SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(X)       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                     For the Fiscal Year ended July 3, 1999
                                       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                                 38-0493110
     (State of other jurisdiction of         (IRS Employer Identification No.)
      incorporation or organization)


      49 West Third Street, Holland, Michigan          49423-2813
      (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                      New York 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 the Form 10-K or any amendment to this
Form 10-K. ___X___

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant was $99,942,880 as of August 31, 1999.

Number of  shares  outstanding  of each of the  registrant's  classes  of common
stock, as of August 31, 1999.
     5,976,279 shares of Class A Common Stock par value, $.10 per share
     4,158,502 shares of Class B Common Stock par value, $.10 per share
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                                                                               2
                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  registrant's  Annual Report to Shareholders for the fiscal year
ended July 3, 1999, are  incorporated  by reference into Part II of this report.
Portions  of  the  registrant's  proxy  statement  for  its  annual  meeting  of
shareholders  to be held November 5, 1999,  are  incorporated  by reference into
Part III of this report.

                                     PART I.

ITEM 1.   BUSINESS


FORWARD-LOOKING STATEMENTS

This  report  contains  forward-looking  statements  within  the  meaning of the
Private  Securities   Litigation  Reform  Act  of  1995.  The  terms  "believe,"
"anticipate,"  "intend," "goal," "expect," and similar  expressions may identify
forward-looking  statements.  Investors are cautioned  that any  forward-looking
statements,  including  statements  regarding  the  intent,  belief  or  current
expectations  of the Company or its  management,  are not  guarantees  of future
performance  and involve risks and  uncertainties,  and that actual  results may
differ  materially  from  those in  forward-looking  statements  as a result  of
various factors including, but not limited to (i) general economic conditions in
the markets in which the Company  operates,  (ii)  fluctuation  in  worldwide or
regional  automobile  and light truck  production,  (iii)  changes in  practices
and/or policies of the Company's significant customers,  (iv) market development
of specific  products of the  Company,  including  electrochromic  mirrors,  (v)
whether the Company  successfully  implements its European  restructuring,  (vi)
effects of the year 2000 on the  Company's  business  and (vii)  other risks and
uncertainties.  The  Company  does not  intend to update  these  forward-looking
statements.


ITEM 1 (a)  GENERAL DEVELOPMENT OF BUSINESS

Donnelly  Corporation  ("the Company") was incorporated in Michigan in 1936. The
Company's  corporate  offices  are  located  at 49 West Third  Street,  Holland,
Michigan,  49423-2813,  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.

The Company is an  international  supplier  of  automotive  parts and  component
systems through manufacturing operations and various joint ventures in North and
South  America,  Europe and Asia.  The  Company  primarily  supplies  automotive
customers around the world with rear view mirror systems, modular window systems
and handle products. The Company's  non-automotive  products represent less than
4% of total net sales for each of the last three years.

The  Company's  fiscal  year is the 52- or 53- week period  ending the  Saturday
nearest June 30.  Fiscal years ended July 3, 1999,  June 27, 1998,  and June 28,
1997,  included  53,  52 and 52 weeks,  respectively.  The  fiscal  years of the
Company's German and Spanish subsidiaries end on May 31. Effective July 4, 1999,
the  Company  will  change  the date  for the end of its  fiscal  year  from the
Saturday nearest June 30 to December 31. For the transition  period from July 4,
1999, to December 31, 1999, the Company's  fiscal quarter will end on October 2.
All year and quarter  references relate to the Company's fiscal years and fiscal
quarters, unless otherwise stated.

The  Company's  net  sales  and  net  income  may  be  subject  to   significant
fluctuations  attributable  primarily to  production  schedules of the Company's
major automotive customers.  In addition,  the Company has benefited from strong
product content on light trucks,  including sport utility vehicles,  as compared
to  automobiles.  These
<PAGE>
                                                                               3

factors cause results to fluctuate  from period to period and year to year.  The
comparability  of the  Company's  results  on a period to  period  basis is also
affected by the  Company's  formation and  disposition  of  subsidiaries,  joint
ventures and alliances, and acquisitions and investments in new product lines.

The  Company  is  committed  to  improving  shareholder  value  through  focused
development  of core  automotive  businesses,  primarily  by  increasing  dollar
content per vehicle  through the expansion of market share,  introduction of new
technologies,  increasing  volume  through  penetration  into  new and  emerging
markets  and  improving  the  efficiency  of  operations.  Consistent  with this
strategy, in 1999, the Company continued to build volume growth for its existing
products,  introduced new products, expanded its equipment and facilities, began
implementing  a turnaround  plan in Europe,  sold or merged its  investments  in
non-automotive  businesses  that  have  not  met  the  Company's  operating  and
financial objectives and continued the ongoing development of its joint ventures
in emerging markets.

The Company has  experienced  more than 16% compounded  growth rate in net sales
since 1989.  The  increase in net sales has been due to growth in the  Company's
established  products of complete outside mirrors,  modular encapsulated windows
and value added features on interior  mirrors;  introduction of new products and
technologies  such as  electrochromic  mirrors,  bonded hardware  modular window
systems and door handle  products;  and through the acquisition of Donnelly Hohe
GmbH & Co.  KG  ("Donnelly  Hohe") in  Europe.  In  addition,  the  Company  has
benefited  from content on strong selling  vehicles such as the  DaimlerChrysler
Minivan,  the  Ford  Expedition  and  Ford  Taurus  in  North  American  and the
Volkswagen  Passat and Volkswagen  Polo in Europe.  The continued  growth of the
Company's  products in existing and new markets and its offerings of value-added
innovative  technologies  is an  important  strategy  to the  Company's  overall
financial performance.

During the past five years, the Company has significantly  expanded its presence
in Europe.  The  Company's  strategy  to  penetrate  European  markets  has been
primarily through acquisitions,  the most significant of which was Donnelly Hohe
in March 1995 and market penetration of the Company's electrochromic mirrors and
modular window systems. Donnelly Hohe, based in Germany, serves many of the main
auto producers in Europe in exterior mirrors, interior mirrors, door handles and
certain non-automotive products through four operating facilities in Germany and
one in Spain. In May 1997, the Company announced a European  restructuring  plan
to realign manufacturing capacity,  improve operating efficiencies and to reduce
future  operating  costs.  The  restructuring  plan was  primarily  based on the
decision to re-organize product lines and production processes within operations
of Donnelly  Hohe at  Dorfprozelten,  Germany and other  European  locations  in
Schleiz,  Germany,  Spain and Ireland.  In  addition,  the plan  included  costs
associated with the  restructuring of management at Donnelly Hohe and within the
overall  European  management  structure.  The strategic  intent of the plan was
primarily  to  consolidate  redundant  manufacturing  processes,   move  certain
assembly  operations to lower cost areas of production and  centralize  European
management responsibility.

In September 1998, the Company's  Senior  Management Team made the commitment to
dedicate  additional  management  resources  from North America to assist in the
improvement  in the  Company's  European  operations  by  assigning  four senior
executives to long-term assignments in Europe. The Company's European automotive
segment  recorded  unfavorable  operating  results  over the last  three  years,
despite strong automotive car build and overall sales increases in the Company's
European  operations.  In  addition,  certain  key  operating  units  in  Europe
continued  to perform at an  operating  loss.  In  February  1999,  the  Company
announced a European turnaround plan. The objective of the restructuring plan is
to improve the overall operating efficiency and customer service of the European
organization by 1)  re-organizing  certain  manufacturing  and customer  service
functions  into a  customer  focused  structure,  2)  consolidating  two  German
manufacturing   facilities,  3)  implementing  throughout  Europe  the  Donnelly
Production  System, th Company's approach to lean  manufacturing  processes,  4)
re-negotiating   an  existing  labor  contract  and  5)  re-aligning  sales  and
engineering  functions  throughout Europe. The remaining actions associated with
the 1997  Restructuring,  which were delayed due to the changes in the Company's
European management,  will be carried out with the 1999 plan and are expected to
be  completed  in  conjunction  with  the  most  recent  European  restructuring
initiatives.
<PAGE>
                                                                               4

As part of the Company's commitment to focus on its core automotive  businesses,
the Company has continued actions to re-position its non-automotive  businesses.
In 1997,  the Company  structured its  non-automotive  businesses to be operated
independently,  creating Donnelly Optics  Corporation  ("Optics"),  a subsidiary
based  in  Tucson,  Arizona,  for the  manufacture  and  sale  of  high-quality,
injection  molded,  diffractive  and  hybrid  optical  lenses  and  systems  and
Information  Products,  Inc.,  a subsidiary  based in Holland,  Michigan for the
manufacture  and sale of shaped,  coated  glass for the  computer  touch  screen
industry.   In  addition,   the  Company  has   historically   operated  various
non-automotive joint ventures. Over the last two years, the Company has executed
the following actions associated with these businesses and joint ventures:

     In the second quarter of 1998, the Company sold its 50% interest in Applied
     Films  Corporation  ("AFC") as part of an  initial  public  offering.  As a
     result of this sale,  the Company  received  $7.9 million in net  proceeds,
     after  taxes and  related  out of pocket  costs and  recognized  a one-time
     pretax gain of approximately $4.6 million.

     In the second  and third  quarters  of 1999,  the  Company  sold its entire
     interest in Vision Group plc ("Vision Group").  As a result of these sales,
     the Company  received  $8.6 million in proceeds  and  recognized a combined
     pretax gain of approximately $5.5 million.

     During 1999,  the Company  merged Optics into a wholly owned  subsidiary of
     Applied Image Group,  Inc. ("AIG"),  a New York  Corporation,  of which the
     Company retains a 13% interest and a $5 million convertible note.

As a result of these  transactions,  the operating  results of AFC, VISION Group
and  Optics  are no  longer  included  in the  Company's  combined  consolidated
financial   statements.    See   Item   1   (c)   "Narrative    Description   of
Business--Non-Automotive  Businesses"  for a more  detailed  discussion of these
non-automotive businesses.

On July 1, 1999, the Company signed a letter of intent to sell its investment in
Lear Donnelly  Overhead  Systems,  LLC ("Lear  Donnelly"),  to Lear  Corporation
("Lear") for an undisclosed  amount.  The transaction  was closed  September 14,
1999 and is expected to have a one-time,  material  favorable  impact on the net
income and cash flow of the  Company.  In  addition,  due to the transfer of the
Company's  interior  lighting  and trim sales  contracts  included  in the joint
venture to Lear, future annual net sales will be reduced by approximately $65 to
$70  million  per year.  Due to the joint  venture  operating  at  approximately
break-even  since its  formation,  the sale of the Company's  share of the joint
venture  is not  expected  to have a  material  impact on the  Company's  future
results of operations or financial position. However, gross profit and operating
margins as a percent of sales for future periods will be favorably impacted once
the sale is completed.  The carrying  value of the Company's  investment in Lear
Donnelly was $8.6 million at July 3, 1999.

In the fourth  quarter of 1999,  the Company  formed  Schott  Donnelly LLC Smart
Glass  Solutions  ("Schott  Donnelly"),  a 50-50 joint venture with Schott North
America  Manufacturing,  Inc., a wholly owned  subsidiary of Schott  Corporation
("Schott").  Schott is a wholly owned  subsidiary of Schott Glas, which is based
in Germany  and is one of the  world's  leading  producers  of  specialty  glass
products. The joint venture will design and manufacture electrochromic glass for
automotive and architectural applications.

