systems particularly for
the S-10 Blazer, Saturn, Taurus, Aerostar and Jeep Grand Cherokee
programs.  

    Gross profit margin increased to 22.9% in 1993, from 22.4% in
1992.  Operational improvements and higher sales volumes, especially
in modular windows helped offset price pressures in the automotive
industry.  

    Selling, administrative and general expenses of $37.0 million
increased to 12.3% of sales in 1993, from 12.1% of sales in 1992. 
This increase occurred due to the high level of legal expenses
compared to 1992.  Without the excessive legal charges these expenses
would have decreased as a percentage of sales. 

    Research and development expenses remained consistent with those
in 1992, at 5.3% of sales.  

    Interest expense decreased in 1993 to $3.2 million from $3.5
million in 1992.  Lower interest rates along with lower borrowing
levels on average both favorably impacted performance in 1993.  Lower
debt levels throughout 1993 resulted from the Company's common stock
offering in May of 1992 and the transfer of $6.8 million of debt to
DAFC.

    Royalty income was $1.7 million in 1993, compared to $1.2 in
1992.  The increase primarily resulted from increased automotive
production in 1993.  The Company paid $3.6 million in patent
litigation settlements in 1993, which significantly impacted financial
performance for the year.  

    Minority interest in net income of subsidiary of $0.7 million in
1993 compared to $0.03 million in 1992 resulted from improved
performance at D&A. This improvement primarily resulted from higher
sales volumes due to strong Saturn sales and production.  The Company
was also able to take advantage of a tax benefit associated with prior
operating losses at D&A which were incurred during start-up.  The
benefit from utilizing the loss carryforward was recognized as an
extraordinary item and had an income effect of $0.6 million in 1993
compared to $0.2 million in 1992.  

    Equity in earnings of affiliated companies increased to $0.6
million in 1993 primarily as a result of DAFC's performance.

    The Company had record net income of $7.9 million in 1993,
compared to $7.1 million in 1992.  Increased sales volumes and
improvements in operations offset higher patent litigation and
settlement costs and customer price reductions.

ACQUISITION

    In June 1994, Donnelly acquired 100% of the outstanding stock of
an Irish company that primarily supplies complete exterior mirrors to
Honda of Europe and Rover.  The company has been renamed Donnelly
Vision Systems Europe, Ltd. This acquisition had no material effect
on the combined consolidated financial statements of the Company.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's current ratio was 1.7 at July 2, 1994 and 2.0 at
July 3, 1993.  Working capital was $36.4 million at July 2, 1994,
compared to $33.8 million at July 3, 1993.  This increase included
higher customer tooling to be billed to support new programs,
increased accounts receivable and inventories due to higher sales
levels and assets included in the Irish acquisition.

    Capital spending levels increased to $35.3 million in 1994, from
$17.0 million in 1993 and $9.9 million in 1992.  Capital expenditures
in 1994 supported a number of major programs throughout the Company. 
Many of these will not be completed until 1995.  A wide range of
expansion activities occurred in the modular window and complete
exterior mirror areas to support new business programs.  A new
redesigned manufacturing facility for interior mirrors will
consolidate operations from three other facilities to improve
productivity.  A new facility was also constructed in Mexico to
relocate and consolidate the production of exterior mirror glass,
currently being produced in three separate facilities.

    The Company expects its 1995 capital expenditures will remain
high to support further expansion of both building and equipment for
modular windows (including a new operation in France) and complete
exterior mirrors; completion of the interior mirror transition; and
other capital needed to meet future business commitments.  The Company
expects to finance this growth with its current revolving credit
agreement and new senior notes of $15.0 million issued with an
insurance company early in fiscal 1995.  The notes have a four month
delayed takedown with principal payments commencing in fiscal 2000
until maturity in fiscal 2005.

FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) ISSUES

    Effective July 4, 1993, the Company adopted SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," as
explained in Note 6 to the combined consolidated financial statements. 
The impact of adopting this change increased postretirement health
care costs by $1.1 million in 1993.

    Effective July 4, 1993, the Company adopted SFAS 109, "Accounting
for Income Taxes," as explained in Note 7 to the combined consolidated
financial statements.  This change favorably effected earnings by $0.5
million, which is reported separately in the combined consolidated
statements of income.

    No other recently adopted or issued FASB statements have or are
expected to have a material impact on the Company.

SUBSEQUENT EVENT

    On August 15, 1994, the Company announced an agreement to sell
its appliance products business to Gemtron Corporation.  This segment
represented approximately 1% of combined consolidated net sales of the
Company in fiscal 1994.  Closing of the sale is expected to occur by
October 1, 1994.  While final proceeds have not yet been determined,
it is expected that the transaction will include a cash price payable
at closing resulting in a net gain of less than $5 million and a
royalty payment over each of the next two years.


ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT SHARE DATA          July 2,      July 3,      June 27
       Year ended                         1994         1993         1992
<S>                                    <C>          <C>          <C>
Net Sales                              $337,262     $300,927     $271,399
Cost of sales                           263,630      232,017      210,647
    Gross profit                         73,632       68,910       60,752
Operating expense
Selling                                   6,194        5,634        4,964
Administrative and general               31,771       31,329       27,811
Research and development                 21,362       15,889       14,175
Restructuring charges                     1,184                       910
Total operating expenses                 60,511       52,852       47,860
    Operating income                     13,121       16,058       12,892
Non-operating expenses (income):
Interest expense                         3,528        3,216         3,506
Royalty income                           (1,370)      (1,681)      (1,238)
Patent settlement                                      3,600
Other income, net                           (45)         (13)        (181)
Non-operating expenses                    2,113        5,122        2,087
    Income before taxes on income        11,008       10,936       10,805
Taxes on income                           3,334        3,571        3,889
    Income before minority
    interest and equity earnings          7,674        7,365        6,916
Minority interest in net income
of subsidiary                              (825)        (741)         (26)
Equity in earnings (loss) of
affiliated companies                       (104)         633            3
Income before extraordinary gain
and cumulative effect of change
in accounting principle                   6,745        7,257        6,893
Tax benefit from utilization of
loss carryforward                                        595          189
Cumulative effect of adopting 
SFAS 109                                    513
Net income                               $7,258       $7,852       $7,082
Per share of common stock:
Income before extraordinary gain
and cumulative effect of change
in accounting principle                  $0.87        $0.94        $0.98
Tax benefit from utilization of
loss carryforward                                      0.08         0.02
Cumulative effect of adopting SFAS
109                                        0.07
Income per share of common stock          $0.94       $1.02        $1.00
</TABLE>

The accompanying notes are an integral part of these statements.

COMBINED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
In thousands, except share data            July 2,      July 3,  
                                            1994         1993   
<S>                                      <C>          <C>
Current assets:
Cash and cash equivalents                  $1,374        $1,214
Accounts receivable, less allowances of
$676 and $562                              47,303        39,226
Inventories                                19,976        15,049
Customer tooling to be billed              13,137         7,894
Prepaid expenses                            3,027         3,386
Deferred income taxes                         747           770
    Total current assets                   85,564        67,539
Property, plant and equipment
Land                                        3,342         2,067
Buildings                                  27,919        25,081
Machinery and equipment                    87,602        83,336
Construction in progress                   24,406         2,753
  Subtotal                                143,269       113,237
Less accumulated depreciation              51,898        47,318
    Net property, plant and equipment      91,371        65,919
Other assets                                6,866         6,382
    Total assets                         $183,801      $139,840
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                          $33,880       $22,819
Current maturities of long-term debt          347            77
Accruals:
Compensation                                7,007         5,405
Taxes                                       3,483         1,901
Postretirement plans                          582         1,067
Other                                       3,859         2,438
    Total current liabilities              49,158        33,707
Long-term debt, less current maturities    53,138        33,688
Postretirement plans                        4,778           605
Deferred income taxes and other             4,290         5,605
    Total liabilities                     111,364        73,605
Minority interest                           1,611           689
Shareholders' equity:
Preferred stock, 7 1/2% cumulative, $10
par:  chares authorized 250,000 issued
53,112                                        531           531
Common stocks:
   Class A, $.10 par; shares authorized
   30,000,000 issued 4,146,549 and
   4,126,472                                  415           413
   Class B, $.10 par; shares authorized
   15,000,000 issued 3,583,632                358           358
   Donnelly Export Corporation, $.01 par;
   shares authorized 600,000, issued
   409,561                                      4             4
Additional paid-in capital                 20,730        20,428
Cumulative foreign currency translation
adjustment                                   (640)         (869)
Retained earnings                          49,428        44,681
    Total shareholders' equity             70,826        65,546
    Total liabilities and shareholders'
    equity                               $183,801      $139,840
</TABLE>
The accompanying notes are an integral part of these statements.

COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
In thousands                       July 2,       July 3,       June 27,
                                    1994          1993          1992
<S>                               <C>           <C>           <C>
OPERATING ACTIVITIES
Net income                          $7,258        $7,852       $7,082
Adjustments to reconcile 
net income to net cash
provided by operating
activities: 
Depreciation and amortization        9,771         8,335        9,522
Deferred pension cost and
postretirement benefits              3,941           199          832
Deferred income taxes               (1,432)         (190)        (138)
Minority interest                      825           741           26
Equity in (earnings) loss of
affiliated companies                    28           (674)        (11)
Extraordinary gain                                   (595)       (189)
Cumulative effect of change in
accounting principle                  (513)
Changes in operating assets and
liabilities:
Accounts receivable                 (9,228)         3,866     (12,245)
Inventories                         (6,074)           910      (3,744)
Prepaid expenses and other
current assets                      (3,352)        (7,336)       (177)
Accounts payable and other 
current liabilities                 14,813         (4,206)      9,734
Other                                  375            606         535
    Net cash from operating
    activities                      16,412          9,508      11,227
INVESTING ACTIVITIES
Capital expenditures               (35,329)       (16,995)     (9,918)
Change in unexpended bond 
proceeds                             1,093         (1,206)        890
Other                                  847           (576)        (66)
    Net cash for investing 
    activities                     (33,389)       (18,777)     (9,094)
FINANCING ACTIVITIES
Proceeds from long-term debt        21,362         14,895     
Repayments on long-term debt<PAGE>
       (2,018)        (5,996)      (9,645)
Resources provided by minority
interest                                                          400
Common stock issuance                  304             554     11,444
Dividends paid                      (2,511)         (2,739)    (1,600)
    Net cash from financing
    activities                      17,137           6,714        599
Increase (decrease) in cash 
and cash equivalents                   160          (2,555)     2,732
Cash and cash equivalents, 
beginning of year                    1,214           3,769      1,037
Cash and cash equivalents, 
end of year                         $1,374          $1,214     $3,769
</TABLE>

The accompanying notes are an integral part of these statements.

COMBINED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                        Common Common Common
In           Preferred  Class  Class  Donnelly  Additional Cumulative  Retained
thousands,   Stock      A      B     Export    Paid-in      Foreign    Earnings
except                               Corp.     Capital     
Currency
share                                                    
Translation 
data                                                      
Adjustment
<S>           <C>       <C>    <C>    <C>      <C>         <C>        <C>
Balance,
July 1, 
1991          $531       $270  $287   $4       $8,644      $(494)     $33,688
Net income                                                              7,082
Foreign
currency
translation
adjustment                                                  1,450
Cash
dividends
declared:
Preferred
stock-$.75
per share                                                                (40)
Common
stock:
Class A-
 $.238
per share                                                               (854)
Class B-
 $.238
per share                                                               (854)
Issuance of
common stock
in a five
for four
stock split
in the form
of a 25
percent
stock
dividend                  68    71               (144)
Public
offering                  69                   11,273
Common stock
issued under
employee
benefit
plans                      1                      106
Balance,
June 27,
1992          531       408    358     4       19,879        956      39,022

Net income                                                             7,852
Foreign
currency
translation
adjustment                                                (1,825)
Cash
dividends
declared:                                                               (40)
Preferred
stock-$.75
per share                                                               (40)
Common
stock:
Class A-
$.28
per share                                                            (1,149)
Class B-
$.28
per share                                                            (1,004)
Common stock
issued under
employee
benefit
plans                   5                       549 
Balance,
July 3, 1993    531   413    358        4    20,428       (869)      44,681               
Net income                                                            7,258
Foreign
currency
translation
adjustment                                                 229
Cash
dividends
declared:
Preferred
stock-$.75
per share                                                               (40)
Common
stock:
Class A-
$.32 per
share                                                                (1,323)
Class B-
$.32 per
share                                                                (1,148)
Common stock
issued under
employee
benefit
plans                   2                        302

Balance,
July 2, 
1994        $531    $415   $358       $4     $20,730     $(640)     $49,428
</TABLE>

The accompanying notes are an integral part of these statements.
NOTES TO THE COMBINED CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination and Consolidation

    The combined consolidated financial statements include the
accounts of Donnelly Corporation, Donnelly Export Corporation and all
majority owned subsidiaries (the Company) after all significant
intercompany balances, transactions and shareholdings have been
eliminated.  Investments in 20% to 50% owned companies are accounted
for using the equity method of accounting.  

    Voting control of Donnelly Corporation and Donnelly Export
Corporation is vested in the same shareholders and the corporations
are under common management.  Because of these relationships, the
accounts of the two corporations are included in the financial
statements as if they were a single entity.

Foreign Currency Translation

    Assets and liabilities of the Company's foreign consolidated
subsidiaries are translated into U.S. dollars at exchange rates in
effect at the end of the period, while income and expenses are
translated at the average rates of exchange during the period. 
Translation adjustments are reported in a separate component of
shareholders' equity.  Other foreign currency transaction gains
(losses) included in net income were $(0.3) million, $0.2 million, and
$0.02 million for 1994, 1993, and 1992, respectively.

Cash and Cash Equivalents

    Cash equivalents include all highly liquid investments with a
maturity of three months or less when purchased.

Inventories

    Inventories are stated at the lower of cost or market.  Cost is
determined by the last-in, first-out (LIFO) method, except for
inventories of the majority owned subsidiaries which are valued at the
first-in, first-out (FIFO) method.

Property, Plant, and Equipment

    Property, plant and equipment are stated at cost.  Depreciation
is provided primarily by the sum-of-the-years-digits accelerated
method for property acquired prior to July 1, 1988, and the
straight-line method for property acquired after June 30, 1988. 
Depreciation is computed over the estimated useful lives of the assets
as follows:

                               Years
Buildings                     10 to 40
Machinery and equipment       3 to 12

    For tax purposes, useful lives and accelerated methods are used
as permitted by the taxing authorities.

Income Taxes

    Effective July 4, 1993, deferred taxes reflect the differences
between the financial statement and tax basis of assets and
liabilities.  Available tax credits are taken into income as
reductions of current income tax provisions.

Income Per Share of Common Stock

    Income per share is computed by dividing net income, adjusted for
preferred stock dividends, by the weighted average number of shares
of Donnelly Corporation common stock outstanding, as adjusted for
stock splits (7,716,923 in 1994, 7,686,104 in 1993 and 7,070,201 in
1992).

Fiscal Year

    The Company's fiscal year is the 52 or 53 week period ending the
Saturday nearest June 30.  Fiscal years 1994, 1993 and 1992 ended on
July 2, July 3 and June 27, respectively, and included 52 weeks, 53
weeks and 52 weeks, respectively.

Reclassifications

    Certain reclassifications have been made to prior year data to
conform to the current year presentation.  

2.  INVENTORIES

Inventories consist of:
<TABLE>
<CAPTION>
In thousands                        1994          1993 
<S>                               <C>           <C>
LIFO cost:
Finished products and work
in process                        $ 9,836        $ 7,840
Raw materials                       6,781          5,256 
Subtotal                          $16,617        $13,096

FIFO cost:
Finished products and work
in process                          1,915          1,345
Raw materials                       1,444            608
Subtotal                            3,359          1,953
TOTAL                             $19,976        $15,049
</TABLE>

   If only the first-in, first-out method of inventory valuation had
been used, inventories would have been $0.6 million and $0.9 million
higher than reported at July 2, 1994 and July 3, 1993, respectively,
and would have approximated replacement cost.

3.  DEBT

Debt consists of:
<TABLE>
<CAPTION>
In thousands                        1994           1993 
<S>                               <C>             <C>
Borrowings under revolving
credit agreements at 4.94%        $18,800          $11,200
Senior Notes, due fiscal
2004, principal payable in
installments beginning in
fiscal 1999, interest at
6.67%                              15,000
Industrial revenue bonds:
$9,500 at adjustable rates
(3.1% at July 2, 1994), due
in fiscal 2008-2010; $5,000
at a fixed rate of 8.13%,
due in fiscal 2012                 14,500           14,500
Senior Notes, due fiscal
1997, principal payments
payable semiannually,
interest at 9.01%                   3,636            5,872
Other                               1,549            2,193
Total                              53,485           33,765
Less current maturities               347               77
Total                             $53,138          $33,688
</TABLE>
   The Company has a $55 million Revolving Credit Agreement which
expires July 16, 1997.  Interest is at prime unless one of three
alternative elections are made by the Company.  It is the Company's
intent to refinance Senior Notes with the revolving credit
agreement.

    The $9.5 million industrial revenue bonds are secured by letters
of credit which must be renewed annually.  All industrial revenue
bonds are collateralized by the purchased land, building and
equipment.

    Early in fiscal 1995, the Company issued a $15 million note at an
interest rate of 7.22% with an insurance company.  The note has a four
month delayed takedown with principal payments commencing in fiscal
2000 until maturity in fiscal 2005.

    The various borrowings subject the Company to certain
restrictions relating to, among other things, minimum net worth,
payment of dividends and maintenance of certain financial ratios. 
Retained earnings available for dividends at July 2, 1994, are $17.4
million.

Annual principal maturities consist of:
<TABLE>
<CAPTION>
Year Ending      In thousands         Amount 
<S>                                 <C>
1995                                 $   347
1996                                     159
1997                                      19
1998                                   8,360
1999                                   1,788
2000 and thereafter                   42,812
 Total                               $53,485
</TABLE>
    The Company has interest rate swap agreements which convert a
total of $20 million of variable interest rate debt to fixed interest
rates averaging 8.38%.  These agreements expire in fiscal 1998 and
1999.  Net payments or receipts under these agreements are included
in interest expense.

    The Company also provides a guarantee for up to $7 million of
DAFC's borrowings.  This guarantee will be gradually eliminated by the
end of 1996.

    Interest payments of $3.7 million, $3.3 million and $3.9 million
were made in 1994, 1993 and 1992, respectively.

4.  PREFERRED STOCK AND COMMON STOCK

    Each share of 7 1/2% cumulative preferred stock is entitled to
one vote for the election of the members of the Board of Directors not
elected by the holders of Class A Common Stock, and all other matters
at all shareholders' meetings whenever dividend payments are in
arrears for four cumulative quarters.  No arrearage existed at July
2, 1994.  The preferred stock is redeemable in whole or in part, if
called by the Company, at $10.50 per share.  There are 1,000,000
authorized shares of series preferred stock, no par value.  At July
2, 1994 and July 3, 1993, no series preferred stock was
outstanding.

    Each share of Class A Common Stock and Class B Common Stock is
entitled to one vote and ten votes, respectively, at all shareholders'
meetings.  The holders of Class A Common Stock are entitled to elect
one-quarter of the members of the Board of Directors.  The remaining
directors are elected by the holders of Class B Common Stock and any
preferred stock entitled to vote.

5.  STOCK PURCHASE AND OPTION PLANS

    The Company's Employees' Stock Purchase Plan permits the purchase
in an aggregate amount of up to 437,800 shares of Class A Common
Stock.  Eligible employees may purchase stock at market value, or 90%
of market value if the price is $8 per share or higher, up to a
maximum of $5,000 per employee in any calendar year.  The Company
issued  19,677 shares in 1994, 18,526 shares in 1993 and 10,299 shares
in 1992 under this plan.

    The Company's Stock Option Plans permit the granting of either
nonqualified or incentive stock options to certain key employees and
directors to purchase in an aggregate amount of up to 862,500 shares
of the Company's Class A Common Stock.  The options, which become
exercisable twelve months after date of grant, expire after ten years
from date of grant.  Although the plan administrator may establish the
nonqualified option price at below market value at date of grant,
incentive stock options may be granted only at prices not less than
the market value.

    Options have been granted to purchase common stock at prices
ranging from $9.20 to $20.125 per share.  A summary of option
transactions follows:
<TABLE>
<CAPTION>
In thousands  Year ended             1994     1993     1992
<S>                                  <C>      <C>      <C>
Options outstanding,
beginning of year                    283      247      186
Options granted                       79       65       62
Options exercised                     (1)     (29)      (1)
Options outstanding, end
of year                              361      283       247
Exercisable, end of
year                                 282      218       185
</TABLE>
    The Company has reserved 473,225 shares for future grants at July
    2, 1994.

6.  BENEFIT PLANS

    A.  Pension Benefits

        The Company sponsors defined benefit pension plans covering
substantially all employees.  Pension costs for the plans are funded
in amounts which equal or exceed regulatory requirements.  Benefits
under these plans are based primarily on years of service and
compensation.

        Assumptions and net periodic pension cost are as follows:
<TABLE>
<CAPTION>
In thousands  Year ended             1994      1993      1992
<S>                                <C>        <C>       <C>
Discount rate                        8.25%      8%        9%
Compensation increase                5.00%      5%        5%
Expected return on plan
assets                               9.50%      10%       10%
Service cost                        $3,178     $2,417    $2,330
Interest cost                        3,912      3,259     2,807
Actual return on plan
assets                                (854)    (3,863)   (2,940)
Net amortization and
deferral                            (2,292)       737       213
Total                               $3,944     $2,550    $2,410
</TABLE>

    The increase in the net periodic pension cost in 1994 was
primarily due to the change in the discount rate.