As part of the Company's strategy to enhance global market  penetration  through
the  development of joint  ventures in emerging  markets,  the Company  operates
joint  ventures in Asia and South America.  In Asia, the Company  operates three
joint ventures for  manufacture  and sale of the Company's  automotive  products
into the Asian and  Australian  markets;  Varitronix  EC  (Malaysia)  Sdn.  Bhd.
("Varitronix  EC") for  electrochromic  mirror cells;  Shanghai  Donnelly Fu Hua
Window Systems Company Ltd. ("Shanghai Donnelly Fu Hua") for window systems; and
Shunde  Donnelly Zhen Hua  Automotive  Systems Co. Ltd.  ("Shunde  Donnelly Zhen
Hua") for exterior  mirror  products.  In South  America,  the Company  operates
Donnelly/Arteb,   LTDA  ("Donnelly/Arteb")  for  the  manufacture  and  sale  of
interior,  exterior and electrochromic  mirror products into this market.  These
joint  ventures  provide the Company with key entries into  emerging  automotive
markets  which are  expected  to have a combined  overall  increase  in industry
automotive
<PAGE>
                                                                               5

production  greater than the markets in North America and Europe. See Item 1 (c)
"Narrative  Description Of Business--Joint  Ventures" for additional information
concerning these joint ventures.


ITEM 1 (b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company is primarily  managed based on  geographic  segments and the product
markets they serve.  The Company has two  reportable  segments:  North  American
Automotive  Operations ("NAAO") and European Automotive  Operations ("EAO"). The
operating  segments are managed  separately  as they each  represent a strategic
operational  component  that offers the Company's  product lines to customers in
different  geographical  markets.  Although  each  segment  offers  all  of  the
Company's automotive product lines, the majority of the Company's net sales from
modular windows and handle  products  originate from NAAO.  Operating  financial
information  is available  that is evaluated  regularly by the  Company's  chief
executive  officer,  or corporate  management  team, in deciding how to allocate
resources and in assessing the segments'  performance.  The corporate management
team,  which  establishes each overall  strategy  and policy  standards  for the
Company,  includes the chief executive  officer,  chief  operating  officers and
senior executives in  administration,  finance,  operations and technology.  The
chief  operating  officer  of each  segment,  each of  whom is a  member  of the
corporate  management  team, is responsible for the management of  profitability
and cash flow for each respective segments' operations. In addition, the Company
provides  products  to  certain  non-automotive   markets,  none  of  which  are
reportable  segments.  The financial  information by segment  is incorporated by
reference  from  Note 3 to the  financial  statements  on page 27 of the  Annual
Report.

ITEM 1 (c)  NARRATIVE DESCRIPTION OF BUSINESS

PRODUCTS, SERVICES, MARKETS AND METHODS OF DISTRIBUTION

Automotive Rear View Mirror Systems

The Company began producing  prismatic day/night mirror glass in 1939, and today
manufactures a wide range of interior and exterior rear view mirror products and
believes  it is the world's  largest  producer  of  automotive  rear view mirror
systems.

Electrochromic  Products.  The Company has made  significant  investments in the
development of solid-state,  thin-film  electrochromic  technology that has been
commercialized for mirror  applications and has potential use for various window
applications.  Electrochromic  coatings  allow the user to  darken  glass to the
desired degree through the application of an electrical  current to the coating.
In the fourth quarter of 1999, the Company formed Schott Donnelly, a 50-50 joint
venture,  with Schott  Corporation,  one of the  world's  leading  producers  of
specialty  glass  products.  The joint venture will be engaged in the design and
manufacture  of   electrochromic   glass  for   automotive   and   architectural
applications.

The Company  continues  to market  electrochromic  day/night  automotive  mirror
systems which are electrically  dimmable to reduce the glare from the headlights
of other  vehicles  approaching  from the rear.  The  Company has  continued  to
actively  develop newer and more advanced  electrochromic  technologies  for the
automotive  marketplace and has developed or licensed a number of  technologies,
of which several are already available for commercial use.
<PAGE>
                                                                               6

The Company produces  GLAREFREE"  electrochromic  mirrors for Ford,  Volkswagen,
Audi, BMW, PSA, DaimlerChrysler,  GM, Volvo, Renault, Honda, Subaru, Mitsubishi,
Porsche,  Jaguar and Daewoo. These purchase agreements  illustrate the Company's
position as a strong player in a global market for  electrochromic  mirrors that
industry  sources expect to grow to $1 billion.  The Company  believes it is the
only  exterior  mirror   manufacturer   that  is  verticially   integrated  with
electrochromic cell manufacturing capability.  With strong technologies to offer
and having favorably settled the patent issues that have hampered its ability to
compete in recent years,  the Company has set ambitious goals for increasing its
electrochromic mirror market share in the years ahead.

Interior  Rear View  Mirrors.  The Company has a  predominant  share of the U.S.
market for interior rear view prismatic  mirrors and in 1999 sold  approximately
18.9 million units worldwide.  The interior rear view mirror product line ranges
from the basic day/night flip mirror to rear-vision  systems that  incorporate a
variety of sophisticated  electronic features into complex modular interior rear
view mirror  assemblies.  The Company  continues to design and market innovative
value-added  features  integrated  into the rear  view  mirror  such as  lights,
electronic compasses, temperature and other displays.

The Company manufactures and markets automotive interior rear view mirrors using
patented  electrochromic  technology  that  automatically  dims the mirror  when
headlights  approach  from the  rear.  Electrochromic  rear view  mirrors  are a
value-added substitute for traditional prismatic base mirrors and are sold for a
higher dollar price per unit than prismatic base mirrors.  The Company  believes
that electrochromic rear view mirrors currently represent  approximately 20% and
8% of all interior rear view mirrors sold by all suppliers to original equipment
manufacturers in the North American and European markets,  respectively, for the
1999 model year. The market for electrochromic  mirrors continues to grow and in
1999,  electrochromic  mirrors  were offered on  approximately  51 car models in
North  America,  compared to only  approximately  19 models in 1991. The Company
believes that  electrochromic  mirrors will represent an increasing share of the
rear view mirror market, both in terms of number of units and dollar volume, and
represent a significant growth area for the Company.

The  Company is in the  process of  developing  electronic  vision  systems  for
vehicles  that make use of advanced  sensors and video  microchip  technology to
replace  dimmable  interior  and  exterior  mirror  systems.  Although  not  yet
commercialized,  the  development  of this  technology  is part of the Company's
strategy to be a technology leader in the market for automotive rear view vision
systems.  The Company has been engaged in a research program with a key customer
for the development and commercialization of this technology.

Exterior Rear View Mirrors. The Company believes it is the largest exterior rear
view mirror  manufacturer  in the world and  considers  itself a technology  and
manufacturing  leader  with  manufacturing  facilities  in  the  United  States,
Germany,   Spain,  Ireland,   Brazil  and  China.  Through  these  manufacturing
locations,  the Company has a strong presence in each major automotive market in
the world.  The Company has booked  significant  new orders in recent years that
will make this product  line the fastest  growing  business for the Company.  In
calendar  year 2000,  the Company will launch new business  with annual sales of
$39 million,  including orders for twelve General Motors  vehicles,  the largest
single exterior rear view mirror order in the Company's history.

The Company has used its  expertise and customer  relationships  in the interior
mirror  market to develop its product  line and increase its share of the market
for complete  exterior mirror systems.  The expansion of the Company's  European
operations,   particularly  the  acquisition  of  Donnelly  Hohe,  substantially
increased  the  Company's  production  capacity and sales of exterior  rear view
mirrors,  especially  in the  European  market.  The Company  believes  that its
increased  presence in the European market will assist the Company in increasing
its sales of exterior rear view mirrors in North America and other markets.  The
Company supplies exterior rear view mirror  assemblies  primarily to Honda, Ford
and Mazda in the United States and to major European  automakers  including BMW,
Volkswagen, Renault, Audi and Ford in Europe. The Company also supplies exterior
rear view mirror systems to automakers  throughout southern China through one of
it's  Chinese  joint  ventures  and South  America  through its joint  venture i
Brazil.
<PAGE>
                                                                               7

Exterior  rear view mirrors are  combined  with  automatic  or manual  adjusting
mechanisms,  wire  harnesses  and other  hardware  within  an  injection-molded,
color-matched housing and are more complex than base interior rear view mirrors.
The per vehicle sales price of exterior  mirrors  substantially  exceeds that of
interior  rear view mirrors due to the greater  complexity of exterior rear view
mirrors and the fact that most new vehicles are equipped  with two exterior rear
view mirrors.

The Company also manufactures and markets dimmable  electrochromic exterior rear
view  mirrors.  The  Company  believes  that  electrochromic  rear view  mirrors
currently  represent  only 9% of all  exterior  rear view  mirrors  in the North
American   market  for  the  1999  model  year.   The  Company   believes   that
electrochromic  exterior rear view mirrors will represent an increasing share of
the rear view mirror market, both in terms of number of units and dollar volume,
and  that  the  electrochromic  mirror  market  presents  a  significant  growth
opportunity for the Company.

In 1996, the Company introduced its patented Illuminator(TM)ground  illumination
mirror,  the world's first  commercial  automotive  outside mirror that includes
remote-control  security lighting. The Illuminator(TM)can  also be equipped with
electrochromic dimming and exterior turn indicators and was recognized as one of
the "1996 100 Best of What's New  Products"  by Popular  Science  magazine.  The
Illuminator(TM)was  initially offered as an option on the Lincoln Mark VIII. The
Company is aggressively marketing th is product to its customers.

Modular Windows

The  Company  pioneered  and today is a leading  supplier  of  modular  windows.
Modular  windows,  which have  continued to increase in  popularity  since their
introduction,  are produced by molding glass,  hardware,  weather  stripping and
other  components  into a single unit  assembly  and can be used for  automotive
windows and sunroofs.  The Company  believes its modular  windows offer improved
quality and aerodynamics,  greater design flexibility and lower production costs
for  automakers  than   conventional   automotive   windows.   In  addition,   a
significantly  growing  product  offering  for the Company is  innovative  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.

The Company's  modular window assemblies are used for rear and liftgate windows,
quarter windows,  aperture  windows,  fixed vent windows,  roll-up windows,  sun
roofs,  rear windows and  windshields.  The Company produces modular windows for
DaimlerChrysler,  Ford, General Motors, Honda, Isuzu and Toyota in North America
and  DaimlerChrysler and Isuzu in Europe. The Company's modular windows are used
on many popular vehicles such as the  DaimlerChrysler  Caravan/Voyager  minivan,
the Jeep Grand Cherokee, the Ford Expedition and the Ford Taurus/Sable. In 1999,
the Company continued to launch many new important modular programs.

The  Company   believes  that  its  materials   technology   and   manufacturing
capabilities  provide a  significant  competitive  advantage  in the  market for
modular  windows.  The Company offers a variety of modular  window  technologies
including  molded-in body color panels,  flush bonded hardware as well as single
and double sided  encapsulation.  Modular  windows can be molded using polyvinyl
chloride  ("PVC") or a urethane  reaction  injection  molding  process.  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
advantages.

The Company has signed an agreement to form a new company, Donnex, which will be
a 50-50 joint venture with Essex Specialty  Products,  Inc., the world's leading
producer of automotive  adhesives and sealants.  Donnex was  established for the
marketing,  manufacture and delivery of complete,  ready-to-install  windows and
window systems to automotive  customers on a just-in-time basis and in sequence.
This Company is in the marketing phase of this innovative technology.
<PAGE>
                                                                               8

The Company  believes that the increasing use of modular windows reflects trends
in the automotive  industry towards increased levels of outsourcing,  demand for
integrated  modules  and  systems  and  reliance  on  suppliers  for  design and
manufacturing,  particularly in the North American  market.  The Company expects
continued  growth in the modular  window  market,  as evidenced by the number of
modular windows that automakers have specified for future models.

Interior Lighting and Trim

In September  1997, the Company entered into an agreement with Lear to form Lear
Donnelly, a joint venture for the design, development,  marketing and production
of interior trim overhead systems and components for the global market. See Item
1  (c)  "Narrative  Description  of  Business--Joint  Ventures"  for  additional
information  concerning  this joint  venture.  Through the Lear  Donnelly  joint
venture,  the Company has manufactured  various interior trim products including
dome lights,  interior  door lights,  map lights,  courtesy  lamps,  lighted and
non-lighted grab handles, visors and trim components such as overhead consoles.

On July 1, 1999, the Company signed a letter of intent to sell its investment in
Lear Donnelly to Lear for an  undisclosed  amount.  The  transaction  was closed
September 14, 1999 and is expected to have a one-time, material favorable impact
on the net income and cash flow of the Company. In addition, due to the transfer
of the  Company's  interior  lighting and trim sales  contracts  included in the
joint venture to Lear,  future annual net sales will be reduced by approximately
$65 to $70 million per year.

Handle Products

The Company produces a wide variety of interior and exterior handle products for
Ford, Honda, Mazda, Nissan and Volvo. This product line was established based on
the  Company's  capabilities  in  color-matched  painting and plastic  injection
molding. The Company supplies various handle products designs including plastic,
diecast and  chrome-plated  door  handles as well as products  with  value-added
electronic  features.  These products are synergistic to the Company's  complete
exterior  rear view  mirror  product  line and are  marketed  by  combining  the
Company's  capabilities  in  design,   painting  and  added  features,  such  as
electronics for both product lines.

Non-Automotive Businesses

The Company is committed to its core automotive businesses. However, the Company
has developed a number of non-automotive  businesses and relationships  over the
years,  which  arose from  existing  or  developed  core  technologies  that had
applications  outside of the automotive  industry,  none of which are reportable
segments. The Company's  non-automotive products represent less than 4% of total
net sales for each of the last three years.

In the third quarter of 1997, the Company created Donnelly Optics Corporation, a
wholly  owned  subsidiary,  based in Tucson,  Arizona,  to sell and  manufacture
high-quality,  injection  molded,  diffractive  and  hybrid  optical  lenses and
systems.  Diffractive  optics have a wide variety of uses in such  industries as
computers,  telecommunications,  aerospace,  medical  instruments  and the  auto
industry.  The Company had booked business with customers in the digital imaging
market,  developed a proprietary lense system for digital cameras and had orders
to produce highly specialized exterior lighting lenses for a North American auto
manufacturer.  Optics  had  been  incurring  significant  operating  losses.  In
addition, in the fourth quarter of 1998, Optics recognized a $3.5 million charge
against  operating income, or $2.3 million after tax, due to the cancellation of
a customer order for  injection-molded  lenses.  The customer order was canceled
due to market dynamics in the digital  imaging sector of the computer  industry.
In the second  quarter of 1999,  the Company  merged  Optics into a wholly owned
subsidiary of AIG, a New York Corporation. In the merger, the Company received a
13%  interest  in AIG  and a $5  million  convertible  note.  AIG  develops  and
manufactures  opto-imaging  products for the lighting,  automotive,  optical and
photonics industries. As a result of this transaction,  the financial results of
Optics  are no longer  included  in the  Company's  financial  statements  after
December 1, 1998.  The  Company's  operating  results  were not impacted by this
transaction.
<PAGE>
                                                                               9

The Company believes Information Products, Inc., a wholly owned subsidiary based
in Holland,  Michigan,  is the world's largest  producer of specialty coated and
shaped glass for the computer touch screen industry. The glass is used in a wide
variety of touch screen applications such as information kiosks, cash registers,
industrial controls, personalized greeting card kiosks and others.

In the second and third quarters of 1999,  the Company sold its entire  interest
in VISION Group. As a result of these sales,  the Company  received $8.6 million
in proceeds and recognized a combined pretax gain of approximately $5.5 million,
or $0.35 per share  after  tax.  In the second  quarter of quarter of 1997,  the
Company had also sold a portion of its investment in VISION Group in conjunction
with a public  offering of VISION  Group  shares,  resulting  in a $0.9  million
pretax gain. The Company's equity in the financial results of VISION Group is no
longer included in the Company's financial statements after November, 1999.

In the second  quarter of 1998, the Company sold its 50% interest in AFC as part
of an initial public  offering.  As a result of this sale, the Company  received
$7.9 million in net  proceeds,  after taxes and related out of pocket fees,  and
recognized a pretax gain of approximately $4.6 million, or $0.22 per share after
tax.

Joint Ventures

Schott  Donnelly.  In the fourth  quarter of 1999,  the  Company  formed  Schott
Donnelly, a 50-50 joint venture with Schott North America Manufacturing, Inc., a
wholly owned  subsidiary of Schott  Corporation  ("Schott").  Schott is a wholly
owned  subsidiary  of Schott  Glas,  which is based in Germany and is one of the
world's leading  producers of specialty  glass products.  The joint venture will
design and  manufacture  electrochromic  glass for automotive and  architectural
applications. The Company received $2 million and contributed certain assets and
liabilities  for the creation of the joint venture.  In accordance  with the LLC
operating agreement,  losses generated by the joint venture will be allocated to
Schott until Schott has contributed $9.5 million.

Lear Donnelly.  On November 3, 1997,  the Company  formed Lear  Donnelly,  a 50%
owned  joint  venture  with Lear  Corporation.  Lear  Donnelly is engaged in the
design,  development  and production of overhead  systems and components for the
global market,  including  complete overhead systems,  headliners,  consoles and
lighting components, vehicle electrification interfaces,  electronic components,
visors  and  assist  handles.  The  Company  and Lear each  contributed  certain
technologies, assets and liabilities for the creation of the joint venture.

On July 1, 1999, the Company signed a letter of intent to sell its investment in
Lear Donnelly to Lear for an  undisclosed  amount.  The  transaction  was closed
September 14, 1999 and is expected to have a one-time, material favorable impact
on the net income and cash flow of the Company. In addition, due to the transfer
of the  Company's  interior  lighting and trim sales  contracts  included in the
joint venture to Lear,  future annual net sales will be reduced by approximately
$65 to $70 million per year.

Donnelly/Arteb.  In  1998,  the  Company  formed  a  50-50  joint  venture  with
Industrias  Arteb S.A. to produce  interior and  exterior  mirrors for the South
American automotive industry.  Donnelly/Arteb is located near Sao Paulo, Brazil.
In 1999,  Donnelly/Arteb  began  producing  replacement  parts for  distribution
within the South American market and is in the process of launching new programs
for the Brazilian production of several General Motors' vehicles. Donnelly/Arteb
is  continuing  to focus on  strategically  growing  its  presence  in the South
American market.

Varitronix.  In 1998, the Company formed Varitronix EC, a 50% owned,  controlled
joint venture with the Malaysian  subsidiary  of Varitronix  International  Ltd.
Varitronix EC is located in Penang, Malaysia, within a world-class manufacturing
facility that began producing electrochromic cells in the first quarter of 1999.
With this production startup, the Company is the only automotive supplier in the
world with EC manufacturing or assembling  capabilities in North America, Europe
and Asia.  Due to the Compan  having board  control of this joint  venture,  the
financial  statements  of  Varitronix  EC are  consolidated  with  those  of the
Company.
<PAGE>
                                                                              10

Donnex.  The Company  previously  signed a joint venture agreement to form a new
company,  Donnex,  which will be a 50-50 joint  venture  between the Company and
Essex  Specialty  Products,  Inc.,  the world's  leading  producer of automotive
adhesives  and  sealants.  Donnex  intends  to  produce  and  deliver  complete,
ready-to-install  windows  and  window  systems  to  automotive  customers  on a
just-in-time  basis and in  sequence.  It is expected  that Donnex will base its
initial operations in the Detroit,  Michigan,  metropolitan area. Donnex expects
to have commercially validated product available for sale by early calendar year
2000.

Shunde  Donnelly  Zhen Hua. In the first  quarter of 1997,  the  Company  formed
Shunde  Donnelly  Zhen Hua,  based in the Chinese  city of Shunde,  in Guangdong
Province, a joint venture with Shunde Zhen Hua Automotive Parts Co. Ltd ("Shunde
Zhen Hua"). The Company has a 30% interest in the Shunde Donnelly Zhen Hua joint
venture which  manufactures  interior and exterior mirror systems for automakers
throughout  southern  China,  including the Chinese  operations  of  Volkswagen,
DaimlerChrysler  and Isuzu.  Disputes  have  arisen  between the Company and its
joint venture partner. The parties have entered into an agreement to resolve the
disputes  and  reorganize  the joint  venture  company.  The  agreement  will be
effective upon approval of municipal  authorities in China, approval of which is
expected by the  parties.  Shunde Zhen Hua intends to sell their  portion of the
joint venture to a new partner:  Ganxiang Automobile Mirror Company, the largest
automotive mirror supplier in China.

Donnelly  Electronics,  LLC  ("Donnelly  Electronics").  In the first quarter of
1997, the Company created an affiliate,  Donnelly  Electronics;  a joint venture
between the Company and an individual  with expertise in automotive  electronics
technology.  The Company owns 18.9% of Donnelly  Electronics  with the option to
acquire up to 100% of Donnelly Electronics over time. The joint venture based in
Holly,  Michigan,  specializes  in the  design  and  manufacture  of  electronic
components  and  sub-assemblies  and produces  the  electrical  components  that
Donnelly  uses  for  products  such as  electrochromic  rear  view  mirrors  and
electronic compass systems.  The firm will also provide electronics  development
for future  Donnelly  products that may include  rear-vision  camera systems and
others.  In  addition  to  supporting  the  automotive  electronic  needs of the
Company,  Donnelly  Electronics pursues business with other automotive suppliers
that are not competitors of the Company as well as other business opportunities.

Shanghai  Donnelly Fu Hua.  In the fourth  quarter of 1996,  the Company  formed
Shanghai  Donnelly  Fu Hua, a 50-50  joint  venture  with  Shanghai Fu Hua Glass
Company,  Ltd.,  which produces window systems for automotive  customers in Asia
and Australia.  Shanghai Fu Hua Glass Company is itself a joint venture  between
Ford Motor  Company and Shanghai Yao Hua Glass Works.  The joint  venture  began
manufacturing  encapsulated  and framed glass  products in 1998.