    The funded status of the defined benefit pension plans is
summarized below.
<TABLE>
<CAPTION>
In thousands                           1994        1993
<S>                                  <C>          <C>
Accumulated benefit
obligation, including
vested benefits of
$31,466 and $27,885                  $(32,991)    $(29,576)
Effect of projected
compensation increases                (19,785)     (15,951)
Projected benefit
obligation for service
rendered to date                      (52,776)     (45,527)
Plan assets at fair
value, primarily
corporate equity and
debt securities                        39,565       37,700
Projected benefit
obligation in excess of
plan assets                           (13,211)      (7,827)
Unrecognized net
transition obligation                     589          684
Unrecognized prior
service cost                              237          196
Unrecognized net loss                   9,048        5,990
Net pension obligation               $ (3,337)        (957)
</TABLE>

    B.  Postretirement Health Care Benefits

    The Company provides certain health care and life insurance
benefits for eligible active and retired employees.  The plan contains
cost saving features such as deductibles, coinsurance and a lifetime
maximum and is unfunded. 

    Prior to July 4, 1993, the cost of providing these benefits was
recognized as a charge to income in the period the claims were paid
and was $0.2 million in 1993 and 1992.  Effective July 4, 1993, the
Company adopted Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions."  This Statement requires the accrual, during the employee's
years of service, of the expected cost of providing those benefits to
an employee and the employee's beneficiaries and covered dependents. 
The net transition obligation represents the difference between the
accrued postretirement benefit costs prior to the adoption of SFAS No.
106 and the Plan's unfunded accumulated postretirement benefit
obligation as of July 4, 1993.  The net transition obligation of $7.9
million at July 4, 1993 will be amortized over 22 years.

   The components of the net periodic postretirement benefit cost
for the year ended July 2, 1994, are as follows:
<TABLE>
<CAPTION>
In thousands         Year ended         1994
<S>                                    <C>
Service cost                            $  388
Interest cost                              661
Amortization of net transition
obligation over 22 years                   360
Net periodic postretirement
benefit cost                            $1,409
</TABLE>

     The postretirement benefit liability recognized in the 1994
     balance sheet is as follows:
<TABLE>
<CAPTION>
In thousands         Year ended         1994
<S>                                    <C>
Retirees                                $5,722
Fully eligible active
participants                                32
Other active participants                4,185
Accumulated postretirement
benefit obligation                       9,939
Unrecognized transition
obligation                              (7,560)
Unrecognized net loss                   (1,254)
Postretirement health care
liability                                1,125
Less current portion                       444
Noncurrent liability                    $  681
</TABLE>

    The actuarial calculation assumes a health care inflation rate of
13% in 1994, declining uniformly to 6% in 2000, and remaining level
thereafter.  The health care cost trend rate has an effect on the
amounts reported.  Increasing the assumed health care inflation rate
by 1% would increase the accumulated postretirement benefit obligation
by $0.6 million, and the net periodic postretirement benefit cost for
the year by $40,000.  The weighted average discount rate used in
determining the accumulated postretirement benefit obligation was
8.25%.

    C.  Other Postemployment Benefits

        Effective July 4, 1993, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits."  The new rules require recognition of
specified postemployment benefits provided to former or inactive
employees, such as severance pay, workers compensation, supplemental
employment benefits, disability benefits and continuation of health
care and life insurance coverage.  Adoption of the new rules did not
have a material effect on the Company's 1994 net earnings or financial
position.

7. TAXES ON INCOME

    Effective July 4, 1993, the Company prospectively adopted
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes".  The cumulative effect of this
accounting change of $0.5 million is reported separately in the
combined consolidated statement of income.  Deferred income taxes
under SFAS No. 109 reflect the impact of "temporary differences"
between the amounts of assets and liabilities for financial reporting
purposes and the reserve amounts as measured by income tax laws.  The tax
effects of temporary differences which give rise to a significant
portion of deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
In thousands
   1994                          Amount
<S>                             <C>
Fixed asset                      $(4,382)
Retirement plans                   1,129
Postretirement benefits              394
Accrued expenses and other           633
Net deferred tax liability       $(2,226)
</TABLE>
<TABLE>
<CAPTION>
In thousands      Year ended       1994      1993      1992
<S>                               <C>       <C>       <C>
Income before taxes on
income consists of
Domestic                          $14,453   $12,027   $11,778
Foreign                            (3,445)   (1,091)     (973)
Total                             $11,008   $10,936   $10,805

Tax expense (benefits)
consist of:
Current:
Domestic                           $4,702     $3,763   $4,421
Foreign                               (16)        (2)     (84)  
Subtotal                            4,766      3,761    4,337
Deferred:
Domestic                           (1,101)       (96)    (537)
Foreign                              (331)       (94)     125  
Subtotal                           (1,432)      (190)    (448)
Total                              $3,334     $3,571   $3,889
</TABLE>

    The difference from the amount that would be computed by
applying
the federal statutory income tax rate to income before taxes on
income
is reconciled as follows:
<TABLE>
<CAPTION>
In thousands  Year ended            1994    1993     1992
<S>                                <C>      <C>      <C>
Income taxes at federal
statutory rate                       34%      34%      34%
Impact of:
Available tax credits               (11)               (2)
Foreign subsidiary
earnings                              7        3        3
DISC earnings                        (3)      (3)      (2)
Other                                 3       (1)       3
Effective tax rate                   30%      33%      36%
Income taxes paid                   $3,149   $3,926   $2,938
</TABLE>

    The Company recognized a $0.6 million and $0.2 million
extraordinary tax benefit in 1993 and 1992, respectively, from
utilization of the net operating loss carryforward relating to
previous start-up losses of D&A Technology, Inc.

    Deferred income taxes in 1993 and 1992 were provided for
significant timing differences in the recognition of revenue and
expenses for tax and financial statement purposes, principally
depreciation and pension costs.

    Cumulative undistributed earnings of the foreign subsidiary
amounted to $1.7 million and $5.1 million at July 2, 1994 and July 3,
1993, respectively, the majority of which is intended to be
permanently reinvested.

8.  COMMITMENTS AND CONTINGENCIES

    A.  Patent Litigation

    Certain electrochromic mirror technology of the Company has been
the subject of patent litigation between the Company and Gentex
Corporation ("Gentex").  The Company entered into a settlement
agreement with Gentex on May 20, 1993.  Under this agreement the
Company paid a total of $3.6 million in satisfaction of Gentex's
claims for damages in the lawsuits.  Following this settlement, Gentex
filed another lawsuit against the Company on June 7, 1993.  In this
suit, Gentex alleged that the Company's solid polymer film
electrochromic mirror infringed one of the Gentex patents involved in
the prior litigation and that the Company had violated the injunction
entered by the court in the previous litigation.  Gentex sought
unspecified damages and an injunction against further alleged
infringement by the Company.  On March 21, 1994, the Company's motion
for summary judgement of non-infringement was granted and the lawsuit
was dismissed.  Gentex has filed an appeal of this ruling, and no
decision is expected on this until 1995.  The Company has filed a
motion seeking a preliminary injunction against further infringement
of one of its patents pending final resolution of the lawsuit.  Gentex
has filed a motion for summary judgement that the patent in question
is invalid.  Neither of these motions has yet been decided by the
Court. 

    The Company's lawsuit against Gentex, filed on July 8, 1993,
remains outstanding.  In this suit, the Company has alleged that
Gentex's lighted electrochromic mirror infringes three of the
Company's patents and that all of Gentex's electrochromic mirrors
infringe a fourth patent owned by the Company.  The Company is seeking
unspecified damages and an injunction against further infringement by
Gentex.  Pretrial discovery is being conducted in this action and a
trial has been scheduled to begin in October 1995.  

    B.  Other Litigation

    The Company and its subsidiaries are involved in certain other
legal actions and claims, including environmental claims, arising in 
the ordinary course of business.  Management believes (based on advice
of legal counsel) that such litigation and claims will be resolved
without material effect on the Company's financial position.

    C.  Other

    As of July 2, 1994, the Company had capital expenditure purchase
commitments outstanding of approximately $15 million.

9.  LEASES

    The Company leases various facilities and equipment.  Rental
expense charged to operations amounted to approximately $2.5 million
for 1994, $2.5 million for 1993, and $2.3 million for 1992.

    Future minimum lease payments consist of:
<TABLE>
<CAPTION>
Year ending     In thousands      Amount
<S>                             <C>
1995                             $2,205
1996                              1,818
1997                              1,200
1998                                700
1999                                653
2000 and thereafter               1,410
                                 $7,986
</TABLE>

10. SEGMENT REPORT

    The Company is primarily engaged in the research, design,
development, manufacture, marketing and sale of interior and exterior
rearview mirrors, interior lighting and interior trim products, and
modular windows for world automotive markets.  Prior to 1993, the
Company was also engaged in the research, design, development,
manufacture, marketing and sale of highly technical solid-state glass
coatings for products used primarily in the electronics and computer
industries worldwide.  Effective May 3, 1992, the liquid crystal
display products aspect of the coated products business was
transferred to Donnelly  Applied Films Corporation, a 50% owned joint
venture accounted for on the equity method of accounting.  As a
result, this segment is no longer reported separately.  This segment
represented approximately 11% of combined consolidated net sales of
the Company in fiscal 1992.   

    Export revenues are foreign revenues produced by identifiable
assets located in the United States.  Foreign revenues are generated
by identifiable assets located at the Company's Irish subsidiaries 
which produce automotive products.  A summary of the Company's
operations by geographic area follows:
<TABLE>
<CAPTION>
In thousands  Year ended           1994       1993       1992
<S>                              <C>        <C>        <C>
Revenues:
United States                     $296,226   $253,631   $207,724
Foreign                             18,367     23,065     20,960
Export:
Americas                            21,557     22,153     21,085
Asia                                   310        400     19,118
Europe                                 785        895      1,889
Other                                   17        783        623 

Total                             $337,262   $300,927   $271,399

Operating Income (loss)
United States                     $ 16,397   $ 16,962   $ 13,634
Foreign                             (3,276)      (904)      (742)
                                    13,121     16,058     12,892
Identifiable Assets
United States                     $165,172   $125,465   $114,102
Foreign                             18,629     14,375     17,127
Total                             $183,801   $139,840   $131,299
</TABLE>
 
   Sales to major U.S. automobile manufacturers as a percent of the
Company's net sales follows:
<TABLE>
<CAPTION>
          Year ended              1994     1993     1992
<S>                              <C>      <C>      <C>
Ford Motor Company                 24%      21%      20%
General Motors Corporation         21       23       24 
Chrysler Corporation               18       18       10
Honda of America Mfg               12       12       14 
                                   75       74       68
</TABLE>
11. RESTRUCTURING CHARGES

    In the fourth quarter of 1994, the Company recognized
restructuring costs of $1.2 million, or the equivalent of 10 cents per
share after taxes.  This charge is to cover a severance program and
other expenses associated with the restructuring of DML.  A
restructuring charge of $0.9 million was taken in the fourth quarter
of 1992 to cover an early retirement and severance program and other
expenses associated with the formation of the DAFC joint venture.

12. SUBSEQUENT EVENT

    On August 15, 1994, the Company announced an agreement toits
appliance products business to Gemtron Corporation.  This segment
represented approximately 1% of combined consolidated net sales of the
Company in fiscal 1994.  Closing of the sale is expected to occur by
October 1, 1994.  While final proceeds have not yet been determined,
it is expected that the transaction will include a cash price payable
at closing resulting in a net gain of less than $5 million and a
royalty payment over each of the next two years.

13. COMMON STOCK PRICE PER SHARE - UNAUDITED  
<TABLE>
<CAPTION>
Fiscal             1994     1994     1993     1993
Quarter            High     Low      High     Low
<S>                <C>      <C>      <C>      <C>
First              $21.75   $18.75   $20.00   $14.63
Second              20.38    18.50    17.75    13.25
Third               20.25    14.13    20.75    16.75
Fourth              16.50    14.38    20.63    15.88
</TABLE>

14. QUARTERLY FINANCIAL DATA - UNAUDITED
<TABLE>
<CAPTION>
In thousands,
ands,
except per
share data
Three months
ended             October 2    January 1    April 2     July 2     Total Year
<S>               <C>          <C>          <C>         <C>        <C>
1994
Net sales         $68,255      $80,070      $90,897     $98,040    $337,262
Gross profit       14,136       16,626       19,822      23,048      73,632
Operating income      832        2,494        4,402       5,393      13,121
Income before
cumulative
effect of
change in
accounting
principle:
Income                359          675        2,679       3,032       6,745
Per common
 share                .05          .09          .35         .39         .87
Net income:
Income                872          675        2,679       3,032       7,258   
Per common
 share                .11          .09          .35         .39         .94
Dividends
declared per
share of
common stock          .08          .08          .08         .08         .32
</TABLE>
<TABLE>
<CAPTION>
                  October 2   January 1    April 2      July 2      Total Year
<S>               <C>         <C>          <C>          <C>         <C>
1993
Net sales         $67,851     $70,659      $79,625      $82,792     $300,927
Gross profit       15,254      15,561       17,995       20,100       68,920
Operating
income              2,634       3,483        4,024        5,917       16,058
Income before
extraordinary
gain:
Income              1,446       1,920        2,453        1,438        7,257
Per common
 share                .19         .25          .32          .18          .94
Net income:
Income              1,546       2,089        2,631        1,586        7,852
Per common
 share                .20         .27          .34          .21         1.02
Dividends
declared per
share of
common stock          .07         .07          .07          .07          .28

</TABLE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

    The management of Donnelly Corporation is responsible for the
preparation and integrity of the combined consolidated financial
statements and all other information contained in this Annual Report. 
The financial statements were prepared in accordance with generally
accepted accounting principles and include amounts that are based on
management's informed estimates and judgements.

    In fulfilling its responsibility for the integrity of financial
information, management has established a system of internal
accounting control which provides reasonable assurance that assets are
properly safeguarded and accounted for and that transactions are
executed in accordance with management's authorization and recorded
and reported properly.

    The financial statements have been audited by our independent
public accountants, BDO Seidman, whose unqualified report is presented
on the next page.  The independent accountants provide an objective
assessment of the degree to which management meets its responsibility
for fairness of financial reporting.  They regularly evaluate the
internal control structure and perform such tests and other procedures
as they deem necessary to reach and express an opinion on the fairness
of the financial statements.

    The Audit Committee of the Board of Directors, consisting solely
of outside Directors, meets regularly with the independent public
accountants and management to review and discuss the major audit
findings, the adequacy of the system of internal accounting control
and quality of financial reporting.  The independent accountants also
have free access to the Audit Committee to discuss auditing and
financial reporting matters with or without management present.

J. Dwane Baumgardner, Ph.D.
Chief Executive Officer and
Chairman of the Board

James A. Knister
Senior Vice President of Administration
and Chief Financial Officer

William R. Jellison, CMA
Vice President of Financial Operations,
Treasurer and Corporate Controller 


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

DONNELLY CORPORATION
HOLLAND, MICHIGAN
    
    We have audited the combined consolidated balance sheets of
Donnelly Corporation and subsidiaries as of July 2, 1994 and July 3,
1993, and the related combined consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the
period ended July 2, 1994.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits. 
We did not audit the financial statements of Donnelly Mirrors Limited,
a foreign subsidiary, which statements reflect total assets and net
sales constituting 8% and 5%, respectively, for 1994, 10% and 8% for
1993, and 8% of net sales for 1992, of related combined consolidated
totals.  Those statements were audited by other auditors whose reports
have been furnished to us, and our opinion, insofar as it relates to
the amounts included for Donnelly Mirrors Limited, is based solely on
the reports of the other auditors.

    We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits and the reports
of the other auditors provide a reasonable basis for our opinion.

    In our opinion, based on our audits and the reports of the other
auditors, the combined consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Donnelly Corporation and subsidiaries as of July 2, 1994 and July
3, 1993, and the results of their operations and their cash flows for
each of the three years in the period ended July 2, 1994, in
conformity with generally accepted accounting principles.

    As discussed in notes 6 and 7 to the combined consolidated
financial statements, effective July 4, 1993, the Company changed its
method of accounting for postretirement health care benefits and
income taxes, respectively.


BDO Seidman
Certified Public Accountants
Grand Rapids, Michigan
July 28, 1994, except for Note 12, as to which the date is August 15,
1994  

ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

    Not applicable.

                             PART III.

ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    Directors of Registrant.  Information relating to directors and
director nominees of the registrant contained in the registrant's
definitive Proxy Statement for its Annual Meeting of Shareholders to
be held October 21, 1994, and filed pursuant to Regulation 14A, is
incorporated by reference.

    Executive Officers of Registrant.  

    The Executive Officers of the Company are as follows:

Name                     Age   Positions and             Year    
                                Offices held             First
                                                         Elected
                                                        Executive
                                                         Officer

J. Dwane Baumgardner     54   Director,Chairman, CEO,       1978
                              President
James A. Knister         56   Senior Vice President
                              & CFO                         1972
Ronald A. VandenBerg     55   Senior Vice President         1976
John F. Donnelly, Jr.    42   Senior Vice President         1986
Bob J. Tennison          47   Senior Vice President         1994
Richard G. Williams      48   Senior Vice President         1994

    John F. Donnelly, Jr., is a descendant of Bernard P. Donnelly,
Sr., the Company's founder, and is the brother of Joan E. Donnelly,
a director of the Company. B. Patrick Donnelly, III, Joan E.
Donnelly, Thomas E. Leonard, Gerald T. McNeive and Rudolph B.
Pruden, all Directors of the Company, are descendants of, or are
married to descendants of Bernard P. Donnelly.  There are no other
family relationships between or among the above-named executive
officers.  There are no arrangements or understandings between any
of the above-named officers pursuant to which any of thnamed
an officer. 

    Dr. Baumgardner has been Chief Executive Officer and a director
since 1982, and Chairman of the Board since 1986.  Mr. Knister has
been a Senior Vice President since 1988 and a Vice President and
CFO for more than five years.  Mr. VandenBerg has been a Senior
Vice President since 1984.  John F. Donnelly, Jr. was elected
Senior Vice President in fiscal 1993.  Prior to that time he was a
Vice President from 1986 through 1993. Mr. Tennison joined Donnelly
in August, 1994.  Prior to joining Donnelly, Mr. Tennison was a
division president at Hennessey Industries, a division of Danahar
Corporation, from October 1991 to 1994; Director of Manufacturing
at Sauer-Sundstrand from July 1990 to 1991; and President of
Manufacturing Services International, a division of Perry Group,
Inc. from 1987 to 1990.  Mr. Williams joined Donnelly in August,
1994.  Prior to joining Donnelly, Mr. Williams was Vice President
of Diversified Products, a division of Automotive Industries from
August 1993 to 1994; President of Automotive Industries Sales, Inc.
from August 1992 to 1993; Vice President of Sales and Marketing for
Standard Products Company from November 1991 to 1992; Managing
Director for Lear Seating Sweden A.B. from November 1990 to 1991;
and Vice President of J.I.T. Operations Europe, a division of Lear
Seating Corporation, from November 1989 to 1990.  All terms of
office are on an annual basis which will expire on
October 21, 1994.

ITEM 11  EXECUTIVE COMPENSATION

    Information relating to executive compensation is contained
under the caption "Executive Compensation" in the Company's
definitive Proxy Statement for its Annual Meeting of Shareholders
to be held October 21, 1994 and the information within those
sections is incorporated herein by reference.

ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

    The sections entitled "Voting Securities and Principal Holders
Thereof", "Nominees for Election as Directors" and "Securities
Ownership of Management" in the definitive Proxy Statement for the
Company's Annual Meeting of Shareholders to be held October 21,
1994, and the information within those sections are incorporated by
reference.

ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The section entitled "Certain Transactions" in the definitive
Proxy Statement for the Company's Annual Meeting of Shareholders to
be held October 21, 1994, and the information within that section
is incorporated by reference.

                             PART IV.

ITEM 14  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K


            INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
(a) (1) Combined Consolidated                Form 10-K 
        Financial Statements                 (Page)
         
    Combined Consolidated Balance Sheets
    July 2, 1994 and July 3, 1993            21

    Combined Consolidated Statements of
    Income - years ended July 2, 1994;
    July 3, 1993; and June 27, 1992          20

    Combined Consolidated Statements of
    Shareholders' Equity - years ended
    July 2, 1994; and July 3, 1993; June
    27, 1992                                 23-24

    Combined Consolidated Statements of
    Cash Flows - years ended July 2,
    1994; July 3, 1993; and June 27,
    1992                                     22

    Notes to the Combined Consolidated
    Financial Statements                     25-37

    Report of Independent Certified
    Public Accountants                       38-39

    Report of Foreign Subsidiary's
    Independent Certified Public
    Accountants                              49-50

                                             Form 10-K
                                             (Page)

(a) (2) Schedules

    Report of Independent Certified
    Public Accountants on Schedules          44

    Schedule V Property Plant and
    Equipment                                45

    Schedule VI Accumulated Depreciation
    of Property Plant and Equipment          46

    Schedule of VIII Valuation and
    Qualifying Accounts                      47

    Schedule X Supplementary Income
    Statement Information                    48

    All other schedules are not submitted because they are not
applicable or not required or because the required information is
included in the financial statements or notes thereto.
   

    
    (a) (3)  Exhibits

    Reference is made to the Exhibit Index which is found on the
    last two pages of the body of this Form 10-K Annual Report
    preceding the exhibits.

    (b)  Reports on Form 8-K

    No reports on Form 8-K were filed during the fourth quarter of
    the year ended July 2, 1994.

    (c)  Exhibits

    The response to this portion of Item 14 is submitted as a
    separate section of this report.

    (d) Financial Statement Schedules

    The response to this portion of Item 14 is submitted as a
    separate section of this report.

SIGNATURES


Pursuant to the requirements of Section 13 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.

DONNELLY CORPORATION

/s/J. Dwane Baumgardner
- - - - - -----------------------------
Chairman, Chief Executive
Officer


Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following person on
behalf of the Registrant in the capacity indicated.  The person
named below hereby appoints J. Dwane Baumgardner and James A.
Knister, and each of them severally, as his or her attorney in
fact, to sign in his or her name and on his or her behalf, as a
director or officer of the Registrant, and to file with the
Commission any and all amendments to this report on Form 10-K.


/s/J. Dwane Baumgardner      /s/James A. Knister
- - - - - -------------------------    -------------------------- 
Chairman, Chief Executive    Senior Vice President 
Officer, and Director        and Chief Financial Officer


/s/William R. Jellison       /s/Arnold F. Brookstone
- - - - - --------------------------   ---------------------------
Vice President, Corporate    Director
Controller and Treasurer


/s/B. Patrick Donnelly III   /s/Joan E. Donnelly
- - - - - --------------------------   -----------------------------
Director                     Director


/s/Thomas E. Leonard        /s/Gerald T. McNeive
- - - - - -------------------------   --------------------------------
Director                    Director


/s/Rudolph B. Pruden        /s/Donald R. Uhlmann
- - - - - -------------------------   ---------------------------------
Director                    Director


/s/Glenn M. Walters         /s/R. Eugene Goodson
- - - - - -------------------------   ---------------------------------
Director                    Director

    DATE: September 28, 1994
    
Donnelly Corporation
Annual Report - Form 10-K

Report of Independent Certified Public Accountants on Financial
Statement Schedules

Donnelly Corporation
Holland, Michigan


The audits referred to in our report dated July 28, 1994, relating
to the combined consolidated financial statements of Donnelly
Corporation and subsidiaries, which is contained in Item 8 of this
Form 10-K, included the audit of the financial statement schedules
listed in the accompanying index.  These financial statement
schedules are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial
statement schedules based upon our audits.

In our opinion, such financial statement schedules present fairly,
in all material respects, the information set forth therein.





/s/BDO SEIDMAN
- - - - - ---------------------------
Grand Rapids, Michigan
July 28, 1994






                         DONNELLY CORPORATION
                              SCHEDULE V
                    PROPERTY, PLANT AND EQUIPMENT
                            (IN THOUSANDS) 
<TABLE>
<CAPTION>
YEAR ENDED 
JUNE 27, 1992
COLUMN A          COLUMN B     COLUMN C     COLUMN D     COLUMN E     COLUMN F
CLASSIFICATION    BALANCE AT   ADDITIONS    SALES OR    OTHER CHANGES  BALANCE
                  BEGINNING     AT COST     RETIREMTS   ADD (DEDUCT)   AT END OF
                  OF PERIOD                                            OF PERIOD
<S>               <C>          <C>          <C>         <C>           <C>
LAND              $ 1,132        $     4      $      0   $     0      $  1,136
BUILDINGS          21,379          1,003          (205)        0        22,177
MACHINERY AND 
EQUIPMENT          69,806         10,305        (1,487)   (2,087)     (1)76,537
CONSTRUCTION IN 
PROGRESS            2,045             56             0         0          2,101
                  $94,362        $11,368       ($1,692)  ($2,087)      $101,951
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 
JULY 3, 1993
COLUMN A          COLUMN B       COLUMN C     COLUMN D   COLUMN E     COLUMN F
CLASSIFICATION    BALANCE AT     ADDITIONS    SALES OR   OTHER        BALANCE
                  BEGINNING      AT COST      RETIREMTS  CHANGES      AT END
                  OF PERIOD                              ADD (DEDUCT) OF PERIOD
<S>               <C>            <C>         <C>        <C>          <C>
LAND              $  1,136       $   931     $     0    $     0      $  2,067
BUILDINGS           22,177         2,981         (77)         0        25,081
MACHINERY AND
EQUIPMENT           76,537        10,606      (3,807)         0        83,336
CONSTRUCTION IN 
PROGRESS             2,101           652           0          0         2,753
                  $101,951       $15,170     ($3,884)   $     0      $113,237
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 
JULY 2, 1994
COLUMN A          COLUMN B    COLUMN C     COLUMN D   COLUMN E      COLUMN F
CLASSIFICATION    BALANCE AT  ADDITIONS    SALES OR   OTHER CHANGES BALANCE
                  BEGINNING    AT COST     RETIREMTS  ADD (DEDUCT)  AT END OF
                  OF PERIOD                                         PERIOD
<S>               <C>         <C>          <C>        <C>           <C>

LAND              $  2,067    $ 1,249      $     0    $    26       (2)$3,342
BUILDINGS           25,081      2,025          (77)       890       (2)27,919
MACHINERY AND 
EQUIPMENT           83,336     10,462       (9,095)     2,899       (2)87,602
CONSTRUCTION IN 
PROGRESS             2,753     21,653            0          0          24,406
                  $113,237    $35,389      ($9,172)    $3,815        $143,269
</TABLE>
(1)  ASSETS TRANSFERRED TO THE DAFC JOINT VENTURE.  SEE ITEM 1(B)
(2)  ASSETS PURCHASED IN ACQUISITION OF SUBSIDIARY.

                           DONNELLY CORPORATION 
                              SCHEDULE VI 
        ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
                            (IN THOUSANDS)
YEAR ENDED JUNE 27, 1992
<TABLE>
<CAPTION>
COLUMN A          COLUMN B    COLUMN C     COLUMN D    COLUMN E      COLUMN F
                  BALANCE AT                           OTHER         BALANCE
                  BEGINNING   ADDITIONS    SALES OR    CHANGES       AT END OF
CLASSIFICATION    OF PERIOD   AT COST      RETIRMTS    ADD (DEDUCT)  PERIOD
<S>               <C>         <C>          <C>         <C>           <C>
BUILDINGS         $ 5,572     $1,097       $  (204)    $     0       $   6,465
MACHINERY AND 
EQUIPMENT          29,668      8,419        (1,233)       (797)      (1)36,057
                  $35,240     $9,516       ($1,437)       ($797)       $42,522
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 
JULY 3, 1993
COLUMN A          COLUMN B    COLUMN C     COLUMN D    COLUMN E      COLUMN F
                  BALANCE AT                            OTHER        BALANCE AT
                  BEGINNING   ADDITIONS    SALES OR    CHANGES-ADD   END OF
CLASSIFICATION    OF PERIOD   AT COST      RETIREMTS   (DEDUCT)      PERIOD
<S>               <C>         <C>          <C>         <C>           <C>
BUILDINGS         $ 6,465     $1,183          ($77)      $0           $ 7,571
MACHINERY AND
EQUIPMENT          36,057      7,122        (3,432)       0            39,747
                  $42,552     $8,305       ($3,432)      $0           $47,318
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 
JULY 2, 1994
COLUMN A          COLUMN B    COLUMN C     COLUMN D    COLUMN E      COLUMN F
                  BALANCE AT                             OTHER       BALANCE
                  BEGINNING   ADDITIONS    SALES OR    CHANGES-ADD   AT END OF
CLASSIFICATION    OF PERIOD    AT COST     RETIREMTS   (DEDUCT)      PERIOD
<S>               <C>         <C>          <C>         <C>           <C>
BUILDINGS         $ 7,571      $1,064        ($109)     $  166       (2)$8,692
MACHINERY AND 
EQUIPMENT          39,747       8,671       (7,515)      2,303       (2)43,206
                  $47,318      $9,735      ($7,624)     $2,469         $51,898
</TABLE>
(1)  ASSETS TRANSFERRED TO THE DAFC JOINT VENTURE.  SEE ITEM 1 (B).
(2)  ASSETS PURCHASED IN ACQUISITION OF SUBSIDIARY.

                         DONNELLY CORPORATION
                            SCHEDULE VIII
                   VALUATION AND QUALIFYING ACCOUNTS
                           (IN THOUSANDS)

YEAR ENDED JUNE 27, 1992
<TABLE>
<CAPTION>
COLUMN A                 COLUMN B      COLUMN C      COLUMN D     COLUMN E
                         BALANCE AT                               BALANCE AT
                         BEGINNING                                  END OF
DESCRIPTION              OF PERIOD     ADDITIONS     RETIREMENTS    PERIOD
<S>                      <C>           <C>           <C>          <C>
RESERVE FOR 
UNCOLLECTIBLE AND
RETURNS AND ALLOWANCES    $658          -- (1)         --(1)        $658
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 3, 1993 
COLUMN A                  COLUMN B     COLUMN C      COLUMN D       COLUMN E
                          BALANCE AT                                BALANCE AT
                          BEGINNING                                   END OF
DESCRIPTION               OF PERIOD    ADDITIONS     RETIREMENTS      PERIOD
<S>                       <C>          <C>           <C>            <C>
RESERVE FOR UNCOLLECTIBLE 
AND RETURNS AND 
ALLOWANCES                 $658          --(1)         --(1)           $562
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 2, 1994
COLUMN A                  COLUMN B      COLUMN C      COLUMN D      COLUMN E
                          BALANCE AT                                BALANCE AT
                          BEGINNING                                   END OF
DESCRIPTION               OF PERIOD     ADDITIONS     RETIREMENTS     PERIOD
<S>                       <C>           <C>           <C>           <C>
RESERVE FOR UNCOLLECTIBLE 
AND RETURNS AND 
ALLOWANCES                 $562           --(1)          --(1)         $676
</TABLE>
(1)  INFORMATION IN THIS COLUMN IS NOT SIGNIFICANT
                     DONNELLY CORPORATION
                          SCHEDULE X
           SUPPLEMENTARY INCOME STATEMENT INFORMATION
                        (IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 27, 1992
COLUMN A                                          COLUMN B
ITEM                                           CHARGED TO COST
                                                AND EXPENSES
<S>                                           <C>
1.  MAINTENANCE AND REPAIRS                       $8,822
2.  DEPRECIATION OF PROPERTY, PLANT AND
    EQUIPMENT                                      9,516
3.  TAXES, OTHER THAN PAYROLL AND INCOME
    TAXES                                          --(1)
4.  ROYALTIES                                      --(1)
5.  ADVERTISING COST                               --(1)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 3, 1993
COLUMN A                                          COLUMN B
ITEM                                           CHARGED TO COST
                                                AND EXPENSES
<S>                                          <C>
1.  MAINTENANCE AND REPAIRS                       $7,665
2.  DEPRECIATION OF PROPERTY, PLANT AND           
    EQUIPMENT                                      8,305
3.  TAXES, OTHER THAN PAYROLL AND INCOME
    TAXES                                          --(1)
4.  ROYALTIES                                      --(1)
5.  ADVERTISING COSTS                              --(1)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 4, 1994
COLUMN A                                          COLUMN B
ITEM                                          CHARGED TO COST
                                                AND EXPENSES
<S>                                          <C>
1.  MAINTENANCE AND REPAIRS                       $9,170
2.  DEPRECIATION OF PROPERTY, PLANT AND
    EQUIPMENT                                      9,734
3.  TAXES, OTHER THAN PAYROLL AND INCOME          
    TAXES                                          --(1)
4.  ROYALTIES                                      --(1)
5.  ADVERTISING COSTS                              --(1)
</TABLE>
(1)  ITEM DOES NOT EXCEED 1% OF TOTAL SALES AND REVENUES AS
REPORTED IN THE RELATED INCOME STATEMENT


Report of the Auditors to the members of Donnelly Mirrors Limited

We have audited the balance sheets at 2 july 1994 and 3 July 1993,
the related profit and loss accounts, cash flow statements and
notes thereon for the three years in the period ended 2 July 1994.

Respective responsibilities of directors and auditors

As described below the company's directors are responsible for the
preparation of the financial statements.  It is our responsibility
to form an independent opinion, based on our audit, on those
statements and to report our opinion to you.

Company law requires the directors to prepare financial statements
for each financial year which give a true and fair view of the
state of affairs of the company and of the profit or loss for that
period.  In preparing those financial statements, the directors are
required to:

*   select suitable accounting policies and then apply them
    consistently
*   make judgements and estimates that are reasonable and prudent
*   prepare the financial statements on the going concern basis
    unless it is inappropriate to presume that the company will
    continue in business

The directors are responsible for keeping proper books of account
which disclose with reasonable accuracy at any time the financial
position of the company and to enable them to ensure that the
financial statements comply with the Companies Acts, 1963 to 1990
and the European Communities (Companies:Group Accounts)Regulations,
1992.  They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the company
and to prevent and detect fraud and other irregularities.

Basis on opinion

We conducted our audit in accordance with Auditing Standards issued
by the Auditing Practices Board.  An audit includes examination, on
a test basis, of evidence relevant to the amounts and disclosures
in the financial statements.  It also includes an assessment of the
significant estimates and judgements made by the directors in the
preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance
that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error.  In forming
our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.


Opinion

In our opinion the financial statements give a true and fair view
of the state of the company's affairs at 2 July 1994 and 3 July
1993 and of its loss for the years ended 2 July 1994, 3 July 1993,
and 27 June 1992 and have been properly prepared in accordance with
the Companies Acts, 1963 to 1990 and the European Communities
(Companies: Group Accounts)Regulations , 1992.

We have obtained all the information and explanations we considered
necessary for the purposes of our audit.  In our opinion proper
books of account have been kept by the company.  The financial
statements are in agreement with the books of account.

In our opinion the information given in the reports of the
directors included with the financial statements is consistent with
those financial statements.

The net assets of the company, as stated in the balance sheet are
more than half of the amount of its called up share capital and, in
our opinion, on that basis there did not exist at 2 July 1994 a
financial situation which, under Section 40(1) of the Companies
(Amendment) Act, 1983, would require the convening of an
extraordinary general meeting of the company.





/s/KPMG Peat Marwick
- - - - - -----------------------------
Chartered Accountants
Registered Auditors

29 July 1994


                    Annual Report - Form 10-K

Exhibit Index

 3      Articles of Incorporation and Bylaws are incorporated by
        reference to Exhibit 3.1 and 3.2 of Registrant's
        Registration Statement on Form S-1, as amended, dated March
        9, 1988, (Registration No. 33-17167) ("S-1 Registration
        Statement").

 4      A specimen stock certificate of the Class A Common Stock
        was filed as a part of a Registration Statement on Form S-
        1 (Registration No. 33-17167) as Exhibit 4.1, and the same
        is hereby incorporated herein by reference.

10.1 Nationwide Life Insurance Company Debt Agreement

10.2 The NBD loan agreement was filed as part of Form 10-K for the
     fiscal year ending July 3, 1993 as Exhibit 10.1 and is hereby
     incorporated herein by reference.

10.3 The Principal Mutual Debt Agreement was filed as part of Form
     10-K for the fiscal year ending July 3, 1993 as Exhibit 10.2
     and is hereby incorporated herein by reference.

10.4A Merger Agreement for the Merger of Donnelly Coated
     Corporation ("DCC") into Applied Coated Corporation, among
     Registrant, DCC, Applied Films Lab, Inc. and Cecil Vanalsburg,
     John Chapin, and Richard Condon, dated February 24, 1992, was
     filed as part of a Registration Statement on Form S-2
     (Registration No. 33-47036) as Exhibit 10.7, and the same is
     hereby incorporated herein by reference.

10.5 The form of Indemnity Agreement between the Registrant and each
     of its directors was filed as a part of a Registration
     Statement on Form S-1 (Registration No. 33-17167) as Exhibit
     10.8, and the same is hereby incorporated herein by reference. 

10.6 The Donnelly Corporation Stock Option Plan was filed as part of
    a Registration Statement on Form S-1 (Registration No. 33-
    17167) as Exhibit 10.9, and the same is hereby incorporated
    herein by reference. 
   
10.7 The Donnelly Corporation 1987 Employees' Stock Purchase Plan,
    including amendments was filed as part of a Registration
    Statement on Form S-8 (Registration No. 33-34746) as Exhibit
    28.1, and the same is hereby incorporated herein by reference.
    
10.8A  Joint Venture Agreement among Asahi Glass Company, Ltd., AP
    Technoglass Corporation and Registrant, dated July 20, 1989,
    was filed as part of a Registration Statement on Form S-2
    (Registration No. 33-47036) as Exhibit 10.13, and the same is
    hereby incorporated herein by reference.

   
10.9   The Donnelly Corporation Non-Employee Director Stock Option Plan
    was filed as part of a Registration Statement on Form S-8 (Registration
    No. 33-55499) as Exhibit 99, and the same is hereby incorporated herein
    by reference.
    
22      Schedule of Affiliates.

24.1Consent of BDO Seidman, independent accountants.

24.2Consent of KPMG Peat Marwick, independent accountants.

27      Financial Data Schedules






                       DONNELLY CORPORATION





                          NOTE AGREEMENT





                     Dated as of July 1, 1994






                   $15,000,000 Principal Amount
                        7.22% Senior Notes
                       Due November 30, 2004





                                                 PPN 257870 B* 5
                        TABLE OF CONTENTS

                                                              PAGE

S1.   DESCRIPTION OF NOTES AND COMMITMENT. . . . . . . . . . . .1

 1.1  Description of Notes . . . . . . . . . . . . . . . . . . .1
 1.2  Commitment; Closing Date . . . . . . . . . . . . . . . . .1

S2.   PREPAYMENT OF NOTES. . . . . . . . . . . . . . . . . . . .2

 2.1  Required Prepayments . . . . . . . . . . . . . . . . . . .2
 2.2  Optional Prepayments . . . . . . . . . . . . . . . . . . .2
 2.3  Notice of Prepayments. . . . . . . . . . . . . . . . . . .2
 2.4  Surrender of Notes on Prepayment or Exchange . . . . . . .3
 2.5  Direct Payment and Deemed Date of Receipt. . . . . . . . .3
 2.6  Allocation of Payments . . . . . . . . . . . . . . . . . .3
 2.7  Payments Due on Saturdays, Sundays and Holidays. . . . . .3

S3.   REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . .4
 
 3.1  Representations of the Company . . . . . . . . . . . . . .4
 3.2  Representations of the Purchaser . . . . . . . . . . . . .9

S4.   CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . 10

 4.1  Representations and Warranties . . . . . . . . . . . . . 10
 4.2  Legal Opinions . . . . . . . . . . . . . . . . . . . . . 10
 4.3  Events of Default. . . . . . . . . . . . . . . . . . . . 10
 4.4  Payment of Fees and Expenses . . . . . . . . . . . . . . 10
 4.5  Legality of Investment . . . . . . . . . . . . . . . . . 10
 4.6  Private Placement Number . . . . . . . . . . . . . . . . 11
 4.7  Proceedings and Documents. . . . . . . . . . . . . . . . 11

S5.   INTERPRETATION OF AGREEMENT. . . . . . . . . . . . . . . 11
 
 5.1  Certain Terms Defined. . . . . . . . . . . . . . . . . . 11
 5.2  Accounting Principles. . . . . . . . . . . . . . . . . . 17
 5.3  Valuation Principles . . . . . . . . . . . . . . . . . . 17
 5.4  Direct or Indirect Actions . . . . . . . . . . . . . . . 18

(i)                    TABLE OF CONTENTS
                           (continued)
                                                             PAGE

S6.   AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . 18

 6.1  Corporate Existence. . . . . . . . . . . . . . . . . . . 18
 6.2  Insurance. . . . . . . . . . . . . . . . . . . . . . . . 18
 6.3  Taxes, Claims for Labor and Materials. . . . . . . . . . 18
 6.4  Maintenance of Properties. . . . . . . . . . . . . . . . 19
 6.5  Maintenance of Records . . . . . . . . . . . . . . . . . 19
 6.6  Financial Information and Reports. . . . . . . . . . . . 19
 6.7  Inspection of Properties and Records . . . . . . . . . . 21
 6.8  ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 21
 6.9  Compliance with Laws . . . . . . . . . . . . . . . . . . 22
 6.10 Acquisition of Notes . . . . . . . . . . . . . . . . . . 23
 6.11 Private Placement Number . . . . . . . . . . . . . . . . 23

S7.   NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 23

 7.1  Working Capital. . . . . . . . . . . . . . . . . . . . . 23
 7.2  Current Ratio. . . . . . . . . . . . . . . . . . . . . . 23
 7.3  Net Worth. . . . . . . . . . . . . . . . . . . . . . . . 23
 7.4  Funded Debt. . . . . . . . . . . . . . . . . . . . . . . 23
 7.5  Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 23
 7.6  Restricted Payments. . . . . . . . . . . . . . . . . . . 24
 7.7  Investments. . . . . . . . . . . . . . . . . . . . . . . 26
 7.8  Joint Ventures . . . . . . . . . . . . . . . . . . . . . 26
 7.9  Sale and Leaseback Transactions. . . . . . . . . . . . . 26
 7.10 Merger or Consolidation. . . . . . . . . . . . . . . . . 26
 7.11 Sale of Assets . . . . . . . . . . . . . . . . . . . . . 27
 7.12 Disposition of Stock or Indebtedness of Subsidiaries . . 27
 7.13 Transactions with Affiliates . . . . . . . . . . . . . . 28
 7.14 Consolidated Tax Returns . . . . . . . . . . . . . . . . 28
 7.15 Nature of Business . . . . . . . . . . . . . . . . . . . 28