KAM Truck Components, Inc. ("KAM"). The Company owns 17.1% of KAM which supplies
mirrors for large trucks,  including  GLARESTOPPER(R)solid  state electrochromic
mirrors,  which  permit  truck  drivers  to  manually  adjust the glare of their
mirrors by a range of up to ten times.

Donnelly Yantai Electronics Corporation Limited. This 50% owned venture produces
coated glass for use in the Chinese LCD market. This operation is located in the
Yantai Peninsula of the People's Republic of China.

MARKETING STAFF

In North America,  Europe,  Japan and Asia,  the Company  markets its automotive
products  by  combining  the  engineering  product  expertise  of members of the
Company's  engineering  staff  with a customer  focused  sales  force,  who work
together with the Company's customers' design teams early in the design process.
The Company's wholly owned European subsidiaries employ a sales force located in
Europe and also sell  through a trading  company in Japan.  Nearly all sales are
made  directly to  automakers  with the  exception of some interior and exterior
mirror glass components.
<PAGE>
                                                                              11

The Company markets its  non-automotive  products through a sales force who also
work in  conjunction  with the  Company's  engineers.  The  Company  works  with
potential  customers  on the  development  of new  applications  for  electronic
information display products.

NEW PRODUCT OR INDUSTRY SEGMENT INFORMATION

New  applications  in  electronics  continue to play an  increasing  role in the
Company's future.  As vehicles become more  electronically  sophisticated,  auto
manufacturers  are looking for  opportunities to pack value-added  features into
new areas of the car.

The Company is a leader in developing  "plug and play" modules that are flexible
and allow vehicle  manufacturers to offer different  configurations  of features
through  the  same  module.   An  example  of  these   modules  is  an  interior
electrochromic  mirror offered to a luxury vehicle  manufacturer in Europe.  The
mirror functions as a communications node for the vehicle's  electronics system,
representing a significant  first in the automotive  industry.  In essence,  the
electronics  that  control a number of  different  passenger  comfort and safety
functions have been integrated into the rear view mirror.

The Company has developed  independently or acquired  technology for a number of
critical  electronic  product modules for use in the Company's mirror systems or
for independent sale. These products include memory devices for actuators, power
fold modules, ground illumination features,  electronic remote entry systems and
other products.

A recent product offering is the Company's  SmartRelease(TM)trunk release system
which  uses  advanced   electronic   sensors  to  detect  heat  and  motion  and
automatically  open  the  trunk  if it  senses  a  person  trapped  inside.  The
SmartRelease(TM)will   debut  on  the  mid-year  2000  Chevrolet  Impala.   This
technology marks an evolution in the auto industry's  efforts to make vehicles a
safer  environment.  The  SmartRelease(TM)system  is more sophisticated than the
manual emergency trunk release handles that the Company deve loped and currently
supplies to automakers.  The electronic  sensors require very little movement on
the part of a person  trapped in a trunk to activate.  The Company  expects that
electronic  modules  and systems  will  continue  to develop  into an  important
feature in the industry.

In response  to this  continued  market  development,  the  Company  founded the
Donnelly   Electronics  joint  venture  which  specializes  in  the  design  and
manufacture  of  electronic  components  and  sub-assemblies.  See  Item  1  (c)
"Narrative Description Of Business--Joint Ventures" for a more detail discussion
of this joint venture.

SOURCES AND AVAILABILITY OF RAW MATERIALS

The Company's  primary raw materials are glass,  paints,  resins and  adhesives.
Glass is supplied by third party glass  manufacturers and by glass manufacturers
affiliated with automakers. Paints, resins and adhesives are other important raw
materials.  Paints used by the Company are supplied primarily by four suppliers.
Most of the resins the Company uses are supplied by four primary suppliers.  The
Company believes that alternative suppliers are available for paints and resins.
Generally, the Company ha multiple sources of supply for the important materials
and components used in its products.  Certain  adhesives for the Company's flush
window systems are supplied  solely by Essex  Chemical and the Company  believes
that an alternative  source of supply is not readily  available.  Because of the
commodity nature of common materials such as glass and plastics,  the Company is
somewhat vulnerable to price fluctuations in many of its material purchases.

PATENTS, LICENSES, ETC.

While the Company owns  approximately  267 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
<PAGE>
                                                                              12

manufacturing   know-how,   design  of  its  own  manufacturing   equipment  and
development of manufacturing  processes are more important than its patents. 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 the production
schedules of the Company's major  automotive  customers.  The Company  generally
reports  lower net sales and net income from July to December  than from January
to June because  domestic  automotive  production is generally  lower during the
first two quarters of the Company's fiscal year.

WORKING CAPITAL

Working  capital was $7.3 million on July 3, 1999,  compared to $58.3 million on
June 27, 1998.  Current assets  decreased as compared to June 1998,  despite the
increase in overall  sales  volumes.  The most  significant  factor  causing the
decrease in working capital was the timing of customer  payments relative to the
ending balance sheet dates of July 3, 1999 and June 27, 1998, respectively.  The
Company's   North  American   customers   provide  payment  to  the  Company  on
pre-established  payment  dates ranging from the 28th to the 30th of each month.
Therefore,  a number of customer  payments  were not  received by June 27, 1998,
resulting in higher  accounts  receivable  balance on this date.  The receipt of
customer  payments,  combined  with  more  active  working  capital  management,
provided funds which were used to reduce revolving lines of credit as of July 3,
1999. Working capital was also impacted by the restructuring charge taken in the
third  quarter  of 1999 and  improved  inventory  turnover.  Inventory  turnover
improved du to improved operational  performance at EAO and inventory write-offs
associated  with the 1999  European  turnaround  plan.  The total  restructuring
reserve at July 3, 1999 was $10.1 million,  of which $7.7 million was classified
as short-term.

The Company has an agreement  to sell,  on a revolving  basis,  an interest in a
defined pool of trade  accounts  receivable of up to $50 million.  The agreement
expires in December  1999,  however is  renewable  for  one-year  periods at the
option of the Company.  The Company  expects to extend the current  agreement or
replace it on  comparable  terms.  At July 3, 1999,  and June 27,  1998, a $40.4
million  and $40.3  million  interest,  respectively,  had been sold  under this
agreement with proceeds used to reduce  revolving  lines of credit.  The sale is
reflected as a reduction of accounts  receivable and as operating cash flows. As
collections  reduce  previously  sold  interests,  new accounts  receivable  are
customarily  sold.  The  proceeds  of sales  are less  than the face  amount  of
accounts  receivable  sold  by  an  amount  that  approximates  the  purchaser's
financing  cost of issuing its own  commercial  paper  backed by these  accounts
receivable.  Discount  fees of $2.1 million in 1999 and 1998 and $1.1 million in
1997, are included in selling,  general and administrative expense. The Company,
as   agent   for  the   purchaser,   retains   collection   and   administrative
responsibilities for the participating interests of the defined pool.

The Company has an unsecured $160 million multi-currency global revolving credit
agreement  which bears interest,  at the election of the Company,  at a floating
rate  under  one of  three  alternative  elections.  A  variable  facility  fee,
currently at 0.225%, is paid on the credit line. This revolving credit agreement
terminates in September  2002, at which time the Company may extend for one-year
periods with the consent of all the participating banks.

Other than the items summarized  above, 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.
<PAGE>
                                                                              13

IMPORTANCE OF LIMITED NUMBER OF CUSTOMERS

In 1999,  approximately  69% of the  Company's  net sales were to the  following
major automobile manufacturers:
<TABLE>
         <S>                                               <C>
         Ford Motor Company                                25%
         DaimlerChrysler                                   20%
         Honda                                              7%
         BMW                                                6%
         VW                                                 6%
         General Motors Corporation                         5%
                                                           ---
         Total                                             69%
                                                           ===
</TABLE>

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

BACKLOG OF ORDERS

As of July 3,  1999,  and June 27,  1998,  the  Company's  backlog of orders was
approximately $181 million and $149 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 order 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

Competition  in the  markets  for the  Company's  automotive  products  is based
primarily on manufacturing  capabilities,  design, quality, cost and delivery. 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.  The level and nature of  competition  involving the Company's
automotive products are varied.

Interior  Rear View Mirrors.  While the Company has a  predominant  share of the
U.S.  interior rear view prismatic  mirror market,  the Company is aware of many
competitors in this market. The Company knows of one principal competitor in the
U.S.  electrochromic  market  and one in the U.S.  lighted  mirror  market.  The
Company has several  worldwide  competitors  for interior  mirror glass sales in
Japan and Europe,  although  the Company  believes  each  interior  mirror glass
competitor has a smaller market share than the Company.  In Europe,  the Company
competes with several other  manufacturers of complete interior rear view mirror
assemblies.

The  Company's  principal  competitor  for  automatic  electrochromic  rear view
mirrors is Gentex  Corporation,  which  currently  has a  dominant  share of the
market for electrochromic  mirrors.  The Company and Gentex Corporation had been
involved in patent  litigation with respect to certain aspects of electrochromic
technology.  The  litigation  previously  had an adverse impact on the Company's
ability to market  interior  electrochromic  mirrors  in the  United  States and
Europe.  During the fourth  quarter of 1996,  the  Company  reached a patent and
licensing settlement with Gentex Corporation,  and management believes that this
settlement facilitates its efforts to market electrochromic mirrors.
<PAGE>
                                                                              14

Exterior Rear View Mirrors.  The Company has many  competitors  in the worldwide
exterior  rear view mirror  market.  Through the  Company's  operations in North
American and Europe,  the Company is a leading  producer of automotive  exterior
rear view  mirrors.  The  Company  has one  competitor  in the U.S.  market  for
automatic exterior electrochromic mirrors.

Modular  Windows.  The Company has many  competitors  in the  worldwide  modular
window market.  Certain  competitors are major automotive glass manufacturers or
are closely  associated  with  automobile  or glass  manufacturers.  The Company
believes that the glass  manufacturers  could further vertically  integrate into
glass molding and that these companies  would be significant  competitors due to
their size.  However,  the Company believes that it is still a technology leader
for glass encapsulation and metal bonding of attachments to glass.

Handle  Products.  The Company has many competitors in the worldwide door handle
market.  Certain competitors already supply (or are well positioned to supply in
the future) broader interior trim or exterior  ornamentation sets, often working
in concert with door systems integrators.  The Company will continue to use door
handles to leverage  capacity  and to  strategically  support  exterior  mirrors
through  the sale of  coordinated  "door  sets"  of  exterior  mirrors  and door
handles.

Other Products.  With respect to its information products business,  the Company
believes  it is the  world's  leading  producer  of  coated  bent  glass for the
CRT-based  electronic  display and interactive  systems market. The Company also
supplies a number of small-volume  non-automotive  products in Europe;  however,
the  Company  is not a  predominant  market  leader  for any of these  products.
Competition  in all of  these  product  areas is based  on  price,  service  and
quality.


RESEARCH AND DEVELOPMENT

Continued emphasis on effective  research and product  development is a key part
of the  Company's  strategy for future  growth.  The Company  believes  that its
technological  and product  development  capabilities  will enable it to provide
sophisticated  integrated  modules  and  systems  and to perform  the  increased
responsibilities automotive suppliers are expected to manage.