S8.   EVENTS OF DEFAULT AND REMEDIES THEREFOR. . . . . . . . . 28

 8.1  Nature of Events . . . . . . . . . . . . . . . . . . . . 28
 8.2  Remedies on Default. . . . . . . . . . . . . . . . . . . 30
 8.3  Annulment of Acceleration of Notes . . . . . . . . . . . 30
 8.4  Other Remedies . . . . . . . . . . . . . . . . . . . . . 30

                              (ii)
                         TABLE OF CONTENTS
                           (continued)
                                                             PAGE

 8.5  Conduct No Waiver; Collection Expenses . . . . . . . . . 30
 8.6  Remedies Cumulative. . . . . . . . . . . . . . . . . . . 31
 8.7  Notice of Default. . . . . . . . . . . . . . . . . . . . 31

S9.   AMENDMENTS, WAIVERS AND CONSENTS . . . . . . . . . . . . 32

 9.1  Matters Subject to Modification. . . . . . . . . . . . . 32
 9.2  Solicitation of Holders of Notes . . . . . . . . . . . . 32
 9.3  Binding Effect . . . . . . . . . . . . . . . . . . . . . 32

S10.  FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND
      REPLACEMENT. . . . . . . . . . . . . . . . . . . . . . . 33

 10.1 Form of Notes. . . . . . . . . . . . . . . . . . . . . . 33
 10.2 Note Register. . . . . . . . . . . . . . . . . . . . . . 33
 10.3 Issuance of New Notes upon Exchange or Transfer. . . . . 33
 10.4 Replacement of Notes . . . . . . . . . . . . . . . . . . 33

S11.  MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 34

 11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 34
 11.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 34
 11.3 Reproduction of Documents. . . . . . . . . . . . . . . . 34
 11.4 Successors and Assigns . . . . . . . . . . . . . . . . . 34
 11.5 Law Governing. . . . . . . . . . . . . . . . . . . . . . 35
 11.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . 35
 11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . 35
 11.8 Reliance on and Survival of Provisions . . . . . . . . . 35
 11.9 Integration and Severability . . . . . . . . . . . . . . 35

ANNEXES

      I -   List of Subsidiaries and Joint Ventures and
            Jurisdictions in Which the Company, Subsidiaries and
            Joint Ventures are Organized and Qualified
            to Do Business . . . . . . . . . . . . . . . . . . 37

      II -  Liens. . . . . . . . . . . . . . . . . . . . . . . 38

      III - Litigation . . . . . . . . . . . . . . . . . . . . 39

      IV  - Funded Debt. . . . . . . . . . . . . . . . . . . . 40

                              (iii)

                            EXHIBITS

A  -  Form of Senior Note. . . . . . . . . . . . . . . . . . . 41
B  -  Form of Legal Opinion of the Purchaser's Counsel . . . . 43
C  -  Form of Legal Opinion of the Company's                     
       Counsel . . . . . . . . . . . . . . . . . . . . . . . . 44









                              (iv)
                      DONNELLY CORPORATION

                         NOTE AGREEMENT


                    Dated as of July 1, 1994


Nationwide Life
  Insurance Company
One Nationwide Plaza
Columbus, Ohio  43215-2220

Ladies and Gentlemen:

    DONNELLY CORPORATION, a Michigan corporation (the "Company"),
agrees with you as follows:

S1.  DESCRIPTION OF NOTES AND COMMITMENT

    1.1  Description of Notes.  The Company has authorized the
issuance and sale of $15,000,000 aggregate principal amount of its
Senior Notes (the "Notes"), to be dated the date of issuance, to
bear interest from such date (computed on the basis of a 360-day
year comprised of twelve 30-day months), payable semi-annually on
May 31 and November 30 of each year, commencing May 31, 1995, and
at maturity, at the rate of 7.22% per annum prior to maturity and
to bear interest on any overdue principal (including any overdue
optional or required prepayment), on any overdue Make-Whole Amount
or premium (to the extent legally enforceable), and on any overdue
installment of interest (to the extent legally enforceable) at the
rate of 9.22% per annum.  The Notes shall be expressed to mature
on November 30, 2004 and shall be substantially in the form
attached as Exhibit A.  The term "Notes" as used herein shall
include each Note delivered pursuant to this Note Agreement (the
"Agreement") and each Note delivered in substitution or exchange
therefor and, where applicable, shall include the singular number
as well as the plural.  Any reference to you in this Agreement
shall in all instances be deemed to include any nominee of yours
or any separate account or other person on whose behalf you are
purchasing Notes.  You are sometimes referred to herein as the
"Purchaser."

    1.2  Commitment; Closing Date.  Subject to the terms and
conditions of this Agreement and on the basis of the
representations and warranties hereinafter set forth, the Company
agrees to issue and sell to you, and you agree to purchase from
the Company, all of the Notes at a price of 100% of the principal
amount thereof.

    Delivery of and payment for the Notes shall be made at the
offices of the Gardner, Carton & Douglas, 321 N. Clark Street,
Chicago, Illinois 60610, at 10:00 a.m., Chicago Time on
November 30, 1994, or such other time on such later date, not later
than 5:00 p.m., Chicago Time on December 1, 1994 as you and the
Company may mutually agree (the "Closing Date").  The Notes shall
be delivered to you in the form of one or more Notes in fully
registered form, issued in your name or in the name of your
nominee.  Delivery of the Notes to you on the Closing Date shall
be against payment of the purchase price thereof in Federal funds
or other funds in U.S. dollars immediately available at NBD Bank,
N.A., 611 Woodward, Detroit, Michigan 48226, ABN 072000326 for
deposit in the Company's Account No. 10714-83.  If on the Closing
Date the Company shall fail to tender the Notes to you, you shall
be relieved of all remaining obligations under this Agreement. 
Nothing in the preceding sentence shall relieve the Company of any
liability occasioned by such failure to deliver the Notes.  

S2.  PREPAYMENT OF NOTES

    2.1  Required Prepayments.  In addition to payment of all
outstanding principal of the Notes at maturity and regardless of
the amount of Notes which may be outstanding from time to time,
the Company shall prepay and there shall become due and payable on
the dates set forth below the principal amounts of the Notes set
forth opposite such dates (or such lesser amounts as would
constitute payment in full on the Notes):

        Date                    Principal Amount

     November 30, 1999              $1,750,000
     May 31, 2000                   $1,750,000
     November 30, 2000              $1,750,000
     May 31, 2001                   $1,750,000
     November 30, 2001              $1,750,000
     May 31, 2002                   $1,750,000
     November 30, 2002              $1,750,000
     May 31, 2003                   $687,500
     November 30, 2003              $687,500
     May 31, 2004                   $687,500

Each such prepayment shall be at a price of 100% of the principal
amount prepaid, together with interest accrued thereon to the date
of prepayment, without a Make-Whole Amount or premium.

    2.2  Optional Prepayments.  (a) Upon notice as provided in
Section 2.3(a) and (b), the Company may prepay the Notes, in whole
or in part, at any time prior to November 30, 2001, in an amount
not less than $100,000, an integral multiple of $100,000 in excess
thereof or such lesser amount as shall constitute payment in full
of the Notes.  Each such prepayment shall be at a price of 100% of
the principal amount to be prepaid, plus interest accrued thereon
to the date of prepayment, plus the Make-Whole Amount.

    (b)  Upon notice as provided in Section 2.3(a), the Company
may prepay the Notes, in whole or in part, at any time on or after
November 30, 2001, in an amount not less than $100,000, an integral
multiple of $100,000 in excess thereof or such lesser amount as
shall constitute payment in full of the Notes.  Each such
prepayment shall be at a price of 100% of the principal amount to
be prepaid, plus interest accrued thereon to the date of
prepayment, plus the lesser of the Make-Whole Amount or a premium
as follows:

          If Prepaid in the Period        Premium
          
          November 30, 2001 to            1.6%
            November 30, 2002
          
          November 30, 2002 to             .8%
            November 30, 2003
          
          Thereafter                        0%

    (c)  Any optional prepayment of less than all of the Notes
outstanding pursuant to Section 2.2(a) or (b) shall be applied to
reduce, pro rata, the prepayments and payment at maturity required
by Section 2.1.  

    (d)  Except as provided in Section 2.1, this Section 2.2 or
Section 7.11, the Notes shall not be prepayable in whole or in
part.

    2.3  Notice of Prepayments.  (a)  The Company shall give notice
of any optional prepayment of the Notes pursuant to Section 2.2(a)
or (b) to each holder of the Notes not less than 30 days nor more
than 60 days before the date fixed for prepayment, specifying
(i) such date, (ii) the principal amount of the holder's Notes to
be prepaid on such date, (iii) the Determination Date for
calculating the Make-Whole Amount, if applicable, (iv) the premium,
if applicable, and (v) the accrued interest applicable to the
prepayment.  Notice of prepayment having been so given, the
aggregate principal amount of the Notes specified in such notice,
together with the actual Make-Whole Amount or the premium, if any,
and accrued interest thereon shall become due and payable on the
prepayment date.

    (b)  In the case of any optional prepayment pursuant to Section
2.2(a) and in the case of any Make-Whole Amount payable pursuant to
Section 2.2(b), the Company shall also give notice to each holder
of the Notes by telecopy, telegram, telex or other same-day written
communication, 3 Business Days prior to the prepayment date, of the
Make-Whole Amount applicable to such prepayment and the details of
the calculations used to determine the amount of such Make-Whole
Amount.

    2.4  Surrender of Notes on Prepayment or Exchange.  Subject to
Section 2.5, upon any partial prepayment of a Note pursuant to this
Section 2 or partial exchange of a Note pursuant to Section 10.3,
such Note may, at the option of the holder thereof, (i) be
surrendered to the Company pursuant to Section 10.3 in exchange for
a new Note or Notes equal to the principal amount remaining unpaid
on the surrendered Note, or (ii) be made available to the Company,
at the Company's principal office, for notation thereon of the
portion of the principal so prepaid or exchanged.  In case the
entire principal amount of any Note is prepaid or exchanged, such
Note shall be surrendered to the Company following such prepayment
for cancellation and shall not be reissued, and no Note shall be
issued in lieu of such Note.

    2.5  Direct Payment and Deemed Date of Receipt. Notwithstanding
any other provision contained in the Notes or this Agreement, the
Company will pay all sums becoming due on each Note held by you or
any subsequent Institutional Holder by wire transfer of immediately
available funds to such account as you have designated in
Schedule I, or as you or such subsequent Institutional Holder may
otherwise designate by notice to the Company, in each case without
presentment and without notations being made thereon, except that
any such Note so paid or prepaid in full shall be surrendered to the
Company for cancellation.  Any wire transfer shall identify such
payment in the manner set forth in Schedule I and shall identify the
payment as principal, Make-Whole Amount, or premium, if any, and/or
interest.  You and any subsequent Institutional Holder of a Note to
which this Section 2.5 applies agree that, before selling or
otherwise transferring any such Note, you or it will make a notation
thereon of the aggregate amount of all payments of principal
theretofore made and of the date to which interest has been paid
and, upon written request of the Company, will provide a copy of
such notations to the Company.  You will notify the Company if you
sell or otherwise transfer a Note.  Any payment made pursuant to
this Section 2.5 shall be deemed received on the payment date only
if received before 10:00 A.M., Chicago time.  Payments received
after 10:00 A.M., Chicago time, shall be deemed received on the next
succeeding Business Day.

    2.6  Allocation of Payments.  In the case of a prepayment
pursuant to Section 2.1 or 2.2(a) or (b), if less than the entire
principal amount of all of the Notes outstanding is to be paid, the
Company will prorate the aggregate principal amount to be prepaid
among the outstanding Notes in proportion to the unpaid principal
amounts thereof.  

    2.7  Payments Due on Saturdays, Sundays and Holidays.  If any
interest payment date on the Notes or the date fixed for any other
payment of any Note or exchange of any Note is a Saturday, Sunday
or a legal holiday or a day on which banking institutions in the
United States of America generally are authorized by law to close,
then such payment or exchange need not be made on such date but may
be made on the next succeeding Business Day which is not a Saturday,
Sunday or a legal holiday or a day on which banking institutions in
the United States of America generally are authorized by law to
close, with the same force and effect as if made on the due date.

S3.  REPRESENTATIONS

    3.1  Representations of the Company.  As an inducement to, and
as part of the consideration for, your purchase of the Notes
pursuant to this Agreement, the Company represents and warrants to
you as follows:

    (a)  Corporate Organization and Authority.  The Company is a
solvent corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan.  The Company has
all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as
presently proposed to be conducted, to enter into and perform the
Agreement and to issue and sell the Notes as contemplated in this
Agreement.

    (b)  Qualification to Do Business.  The Company is duly
qualified or licensed and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the nature of
the business transacted by it or the character of its properties
owned or leased makes such qualification or licensing necessary. 
A list of those jurisdictions wherein the Company is qualified to
do business is attached as Annex I.

    (c)  Subsidiaries.  The Company has no Subsidiaries or Joint
Ventures, as defined in Section 5.1, except those listed in the
attached Annex I, which correctly sets forth the percentage of the
outstanding Voting Stock of each Subsidiary or percentage of
ownership interest in each Joint Venture which is owned, of record
or beneficially, by the Company and/or one or more Subsidiaries. 
Each Subsidiary and Joint Venture has been duly organized and is
validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and is duly licensed
or qualified and in good standing as a foreign corporation or other
organization in each other jurisdiction where the nature of the
business transacted by it or the character of its properties owned
or leased makes such qualification or licensing necessary.  A list
of the jurisdiction of incorporation or organization and 
jurisdictions wherein each Subsidiary and Joint Venture is qualified
or licensed to do business is set forth in Annex I.  Each Subsidiary
and each Joint Venture has full corporate or other power and
authority to own and operate its properties and to carry on its
business as now conducted and as presently proposed to be conducted. 
The Company and/or one or more Subsidiaries have good and marketable
title to all of the shares they purport to own of the capital stock
of each Subsidiary and each Joint Venture or to all of the ownership
interests they purport to own in each Joint Venture, free and clear
in each case of any Lien, except as otherwise disclosed in the
attached Annex I, and all such shares or ownership interests have
been duly issued and are fully paid and nonassessable, except as
disclosed in Annex I.

    (d)  Financial Statements.  The combined consolidated balance
sheets of the Company and its Subsidiaries as of July 2, 1994,
July 3, 1993, June 27, 1992, June 30, 1991, June 30, 1990 and
June 30, 1989, and the related combined consolidated statements of
income, shareholders' equity and cash flows for each of the fiscal
years ended on such dates, accompanied by the reports and
unqualified opinions of BDO Seidman, independent public accountants,
copies of which will be or have heretofore been delivered to you,
will be or were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved (except as otherwise noted therein) and present fairly the
combined consolidated financial position of the Company and its
Subsidiaries on such dates and their combined consolidated results
of operations and cash flows for the years then ended.  The
unaudited interim condensed combined consolidated balance sheets of
the Company and its Subsidiaries as of April 3, 1993 and April 2,
1994, and the unaudited interim condensed combined consolidated
statements of income and cash flows of the Company and its
Subsidiaries for the periods then ended, copies of which have
heretofore been delivered to you, were prepared in accordance with
generally accepted accounting principles and present fairly the
financial position of the Company and its Subsidiaries as of such
dates and the results of their operations for the fiscal periods
then ended, subject to customary year-end audit adjustments.  The
unaudited interim condensed combined consolidated balance sheets of
the Company and its Subsidiaries as of October 1, 1994 and
October 2, 1993, and the unaudited interim condensed combined
consolidated statements of income and cash flows of the Company and
its Subsidiaries for the periods then ended, copies of which will
be delivered to you, will be prepared in accordance with generally
accepted accounting principles and will present fairly the financial
position of the Company and its Subsidiaries as of such dates and
the results of their operations for the fiscal periods then ended,
subject to customary year-end audit adjustments.

    (e)  No Contingent Liabilities or Adverse Changes.  Neither the
Company nor any of its Subsidiaries or Joint Ventures has any
contingent liabilities which, individually or in the aggregate, are
material to the Company, to any of its Subsidiaries or to any of its
Joint Ventures, other than as indicated in the most recent audited
financial statements described in the foregoing paragraph (d) of
this Section 3.1, and, except as set forth in such financial
statements, since July 3, 1993 there have been, and after October
1, 1994 there will be, no changes in the condition, financial or
otherwise, of the Company, its Subsidiaries and its Joint Ventures
except changes occurring in the ordinary course of business, none
of which, individually or in the aggregate, have had or will have
a Material Adverse Effect.

    (f)  Pending Litigation or Proceedings.  Except as set forth in
Annex III, there are no actions, suits or proceedings at law or in
equity or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, administrative
instrumentality or other agency, domestic or foreign, pending or,
to the knowledge of the Company, threatened in writing against or
affecting the Company, any Subsidiary or any Joint Venture,
including any action involving Gentex Corporation, which are
reasonably likely to result, individually or in the aggregate, in
a Material Adverse Effect.

    (g)  Compliance with Law.  (i)  Neither the Company nor any
Subsidiary nor any Joint Venture has received any notice, not
heretofore complied with, from any federal, state or local authority
or any insurance or inspection body to the effect, and neither the
Company nor any Subsidiary has knowledge, that any of the
properties, Facilities, equipment or business procedures or
practices of the Company, any Subsidiary or any Joint Venture fail
to comply with any applicable law, ordinance, regulation, building
or zoning law, or any other requirements of any such authority or
body, which noncompliance could have, individually or in the
aggregate, a Material Adverse Effect.

         (ii)  Neither the Company nor any Subsidiary nor any
Affiliate of the Company is an entity defined as a "designated
national" within the meaning of the Foreign Assets Control
Regulations, 31 C.F.R. Chapter V, or is in violation of any Federal
statute or Presidential Executive Order, or any rules or regulations
of any department, agency or administrative body promulgated under
any such statute or Order, concerning trade or other relations with
any foreign country or any citizen or national thereof or the
ownership or operation of any property and no restriction or
prohibition under any such statute, Order, rule or regulation has
a Material Adverse Effect.

    (h)  ERISA.  Based upon your representations in Section 3.2 of
this Agreement, neither the purchase of the Notes by you nor the
consummation of any of the other transactions contemplated by this
Agreement is or will constitute a "prohibited transaction" within
the meaning of Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code"), or Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").  Each employee
pension benefit plan, as defined in Section 3(2) of ERISA, that has
been established by or contributed to or is maintained by the
Company or any Subsidiary (a "Plan") complies in all material
respects with ERISA and other applicable laws; specifically,
(i) there is no accumulated funding deficiency, as defined in
Section 302(a)(2) of ERISA with respect to any Plan; and (ii) no
reportable event (as defined in Section 4043(b) of ERISA and
applicable regulations) with respect to any Plan has occurred that
has resulted in material liability to the Company or any Subsidiary. 
Neither the Company nor any Subsidiary has incurred withdrawal or
termination liability with respect to any multiemployer plan (as
defined in the Multiemployer Pension Plan Amendments Act of 1980,
as amended) to which the Company or any Subsidiary has contributed
(a "Multiemployer Plan") that has not been satisfied in full; and
neither the Company nor any Subsidiary has any knowledge that any
Multiemployer Plan is in reorganization.  No liability (whether or
not such liability is being contested) has been asserted against the
Company or any Subsidiary in connection with any Plan or any
Multiemployer Plan by the Pension Benefit Guaranty Corporation (the
"PBGC"), by a trustee appointed pursuant to Section 4042(b) or (c)
of ERISA, or by a sponsor or an agent of a sponsor of a
Multiemployer Plan, and no Lien has been attached and no person has
threatened to attach a Lien on any of the Company's or any
Subsidiary's property as a result of failure to comply with ERISA
or as a result of the termination of any Plan.  Each Plan (except
for any Plan which is unfunded and maintained primarily for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees), as most recently
amended, including amendments to any trust agreement, group annuity
or insurance contract, or other governing instrument, is the subject
of a favorable determination by the Internal Revenue Service with
respect to its qualification under Section 401(a) of the Code.

    (i)  Title to Properties.  Except as disclosed on the most
recent audited consolidated balance sheet described in the foregoing
paragraph (d) of this Section 3.1, the Company and each Subsidiary
has (i) good title in fee simple or its equivalent under applicable
law to all the real property owned by it and (ii) good title to all
of the other property reflected in such balance sheet or
subsequently acquired by the Company or any Subsidiary (except as
sold or otherwise disposed of in the ordinary course of business),
in each case free from all Liens or defects in title except those
permitted by Section 7.5.

    (j)  Leases.  The Company and each Subsidiary enjoy peaceful
and undisturbed possession under all leases under which the Company
or such Subsidiary is a lessee or is operating.  None of such leases
contains any provision which might materially and adversely affect
the operation or use of the property so leased.  All of such leases
are valid and subsisting and neither the Company or any Subsidiary
nor any third party is in default under any of such leases.

    (k)  Franchises, Patents, Trademarks and Other Rights.  The
Company and each Subsidiary have all franchises, permits, licenses
and other authority necessary to carry on or used in their
businesses as now being conducted and as proposed to be conducted,
and neither the Company nor any Subsidiary is in default under any
of such franchises, permits, licenses or other authority except for
franchises, permits, licenses or other authority, the lack or loss
of which, and defaults, which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.

The Company and each Subsidiary own or possess all patents,
trademarks, service marks, trade names, copyrights, licenses and
rights with respect to the foregoing necessary for, or used by them
in, the present conduct of their businesses, without any known
conflict with the rights of others which could have, individually
or in the aggregate, a Material Adverse Effect.

    (l)  Authorization.  This Agreement and the Notes have been duly
authorized on the part of the Company and the Agreement does, and
the Notes when issued will, constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their
terms, except to the extent that enforcement of the Notes may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable
principles, regardless of whether enforcement is sought in equity
or at law.  The sale of the Notes, the execution and delivery of the
Agreement and compliance by the Company with all of the provisions
of this Agreement and the Notes (i) are within the Company's
corporate powers, (ii) have been duly authorized by proper corporate
action, (iii) are legal and will not violate any provisions of any
law or regulation or order of any court, governmental authority or
agency and (iv) will not result in any breach of any of the
provisions of, or constitute a default under, or result in the
creation of any Lien on any property of the Company or any
Subsidiary under the provisions of, any charter document, by-law,
loan agreement or other agreement or instrument to which the Company
or any Subsidiary is a party or by which any of them or their
property are bound.  

    (m)  No Defaults.  No event has occurred and no condition exists
which, upon the issuance of the Notes, would constitute a Default
or an Event of Default under this Agreement.  Neither the Company
nor any Subsidiary is in default under any charter document, by-
law, loan agreement or other agreement or instrument to which it is
a party or by which it or its property is bound.

    (n)  Governmental Consent.  Neither the nature of the Company
or any of its Subsidiaries, their respective businesses or
properties, nor any relationship between the Company or any of its
Subsidiaries and any other Person, nor any circumstances relative
to the offer, issuance, sale or delivery of the Notes or execution
and delivery of this Agreement is such as to require a consent,
approval or authorization of, or withholding of objection on the
part of, or filing, registration or qualification with, any
governmental authority on the part of the Company in connection with
the execution and delivery of this Agreement, or the offer,
issuance, sale or delivery of the Notes.

    (o)  Taxes.  All tax returns required to be filed by the Company
or any Subsidiary in any jurisdiction have been filed, and all
taxes, assessments, fees and other governmental charges upon the
Company or any Subsidiary, or upon any of their respective
properties, income or franchises, which are due and payable, have
been paid timely or within appropriate extension periods or
contested in good faith by appropriate proceedings that stay the
collection thereof by the applicable governmental authority during
the period of the contest and as to which adequate reserves are
maintained in accordance with generally accepted accounting
principles.  The Federal income tax liability of the Company and
its Subsidiaries has been finally determined by the Internal Revenue
Service and satisfied for all taxable years up to and including the
taxable year ended June 30, 1991 and no material controversy in
respect of additional taxes due since such date is pending or, to
the Company's knowledge, threatened.  The provisions for taxes on
the books of the Company and each Subsidiary are adequate for all
open years and for the current fiscal period.

    (p)  Status under Certain Statutes.  Neither the Company nor
any Subsidiary is:  (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding
company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act of 1935,
as amended, or (ii) a "public utility" as defined in the Federal
Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such
"affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.

    (q)  Private Offering.  The Company has not authorized or
employed any Person as agent, broker, dealer or otherwise in
connection with the offering of the Notes or any similar security
of the Company, and the Company has not offered any of the Notes or
any similar security of the Company for sale to, or solicited offers
to buy any thereof from, or otherwise approached or negotiated with
respect thereto with, any prospective purchaser, other than
institutional investors, including the Purchaser, each of whom was
offered all or a portion of the Notes at private sale for
investment.  Neither the Company nor anyone acting on its
authorization will offer the Notes, or any part thereof or any
similar security for issuance or sale to, or solicit any offer to
acquire any of the same from, anyone so as to bring the issuance
and sale of the Notes within the provisions of Section 5 of the
Securities Act.

    (r)  Effect of Other Instruments.  Neither the Company nor any
Subsidiary is bound by any agreement or instrument or subject to
any charter or other corporate restriction which (i) in any way
specifically restricts the Company's ability to perform its
obligations under this Agreement or the Notes or any Subsidiary's
ability to pay dividends or make advances to the Company or (ii) has
a Material Adverse Effect.

    (s)  Use of Proceeds.  The Company will apply the net proceeds
from the sale of the Notes to refinance existing Indebtedness.  None
of the transactions contemplated in this Agreement (including,
without limitation thereof, the use of the proceeds from the sale
of the Notes) will violate or result in a violation of Section 7 of
the Exchange Act, or any regulations issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System (12 C.F.R.,
Chapter II).  None of the proceeds from the sale of the Notes will
be used to purchase or carry or refinance any borrowing the proceeds
of which were used to purchase or carry any "margin stock" or
"margin security" in violation of Regulations G, T, U or X.

    (t)  Condition of Property.  All of the facilities of the
Company and each of its Subsidiaries are in sound operating
condition and repair, except for facilities being repaired in the
ordinary course of business.

    (u)  Books and Records.  The Company and each Subsidiary
(i) maintain books, records and accounts in reasonable detail which
accurately and fairly reflect their respective transactions and
business affairs, and (ii) maintain a system of internal accounting
controls sufficient to provide reasonable assurances that
transactions are executed in accordance with management's general
or specific authorization and to permit preparation of financial
statements in accordance with generally accepted accounting
principles.

    (v)  Environmental Compliance.  The Company and each Subsidiary
(including their operations and the conditions at or in their
Facilities) comply with all Environmental Laws except for violations
which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; the Company and each
Subsidiary have obtained all permits under Environmental Laws
necessary to their respective operations, all such permits are in
full force and effect, and the Company and each Subsidiary are in
compliance with all material terms and conditions of such permits
except for permits, individually or in the aggregate, the lack of
which or noncompliance with which could not reasonably be expected
to have a Material Adverse Effect; and neither the Company nor any
of its Subsidiaries has any liability (contingent or otherwise) in
connection with any Release of any Hazardous Material or the
existence of any Hazardous Material on, under or about any Facility
that could give rise to an Environmental Claim that could reasonably
be expected to have a Material Adverse Effect.

    (w)  Full Disclosure.  Neither the financial statements referred
to in paragraph (d) of this Section 3.1, nor this Agreement, nor any
other written statement or document furnished by or on behalf of the
Company to you in connection with the negotiation of the sale of the
Notes and the execution and delivery of the Agreement, taken
together, contain any untrue statement of a material fact or omit
a material fact necessary to make the statements contained therein
or herein not misleading in light of the circumstances under which
they were made.  There is no fact (exclusive of general economic,
political or social conditions or trends) particular to the Company
and known by the Company that the Company has not disclosed to you
in writing and that has a Material Adverse Effect or, so far as the
Company can now foresee, will have, individually or in the
aggregate, a Material Adverse Effect, or will restrict the Company's
performance of its undertakings under this Agreement and the Notes.

    3.2  Representations of the Purchaser.  You represent, and in
entering into this Agreement the Company understands, that you are
acquiring the Notes for your own account and not with a view to any
distribution thereof, provided that the disposition of your property
shall at all times be and remain within your control; subject,
however, to compliance with Federal securities laws.  You
acknowledge that the Notes have not been registered under the
Securities Act and you understand that the Notes must be held
indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.

You have been advised that the Company does not contemplate
registering, and is not legally required to register, the Notes
under the Securities Act.

    You further represent that either: (i) no part of the funds to
be used by you to purchase the Notes will constitute assets
allocated to any separate account maintained by you; or (ii) no part
of the funds to be used by you to purchase the Notes will constitute
assets allocated to any separate account maintained by you such that
the application of such funds will constitute a prohibited
transaction under Section 406 of ERISA; or (iii) all or a part of
such funds will constitute assets of one or more separate accounts
maintained by you, and you have disclosed to the Company the names
of such employee benefit plans whose assets in such separate account
or accounts exceed 10% of the total assets or are expected to exceed
10% of the total assets of such account or accounts as of the date
of such purchase and the Company has advised you in writing that the
Company is not a party-in-interest nor are the Notes employer
securities with respect to the particular employee benefit plans
disclosed to the Company by you as aforesaid (for the purpose of
this clause (iii), all employee benefit plans maintained by the same
employer or employee organization are deemed to be a single plan). 
As used herein, the terms "separate account," "party-in-interest,"
"employer securities," and "employee benefit plan" have the meanings
assigned to them in ERISA.


S4.  CLOSING CONDITIONS

    Your obligation to purchase the Notes on the Closing Date shall
be subject to the performance by the Company of its agreements
hereunder, which are to be performed at or prior to the time of
delivery of the Notes, and to the following conditions to be
satisfied on or before the Closing Date:

    4.1  Representations and Warranties.  The representations and
warranties of the Company contained in this Agreement or otherwise
made in writing in connection herewith shall be true and correct on
or as of the Closing Date and the Company shall have delivered to
you a certificate to such effect, dated the Closing Date and
executed by the President and Chief Operating Officer, the Senior
Vice President of Administration and Chief Financial Officer or the
Vice President of Financial Operations, Treasurer and Corporate
Controller of the Company.

    4.2  Legal Opinions.  You shall have received from Gardner,
Carton & Douglas, who is acting as your special counsel in this
transaction, from Varnam, Riddering, Schmidt & Howlett, counsel to
the Company, their opinions, dated such Closing Date, in form and
substance satisfactory to you and covering substantially the matters
set forth or provided in the attached Exhibits B and C,
respectively.

    4.3  Events of Default.  No event shall have occurred and be
continuing on the Closing Date which would constitute a Default or
an Event of Default, and the Company shall have delivered to you a
certificate to such effect, dated the Closing Date and executed by
the President and Chief Operating Officer, the Senior Vice President
of Administration and Chief Financial Officer or the Vice President
of Financial Operations, Treasurer and Corporate Controller of the
Company.

    4.4  Payment of Fees and Expenses.  The Company shall have paid
all fees, expenses, costs and charges, including the fees and
expenses of Gardner, Carton & Douglas, your special counsel,
incurred by you through the Closing Date and incident to the
proceedings in connection with, and transactions contemplated by,
this Agreement and the Notes.

    4.5  Legality of Investment.  Your acquisition of the Notes
shall constitute a legal investment as of the Closing Date under
the laws and regulations of each jurisdiction to which you may be
subject (without resort to any "basket" or "leeway" provision which
permits the making of an investment without restrictions as to the
character of the particular investment being made), and such
acquisition shall not subject you to any penalty or other onerous
condition in or pursuant to any such law or regulation; and you
shall have received such certificates or other evidence as you may
reasonably request to establish compliance with this condition.

    4.6  Private Placement Number.  A private placement number with
respect to the Notes shall have been issued by S&P.

    4.7  Proceedings and Documents.  All corporate proceedings taken
in connection with the transactions contemplated by this Agreement,
and all documents necessary to the consummation of such transactions
shall be satisfactory in form and substance to you and your special
counsel, and you and your special counsel shall have received copies
(executed or certified as may be appropriate) of all legal documents
or proceedings which you and they may reasonably request.


S5.  INTERPRETATION OF AGREEMENT

    5.1  Certain Terms Defined.  The terms hereinafter set forth
when used in this Agreement shall have the following meanings:   

    Affiliate - Any Person (other than a Subsidiary or an original
Purchaser) (i) who is a director or executive officer of the Company
or any Subsidiary, (ii) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under
common control with, the Company, (iii) which beneficially owns or
holds securities representing 5% or more of the combined voting
power of the Voting Stock of the Company or any Subsidiary or
(iv) of which securities representing 5% or more of the combined
voting power of its Voting Stock (or in the case of a Person not a
corporation, 5% or more of its equity) is beneficially owned or held
by the Company or any Subsidiary.  The term "control" means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.

    Agreement - As defined in Section 1.1.

    Business Day - Any day, other than Saturday, Sunday or a legal
holiday or any other day on which banking institutions in the United
States of America generally are authorized by law to close.

    Capitalized Lease - Any lease the obligation for Rentals with
respect to which, in accordance with generally accepted accounting
principles, would be required to be capitalized on a balance sheet
of the lessee or for which the amount of the asset and liability
thereunder, as if so capitalized, would be required to be disclosed
in a note to such balance sheet.

    Closing Date - As defined in Section 1.2.

    Code - As defined in Section 3.1(h).

    Consolidated Funded Debt - Funded Debt of the Company and its
Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles.

    Consolidated Net Income - For any period, the net earnings of
the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with generally accepted accounting
principles, but excluding extraordinary items.  

    Consolidated Net Worth - The consolidated shareholders' equity
of the Company and its Subsidiaries determined in accordance with
generally accepted accounting principles.

    Consolidated Total Assets - The total assets of the Company and
its Subsidiaries determined on a consolidated basis in accordance
with generally accepted accounting principles.

    Consolidated Total Capitalization - The sum of Consolidated Net
Worth and Consolidated Funded Debt.

    Default - Any event which, with the lapse of time or the giving
of notice, or both, would become an Event of Default.

    Determination Date - The day 3 Business Days before the date
fixed for a prepayment pursuant to Section 2.2 or Section 7.11 or
the date of declaration pursuant to Section 8.2.

    Environmental Claim - Any notice of violation, claim, demand,
abatement order or other order by any Person for any damage,
including personal injury (including sickness, disease or death),
tangible or intangible property damage, contribution, indemnity,
indirect or consequential damages, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, resulting from
or based upon (i) the existence of a Release (whether sudden or non-
sudden or accidental or non-accidental) of, or exposure to, any
Hazardous Material in, into or onto the environment at, in, by, from
or related to any Facility, (ii) the use, handling, transportation,
storage, treatment or disposal of Hazardous Materials in connection
with the operation of any Facility, or (iii) the violation, or
alleged violation, of any statute, rule, regulation, ordinance,
order, permit, license or authorization of or from any governmental
authority, agency or court relating to environmental matters
pertaining to the Facilities.

    Environmental Laws - All laws relating to environmental matters,
including those relating to (i) fines, orders, injunctions,
penalties, damages, contribution, cost recovery compensation, losses
or injuries resulting from the Release or threatened Release of
Hazardous Materials and to the generation, use, storage,
transportation, or disposal of Hazardous Materials, in any manner
applicable to the Company or any of its Subsidiaries or any of their
respective properties, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability
Act (42 U.S.C. S 9601 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. S 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. S 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. S 1251 et seq.), the
Clean Air Act (42 U.S.C. S 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. S 2601 et seq.), and the Emergency Planning
and Community Right-to-Know Act (42 U.S.C. S 11001 et seq.), and
(ii) environmental protection, including the National Environmental
Policy Act (42 U.S.C. S 4321 et seq.), and comparable foreign and
state laws, each as amended or supplemented, and any similar or
analogous local, state, federal or foreign statutes and regulations
promulgated pursuant thereto, each as in effect as of the date of
determination.

    ERISA - As defined in Section 3.1(h).

    Event of Default - As defined in Section 8.1.

    Exchange Act - The Securities Exchange Act of 1934, as amended,
and as it may be further amended from time to time.

    Facility - Any and all real property (including all buildings,
fixtures or other improvements located thereon) now or heretofore
owned, leased, operated or used (under permit or otherwise) by the
Company or any of its Subsidiaries.

    Funded Debt - As of any date of determination, all Indebtedness
properly classified as long-term debt in accordance with generally
accepted accounting principles, including (A) Indebtedness which by
its terms matures more than one year from the date of creation
(including any portion thereof payable within a year) or which may
be renewed or extended at the option of the obligor for more than
one year from such date whether or not theretofore renewed or
extended, (B) Indebtedness outstanding under a revolving credit or
similar agreement providing for borrowings (and renewals and
extensions thereof) over a period of more than one year
notwithstanding that any such Indebtedness may be payable within one
year after the creation thereof and (C) the principal portion of
obligations under Capitalized Leases.

    Guaranties - All obligations (other than endorsements in the
ordinary course of business of negotiable instruments for deposit
or collection) of a Person guaranteeing or, in effect, guaranteeing
any Indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person:  (i) to purchase such
Indebtedness or obligation or any property or assets constituting
security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or (z)
otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligation, (iii) to lease property
or to purchase securities or other property or services primarily
for the purpose of assuring the owner of such Indebtedness or
obligation against loss in respect thereof, or (iv) otherwise to
assure the owner of the Indebtedness or obligation against loss in
respect thereof.  For the purposes of all computations made under
this Agreement, Guaranties in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which has
been guaranteed, and Guaranties in respect of any other obligation
or liability or any dividend shall be deemed to be Indebtedness
equal to the maximum aggregate amount of such obligation, liability
or dividend.

    Hazardous Materials - (i) Any chemical, material or substance
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," or "toxic substances" or words
of similar import under any Environmental Laws; (ii) any oil,
petroleum or petroleum derived substance, any drilling fluid,
produced water or other waste associated with the exploration,
development or production of crude oil, any flammable substance or
explosive, any radioactive material, any hazardous waste or
substance, any toxic waste or substance or any other material or
pollutant that (x) poses a hazard to any property of the Company or
any of its Subsidiaries or to Persons on or about such property or
(y) causes such property to be in violation of any Environmental
Law; (iii) any friable asbestos, urea formaldehyde foam insulation,
electrical equipment which contains any oil or dielectric fluid with
levels of polychlorinated biphenyls in excess of fifty parts per
million; and (iv) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any
governmental authority.

    Indebtedness - (i) All items of borrowings, including
Capitalized Leases, which in accordance with generally accepted
accounting principles would be included in determining total
liabilities as shown on the liability side of a balance sheet, and
(ii) Guaranties of obligations of other Persons of the character
referred to in this definition, provided, however, that, except as
otherwise required in this Agreement, Indebtedness of a Person shall
not include Indebtedness which would be eliminated in preparing a
consolidated balance sheet in accordance with generally accepted
accounting principles.

    Institutional Holder - Any bank, trust company, insurance
company, pension fund, mutual fund or other similar financial
institution, including, without limiting the foregoing, any
"qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act, which is or becomes a holder of any Note.

    Investments - All investments made, in cash or by delivery of
property, directly or indirectly, in any Person, whether by
acquisition of shares of capital stock, indebtedness or other
obligations or securities or by loan, advance, capital contribution
or otherwise; provided, however, that "Investments" shall not mean
or include investments in property to be used or consumed in the
ordinary course of business.

    Joint Venture - Any association with one or more Persons to
undertake, through a corporation or partnership, a commercial or
business enterprise.

    Lien - Any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including any agreement to grant any of
the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, including a Capitalized
Lease, and the filing of or agreement to file any financing
statement under the Uniform Commercial Code of any jurisdiction in
connection with any of the foregoing.

    Make-Whole Amount - As of any Determination Date, to the extent
that the Reinvestment Yield on such Determination Date is lower than
the interest rate payable on or in respect of the Notes, the excess
of (a) the sum of the present values of each principal and interest
payment to be foregone by any prepayment (exclusive of accrued
interest on such Notes through the date of prepayment) on such Notes
(taking into account the manner of application of such prepayment
required by Section 2.2(c)), determined by discounting (semi-
annually on the basis of a 360-day year composed of twelve 30-day
months), each such payment at a rate that is equal to the
Reinvestment Yield over (b) the aggregate principal amount of such
Notes then to be prepaid or paid.  To the extent that the
Reinvestment Yield on any Determination Date is equal to or higher
than the interest rate payable on or in respect of such Notes, the
Make-Whole Amount is zero.

    Material Adverse Effect - (i) A material adverse effect on the
business, properties, profits, prospects, operations or condition,
financial or otherwise, of the Company or any Subsidiary, (ii) the
impairment of the ability of the Company to perform its obligations
under this Agreement or the Notes or (iii) the impairment of the
ability of the holders of the Notes to enforce such obligations.

    Moody's - Moody's Investors Service, Inc.

    Multiemployer Plan - As defined in Section 3.1(h).

   Net Worth - With respect to any Joint Venture, total assets less
total liabilities, all as determined in accordance with generally
accepted accounting principles.

   Notes - As defined in Section 1.1.

    PBGC - As defined in Section 3.1(h).

    Person - Any individual, corporation, partnership, Joint
Venture, association, joint-stock company, trust, unincorporated
organization or government or any governmental authority, agency or
political subdivision.

    Plan - As defined in Section 3.1(h).

    Purchaser - As defined in Section 1.1.

    Reinvestment Yield - shall mean the sum of (i) 0.60% plus (ii)
the yield reported, as of 10:00 A.M. (New York City time) on the
Determination Date, on the Cantor-Fitzgerald Brokerage Screen
available on the Bloomberg and Knight Ridder Information System (or,
if not available, any other nationally recognized trading screen
reporting on-line intraday trading in United States government
securities) for actively traded U.S. Treasury securities having a
maturity equal to the Weighted Average Life to Maturity of the Notes
then being prepaid or paid as of the date of prepayment or payment,
rounded to the nearest month, or if such yields shall not be
reported as of such time or the yields reported as of such time are
not ascertainable in accordance with the preceding clause, then the
arithmetic mean of the yields published in the statistical release
designated H.15(519) (or any successor publication) of the Board of
Governors of the Federal Reserve System under the caption "U.S.
Government Securities--Treasury Constant Maturities" (the
"statistical release") for the maturity corresponding to the
remaining Weighted Average Life to Maturity of the Notes as of the
date of such prepayment or payment rounded to the nearest month. 
For purposes of calculating the Reinvestment Yield, the most recent
weekly statistical release published prior to the applicable
Determination Date shall be used.  In the event the statistical
release is not published, the arithmetic mean of such reasonably
comparable index as may be designated by the holders of at least 51%
in aggregate principal amount of the Notes, for the maturity
corresponding to the remaining Weighted Average Life to Maturity of
the Notes as of the date of prepayment or payment, as the case may
be, rounded to the nearest month shall be used.  If no maturity
exactly corresponding to such rounded Weighted Average Life to
Maturity shall appear therein, yields for the two most closely
corresponding published maturities (one of which occurs prior and
the other subsequent to the Weighted Average Life to Maturity) shall
be calculated pursuant to the foregoing sentence and the
Reinvestment Yield shall be interpolated from such yields on a
straight-line basis (rounding, in each of such relevant periods, to
the nearest month).