In 1999, 1998 and 1997, research and development  expenditures were $34.2, $36.4
million and $32.5 million, respectively, or 3.8%, 4.8% and 4.8% of the Company's
net sales for those years.  These  expenses were lower for 1999 primarily due to
the Lear Donnelly  joint  venture,  the formation of the Schott  Donnelly  joint
venture, the Optics merger and Donnelly Electronics.  Operating expenses for the
respective  businesses  and  technologies  contributed  by the  Company to these
ventures were  transferred to the newl formed  company's which are accounted for
under the equity or cost  method of  accounting.  The  Company  expects to spend
approximately  3.5%  to  4.0%  of its  net  sales  each  year  on  research  and
development. Over 80% of the Company's research and development expenditures are
product specific and conducted by the Company's product  engineers.  The Company
has a corporate  applied research group,  including  several Ph.D's,  located at
research  facilities  in Holland,  Michigan.  The Company owns numerous U.S. and
foreign patents and has licenses for other patents and  technology.  The Company
also licenses  certain of its own patents and technology to others.  The Company
believes its manufacturing  know-how,  design of its own manufacturing equipment
and  development  of  manufacturing  processes are other  important  competitive
advantages.

HUMAN RESOURCES

The Company  believes its human resources are one of its fundamental  strengths.
The Company has  operated  for over 50 years under a  team-based,  participative
management  system.  The  Company  believes  that this  approach  has  increased
productivity  by emphasizing  employee  opportunity and  participation  aimed at
continuous  improvement.  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.
<PAGE>
                                                                              15

The  Company  is  nationally  recognized  as a  leader  in  the  application  of
participative  management  principles  and systems.  The Company  currently  has
approximately  5,600  employees  worldwide and  approximately  3,200 work in the
Company's  North  American  operations  in the U.S.  and Mexico.  The  Company's
non-North American employees are primarily located in Germany,  Ireland, France,
Spain and Malaysia. The Company considers its relationship with its employees to
be good.

The Company's United States workforce is non-union.  The Company's workforces in
Ireland,  Mexico  and  France  are  unionized,  as are  the  workforces  of most
companies in these countries.  The Company's workforce in Germany is represented
by a works council  which has employee  representation.  The  workforces of most
companies  in Germany are  required to be  represented  by works  councils.  The
Company's  workforce  in Spain  is  non-union.  The  Company  has no  collective
bargaining   agreements  in  Ireland  or  Mexico,  wher  non-economic  terms  of
employment are governed by statute.  The Company  negotiates  wages and benefits
approximately annually with its German, Spanish and Irish workforce. The Company
recently completed  re-negotiation of its labor contract in Germany allowing for
greater work flexibility rules, broader  productivity  guidelines and a delay in
certain  wage  increases   until  certain  income   profitability   targets  are
accomplished.  The Company negotiates wages approximately  annually and benefits
approximately  bi- annually with its workforce in Mexico.  The Company's  French
subsidiary is subject to the salary schedule and conditions  collectively agreed
to on a national and  regional  basis  between  employers  and  employees in the
plastics  industry.  The Company is currently reducing its European workforce as
part of its European  restructuring plans. See Item 7, "Management's  Discussion
and Analysis of Financial Conditions and Results of Operations."

ENVIRONMENTAL MATTERS

Like similar companies, the Company's operations and properties are subject to a
wide variety of increasingly  complex and stringent  federal,  state,  local and
international laws and regulations,  including those governing the use, storage,
handling,  generation,  treatment,  emission, release, discharge and disposal of
certain  materials,  substances and wastes, the remediation of contaminated soil
and  groundwater   and  the  health  and  safety  of  employees   (collectively,
"Environmental  Laws"). As such, the nature of the Company's  operations exposes
it to the risk of  claims  with  respect  to such  matters  and  there can be no
assurances that material costs or liabilities will not be incurred in connection
with such claims.

Certain Environmental Laws regulate air emissions,  water discharges,  hazardous
materials and wastes and require public disclosure related to the use of various
hazardous or toxic  materials.  The  Company's  operations  are also governed by
Environmental  Laws relating to workplace  safety and worker health.  Compliance
with  Environmental  Laws  may  require  the  acquisition  of  permits  or other
authorizations  for certain  activities and compliance with various standards or
procedural requirements.

Based upon its experience to date, the Company  believes that the future cost of
compliance   with   existing   Environmental   Laws  and   liability  for  known
environmental  claims  pursuant  to such  Environmental  Laws,  will  not have a
material  adverse  effect on the  Company's  financial  position  or  results of
operations  and cash flows.  However,  future events,  such as new  information,
changes  in  existing  Environmental  Laws or  their  interpretation,  and  more
vigorous  enforcement  of policies by regulatory  authorities,  may give rise to
additional expenditures or liabilities that could be material.

ITEM 1 (d)  INFORMATION ABOUT FOREIGN OPERATIONS

During 1999,  approximately 32% of combined  consolidated net sales were derived
from  the  Company's   foreign   operations.   Approximately   14%  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 also
licensed  major  automotive  glass  companies in Europe and Japan to manufacture
modular windows for sale in foreign markets using the Company's technology.
<PAGE>
                                                                              16

North American  revenues are revenues  resulting from sales originating from the
United States. U.S. and export sales are classified based on where the sales are
made.  Foreign revenues are generated from sales  originating from the Company's
various foreign locations.  The Company has various foreign subsidiaries located
in Germany,  Ireland,  Spain, France, Mexico and Malaysia.  The Company operates
two  subsidiaries  in Germany,  Donnelly  Hohe GmbH & Co. KG and  Donnelly  Hohe
Schleiz GmbH & Co. KG; two subsidiaries in Ireland, Donnelly Mirrors Limited and
Donnelly Vision Systems Europe Limited; one in Spain, Donnelly Hohe Espana S.A.;
one in France,  Donnelly  EuroGlas  Systems  SARL;  one in Mexico,  Donnelly  de
Mexico, S.A. de C.V. and one in Malaysia, Varitronix EC.

The Company has various  non-controlled,  joint ventures in emerging  automotive
markets. The Company has established the Asian and the South American markets as
the top two emerging  market  priorities.  As discussed in Item 1 (c) "Narrative
Description  of  Business--Joint  Ventures",  the Company has two joint ventures
located in China,  Shanghai Donnelly Fu Hua and Shunde Donnelly Zhen Hua and one
in Brazil, Donnelly/Arteb.

A summary of the Company's  operations  by geographic  area follows and does not
include  sales  of  joint  ventures  in which  the  Company  holds a 50% or less
non-controlled ownership interest:
<TABLE>

In thousands               Year ended                1999          1998             1997
------------------------------------------------------------------------------------------

Revenues:
<S>                                           <C>               <C>              <C>
North American:
     United States..................            $  482,062      $420,544          $390,852
       Export:
         Americas...................               122,513        76,433            54,302
         Asia.......................                 6,847         3,313             2,825
         Europe.....................                 1,355         2,002             1,829
         Other......................                   386           350                76
                                                -------------------------------------------
                                               $   613,163      $502,642          $449,884

Germany.............................               177,196       173,857           138,215
Ireland.............................                61,682        43,245            43,076
Other Foreign.......................                52,928        43,567            40,122
                                                 ------------------------------------------
                                               $   904,969      $763,311          $671,297
                                                 ==========================================


In thousands                                        1999            1998            1997
-------------------------------------------------------------------------------------------

Long-Lived Assets:
United States.......................           $   116,409    $   99,518        $   93,699
Germany.............................                46,944        47,923            50,342
Ireland.............................                 8,203         8,522             8,894
Other Foreign.......................                18,076        13,962            13,289
                                                 -------------------------------------------
                                               $   189,632    $  169,925        $  166,224
                                                 ===========================================
</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.
<PAGE>
                                                                              17


ITEM 2.   PROPERTIES

The Company, solely or through several joint ventures, owns or leases facilities
which are located throughout North America,  Europe, Asia and South America. The
location,  square footage and use of the most  significant  facilities at August
31, 1999, were as follows:

<TABLE>
                                            Combined
Location of Facility                      Square Footage              Use
<S>                                          <C>            <C>
North American Automotive Operations:
Holland, Michigan (10)*                      899,000        Manufacturing, Warehouse and Office
Grand Haven, Michigan                        156,000        Manufacturing, Warehouse and Office
Newaygo, Michigan*                           177,000        Manufacturing, Warehouse and Office
Norton Shores, Michigan*                      24,000        Manufacturing and Office
Detroit, Michigan*                             4,000        Sales and Marketing Office
Mt. Sterling, Kentucky                        45,000        Manufacturing, Warehouse and Office
Monterrey, Mexico                             64,000        Manufacturing, Warehouse and Office
Tokyo, Japan *                                   200        Sales and Marketing Office

European Automotive Operations:
Naas, Ireland                                 88,000        Manufacturing, Warehouse and Office
Manorhamilton, Ireland                        25,000        Manufacturing, Warehouse and Office
Langres, France*                              40,000        Manufacturing, Warehouse and Office
Paris, France                                  2,000        Sales and Marketing Office
Collenberg, Germany (2)*                     228,000        Manufacturing, Warehouse and Office
Dorfprozelten, Germany*                      319,000        Manufacturing, Warehouse and Office
Schleiz, Germany (2)*                         95,000        Manufacturing, Warehouse and Office
Barcelona, Spain                              60,000        Manufacturing, Warehouse and Office
Palmela, Portugal                             17,000        Warehouse and Office
Goteborg, Sweden *                             3,000        Sales, Marketing and Design Office

Other Segments:
Holland, Michigan **                          65,000        Manufacturing and Office
Marlette, Michigan**                         200,000        Manufacturing and Office
Tucson, Arizona (2)**                         49,000        Manufacturing, Warehouse and Office
Dublin, Ireland**                             30,000        Manufacturing, Warehouse and Office
Prestice, Czech Republic **                   90,000        Manufacturing and Office
Shunde City, China **                         68,000        Manufacturing, Warehouse and Office
Shanghai, China **                            12,000        Manufacturing, Warehouse and Office
Penang, Malaysia **                           23,000        Manufacturing and Office
Sao Bernardo do Compo, Brazil **              25,000        Manufacturing and Office
</TABLE>
   * Leased facilities. Four of the ten Holland, Michigan facilities are leased.
     Approximately 165,000 square feet of the Dorfprozelten, Germany facility is
     leased.  One of the two  Collenberg,  Germany,  as well as,  one of the two
     Schliez, Germany facilities are leased.

  ** Owned or leased by a joint venture.

The Company believes its facilities are modern,  well-maintained  and adequately
insured and are primarily  utilized.  Because of its rapid growth in sales,  the
Company is continually evaluating the need for additional office,  manufacturing
and warehouse space.
<PAGE>
                                                                              18

As of July 3, 1999, the Company had capital  expenditures  purchase  commitments
outstanding of approximately $11.9 million.

The Company  provides a guarantee for $7.2 million in municipal  funding for the
construction of a manufacturing facility.

ITEM 3.   LEGAL PROCEEDINGS

On January 21, 1997, Midwest Manufacturing Holdings,  L.L.C. ("Midwest") filed a
lawsuit against the Company in Cook County,  Illinois Circuit Court with respect
to terminated  discussions regarding the possibility of Midwest's acquisition of
the Company's  Information Products business.  The litigation was removed to the
U.S. District Court for the Northern District of Illinois.  Midwest alleges that
a verbal  agreement  to purchase  the  Information  Products  business  had been
reached and has filed its lawsuit in an attempt to compel the Company to proceed
with the sale or to pay Midwest  damages.  On August 28, 1997, the court granted
the Company's motion to dismiss one of three counts and on February 5, 1998, the
court  granted the  Company's  motion for summary  judgment on the remaining two
counts.  Midwest then appealed the court's  decision to the U.S. Seventh Circuit
Court of Appeals.  While the appeal was  pending,  on October 7, 1998,  the U.S.
District  Court for the  Northern  District  of  Illinois  vacated  its  earlier
judgment  and ruling on  jurisdictional  grounds.  The case was  remanded to the
Illinois  Circuit Court of Cook County where the litigation is now pending.  The
claim by Midwest was resolved late in September,  1999 without a material effect
on the Company's financial condition, results of operations or liquidity.

On May  12,  1998,  Metagal  Industria  E  Cornercio  Ltda  ("Metagal")  filed a
complaint  against  the  Company  in the U.S.  District  Court  for the  Eastern
District  of  Michigan.   The  complaint  requests  a  declaratory  judgment  of
non-infringement  and invalidity of certain  Company  patents  related to lights
integrated into  automotive  mirrors.  The Company  believes that the litigation
will not have a material  adverse effect on the Company's  financial  condition,
results of operation or liquidity.

On October 6, 1998,  the Company filed a complaint  against  Metagal in the U.S.
District Court for the Western  District of Michigan.  The lawsuit  alleges that
the  production  and sale by  Metagal of certain  automotive  rear view  mirrors
incorporating  lights infringes one of the Company's patents.  The Company seeks
an injunction  against  Metagal,  as well as  unspecified  damages.  Metagal has
denied  infringement  and asserts  that the  Company's  patent is invalid.  This
lawsuit has recently been transferred to the Eastern District of Michigan, where
Metagal's  declaratory  judgment action described above is pending.  The Company
believes that this  litigation  will not have a material  adverse  effect on the
Company's financial condition and liquidity.

The Company and its subsidiaries are involved in certain other legal actions and
claims  incidental  to its  business,  including  those  arising  out of alleged
defects, breach of contracts, product warranties, employment-related matters and
environmental matters. An estimated loss from a legal action or claim is accrued
when events  exist that make the loss  probable  and the loss can be  reasonably
estimated.  Although  the  Company  maintains  accruals  for  such  claims  when
warranted,  there can be no assurance  that such  accruals  will  continue to be
adequate.  The Company  believes that accruals  related to such  litigation  and
claims are  sufficient  and that these items will be resolved  without  material
effect on the Company's financial position, results of operations and liquidity,
individually and in the aggregate.

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 3, 1999.
<PAGE>
                                                                              19


ADDITIONAL ITEM - EXECUTIVE OFFICERS OF THE REGISTRANT

Senior Corporate and Executive Officers of Registrant.  The Senior Corporate and
Executive Officers of the Company are as follows:
<TABLE>
                                                              Positions and                      Year First Elected
Name                                        Age               Offices Held                       Executive Officer
<S>                                         <C>               <C>                                         <C>
J. Dwane Baumgardner, Ph.D.                 59                Director, Chairman                          1978
                                                                       CEO, President
John F. Donnelly, Jr.                       47                COO of Europe                               1986
Maryam Komejan                              48                Senior Vice President,                      1993
                                                                       Corporate Secretary
Niall R. Lynam, Ph.D.                       45                Senior Vice President, CTO                  1992
Scott E. Reed                               42                Senior Vice President, CFO                  1998
Russell B. Scaffede                         50                Senior Vice President, Global               1998
                                                                       Manufacturing
Donn J. Viola                               54                COO of North America                        1996
Ronald L. Winowiecki                        32                Chief Accounting Officer, Corporate         1998
                                                                       Controller
</TABLE>
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,  Jr. 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 them was named an officer.

Dwane  Baumgardner has been Chief  Executive  Officer and a director since 1982,
Chairman of the Board since 1986 and President since 1994. John F. Donnelly, Jr.
was elected  Chief  Operating  Officer of the Company's  European  operations in
September  1998.  Prior to that  time he was  Senior  Vice  President  from 1993
through 1998.  Donn Viola joined the Company as Chief  Operating  Officer of the
Company's North America operations in August 1996. Prior to joining the Company,
he was Senior Executive Vice President Chief Operating Officer and member of the
Board of  Directors  for Mack  Trucks  Incorporated  from  1994 to 1996.  Maryam
Komejan has been Senior Vice President since 1995, Vice President since 1993 and
Corporate  Secretary  since 1989.  Niall Lynam was elected Senior Vice President
and Chief  Technical  Officer in 1996.  Prior to that time he was Vice President
from 1992 through 1996.  Scott Reed joined the Company as Senior Vice  President
and Chief Financial  Officer in September of 1998. Prior to joining the Company,
he served as Director of  International  Finance for Chrysler  Corporation  from
1995 to 1998 and was Manager of Finance,  Production  Platform from 1993 to 1995
for Chrysler  Corporation.  Russ Scaffede has been Senior Vice  President  since
April 1998 and Vice President since October 1995.  Prior to joining the Company,
he was employed from 1993 to 1995, by RWD Technologies,  Inc., a consulting firm
engaged in the development and implementation of lean manufacturing systems. Ron
Winowiecki was elected  Corporate  Controller in August 1998. Prior to that time
he was Controller of North American Operations since December 1996 and Assistant
Controller since 1993.

Officers are elected annually.
<PAGE>
                                                                              20


                                    PART II.

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

The Company's  common stock is traded on the New York Stock  Exchange  under the
symbol "DON". Market quotations regarding the range of high and low sales prices
of the Company's common stock were as follows:

<TABLE>
     Fiscal                       1999                 Dividends
     Quarter              High             Low          Declared
     -----------------------------------------------------------------
<S>                    <C>                 <C>         <C>
     First              $18.88             $14.13       $.10
     Second              16.00              12.50        .10
     Third               15.25              12.13        .10
     Fourth              17.50              12.88        .10


     Fiscal                       1998                 Dividends
     Quarter              High             Low            Declared
     -----------------------------------------------------------------
     First              $23.75             $16.75       $.10
     Second              22.44              17.50        .10
     Third               19.31              16.25        .10
     Fourth              22.38              18.00        .10
     -----------------------------------------------------------------
</TABLE>
As of August 31, 1999, the Company had approximately  1,000 holders of record of
shares of Class A Common Stock.

ITEM 6.   SELECTED FINANCIAL DATA
<TABLE>
In thousands, except
per share data                         1999           1998            1997             1996            1995
---------------------------------------------------------------------------------------------------------------
<S>                                <C>            <C>            <C>               <C>            <C>
Net sales                           $   904,969    $   763,311    $   671,297       $   439,571    $   383,340
Income before taxes on
  income                                  9,693         19,179         12,005            12,349         16,823
Net Income                               10,592         13,009         10,020             8,454         11,009
Net income per common
  share - Basic                            1.05           1.30           1.01              0.86           1.14
Net income per common
   share - Diluted                         1.04           1.29           1.00              0.85           1.12
Dividends declared per
  common share                             0.40           0.40           0.36              0.32           0.26
Total assets                            395,101        377,885        358,293           271,492        223,788
Debt including current
  maturities                             92,215        123,761        122,901           101,916         66,802
Preferred stock                             531            531            531               531            531
Shareholders' equity
  (total)                               108,331        103,282         93,827            88,852         82,900
Restructuring and other
  charges (gain)                          8,777          3,468          9,965             2,399         (2,265)
</TABLE>
<PAGE>
                                                                              21

The selected  financial data for the Company for each of the five years has been
derived  from the combined  consolidated  financial  statements  of the Company,
which have been audited by the Company's independent auditors, BDO Seidman, LLP.
The data should be read in conjunction with the combined consolidated  financial
statements and related notes thereto,  "Management's  Discussion and Analysis of
Results of Operations and Financial  Condition"  and  "Financial  Statements and
Supplementary Data" presented in Items 7 and 8 of this Form 10-K.

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

Incorporated  by  reference  from  the  1999  Annual  Report,   see  "Management
Discussion  and Analysis of Results of Operations  and  Financial  Condition" at
pages 10-19, which is filed as Exhibit 13 to this Form 10-K report.

ITEM 7(a)  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company  is  exposed to changes  in  interest  rates and  foreign  currency
exchange  primarily in its cash,  debt and foreign  currency  transactions.  The
Company holds derivative instruments,  including interest rate swaps and forward
foreign currency  contracts.  Derivative  instruments used by the Company in its
hedging  activities  are  viewed as risk  management  tools and are not used for
trading or speculative  purposes.  Analytical  techniques are used to manage and
monitor foreign exchange and interest rate ris and include market valuation. The
Company believes it is, to a lesser degree,  subject to commodity risk for price
changes  that  relate to  certain  manufacturing  operations  that  utilize  raw
commodities.  The  Company  manages  its  exposure  to changes  in those  prices
primarily  through its  procurement  and sales  practices.  This exposure is not
considered material to the Company.

A discussion  of the  Company's  accounting  policies for  derivative  financial
instruments is included in the Summary of Significant Accounting Policies in the
Notes  to the  Combined  Consolidated  Financial  Statements,  which is filed as
Exhibit  13 to  this  Form  10-K  report.  Additional  information  relating  to
financial instruments and debt is included in Note 8 - Financial Instruments and
Note 6 - Debt and Other  Financing  Arrangements  at pages  30-31.  Quantitative
disclosures  relating  to  financial  instruments  and debt are  included in the
tables below.

International  operations  are  primarily  based in Europe and,  excluding  U.S.
export sales which are  principally  denominated in U.S.  dollars,  constitute a
significant  portion of the revenues and identifiable  assets of the Company and
totaled  $281  million and $139  million,  respectively,  as of and for the year
ended July 3, 1999. A predominent  portion of these  international  revenues and
identifiable assets are based in German marks. The Company has significant loans
to foreign  affiliates  which are  denominated  in foreign  currencies.  Foreign
currency changes against the U.S. dollar affect the foreign currency transaction
adjustments on these long-term  advances to affiliates and the foreign  currency
translation  adjustment  of the Company's  net  investment in these  affiliates,
which impact consolidated equity of the Company. International operations result
in a large volume of foreign currency  commitment and transaction  exposures and
significant foreign currency net asset exposures. Since the Company manufactures
its products in a number of locations  around the world, it has a cost base that
is  diversified  over a  number  of  different  currencies,  as well as the U.S.
dollar,   which  serves  to   counterbalance   partially  its  foreign  currency
transaction  risk.   Selective  foreign  currency  commitments  and  transaction
exposures  are  partially  hedged.  The Company  does not hedge its  exposure to
translation  gains and losses relating to foreign  currency net asset exposures;
however,  when possible, it borrows in local currencies to reduce such exposure.
The  Company  is also  exposed to  fluctuation  in other  currencies  including:
British pounds, French francs, Irish punts, Japanese yen, Mexican pesos, Spanish
pesetas,  Malaysian  ringit and Brazilian  reals.  The fair value of the foreign
currency contracts outstanding has been immaterial each of the last two years.