    Release - Any release, spill, emission, leaking, pumping,
pouring, emptying, dumping, injection, escaping, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or
outdoor environment (including the abandonment or disposal of any
barrel, container or other closed receptacle containing any
Hazardous Material), or into or out of any Facility, including the
movement of any Hazardous Material through the air, soil, surface
water, groundwater or property.

    Rentals - As of the date of any determination thereof, all fixed
payments (including all payments which the lessee is obligated to
make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Subsidiary, as lessee or
sublessee under a lease of real or personal property, but exclusive
of any amounts required to be paid by the Company or a Subsidiary
(whether or not designated as rents or additional rents) on account
of maintenance, repairs, insurance, taxes, assessments, amortization
and similar charges.  Fixed rents under any so-called "percentage
leases" shall be computed on the basis of the minimum rents, if any,
required to be paid by the lessee, regardless of sales volume or
gross revenues.

    Sale and Leaseback Transaction - Any arrangement, directly or
indirectly, with any Person whereby a seller or a transferor shall
sell or otherwise transfer any real or personal property and then
or thereafter lease (whether or not a Capitalized Lease), or
repurchase under an extended purchase contract, the same or similar
property from the purchaser or the transferee of such property.

    S&P - Standard & Poor's Corporation.

    Securities Act - The Securities Act of 1933, as amended, and as
it may be further amended from time to time.

    Subsidiary - Any corporation of which shares of Voting Stock
representing more than 50% of the combined voting power of each
outstanding class of Voting Stock are owned, directly or indirectly,
by the Company.  For purposes of this Agreement, Donnelly Export
Corporation also shall be deemed to be a Subsidiary as long as it
is included in the combined consolidated financial statements of the
Company.

    Voting Stock - Capital stock of any class of a corporation
having power under ordinary circumstances to vote for the election
of members of the board of directors of such corporation, or persons
performing similar functions.

    Weighted Average Life to Maturity - As applied to any prepayment
of principal of the Notes at any date, the number of years obtained
by dividing (a) the then outstanding principal amount of the Notes
to be prepaid, into (b) the sum of the products obtained by
multiplying (i) the amount of each then remaining installment,
sinking fund, serial maturity, or other required payment, including
payment at final maturity, foregone by virtue of such prepayment of
the Notes, by (ii) the number of years (calculated to the nearest
1/12th) which would have elapsed between such date and the making
of such payment.

    Wholly-Owned - When applied to a Subsidiary, any Subsidiary 100%
of the Voting Stock of which is owned by the Company and/or its
Wholly-Owned Subsidiaries, other than directors' qualifying shares.

    Terms which are defined in other Sections of this Agreement
shall have the meanings specified therein.

    5.2  Accounting Principles.  Where the character or amount of
any asset or liability or item of income or expense is required to
be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, the same
shall be done in accordance with United States generally accepted
accounting principles in force at the time this Agreement is
executed, except where such principles are inconsistent with the
requirements of this Agreement.

    5.3  Valuation Principles.  Except where indicated expressly to
the contrary by the use of terms such as "fair value," "fair market
value" or "market value," each asset, each liability and each
capital item of any Person, and any quantity derivable by a
computation involving any of such assets, liabilities or capital
items, shall be taken at the net book value thereof for all purposes
of this Agreement.  "Net book value" with respect to any asset,
liability or capital item of any Person shall mean the amount at
which the same is recorded or, in accordance with generally accepted
accounting principles, should have been recorded in the books of
account of such Person, as reduced by any reserves which have been
or, in accordance with generally accepted accounting principles,
should have been set aside with respect thereto, but in every case
(whether or not permitted in accordance with generally accepted
accounting principles) without giving effect to any write-up, write-
down or write-off (other than any write-down or write-off the entire
amount of which was charged to Consolidated Net Income or to a
reserve which was a charge to Consolidated Net Income) relating
thereto which was made after the date of this Agreement.

    5.4  Direct or Indirect Actions.  Where any provision in this
Agreement refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable
whether the action in question is taken directly or indirectly by
such Person.


S6.  AFFIRMATIVE COVENANTS

    The Company agrees that, for so long as any amount remains
unpaid on any Note:

    6.1  Corporate Existence.  The Company will maintain and
preserve, and will cause each Subsidiary to maintain and preserve,
its corporate existence and right to carry on its business and use,
and cause each Subsidiary to use, its best efforts to maintain,
preserve, renew and extend all of its rights, powers, privileges and
franchises necessary to the proper conduct of its business;
provided, however, that the foregoing shall not prevent any
transaction permitted by Sections 7.10, 7.11 or 7.12 or the
termination of the corporate existence of any Subsidiary if, in the
opinion of the Board of Directors or senior management of the
Company, such termination is in the best interests of the Company,
is not disadvantageous to holders of the Notes and is not otherwise
prohibited by this Agreement.

    6.2  Insurance.  The Company will insure and keep insured, and
will cause each Subsidiary to insure and keep insured, at all times
all of its properties which are of an insurable nature and of the
character usually insured by companies operating properties similar
to the properties of the Company or each such Subsidiary, against
loss or damage by fire and from other causes as are required by law
or sound business practice to be insured and are customarily insured
against by companies engaged in the manufacture and distribution of
automotive parts in such amounts as are usually insured against by
such companies.  The Company will also maintain, and will also cause
each Subsidiary to maintain, at all times adequate insurance against
loss or damage from such hazards and risks to the person and
property of others as are required by law or sound business practice
to be insured and are usually insured against by companies operating
properties similar to the properties of the Company or each such
Subsidiary.  All such insurance shall be carried with financially
sound and reputable insurers of good standing.  The Company shall
furnish you on or prior to the Closing Date a summary of insurance
presently in force.

    6.3  Taxes, Claims for Labor and Materials.  The Company will
pay and discharge prior to the date on which penalties attach
thereto, and will cause each Subsidiary to pay and discharge prior
to the date on which penalties attach thereto, all taxes,
assessments and governmental charges or levies imposed upon it or
its property or assets, or upon properties leased by it (but only
to the extent required to do so by the applicable lease), prior to
the date on which penalties attach thereto, and all lawful claims
which, if unpaid, might become a Lien upon its property or assets,
provided that neither the Company nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim,
the payment of which is being contested in good faith and by proper
proceedings that will stay the forfeiture or sale of any property
and with respect to which adequate reserves are maintained in
accordance with generally accepted accounting principles.

    6.4  Maintenance of Properties.  The Company will maintain,
preserve and keep, and will cause each Subsidiary to maintain,
preserve and keep, its material properties (whether owned in fee or
a leasehold interest) in good repair and working order, ordinary
wear and tear excepted, and from time to time will make all
necessary repairs, replacements, renewals, improvements and
additions.

    6.5  Maintenance of Records.  The Company will keep, and will
cause each Subsidiary to keep, at all times proper books of record
and account in which full, true and correct entries will be made of
all dealings or transactions of or in relation to the business and
affairs of the Company or such Subsidiary, in accordance with
generally accepted accounting principles consistently applied
throughout the period involved (except for such changes as are
disclosed in such financial statements or in the notes thereto and
concurred in by the Company's independent certified public
accountants), and the Company will, and will cause each Subsidiary
to, provide reasonable protection against loss or damage to such
books of record and account. 

    6.6  Financial Information and Reports.  The Company will
furnish to you and to any other Institutional Holder (in duplicate
if you or such other holder so request) the following:

    (a)  As soon as available and in any event within 60 days after
the end of each of the first three quarterly accounting periods of
each fiscal year of the Company, a condensed combined consolidated
balance sheet of the Company and its Subsidiaries as of the end of
such period and condensed combined consolidated statements of income
and cash flows of the Company and its Subsidiaries for the periods
beginning on the first day of such fiscal year and the first day of
such quarterly accounting period and ending on the date of such
balance sheet, setting forth in comparative form the corresponding
condensed combined consolidated figures for the corresponding
periods of the preceding fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved (except for
changes disclosed in such financial statements or in the notes
thereto and concurred in by the Company's independent certified
public accountants) and certified by the chief financial officer or
Vice President of Financial Operations of the Company (i) outlining
the basis of presentation, and (ii) stating that the information
presented in such statements presents fairly the financial condition
of the Company and its Subsidiaries and the results of operations
for the period, subject to customary year-end audit adjustments;

    (b)  As soon as available and in any event within 120 days after
the last day of each fiscal year, a combined consolidated balance
sheet of the Company and its Subsidiaries as of the end of such
fiscal year and the related combined consolidated statements of
income, shareholders' equity and cash flows for such fiscal year,
in each case setting forth in comparative form figures for the
preceding fiscal year, all in reasonable detail, prepared in
accordance with generally accepted accounting principles
consistently applied throughout the period involved (except for
changes disclosed in such financial statements or in the notes
thereto and concurred in by independent certified public
accountants) and accompanied by a report unqualified as to scope of
audit and unqualified as to going concern as to the combined
consolidated balance sheet and the related combined consolidated
statements of income, shareholders' equity and cash flows by BDO
Seidman, or any other firm of independent public accountants of
recognized national standing selected by the Company, to the effect
that such financial statements have been prepared in conformity with
generally accepted accounting principles and present fairly, in all
material respects, the financial condition of the Company and its
Subsidiaries and that the examination of such financial statements
by such accounting firm has been made in accordance with generally
accepted auditing standards;

    (c)  Together with the financial statements delivered pursuant
to paragraphs (a) and (b) of this Section 6.6, a certificate of the
chief financial officer or Vice President of Financial Operations
of the Company, (i) to the effect that such officer has re-examined
the terms and provisions of this Agreement and that, to the best
of
his knowledge, on the date of such certificate, during the periods
covered by such financial statements and as of the end of such
periods, neither the Company nor any Subsidiary is, or was, in
default in the fulfillment of any of the terms, covenants,
provisions and conditions of this Agreement and that no Default or
Event of Default is occurring or has occurred as of the date of
such
certificate, during such periods and as of the end of such periods,
or if such officer is aware of any Default or Event of Default,
such
officer shall disclose in such statement the nature thereof, its
period of existence and what action, if any, the Company has taken
or proposes to take with respect thereto, and (ii) stating whether
the Company is in compliance with Sections 7.1 through 7.15 and
setting forth, in sufficient detail, the information and
computations required to establish whether or not the Company was
in compliance with the requirements of Sections 7.1 through 7.6 and
7.8 through 7.12 during the periods covered by the financial
statements then being furnished and as of the end of such periods;

    (d)  Together with the financial reports delivered pursuant to
paragraph (b) of this Section 6.6, a certificate from the Company's
independent certified public accountants stating that in making the
examination necessary for expressing an opinion on such financial
statements, nothing came to their attention that caused them to
believe that there is in existence or has occurred any Default or
Event of Default hereunder (the occurrence of which is
ascertainable
by accountants in the course of normal audit procedures) or, if
such
accountants shall have obtained knowledge of any such Default or
Event of Default, describing the nature thereof and the length of
time it has existed;

    (e)  Within 5 days after the Company obtains knowledge thereof,
notice of any litigation or any governmental proceeding pending
against the Company or any Subsidiary in which the damages sought
exceed $1,000,000, individually or in the aggregate, or which might
reasonably be expected to result in a Material Adverse Effect;

    (f)  As soon as available, copies of each financial statement,
notice, report and proxy statement which the Company shall furnish
to its stockholders; copies of each registration statement and
periodic report which the Company may file with the Securities and
Exchange Commission, and any similar or successor agency of the
Federal government administering the Securities Act, the Exchange
Act or the Trust Indenture Act of 1939, as amended; without
duplication, copies of each report relating to the Company or its
securities which the Company may file with any securities exchange
on which any of the Company's securities may be registered; copies
of any orders in any material proceedings to which the Company or
any of its Subsidiaries is a party, issued by any governmental
agency, Federal or state, having jurisdiction over the Company or
any of its Subsidiaries; and, except at such times as the Company
is a reporting company under Section 13 or 15(d) of the Exchange
Act or has complied with the requirements for the exemption from
registration under the Exchange Act set forth in Rule 12g-3-2(b),
such financial or other information as any holder of the Notes or
prospective purchaser of the Notes may reasonably request;

    (g)  As soon as available, a copy of each other report
submitted
to the Company or any Subsidiary by independent accountants
retained
by the Company or any Subsidiary in connection with any interim or
special audit made by them of the books of the Company or any
Subsidiary;

    (h)  Annually following any change in the composition of the
Company's Subsidiaries from that set forth in Annex I, as
theretofore updated pursuant to this paragraph, an updated list
setting forth the information specified in Annex I; 

    (i)  If at any time (but only so long as) the Company provides
consolidating financial statements to any holder of Indebtedness,
copies of such consolidating financial statements; and 

    (j)  Such additional information as you or such other
Institutional Holder of the Notes may reasonably request concerning
the Company and its Subsidiaries.

    6.7  Inspection of Properties and Records.  The Company will
allow, and will cause each Subsidiary to allow, any representative
of you or any other Institutional Holder, so long as you or such
other Institutional Holder holds any Note, to visit and inspect any
of its properties, to examine its books of record and account and
to discuss its affairs, finances and accounts with its officers and
its public accountants (and by this provision the Company
authorizes
such accountants to discuss with you or such Institutional Holder
its affairs, finances and accounts).  Such visitations and
inspections shall take place at such reasonable times and as often
as you or such Institutional Holder may reasonably request,
provided
that, if at the time thereof any Default or Event of Default has
occurred and is continuing, such visitations and inspections shall
be at the Company's expense.  Any proprietary or other
confidential,
competitively sensitive information obtained by you or any other
Institutional Holder in the course of any visitation or inspection
shall not be disclosed to any Person unless required by law.

    6.8  ERISA.  (a)  All assumptions and methods used to determine
the actuarial valuation of employee benefits, both vested and
unvested, under any Plan, and each such Plan, whether now existing
or adopted after the date hereof, will comply in all material
respects with ERISA and other applicable laws.

    (b)  The Company will not at any time permit any Plan
established, maintained or contributed to by it or any Subsidiary
or an "affiliate" (as defined in Section 407(d)(7) of ERISA) of the
Company to:  

         (i)  engage in any "prohibited transaction" as such term
is defined in Section 4975 of the Code or in Section 406 of ERISA;

         (ii) incur any "accumulated funding deficiency" as such
term is defined in Section 302 of ERISA, whether or not waived; or

         (iii)     be terminated under circumstances which are
likely to result in the imposition of a lien on the property of the
Company or any Subsidiary pursuant to Section 4068 of ERISA, if and
to the extent such termination is within the control of the
Company;

if the event or condition described in clause (i), (ii) or (iii)
above is likely to subject the Company, any Subsidiary or ERISA
affiliate to liabilities which, individually or in the aggregate,
could have a Material Adverse Effect.

    (c)  Upon request, the Company will furnish you or any other
Institutional Holder a copy of the annual report of each Plan (Form
5500) required to be filed with the Internal Revenue Service no
later than 30 days after the later of the date such report has been
filed with the Internal Revenue Service or the date the copy is
requested.

    (d)  Promptly upon the occurrence thereof, the Company will
give
you and each other Institutional Holder written notice of (i) a
reportable event (within the meaning of Section 4043(b) of ERISA
and
applicable regulations) with respect to any Plan; (ii) the
institution of any steps by the Company, any Subsidiary, any ERISA
affiliate, the PBGC or any other Person to terminate any Plan;
(iii) the institution of any steps by the Company, any Subsidiary
or any ERISA affiliate to withdraw from any Plan; (iv) a prohibited
transaction in connection with any Plan; (v) any material increase
in the contingent liability of the Company, any Subsidiary or any
ERISA affiliate with respect to any liability under any employee
welfare benefit plan (as defined in Section (3)(1) of ERISA) which
has been or is maintained by the Company, any Subsidiary or any
ERISA affiliate for the purpose of providing post-retirement
welfare
benefits to plan participants and their beneficiaries; or (vi) the
taking of any action by the Internal Revenue Service, the
Department
of Labor or the PBGC with respect to any of the foregoing which
would result in any material liability to the Company or any of its
Subsidiaries.

    6.9  Compliance with Laws.  (a) The Company will comply, and
will cause each Subsidiary to comply, with all laws, rules and
regulations, including Environmental Laws, relating to its or their
respective businesses, other than laws, rules and regulations the
failure to comply with which or the sanctions and penalties
resulting therefrom, individually or in the aggregate, would not
have a Material Adverse Effect or would not result in the creation
of a Lien which, if incurred in the ordinary course of business,
would not be permitted by Section 7.3 on any property of the
Company
or any Subsidiary; provided, however, that the Company and its
Subsidiaries shall not be required to comply with laws, rules and
regulations the validity or applicability of which are being
contested in good faith and by appropriate proceedings and as to
which the Company has established adequate reserves on its books
in
accordance with generally accepted accounting principles.

    (b)  Promptly upon the occurrence thereof, the Company will
give
you and each other Institutional Holder notice of the institution
of any proceedings against, or the receipt of notice of potential
liability or responsibility of, the Company or any Subsidiary for
violation, or the alleged violation, of any Environmental Law which
violation could give rise to a material liability of the Company
and
its Subsidiaries taken as a whole.

    6.10  Acquisition of Notes.  Neither the Company nor any
Subsidiary or Affiliate, directly or indirectly, will repurchase
or
offer to repurchase any Notes unless the offer is made to
repurchase
Notes pro rata from all holders at the same time and on the same
terms.  The Company will forthwith cancel any Notes in any manner
or at any time acquired by the Company or any Subsidiary or
Affiliate and such Notes shall not be deemed to be outstanding for
any of the purposes of this Agreement or the Notes.

    6.11  Private Placement Number.  The Company consents to the
filing by your special counsel of copies of this Agreement with S&P
to obtain a private placement number.


S7.  NEGATIVE COVENANTS

    The Company agrees that, for so long as any amount remains
unpaid on any Note:

    7.1  Working Capital.  The Company will not permit working
capital, as determined in accordance with generally accepted
accounting principles on a consolidated basis, at any time to be
less than $6,000,000.

    7.2  Current Ratio.  The Company will not permit consolidated
current assets at any time to be less than 140% of consolidated
current liabilities, as determined in accordance with generally
accepted accounting principles.

    7.3  Net Worth.  The Company will not permit at any time its
Consolidated Net Worth to be less than $50,000,000 plus the
cumulative sum of 40% of Consolidated Net Income (without reduction
for any losses) for each of its fiscal years ending after July 3,
1993.

    7.4  Funded Debt.  The Company will not, and will not permit
any Subsidiary to, permit to exist, create, assume, incur,
guarantee
or otherwise be or become liable for, directly or indirectly, any
Funded Debt other than:

    (a)  the Notes;

    (b)  Outstanding Funded Debt of the Company and its
Subsidiaries
described in the attached Annex IV;

    (c)  Funded Debt of a Subsidiary owed to the Company or a
Wholly-Owned Subsidiary and of the Company owed to a Wholly-Owned
Subsidiary; and

    (d)  Additional Funded Debt, provided that at the time of
incurring such additional Funded Debt and after giving effect
thereto and to the application of the proceeds therefrom, the
Consolidated Funded Debt then to be outstanding does not exceed 65%
of Consolidated Total Capitalization.

    7.5  Liens.  The Company will not, and will not permit any
Subsidiary to, permit to exist, create, assume or incur, directly
or indirectly, any Lien on its properties or assets, whether now
owned or hereafter acquired, except:

    (a)  Liens existing on property or assets of the Company or any
Subsidiary as of the date of this Agreement that are described in
the attached Annex II and Liens resulting from extensions, renewals
or replacements of such Liens, provided that there is no increase
in the Indebtedness secured thereby at the time of renewal and any
new Lien attaches only to the same property theretofore subject to
such earlier Lien;

    (b)  Liens for taxes, assessments or governmental charges not
then due and delinquent or the validity of which is being contested
in good faith and as to which the Company has established adequate
reserves on its books;

    (c)  Liens arising in connection with court proceedings,
provided the execution of such Liens is effectively stayed, such
Liens are being contested in good faith by appropriate proceedings
and the Company has established adequate reserves therefor on its
books;

    (d)  Liens arising in the ordinary course of business and not
incurred in connection with the borrowing of money (including
encumbrances in the nature of zoning restrictions, easements,
rights
and restrictions of record on the use of real property, defects in
title and landlord's, lessor's, mechanics' and materialmen's liens)
that in the aggregate do not materially interfere with the conduct
of the business of the Company and its Subsidiaries taken as a
whole
or materially impair the value of the property or assets subject
thereto;

    (e)  Liens securing Indebtedness of a Subsidiary to the Company
or to a Wholly-Owned Subsidiary or Liens securing Indebtedness of
the Company to a Wholly-Owned Subsidiary;

    (f)  Liens (i) existing on property at the time of its
acquisition by the Company or a Subsidiary and not created in
contemplation thereof, whether or not the Indebtedness secured by
such Lien is assumed by the Company or a Subsidiary; or (ii) on
property created substantially contemporaneously with the date of
acquisition or within 180 days of the acquisition or completion of
construction thereof to secure or provide for all or a portion of
the purchase price or cost of construction of such property; or
(iii) existing on property of a Person at the time such Person is
merged or consolidated with, or substantially all of its assets are
acquired by, the Company or a Subsidiary and not created in
contemplation thereof; provided in the case of clauses (i), (ii)
and (iii) that such Liens do not extend to other property of the
Company or any Subsidiary and that the aggregate principal amount
of Indebtedness secured by each such Lien does not exceed 100% of
the fair market value of all property subject thereto; and

    (g)  Liens not otherwise permitted by paragraphs (a) through
(f) above incurred subsequent to the Closing Date to secure
Indebtedness, provided that at the time of incurring such
additional
Indebtedness and after giving effect thereto and to the application
of the proceeds therefrom, such additional Indebtedness is
permitted
by Section 7.4(d).

    7.6  Restricted Payments.  (a)  The Company will not, except
as
hereinafter provided:

         (i)  declare or pay any dividends, either in cash or
property, on any shares of its capital stock (except dividends or
other distributions payable solely in shares of common stock of the
Company);

         (ii) directly or indirectly, or through any Subsidiary,
purchase, redeem, retire or otherwise acquire any shares of capital
stock of the Company or any warrants, rights or options to purchase
or acquire any shares of its capital stock; or

         (iii)     make any other payment or distribution, either
directly or indirectly, or through any Subsidiary, in respect of
its capital stock;

(all such non-permitted declarations, payments, purchases,
redemptions, retirements, acquisitions, distributions or
investments
being hereinafter referred to as "Restricted Payments") unless,
after giving effect thereto, (x) the aggregate amount of Restricted
Payments made after June 27, 1992 to and including the date of
making the Restricted Payment in question would not exceed the sum
of:  (A) $2,000,000; (B) 50% of cumulative Consolidated Net Income
since June 27, 1992 (less 100% thereof in case of a deficit); (C)
the net cash proceeds received by the Company from the sale of any
shares of its capital stock or warrants to acquire shares of its
capital stock or any Indebtedness that is converted into shares of
its capital stock subsequent to June 27, 1992; and (y) no Default
or Event of Default would exist; and (z) the Company could incur
at
least $1.00 of additional Funded Debt under Section 7.4(d).

    For purposes of this Section, the amount of any Restricted
Payment which is payable or distributable in property other than
cash or shares of capital stock of the Company shall be deemed to
be the greater of the book value or fair market value (as
determined
in good faith by the Board of Directors of the Company) of such
property as of the date of the declaration or payment of such
Restricted Payment.

    (b)  Notwithstanding the limitations in clause (ii) of the
foregoing paragraph (a), the Company may purchase or redeem its
common stock for cash in an amount not to exceed $10,000,000;
provided that after giving effect to such purchase or redemption
the Company shall not be in default in the observance or
performance
of any of the covenants or conditions contained in this Agreement,
including the other limitations in paragraph (a) of this Section
7.6.  On the date of any such purchase or redemption of its common
stock, the Company shall give notice to each holder of the Notes
by
telecopy, telegram, telex or other same-day written communication
of the number of shares of common stock of the Company purchased
or
redeemed and the amount of consideration paid therefor.

    7.7  Investments.  The Company will not, directly or
indirectly,
and will not permit any Subsidiary to, make any Investment, other
than:

         (a)  Investments in Subsidiaries or in Persons which
    through such Investments become Subsidiaries;

         (b)  Investments in Joint Ventures permitted by
    Section 7.8;

         (c)  Investments in direct or indirect obligations of,
    or obligations unconditionally guaranteed by, the United
    States of America or an agency thereof;

         (d)  Investments in commercial paper maturing within 270
    days or less from the date of issuance and rated in one of the
    two highest rating classifications by S&P or Moody's; and

         (e)  Investments in certificates of deposit of commercial
    banks located in the United States of America and having
    capital, surplus and undivided profits of at least
    $150,000,000 and whose long-term debt securities are rated A
    or better by S&P or the equivalent by Moody's.

    7.8  Joint Ventures.  (a) The Company will not, and will not
permit any Subsidiary to, make any Investment in a Joint Venture
if, after giving effect thereto, the then outstanding Investments
of the Company and its Subsidiaries in all Joint Ventures would
exceed 45% of Consolidated Net Worth.

    (b) The Company will not permit the Net Worth of Joint Ventures
in which the Company or any Subsidiary directly or indirectly owns
an interest to be less than a negative $500,000 individually or a
negative $1,000,000 in the aggregate.

    7.9  Sale and Leaseback Transactions.  The Company will not,
and will not permit any Subsidiary to, effect any Sale and
Leaseback
Transaction unless (i) such Sale and Leaseback Transaction occurs
within 180 days of the date of acquisition of property acquired
after the date of this Agreement or completion of construction on
property acquired after the date of this Agreement, whichever
occurs
later, (ii) if such Sale and Leaseback Transaction involves a
Capitalized Lease, such Capitalized Lease is permitted under
Section
7.4 hereof and (iii) such Sale and Leaseback Transaction is
permitted under Section 7.11.

    7.10  Merger or Consolidation.  The Company will not, and will
not permit any Subsidiary to, merge or consolidate with, or sell
all or substantially all of its assets to, any Person, except that:

    (a)  The Company may merge into or consolidate with, or sell
all or substantially all of its assets to, any Person or permit any
Person to merge into it, provided that immediately after giving
effect thereto,

         (i)  The Company is the successor corporation or, if the
Company is not the successor corporation, the successor corporation
is a solvent corporation organized under the laws of a state of the
United States of America having substantially all of its assets in
the United States of America and expressly assumes in writing the
Company's obligations under the Notes and this Agreement;

         (ii) There shall exist no Default or Event of Default; and

         (iii)     The Company or such successor corporation could
incur at least $1.00 of additional Funded Debt under Section
7.4(d);
and 

    (b)  Any Subsidiary may (i) merge into the Company or a Wholly-
Owned Subsidiary or (ii) sell, transfer or lease all or any part
of
its assets to the Company or a Wholly-Owned Subsidiary or
(iii) merge into any Person which, as a result of such merger,
becomes a Wholly-Owned Subsidiary, or (iv) merge with any Person
which does not become a Subsidiary as a result of such merger so
long as such merger is otherwise permitted by Section 7.11;
provided
in each instance set forth in clauses (i) through (iv) that
immediately before and after giving effect thereto there shall
exist
no Default or Event of Default and the Company could incur at least
$1.00 of additional Funded Debt under Section 7.4(d); provided
further that, if the Company is the party to a merger of the type
described in clause (iv), the successor is a solvent corporation
organized under the laws of a state of the United States of America
and expressly assumes the Company's obligations under the Notes and
this Agreement.

    7.11  Sale of Assets.  The Company will not, and will not
permit
any Subsidiary to, sell, lease, transfer or otherwise (including
by
way of merger) dispose of (collectively a "Disposition") any
assets,
including any shares of capital stock of Subsidiaries or any Sale
and Leaseback Transaction, in one or a series of transactions,
other
than in the ordinary course of business, to any Person, except to
the Company or a Wholly-Owned Subsidiary, (i) if, in any fiscal
year, after giving effect to such Disposition, the aggregate net
book value of assets subject to Dispositions during such fiscal
year
would exceed 10% of Consolidated Total Assets as of the end of the
immediately preceding fiscal year or (ii) if a Default or Event of
Default exists; provided, that such Disposition shall not be
subject
to or included in the foregoing limitation and computation in
clause
(i) if the net proceeds of such Disposition are (x) reinvested in
productive assets of a similar nature and at least equivalent value
within 12 months of such Disposition, or (y) applied to reduce
Funded Debt of the Company or its Subsidiaries, including the Notes
(other than Funded Debt that by its terms is subordinate to the
Notes), on a pro rata basis, and in the case of those proceeds
applied to reduce the Notes, the procedures for optional
prepayments
set forth in Sections 2.2(a), (b), (c) and 2.3 shall apply.

    7.12  Disposition of Stock or Indebtedness of Subsidiaries. 
The Company will not, and will not permit any Subsidiary to, issue,
sell or transfer the capital stock or Indebtedness of a Subsidiary
to any Person other than the Company or a Wholly-Owned Subsidiary
if such issuance, sale or transfer would cause it to cease to be
a
Subsidiary, unless (i) all shares of capital stock of such
Subsidiary and all Indebtedness of such Subsidiary owned by the
Company and by every other Subsidiary shall simultaneously be sold,
transferred or otherwise disposed of (except that the Company or
a
Subsidiary need not simultaneously sell, transfer or otherwise
dispose of all shares of capital stock of one or more other
Subsidiaries if the aggregate net book value of the assets of all
such Subsidiaries does not exceed $15,000,000), (ii) such
Subsidiary
does not thereafter own any shares of capital stock or Indebtedness
of the Company or another Subsidiary and (iii) such sale would not
be prohibited under Section 7.11.

    7.13  Transactions with Affiliates.  The Company will not, and
will not permit any Subsidiary to, enter into any transaction
(including the furnishing of goods or services) with an Affiliate,
except in the ordinary course of business as presently conducted
and on terms and conditions no less favorable to the Company or
such
Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.

    7.14  Consolidated Tax Returns.  The Company will not file, or
consent to the filing of, any consolidated Federal income tax
return
with any Person other than a Subsidiary, except to the extent that
the Company is required under the Code to do otherwise.

    7.15  Nature of Business.  The Company will not, and will not
permit any Subsidiary to, enter into any business which is
substantially different from that presently conducted by them.


S8.  EVENTS OF DEFAULT AND REMEDIES THEREFOR

    8.1  Nature of Events.  An "Event of Default" shall exist if
any one or more of the following occurs:

    (a)  Any default in the payment of interest when due on any of
the Notes which is not remedied within 3 days;

    (b)  Any default in the payment of the principal of any of the
Notes or the Make-Whole Amount or the premium thereon, if any, at
maturity, upon acceleration of maturity or at any date fixed for
prepayment;

    (c)  Any default (i) in the payment of the principal of, or
interest or premium on, any other Indebtedness of the Company and
its Subsidiaries aggregating in excess of $1,000,000 as and when
due and payable (whether by lapse of time, declaration, call for
redemption or otherwise) and the continuation of such default
beyond
the period of grace, if any, allowed with respect thereto, or
(ii) (other than a payment default) under any mortgages, agreements
or other instruments of the Company and its Subsidiaries under or
pursuant to which such Indebtedness aggregating in excess of
$1,000,000 is issued and the continuation of such default beyond
the
period of grace, if any, allowed with respect thereto, or (iii)
with
respect to any combination of the foregoing involving Indebtedness
in excess of $1,000,000.

    (d)  Any default in the observance or performance of any of the
covenants or conditions contained in Section 6.8 and Sections 7.1
through 7.14 which is not remedied within 10 days;

    (e)  Any default in the observance or performance of
Section 7.15 or any other covenant or provision of this Agreement
which is not remedied within 30 days after written notice thereof
to the Company by any holder of a Note;

    (f)  Any representation or warranty made by the Company in this
Agreement, or made by the Company in any written statement or
certificate furnished by the Company in connection with the
issuance
and sale of the Notes or furnished by the Company pursuant to this
Agreement, proves incorrect as of the date of the issuance or
making
thereof;

    (g)  Any judgment, writ or warrant of attachment or any similar
process in an aggregate amount in excess of $1,000,000 shall be
entered or filed against the Company or any Subsidiary or against
any property or assets of either and remain unpaid, unvacated,
unbonded or unstayed (through appeal or otherwise) for a period of
60 days after the Company or any Subsidiary receives notice
thereof;

    (h)  The Company or any Subsidiary shall

         (i)  generally not pay its debts as they become due or
admit in writing its inability to pay its debts generally as they
become due;

         (ii) file a petition in bankruptcy or for reorganization
or for the adoption of an arrangement under the Federal Bankruptcy
Code, or any similar applicable bankruptcy or insolvency law, as
now or in the future amended (herein collectively called
"Bankruptcy
Laws"); file an answer or other pleading admitting or failing to
deny the material allegations of such a petition; fail to obtain
the
dismissal of such a petition within 60 days of its filing or be
subject to an order for relief or a decree approving such a
petition; or file an answer or other pleading seeking, consenting
to or acquiescing in relief provided for under the Bankruptcy Laws;

         (iii)     make an assignment of all or a substantial part
of its property for the benefit of its creditors;

         (iv) seek or consent to or acquiesce in the appointment
of
a receiver, liquidator, custodian or trustee of it or for all or
a
substantial part of its property;

         (v)  be finally adjudicated bankrupt or insolvent;

         (vi) be subject to the entry of a court order, which shall
not be vacated, set aside or stayed within 60 days of the date of
entry, (A) appointing a receiver, liquidator, custodian or trustee
of it or for all or a substantial part of its property, or (B) for
relief pursuant to an involuntary case brought under, or effecting
an arrangement in, bankruptcy or (C) for a reorganization pursuant
to the Bankruptcy Laws or (D) for any other judicial modification
or alteration of the rights of creditors; or

         (vii)     be subject to the assumption of custody or
sequestration by a court of competent jurisdiction of all or a
substantial part of its property, which custody or sequestration
shall not be suspended or terminated within 60 days from its
inception.

    8.2  Remedies on Default.  When any Event of Default described
in paragraphs (a) through (g) of Section 8.1 has occurred and is
continuing, the holder or holders of at least 25% in aggregate
principal amount of the Notes then outstanding may, by notice to
the Company, declare the entire principal and all interest accrued
on all Notes to be, and such Notes shall thereupon become,
forthwith
due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are expressly waived. 
Notwithstanding the foregoing, (i) when any Event of Default
described in paragraphs (a) or (b) of Section 8.1 has occurred and
is continuing, any holder may by notice to the Company declare the
entire principal and all interest accrued on the Notes then held
by
such holder to be, and such Notes shall thereupon become, forthwith
due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are expressly waived, and (ii)
when
any Event of Default described in paragraph (h) of Section 8.1 has
occurred, then the entire principal and all interest accrued on all
outstanding Notes shall immediately become due and payable without
presentment, demand or notice of any kind.  When any Event of
Default described in the following paragraphs of Section 8.1 shall
have occurrred:  paragraphs (a), (b), (c)(i), and (d) as to any
default in the observance or performance of any of the covenants
or
conditions contained in Sections 7.1, 7.2, 7.3, 7.4, 7.5, 7.6,
7.10,
7.11, and 7.12 and in paragraph (h), then the Company shall be
obligated to pay a Make-Whole Amount (to the extent permitted by
law) in addition to the entire principal and all interest accrued
on the Notes pursuant to the foregoing sentences of this Section
8.2.  Upon the Notes or any of them becoming due and payable as
aforesaid, the Company will forthwith pay to the holder or holders
of such Notes the entire principal of and interest accrued on such
Notes, plus the Make-Whole Amount, as required, which shall be
calculated on the Determination Date.

    8.3  Annulment of Acceleration of Notes.  The provisions of
Section 8.2 are subject to the condition that if the principal of
and accrued interest on the Notes have been declared immediately
due and payable by reason of the occurrence of any Event of Default
described in paragraphs (a) through (h), inclusive, of Section 8.1,
the holder or holders of 66-2/3% in aggregate principal amount of
the Notes then outstanding may, by written instrument filed with
the
Company, rescind and annul such declaration and the consequences
thereof, provided that (i) at the time such declaration is annulled
and rescinded no judgment or decree has been entered for the
payment
of any monies due pursuant to the Notes or this Agreement, (ii) all
arrears of interest upon all the Notes and all other sums payable
under the Notes and under this Agreement (except any principal or
interest on the Notes which has become due and payable solely by
reason of such declaration under Section 8.2) shall have been duly
paid and (iii) each and every Default or Event of Default shall
have
been cured or waived; and provided further, that no such rescission
and annulment shall extend to or affect any subsequent Default or
Event of Default or impair any right consequent thereto.

    8.4  Other Remedies.  If any Event of Default shall be
continuing, any holder of Notes may enforce its rights by suit in
equity, by action at law, or by any other appropriate proceedings,
whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Agreement or
in
the Notes or in aid of the exercise of any power granted in this
Agreement, and may enforce the payment of any Note held by such
holder and any of its other legal or equitable rights.

    8.5  Conduct No Waiver; Collection Expenses.  No course of
dealing on the part of any holder of Notes, nor any delay or
failure
on the part of any holder of Notes to exercise any of its rights,
shall operate as a waiver of such rights or otherwise prejudice
such
holder's rights, powers and remedies.  If the Company fails to pay,
when due, the principal of, the Make-Whole Amount or premium, if
any, or the interest on, any Note, or fails to comply with any
other
provision of this Agreement, the Company will pay to each holder,
to the extent permitted by law, on demand, such further amounts as
shall be sufficient to cover the cost and expenses, including but
not limited to reasonable attorneys' fees, incurred by such holders
of the Notes in collecting any sums due on the Notes or in
otherwise
enforcing any of their rights incident to an Event of Default.

    8.6  Remedies Cumulative.  No right or remedy conferred upon
or
reserved to any holder of Notes under this Agreement is intended
to
be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to every other right or
remedy given under this Agreement or now or hereafter existing
under
any applicable law.  Every right and remedy given by this Agreement
or by applicable law to any holder of Notes may be exercised from
time to time and as often as may be deemed expedient by such
holder,
as the case may be.

    8.7  Notice of Default.  With respect to Defaults, Events of
Default or claimed defaults, the Company will give the following
notices:

    (a)  The Company promptly, but in any event within 5 days, will
furnish to each holder of a Note written notice of the occurrence
of a Default or an Event of Default.  Such notice shall specify the
nature of such default, the period of existence thereof and what
action the Company has taken or is taking or proposes to take with
respect thereto.

    (b)  If the holder of any Note or of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or
takes any other action with respect to a claimed default, the
Company will forthwith give written notice thereof to each holder
of the then outstanding Notes, describing the notice or action and
the nature of the claimed default.


S9.  AMENDMENTS, WAIVERS AND CONSENTS

    9.1  Matters Subject to Modification.  Any term, covenant,
agreement or condition of this Agreement may, with the consent of
the Company, be amended, or compliance therewith may be waived
(either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained
the consent in writing of the holder or holders of at least 66-2/3%
in aggregate principal amount of outstanding Notes; provided,
however, that, without the written consent of the holder or holders
of all of the Notes then outstanding, no such waiver, modification,
alteration or amendment shall be effective which will (i) change
the
time of payment (including any required prepayment or optional
prepayment) of the principal of or the interest on any Note,
(ii) change the principal amount thereof or the Make-Whole Amount
or premium, if any, or change the rate of interest thereon,
(iii) change any provision of any instrument affecting the
preferences between holders of the Notes or between holders of the
Notes and other creditors of the Company, or (iv) change any of the
provisions of Section 8.2, Section 8.3 or this Section 9.

    For the purpose of determining whether holders of the requisite
principal amount of Notes have made or concurred in any waiver,
consent, approval, notice or other communication under this
Agreement, Notes held in the name of, or owned beneficially by, the
Company, any Subsidiary or any Affiliate thereof, shall not be
deemed outstanding.

    9.2  Solicitation of Holders of Notes.  The Company will not
solicit, request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions of this Agreement or
the Notes unless each holder of the Notes (irrespective of the
amount of Notes then owned by it) shall concurrently be informed
thereof by the Company and shall be afforded the opportunity of
considering the same and shall be supplied by the Company with
sufficient information to enable it to make an informed decision
with respect thereto.  Executed or true and correct copies of any
waiver or consent effected pursuant to the provisions of this
Section 9 shall be delivered by the Company to each holder of
outstanding Notes forthwith following the date on which the same
shall have been executed and delivered by the holder or holders of
the requisite percentage of outstanding Notes.  The Company will
not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional
interest,
fee or otherwise, to any holder of the Notes as consideration for
or as an inducement to the entering into by any holder of the Notes
of any waiver or amendment of any of the terms and provisions of
this Agreement unless such remuneration is concurrently paid, on
the
same terms, ratably to each holder of the then outstanding Notes.

    9.3  Binding Effect.  Any such amendment or waiver shall apply
equally to all the holders of the Notes and shall be binding upon
them, upon each future holder of any Note and upon the Company
whether or not such Note shall have been marked to indicate such
amendment or waiver.  No such amendment or waiver shall extend to
or affect any obligation not expressly amended or waived or impair
any right related thereto.


S10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND
  REPLACEMENT

    10.1  Form of Notes.  Each Note initially delivered under this
Agreement will be in the form of one fully registered Note in the
form attached as Exhibit A.  The Notes are issuable only in fully
registered form and in denominations of at least $200,000 (or the
remaining outstanding balance thereof, if less than $200,000).

    10.2  Note Register.  The Company shall cause to be kept at its
principal office a register (the "Note Register") for the
registration and transfer of the Notes.  The names and addresses
of
the holders of Notes, the transfer thereof and the names and
addresses of the transferees of the Notes shall be registered in
the Note Register.  The Company may deem and treat the person in
whose name a Note is so registered as the holder and owner thereof
for all purposes and shall not be affected by any notice to the
contrary, until due presentment of such Note for registration of
transfer as provided in this Section 10.

    10.3  Issuance of New Notes upon Exchange or Transfer.  Upon
surrender for exchange or registration of transfer of any Note at
the office of the Company designated for notices in accordance with
Section 11.2, the Company shall execute and deliver, at its
expense,
one or more new Notes of any authorized denominations requested by
the holder of the surrendered Note, each dated the date to which
interest has been paid on the Notes so surrendered (or, if no
interest has been paid, the date of such surrendered Note), but in
the same aggregate unpaid principal amount as such surrendered
Note,
and registered in the name of such person or persons as shall be
designated in writing by such holder.  Every Note surrendered for
registration of transfer shall be duly endorsed, or be accompanied
by a written instrument of transfer duly executed, by the holder
of
such Note or by his attorney duly authorized in writing.  The
Company may condition its issuance of any new Note in connection
with a transfer by any Person on compliance with Section 3.2, by
Institutional Holders on compliance with Section 2.5 and on the
payment to the Company of a sum sufficient to cover any stamp tax
or other governmental charge imposed in respect of such transfer.