The Company's cash position includes amounts  denominated in foreign currencies.
The Company manages its worldwide cash requirements  considering available funds
among its subsidiaries and the cost  effectiveness with which these funds can be
accessed.  The  repatriation  of cash  balances  from  certain of the  Company's
affiliates
<PAGE>
                                                                              22

could have adverse tax  consequences.  However,  those  balances  are  generally
available without legal restrictions to fund ordinary business  operations.  The
Company  has and will  continue to transfer  cash from those  affiliates  to the
parent and to other international affiliates when it is cost effective to do so.

The Company  manages  its  interest  rate risk in order to balance its  exposure
between fixed and variable rates while  attempting to minimize  interest  costs.
Slightly  over half of the Company's  long-term  debt is fixed and an additional
$30 million is effectively fixed through interest rate swaps as outlined below.

As of 7/3/99:
Interest Rate Sensitivity:
Principal (Notional) Amount by Expected Maturity
<TABLE>
                                                                                                              Fair value
Year ending    In Thousands       1999*   2000     2001       2002       2003      2004    Thereafter    Total  7/3/99
---------------------------------------------------------------------------------------------------------------------------
Liabilities:
<S>                     <C>     <C>     <C>     <C>         <C>      <C>        <C>        <C>        <C>         <C>
Long-term debt
   Fixed Rate                    $  0   $9,333   $12,106    $12,668   $  8,728   $  5,000   $  3,665   $ 51,500    $ 52,329
   Avg. Interest Rate    6.98%

   Variable Rate                 $ 25   $3,064   $    40   $    553   $ 13,067   $ 13,669   $ 10,297   $ 40,715    $ 40,715
   Avg. Interest Rate    3.58%

Interest Rate Derivative Financial Instruments Related to Debt:

Interest Rate Swaps
  Pay Variable/Receive Fixed     $  0   $    0   $     0   $  5,000   $ 25,000   $      0   $      0   $ 30,000    $   (739)
   Avg. Pay Rate           7.40%
   Avg. Receive Rate       5.85%

*Refers to transition period ending December 31, 1999.
</TABLE>
Exchange Rate Sensitivity:
Principal (Notional) Amount by Expected Maturity
<TABLE>
                                                                                                                    Fair value
Year ending    In Thousands       1999*  2000      2001        2002       2003      2004      Thereafter     Total    7/3/99
-------------------------------------------------------------------------------------------------------------------------------
Liabilities:
<S>                             <C>      <C>       <C>         <C>       <C>       <C>         <C>         <C>        <C>
Long-term debt
   Fixed Rate -US Dollar         $  0    $9,333    $12,106    $12,668    $ 8,728   $ 5,000     $ 3,665     $ 51,500   $ 52,329

   Variable Rate - US Dollar     $  0    $   93    $    40    $    49    $    65   $     6     $ 9,522     $  9,829   $  9,829
   Variable Rate - Euro          $ 25    $2,971    $     0    $   504    $13,002   $10,237     $ 4,147     $ 30,886   $ 30,886

*Refers to transition period ending December 31, 1999.
</TABLE>
<PAGE>
                                                                              23

As of 6/27/98:
Interest Rate Sensitivity:
Principal (Notional) Amount by Expected Maturity
<TABLE>
                                                                                                                Fair value
Year ending    In Thousands         1999       2000       2001       2002       2003    Thereafter      Total     6/27/98
------------------------------------------------------------------------------------------------------------------------------
Liabilities:
<S>                       <C>    <C>       <C>        <C>        <C>         <C>       <C>           <C>        <C>
Long-term debt
   Fixed Rate                    $     0    $  7,000   $ 11,667   $ 10,604   $ 11,517   $ 15,937     $ 56,725   $ 58,540
   Avg. Interest Rate      6.93%

   Variable Rate                 $ 2,067    $  1,894   $  1,866   $    250   $ 18,372   $ 42,532     $ 66,981   $ 66,981
   Avg. Interest Rate      4.44%

Interest Rate Derivative Financial Instruments Related to Debt:

Interest Rate Swaps
  Pay Variable/Receive Fixed     $     0    $      0   $      0   $  5,000   $ 25,000   $      0     $ 30,000   $ (1,140)
   Avg. Pay Rate           7.17%
   Avg. Receive Rate       6.14%
</TABLE>
<TABLE>
Exchange Rate Sensitivity:
Principal (Notional) Amount by Expected Maturity
                                                                                                                    Fair value
Year ending    In Thousands           1999         2000       2001       2002      2003     Thereafter     Total     6/27/98
------------------------------------------------------------------------------------------------------------------------------
Liabilities:
<S>                              <C>            <C>         <C>       <C>        <C>        <C>          <C>        <C>
Long-term debt
   Fixed Rate - US Dollar        $       0      $   7,000  $ 11,667   $ 10,604   $ 11,517   $ 15,937     $ 56,725   $ 58,540

   Variable Rate - US Dollar     $     133      $     119  $    117   $     54   $  3,869   $ 15,911     $ 20,203   $ 20,203
   Variable Rate -
        German mark              $   1,934      $   1,775  $  1,749   $    196   $ 12,658   $ 23,547     $ 41,859   $ 41,859
   Variable Rate-Other           $       0      $       0  $      0   $      0   $  1,845   $  3,074     $  4,919   $  4,919
</TABLE>
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following  combined  consolidated  financial  statements which appear in the
1999 Annual Report are incorporated by reference:

         Combined Consolidated Statements of Income - Page 20.
         Combined Consolidated Balance Sheets - Page 21.
         Combined Consolidated Statements of Cash Flows - Page 22.
         Combined Consolidated Statements of Shareholders' Equity - Page 23.
         Notes to the Combined Consolidated Financial Statements - Pages 24-37.
         Management's Responsibility for Financial Reporting - Page 38.
         Report of Independent Certified Public Accountants - Page 39.
<PAGE>
                                                                              23

Quarterly unaudited financial data relating to the results of operations for the
years ended July 3, 1999,  and June 27, 1998,  appears in the 1999 Annual Report
in Note 16 of the Notes to the Combined  Consolidated  Financial  Statements  at
Page 37 and is incorporated herein by reference.  The aforementioned is filed as
Exhibit 13 to this Form 10-K report.

ITEM 9    CHANGE 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 the  directors  and director
nominees  of the  Registrant  contained  in the  Registrant's  definitive  Proxy
Statement for its Annual  Meeting of  Shareholders  to be held November 5, 1999,
and to be filed pursuant to Regulation 14A, is incorporated by reference.

Executive  Officers of the  Registrant.  Information  relating to the  executive
officers of the Company is included in Item 4 of Part I of this Form 10-K.


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 November 5, 1999, and the information
within those sections is incorporated 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  November 5, 1999,  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 November 5, 1999,
and the information within that section is incorporated by reference.

                                    PART IV.

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

(a)       DOCUMENTS FILED AS PART OF THIS REPORT

1.  Financial  Statements.  The  Registrant's  combined  consolidated  financial
statements,  for the year  ended  July 3,  1999,  together  with the  Report  of
Independent  Certified  Public  Accountants  appear in the 1999 Annual Report on
pages 20-39 and are  incorporated  by  reference  and are filed as Exhibit 13 to
this Form  10-K  report.  The  supplemental  financial  information  listed  and
appearing hereafter should be read in conjunction with the financial  statements
included in this report.
<PAGE>
                                                                              25

2. Financial Statement Schedules.  The following are included in Part IV of this
report  for each of the years  ended July 3,  1999,  June 27,  1998 and June 28,
1997, as  applicable:

                                                                            Page
Report of Independent Certified Public Accountants on Financial
     Statement Schedule                                                       26
Schedule II, Valuation and Qualifying Accounts                                27

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

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

The Registiant  filed a Form 8-K/A,  dated January 4, 1999. The filings included
an  Agreement  and Plan of  Merger  among  Applied  Image  Group,  Inc.,  Optics
Acquisition,  Inc.,  Donnelly Optics Corporation and Bruno Glavich and pro forma
financial statements.

The Registrant  also filed a Form 8-K, dated April 30, 1999. The filing included
a  description  of the  Company's  plan,  effective  July 4, 1999, to change its
fiscal year from the Saturday closest to June 30 to December 31.

(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  section of Item 14 is  submitted as a separate  section of
this report.
<PAGE>
                                                                              26

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, and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the  following  persons on behalf of the  Registrant in
the  capacities and on the date  indicated.  The persons named below each hereby
appoint J. Dwane  Baumgardner and Scott E. Reed, 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/ Scott E. Reed
Chairman, Director,                                 Senior Vice President,
Chief Executive Officer                             Chief Financial Officer
and President
                                                    /s/ Ronald L. Winowiecki
                                                    Chief Accounting Officer,
                                                    Corporate Controller


/s/ John A. Borden                                  /s/ Arnold F. Brookstone
Director                                            Director

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

/s/ R. Eugene Goodson                               /s/ Thomas E. Leonard
Director                                            Director

/s/ Gerald T. McNeive, Jr.                          /s/ Rudolph B. Pruden
Director                                             Director

/s/ Donald R. Uhlmann
Director



DATE:  September 24, 1999
Donnelly Corporation
Annual Report - Form 10-K
<PAGE>
                                                                              27

Report of  Independent  Certified  Public  Accountants  on  Financial  Statement
Schedule

Donnelly Corporation
Holland, Michigan


The audits  referred to in our report  dated  August 12,  1999,  relating to the
combined   consolidated   financial   statements  of  Donnelly  Corporation  and
subsidiaries,  which are  incorporated by reference in Item 8 of this Form 10-K,
included  the  audit  of  the  financial   statement   schedule  listed  in  the
accompanying  index. This financial  statement schedule is the responsibility of
the Company's  management.  Our  responsibility is to express an opinion on this
financial statement schedule based on our audits.

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



/s/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
August 12, 1999
<PAGE>
                                                                              28

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

<TABLE>

                             COLUMN A                      COLUMN B       COLUMN C      COLUMN D          COLUMN E
----------------------------------------------------     ------------   -----------   -------------    ---------------

                                                          BALANCE AT                                       BALANCE AT
                                                           BEGINNING                                           END
                           DESCRIPTION                     OF PERIOD     ADDITIONS      DEDUCTIONS           PERIOD
----------------------------------------------------     ------------   -----------   -------------    ---------------
<S>
RESERVE FOR UNCOLLECTIBLE ACCOUNTS AND                    <C>             <C>              <C>           <C>
SALES RETURNS AND ALLOWANCES:

      YEAR ENDED JUNE 28, 1997                            $  571           $473 (2)         -- (1)         $1,064

      YEAR ENDED JUNE 27, 1998                            $1,064             -- (1)         -- (1)         $1,095

      YEAR ENDED JULY 3, 1999                             $1,095             662(4)         100(3)         $1,665

</TABLE>
(1) INFORMATION IN THIS COLUMN IS NOT SIGNIFICANT
(2) INCREASE DUE TO CONSOLIDATION OF SUBSIDIARY
(3) DECREASE DUE TO MERGER OF SUBSIDIARY INTO NON-CONSOLIDATED JOINT VENTURE
(4) INCREASE DUE TO POTENTIALLY UNCOLLECTIBLE RECEIVABLES
<PAGE>
                                                                              29


                            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
          part of Form 10-K for the fiscal year ended June 28, 1997,  as Exhibit
          4 and is hereby incorporated herein by reference.