    10.4  Replacement of Notes.  Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or
destruction of any Note, and in the case of any such loss, theft
or
destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company or in the
event of such mutilation upon surrender and cancellation of the
Note, the Company, without charge to the holder thereof, will make
and deliver a new Note, of like tenor in lieu of such lost, stolen,
destroyed or mutilated Note.  If any such lost, stolen or destroyed
Note is owned by you or any other Institutional Holder, then the
affidavit of an authorized officer of such owner setting forth the
fact of such loss, theft or destruction and of its ownership of the
Note at the time of such loss, theft or destruction shall be
accepted as satisfactory evidence thereof, and no further indemnity
shall be required as a condition to the execution and delivery of
a new Note, other than a written agreement of such owner (in form
reasonably satisfactory to the Company) to indemnify the Company.


S11.  MISCELLANEOUS

    11.1  Expenses.  The Company agrees to pay directly all
expenses
in connection with the preparation, execution and delivery of this
Agreement and the transactions contemplated by this Agreement,
including, but not limited to, out-of-pocket expenses, charges and
disbursements of special counsel, photocopying and printing costs
and charges for shipping the Notes, adequately insured, to you at
your home office or at such other address as you may designate, and
all similar expenses (including the fees and expenses of counsel)
relating to any amendments, waivers or consents in connection with
this Agreement or the Notes, including, but not limited to, any
such
amendments, waivers or consents resulting from any work-out,
renegotiation or restructuring relating to the performance by the
Company of its obligations under this Agreement and the Notes.  The
Company also agrees that it will pay and save you harmless against
any and all liability with respect to stamp and other documentary
taxes, if any, which may be payable, or which may be determined to
be payable in connection with the execution and delivery of this
Agreement or the Notes (but not in connection with a transfer of
any Notes), whether or not any Notes are then outstanding.  The
obligations of the Company under this Section 11.1 shall survive
the retirement of the Notes.

    11.2  Notices.  Except as otherwise expressly provided herein,
all notices provided for in this Agreement shall be in writing and
delivered or sent by registered or certified mail, return receipt
requested, or by overnight courier, but all other communications
may be sent by regular mail, in each case (i) if to you, to the
address set forth below your name in Schedule I, or to such other
address as you may in writing designate, (ii) if to any other
holder
of the Notes, to such address as the holder may designate in
writing
to the Company, and (iii) if to the Company, to Donnelly
Corporation, 414 East Fortieth Street, Holland, Michigan 49423,
Attention:  Mr. William R. Jellison, Vice President of Financial
Operations, or to such other address as the Company may in writing
designate.

    11.3  Reproduction of Documents.  This Agreement and all
documents relating hereto, including, without limitation,
(i) consents, waivers and modifications which may hereafter be
executed, (ii) documents received by you at the closing of the
purchase of the Notes (except the Notes themselves), and
(iii) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you
by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and you may destroy any
original document so reproduced.  The Company agrees and stipulates
that any such reproduction which is legible shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether
or not such reproduction was made by you in the regular course of
business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in
evidence; provided that nothing herein contained shall preclude the
Company from objecting to the admission of any reproduction on the
basis that such reproduction is not accurate, has been altered or
is otherwise incomplete.

    11.4  Successors and Assigns.  This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns.

    11.5  Law Governing.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.

    11.6  Headings.  The headings of the sections and subsections
of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.

    11.7  Counterparts.  This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be
deemed an original, but all such counterparts shall together
constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account
for more than one such counterpart or reproduction thereof
permitted
by Section 11.3.

    11.8  Reliance on and Survival of Provisions.  All written
covenants, representations and warranties made by the Company
herein
and in any certificates delivered pursuant to this Agreement,
whether or not in connection with a closing, (i) shall be presumed
to have been relied upon by you, notwithstanding any investigation
heretofore or hereafter made by you or on your behalf and (ii)
shall
survive the delivery of this Agreement and the Notes.

    11.9  Integration and Severability.  This Agreement embodies
the entire agreement and understanding between you and the Company,
and supersedes all prior agreements and understandings relating to
the subject matter hereof.  In case any one or more of the
provisions contained in this Agreement or in any Note, or
application thereof, shall be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the
remaining provisions contained in this Agreement and in any Note,
and any other application thereof, shall not in any way be affected
or impaired thereby.

(The remainder of this page is intentionally left blank.)


    IN WITNESS WHEREOF, the Company and the Purchaser have caused
this Agreement to be executed and delivered by their respective
officer or officers thereunto duly authorized.

                            DONNELLY CORPORATION

    
                          By:  /s/     William R. Jellison
                              ----------------------------------
                             Title:  VP Treasurer         

                             NATIONWIDE LIFE INSURANCE COMPANY


                             By:  /s/   Jeffrey G. Milburn      
                              ----------------------------------
                              Title:  Vice President Corporate
                                      Fixed-Income Securities


<PAGE>
                           SCHEDULE I

            Principal Amount of Notes to Be Purchased  

Name and Address of Purchaser          Principal Amount of Notes

Nationwide Life Insurance
  Company
One Nationwide Plaza (1-33-07)              $15,000,000
Columbus, Ohio  43215-2220
Attention:  Corporate Fixed-Income Securities


    Address for all communications is as above, except notices
    of payment and written confirmations of wire or inter-bank
    transfers, which shall be addressed to:

         Nationwide Life Insurance
           Company
         One Nationwide Plaza (1-32-09)
         Columbus, Ohio  43215-2220
         Attention:  Corporate Money Management


    All payments are to be by bank wire transfer of immediately
    available funds to:

         Morgan Guaranty Trust Company of New York
         ABA #021-000-238
         JOURNAL #999-99-024
         F/A/O Nationwide Life Insurance Company 
            Custody A/C#71615
         Attention:  Custody Service Department

         Each wire transfer shall identify such payment as "PPN
         257870 B*5 Donnelly Corporation, 7.22% Senior Notes due
         November 30, 2004."

Tax ID # 31-4156830
<PAGE>
ANNEX I

Subsidiary & JV listing attached

States Qualified to do business in, in addition to state of
incorporation

Entity
    Donnelly Corporation
         Arizona
         Illinois
         Minnesota
         Missouri
         Tennessee
         Ohio
         Indiana
         Kentucky

    DAFC
         Michigan
         Colorado

Joint Ventures with Contingency payments or ownership outstanding

OSD Envision - Donnelly's payments for 50% interest, included
delayed contingency payments, to be paid in January of '94, '95 and
'96.  The additional payments will be a maximum of $2.2MM, and are
based on earnings.

Donnelly Yantai Electronics - Donnelly holds 50% interest in this
joint venture.  The venture was established as a means of selling
remaining Display Coating equipment to China.  Donnelly has no
investment recorded on its books for this ownership interest. 
Ultimately Donnelly's 50% ownership interest will be given to DAFC.

<PAGE>
ANNEX II


Liens


    -Land, Building, Machinery & Equipment purchased under the $5MM
    Kentucky Industrial Revenue   Bonds.  Lease agreement dated 6-
    30-92 UCC filing attached.

    -Any other liens which may exist only support assets under
    operating leases which according to GAAP are not included in
    our financial statements.          



<PAGE>
                            EXHIBIT A

    All right, title and interest of the Kentucky Rural Economic
Development Authority (the "Issuer") in and to (i) the Lease
Agreement (as defined in the Trust Indenture (the "Indenture")),
dated as of June 30, 1992 by and between the Issuer and LaSalle
National Bank (the "Trustee") (except in the Unassigned Rights (as
defined in the Indenture)), (ii) the Receipts and Revenues (as
defined in the Indenture), (iii) all moneys and obligations which
at such time are deposited or are required to be deposited in the
Bond Fund (as defined in the Indenture), and (iv) all other moneys
and obligations which at such time are deposited or are required
to
be deposited with, or are held or are required to be held by or on
behalf of the Trustee in trust under any of the provisions of the
Indenture and any other right, title and interest which at such
time
is subject to the lien of the Indenture, except for (x) moneys or
obligations deposited with or paid to the Trustee for the
redemption
or payment of Bonds (as defined in the Indenture) which are deemed
to have been paid in accordance with Article VIII of the Indenture,
(y) funds held pursuant to Section 4.7 of the Indenture and (z)
funds held in the Rebate Fund (as defined in the Indenture). 


<PAGE>
ANNEX IV


Funded Debt
         (see note 3 of financial statements dated 7/3/93)


    -$55MM Revolving Credit Agreement with NBD and Societe Generale
    dated July 16, 1993.

    -IRB's
         $5.0MM dated April '88
         $4.5MM dated March '90
         $5.0MM dated June '92

    -$3.6MM Private Placement with Principal Mutual dated September
'86

    -$15.0MM Private Placement with Principal Mutual dated November
'93
    
    -Donnelly guarantee to NBD for DAFC up to $7MM

    -Other misc. debt totaling <$3MM
<PAGE>
                                                     EXHIBIT A


                       DONNELLY CORPORATION

                         7.22% SENIOR NOTE

                       Due November 30, 2004



    THIS NOTE MAY BE SUBJECT TO A HOME OFFICE PAYMENT AGREEMENT AND
ACCORDINGLY ANY PROSPECTIVE PURCHASER SHOULD FIRST VERIFY THE
UNPAID
PRINCIPAL AMOUNT WITH THE COMPANY.




Registered Note No. R-_____
_       ________, 1994
$______________


    DONNELLY CORPORATION, a Michigan corporation (the "Company"),
for value received, promises to pay to ____________________ or
registered assigns, on November 30, 2004, the principal amount of
____________ Dollars ($__________) and to pay interest (computed
on
the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the
rate of 7.22% per annum from the date hereof until maturity,
payable
on May 31 and November 30 in each year, commencing May 31, 1995,
and
at maturity, and to pay interest on any overdue principal, on any
overdue Make-Whole Amount or premium and (to the extent legally
enforceable) on any overdue installment of interest at a per annum
rate of 9.22% until paid.  Payments of the principal of, the Make-
Whole Amount or premium, if any, and the interest on this Note
shall
be made in lawful money of the United States of America in the
manner and at the place provided in Section 2.5 of the Note
Agreement hereinafter defined.

    This Note is issued under and pursuant to the terms and
provisions of the Note Agreement, dated as of July 1, 1994, entered
into by the Company with the Purchaser named in Schedule I thereto
(the "Note Agreement"), and this Note and any holder hereof are
entitled to all of the benefits provided for by such Note Agreement
or referred to therein.  Reference is made to the Note Agreement
for
a statement of such benefits.

    As provided in the Note Agreement, upon surrender of this Note
for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered
holder hereof or its attorney duly authorized in writing, a new
Note
for a like unpaid principal amount will be issued to, and
registered
in the name of, the transferee upon the payment of the taxes or
other governmental charges, if any, that may be imposed in
connection therewith.  The Company may treat the person in whose
name this Note is registered as the owner hereof for the purpose
of
receiving payment and for all other purposes, and the Company shall
not be affected by any notice to the contrary.

    This Note may be declared due prior to its expressed maturity
date, voluntary prepayments may be made hereon and certain
prepayments are required to be made hereon all in the events, on
the terms and in the manner as provided in the Note Agreement. 
Such
prepayments include certain required prepayments on May 31 and
November 30 of each year commencing November 30, 1999 through
May 31, 2004, inclusive, with the remaining principal payable on
November 30, 2004, and certain optional prepayments with a Make-
Whole Amount or premium.

    Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding provided for in the Note
Agreement or be placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to the principal, Make-Whole
Amount or premium, if any, and interest due and payable hereon, all
costs of collecting this Note, including reasonable attorneys' fees
and expenses.

    This Note and the Note Agreement are governed by and construed
in accordance with the laws of the State of Illinois.


                             DONNELLY CORPORATION



                             By:_______________________________
                               Its:

<PAGE>
                                                EXHIBIT B


                          LEGAL OPINIONS


    The opinion of Gardner, Carton & Douglas, special counsel for
the Purchaser, shall be to the effect that:

    1.  The Company is a corporation organized and validly existing
in good standing under the laws of the State of Michigan, with all
requisite corporate power and authority to enter into the Agreement
and to issue and sell the Notes.  

    2.  The Agreement and the Notes have been duly authorized by
proper corporate action on the part of the Company, have been duly
executed and delivered by an authorized officer of the Company, and
constitute the legal, valid and binding agreements of the Company,
enforceable in accordance with their terms, except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the rights
of creditors or by equitable principles, regardless of whether
enforcement is sought in a proceeding in equity or at law.
 
    3.  Based upon the representations set forth in the Agreement,
the offering, sale and delivery of the Notes do not require the
registration of the Notes under the Securities Act of 1933, as
amended, nor the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
 
    4.  The issuance and sale of the Notes, the execution and
delivery of the Agreement and compliance with the terms and
provisions of the Notes and the Agreement will not conflict with
or
result in any breach of any of the provisions of the Certificate
of
Incorporation or By-Laws of the Company.

The opinion of Gardner, Carton & Douglas also shall state that the
legal opinion of Varnum, Riddering, Schmidt & Howlett, counsel for
the Company, delivered to you pursuant to the Agreement, is
satisfactory in form and scope to Gardner, Carton & Douglas, and,
in its opinion, the Purchaser and it are justified in relying
thereon and shall cover such other matters relating to the sale of
the Notes and the execution and delivery of the Agreement as the
Purchaser may reasonably request.  Gardner, Carton & Douglas may
rely as to matters of Michigan law upon the opinion of Varnum,
Riddering, Schmidt & Howlett.

<PAGE>
EXHIBIT C

                          LEGAL OPINIONS


The opinion of Varnum, Riddering, Schmidt & Howlett, counsel for
the Company, shall be to the effect that:

    1.   Donnelly is a corporation duly organized, validly existing
and in good standing under the laws of the state of Michigan, has
the requisite corporate power and authority under Michigan law to
carry on its business as now conducted and own and operate its
properties and to enter into and perform its obligations under the
Note Agreement and to issue and sell the Notes, and is duly
qualified to transact business in all other jurisdictions wherein
the failure to qualify would have a Material Adverse Effect.

    2.   Each of the Affiliates (as hereinafter defined) is a
corporation duly organized, validly existing and in good standing
under the laws of the state of Michigan, and has the requisite
corporate power and authority under Michigan law to carry on its
business as presently conducted and own and operate its properties
and is duly qualified to transact business in all other
jurisdictions wherein the failure to qualify would have a Material
Adverse Effect.  As used herein, "Affiliates" means Donnelly
Investments, Inc., Donnelly Export Corporation and Donnelly
International, Inc.  All of the outstanding shares of the capital
stock of Donnelly Investments, Inc. and Donnelly International,
Inc.
are owned by Donnelly free and clear of any Lien, have been duly
and
validly issued and are fully paid and nonassessable.

    3.   The Note Agreement and the Notes have been duly authorized
by proper corporate action on the part of Donnelly, have been duly
executed and delivered by an authorized officer of Donnelly, and
constitute the legal, valid and binding agreements of Donnelley,
enforceable in accordance with their respective terms except to the
extent that enforcement thereof may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws of general application relating to or
affecting the rights of creditors or by equitable principles
regardless of whether enforcement is sought in a proceeding in
equity or at law.

    4.   The issuance and sale of the Notes by Donnelly, the
execution and delivery by Donnelly of the Note Agreement and the
performance by Donnelly of the Note Documents do not (i) violate
the articles of incorporation or bylaws of Donnelly, or (ii) result
in any breach of any of the obligations of, or constitute a default
under, the provisions of any written agreement or other written
instrument relating to the borrowing of money or any other written
agreement the breach of which would have a Material Adverse Effect
to which Donnelly, any of its Subsidiaries or any of the Affiliates
is a party, or by which Donnelly, any of its Subsidiaries or any
of
the Affiliates may be bound, (iii) violate applicable provisions
of
statutory law or regulation, or (iv) based solely on inquiry of
executive officers of Donnelly and the actual knowledge of
attorneys
in such counsel's firm primarily responsible for the provision of
legal services to Donnelly, violate any order, writ, injunction or
decree of any court or governmental authority applicable to
Donnelly, any of its Subsidiaries or any of the Affiliates.

    5.   No consent, approval or authorization of, or any
registration or filing with, any governmental body, federal or
state
of Michigan (including registration of the Notes under the
Securities Act of 1933, as amended (the "Act"), or qualification
of
an indenture under the Trust Indenture Act of 1939, as amended),
is
necessary for the execution, delivery and performance by Donnelly
of the Note Agreement or the offering, issuance and sale of the
Notes by Donnelly to you.  For purposes of the opinions expressed
in this paragraph 5 counsel has relied on the Purchaser's
representations in the Note Agreement and has further assumed that
the Purchaser is an "insurance company" within the meaning of the
Act.  No opinion is expressed with respect to the Purchaser's
compliance with any laws or regulations applicable to the
transaction on account of the nature of the Purchaser's business,
or facts relating specifically to the Purchaser or as to the effect
of any such noncompliance on the opinions set forth in this
paragraph 5.

    6.   Based on the inquiry described below and the actual
knowledge of attorneys in such counsel's firm primarily responsible
for the provision of legal services to Donnelly and without
expressing any opinion as to the potential effect of the case of
Gentex Corp. v. Donnelly Corporation (Case No. 94-1252) presently
pending in the United States Court of Appeals for the Federal
Circuit or any other litigation between Gentex Corporation and
Donnelly Corporation, as to which such firm is not counsel for
Donnelly and, accordingly, render no opinion, and except for any
environmental matters involving Donnelly as a potentially
responsible party at the Sunrise Landfill in Allegan County,
Michigan, as to which such counsel does not have sufficient
information at this time to form any judgment as to the merits, if
any, of the claim or amount or likelihood of potential loss to
Donnelly which might result from such claim, there are no actions
or proceedings against Donnelly, any of its Subsidiaries or any of
the Affiliates pending, or overtly threatened in writing, before
any court, governmental agency or arbitrator, which, if adversely
determined, would exceed an aggregate amount of $2,000,000 in
damages and civil penalties or which would impair the ability of
Donnelly to perform its obligations under the Notes or which would
cause an Event of Default under the Note Agreement or which would
impair the ability of the holders of the Notes to enforce such
obligations.  For purposes of the opinions expressed in this
paragraph 6, counsel has examined the civil dockets of the Ottawa
County, Michigan circuit court and the United States District Court
for the Western District of Michigan, Southern Division and has
consulted with executive officers of Donnelly.

    7.   The issuance of the Notes by Donnelly and the intended use
of the proceeds of the sale of the Notes (based solely on the
representations as to the use of such proceeds made by Donnelly in
Section 3.1(s) of the Note Agreement) do not violate or conflict
with Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.

    8.   Neither Donnelly nor any Subsidiary nor any Affiliate is: 
(i) a "public utility company" or a "holding company," or an
"affiliate" or a "subsidiary company" of a "holding company," or
an
"affiliate" of such a "subsidiary company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as
amended, or (ii) a "public utility" as defined in the Federal Power
Act, as amended, or (iii) an "investment company" or an "affiliated
person" thereof, as such terms are defined in the Investment
Company
Act of 1940, as amended.




                                                       EXHIBIT 22

                         SCHEDULE OF AFFILIATES

                                                  Percentage of
Affliate                    Incorporation         Ownership

Donnelly Mirrors Limited    Organized under the   100%
                            laws of the Republic 
                            of Ireland

Donnelly Vision Systems     Organized under the   100%
Europe, Ltd.                laws of the Republic 
                            of Ireland

Donnelly DE Mexico, S.A.    Organized under the   100%
D.E. C.V.                   laws of Mexico

Donnelly EuroGlass          Organized under the   100%
Systems, E.U.R.L.           laws of France

Donnelly International,     Michigan              100%
Inc.

Donnelly Investments, Inc.  Michigan              100%

D&A Technology, Inc.        Tennessee             60%

Donnelly Happich            Michigan              60%
Technologies, Inc.

Donnelly Applied Films      Colorado              50%
Corporation

OSD Envizion Company        California            50%

VSLI Vision Ltd.            Organized under the   35%
                            laws of Scotland


       Consent of Independent Certified Public Accountants


We hereby consent to the incorporation by reference and use of our
report dated July 28, 1994, which appears on page 31 of Donnelly
Corporation's Annual Report to Shareholders for 1994, in that
corporation's previously filed Form S-8 Registration Statements for
that corporation's 1987 Stock Option Plan and 1987 Employees' Stock
Purchase Plan.





/s/BDO SEIDMAN

Grand Rapids, Michigan
September 27, 1994


               CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference and use of our
report dates July 29, 1994, which appears on Page 49-50 of Donnelly
Corporation's Form 10-K for 1993, in that Corporation's previously
filed Form S-8 Registration Statements for that Corporation's 1987
Stock Option Plan and Employees' Stock Purchase Plan






/s/KPMG Peat Marwick
Dublin, Ireland
July 29, 1994


 

Tag 
 


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<NAME>   Donnelly Corporation    
 
<CURRENCY>                         DOLLARS 
 
        

<FISCAL-YEAR-END>                  JUL-02-1994 
 
<PERIOD-START>                     JUL-04-1994 
 
<PERIOD-END>                       JUL-02-1994 
 
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              0 
 
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