10.1      Multi  Currency  Revolving  Credit Loan Agreement was filed as part of
          Form 10-QA for the quarter  ended  September 27, 1997, as Exhibit 10.1
          and is hereby incorporated herein by reference.

10.2      Nationwide Life Insurance  Company Debt Agreement was filed as part of
          Form 10-K for the fiscal year ended July 1, 1995,  as Exhibit 10.1 and
          is hereby incorporated herein by reference.

10.3      An English  language  summary of an Acquisition  Agreement and related
          documents  written in German  between the  Registrant,  Donnelly GmbH,
          Donnelly Hohe GmbH & Co. KG ("Hohe") and other related parties,  dated
          May 25, 1995, was filed as Exhibit 2 to a Form 8-K dated June 9, 1995,
          and is hereby  incorporated  herein by reference.  An English language
          translation of an Amendment to the Acquisition  Agreement was filed as
          Exhibit 10.1 to Form 10-Q for the quarter ended March 28, 1998, and is
          hereby incorporated herein by reference.

10.4      Nationwide Life Insurance  Company Debt Agreement was filed as part of
          Form 10-K for the fiscal year ended July 2, 1994,  as Exhibit 10.1 and
          is hereby incorporated herein by reference.

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

10.6      The form of Indemnity  Agreement  between  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.

10.7      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.

10.8      The  Donnelly   Corporation   1987  Employees'  Stock  Purchase  Plan,
          including  amendments was  originally  filed as part of a Registration
          Statement on Form S-8 (Registration No. 33-34746) as Exhibit 28.1, and
          has been  subsequently  amended and filed as part of Form 10-Q for the
          quarter  ended  September  27,  1997,  as  Exhibit  10.2 and both such
          exhibits are hereby incorporated herein by reference.

10.9      The Donnelly Corporation Non Employee Director's Stock Option Plan was
          filed as part of a  Registration  Statement on Form S-8  (Registration
          No.  33-55499)  as Exhibit 99, and has been  subsequently  amended and
          filed as part of a  Registration  Statement on Amendment No. 1 to Form
          S-8 on March 2, 1999 as Exhibit 4 and the same is hereby  incorporated
          herein by reference.

10.10     The Donnelly Corporation Executive Compensation Plan was filed as part
          of Form 10-K/A for the fiscal year  ending June 29,  1996,  as Exhibit
          10.11 and is hereby incorporated by reference.
<PAGE>
                                                                              30

10.11     The Donnelly Corporation Unfunded Deferred Director Fee Plan was filed
          as part of Form 10-K/A for the fiscal year  ending June 29,  1996,  as
          Exhibit 10.12 and is hereby incorporated by reference.

10.12     The Donnelly  Corporation Pension Plan for Outside Directors was filed
          as part of Form 10-K/A for the fiscal year  ending June 29,  1996,  as
          Exhibit 10.13 and is hereby incorporated by reference.

10.13     The Donnelly  Corporation  Supplemental  Retirement  Plan was filed as
          part of Form  10-K/A for the fiscal  year  ending  June 29,  1996,  as
          Exhibit 10.14 and is hereby incorporated by reference.

10.14     The Donnelly Corporation Deferred  Compensation Plan was filed as part
          of Form 10-K/A for the fiscal year  ending June 29,  1996,  as Exhibit
          10.15 and is hereby incorporated by reference.

10.15     Letter  from  Donnelly  Corporation  to Mr.  Donn Viola dated July 12,
          1996,  as  modified  on July 22, 1996 was filed as part of Form 10-K/A
          for the fiscal  year  ending June 29,  1996,  as Exhibit  10.17 and is
          hereby incorporated by reference.

10.16     Letter  from  Donnelly  Corporation  to  Mr.  Russell  Scaffede  dated
          September  15,  1995 was filed as part of Form  10-K/A  for the fiscal
          year ending June 29, 1996, as Exhibit 10.18 and is hereby incorporated
          by reference.

10.17     An English language summary of the Security Pooling  Agreement written
          in German between the Registrant and Donnelly Hohe GmbH & Co. KG dated
          September  15,  1995 was filed as part of Form  10-K/A  for the fiscal
          year ending June 29, 1996, as Exhibit 10.19 and is hereby incorporated
          by reference.

10.18     Receivables Purchase Agreement among Donnelly Receivables Corporation,
          Falcon Asset Securitization Corporation and the First National Bank of
          Chicago dated as of November 14, 1996 was filed as part of Form 10-K/A
          for the fiscal  year  ending June 29,  1996,  as Exhibit  10.20 and is
          hereby incorporated by reference.

10.19     Lear Donnelly  Overhead  Systems,  L.L.C.  Operating  Agreement  dated
          November  1, 1997 was filed as part of the Form 10-QA for the  quarter
          ended December 27, 1997, as Exhibit 10.1 and is hereby incorporated by
          reference.

10.20     The Donnelly  Corporation 1997 Employee Stock Option Plan was filed as
          part of a  Registration  Statement  on Form S-8 on November  25, 1997,
          (Registration  No.  333-40987)  as  Exhibit  4, and the same is hereby
          incorporated by reference.

10.21     Amended and Restated  Operating  Agreement  for Donnelly  Electronics,
          L.L.C.,  dated January 1, 1998, was filed as part of Form 10-K for the
          fiscal  year  ended  June 27,  1998,  as  Exhibit  10.21 and is hereby
          incorporated by reference.

10.22     Agreement by and between  Donnelly  Electronics,  L.L.C.  and Donnelly
          Corporation, dated January 1, 1998, was filed as part of Form 10-K for
          the fiscal year ended June 27,  1998,  as Exhibit  10.22 and is hereby
          incorporated by reference.

10.23     Letter from  Donnelly  Corporation  to Mr. Scott Reed dated August 17,
          1998,  was filed as part of Form 10-K for the  fiscal  year ended June
          27, 1998, as Exhibit 10.21 and is hereby incorporated by reference.

10.24     The Donnelly  Corporation  401(k) Retirement  Savings Plan (January 1,
          1999,  Restatement)  was  filed as part of Form  10-Q for the  quarter
          ended April 3, 1999,  as Exhibit  10.2 and is hereby  incorporated  by
          reference.
<PAGE>
                                                                              31

10.25     Agreement and Plan of Merger among Applied Image Group,  Inc.,  Optics
          Acquisition,  Inc.,  Donnelly Optics Corporation and Bruno Glavich was
          filed as an  Exhibit  to Form 8-K/A  dated  January  4,  1999,  and is
          incorporated herein by reference.

10.26     The Donnelly  Corporation 1998 Employee Stock Option Plan was filed as
          Exhibit A to the Proxy  Statement  for the  October  16,  1998  Annual
          Meeting  of  Shareholders  and  is  hereby incorporated  by reference.

10.27     The Donnelly Corporation 1998 Employees' Stock Purchase Plan was filed
          as Exhibit B to the Proxy  Statement  for the  October 16, 1998 Annual
          Meeting  of  Shareholders  and  is  hereby  incorporated by reference.

10.28     Joint Venture Agreement by and among Schott Corporation,  Schott North
          America  Manufacturing,  Inc.,  Schott Glas and  Donnelly  Corporation
          dated as of April 5, 1999.

10.29     Limited Liability Company Agreement of Schott-Donnelly LLC Smart Glass
          Solutions by and between Schott North America Manufacturing,  Inc. and
          Donnelly Corporation dated as of April 5, 1999

10.30     Schott Technology License Agreement by and among Schott Glass,  Schott
          Corporation,  Schott  North  American  Manufacturing,  Inc.,  Donnelly
          Corporation and  Schott-Donnelly LLC Smart Glass Solutions dated as of
          April 5, 1999.

10.31     Donnelly Technology License Agreement by and among Schott Glas, Schott
          Corporation,  Schott  North  American  Manufacturing,  Inc.,  Donnelly
          Corporation and  Schott-Donnelly LLC Smart Glass Solutions dated as of
          April 5, 1999.

13        Certain  portions of the Donnelly  Corporation  1999 Annual  Report to
          Shareholders.   This   information  was  delivered  to  the  Company's
          Shareholders in compliance with Rule 14a-3 of the Securities  Exchange
          Act of 1934, as amended.

21        Schedule of Affiliates.

23        Consent of BDO Seidman, LLP, independent public accountants.

27        Financial Data Schedule.
<PAGE>
EXHIBIT 10.28
          ------------------------------------------------------------



                             JOINT VENTURE AGREEMENT


                                  by and among



                               SCHOTT CORPORATION
                    SCHOTT NORTH AMERICA MANUFACTURING, INC.
                                   SCHOTT GLAS


                                       and


                              DONNELLY CORPORATION


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










                            Dated as of April 5, 1999
<PAGE>
ARTICLE I      DEFINITIONS ..................................................  1

     Section 1.01   "Affiliate" .............................................  1

     Section 1.02   "Agreement" .............................................  1

     Section 1.03   "Annual Business Plan" ..................................  1

     Section 1.04   "Architectural Glazing" .................................  1

     Section 1.05   "Assumed ATC Obligations" ...............................  1

     Section 1.06   "ATC Operation" .........................................  2

     Section 1.07   "ATC Assets" ............................................  2

     Section 1.08   "Automobile" ............................................  2

     Section 1.09   "Automotive Glazing" ....................................  2

     Section 1.10   "Automotive Glazing Business Offer" .....................  2

     Section 1.11   "Background Technology" .................................  2

     Section 1.12   "Closing" ...............................................  2

     Section 1.13   "Closing Date" ..........................................  2

     Section 1.14   "Company" ...............................................  2

     Section 1.15   "Daimler Chrysler" ......................................  2

     Section 1.16   "Definitive Agreements" .................................  2

     Section 1.17   "DC Project" ............................................  2

     Section 1.18   "Donnelly Background Technology" ........................  2

     Section 1.19   "Donnelly Licensed Knowhow" .............................  2

     Section 1.20   "Donnelly Licensed Patents" .............................  3

     Section 1.21   "EC" ....................................................  3

     Section 1.22   "EC Product" ............................................  3

     Section 1.23   "Electrochromic Material" ...............................  3

     Section 1.24   "Execution Date" ........................................  3

     Section 1.25   "Initial Business Plan" .................................  3

     Section 1.26   "Joint Venture" .........................................  3

     Section 1.27   "Joint Venture Fields" ..................................  3

     Section 1.28   "Knowhow" ...............................................  3

     Section 1.29   "LLC Agreement" .........................................  3

     Section 1.30   "Member" ................................................  3

                                       i
<PAGE>
                               TABLE OF CONTENTS
                                  (continued)
                                                                            Page

     Section 1.31   "New Product" ...........................................  3

     Section 1.32   "Party" .................................................  4

     Section 1.33   "Person" ................................................  4

     Section 1.34   "Proprietary Information" ...............................  4

     Section 1.35   "Ramp-Up Period" ........................................  4

     Section 1.36   "Schott" ................................................  4

     Section 1.37   "Schott Background Technology" ..........................  4

     Section 1.38   "Schott Licensed Knowhow" ...............................  4

     Section 1.39   "Schott Licensed Patents" ...............................  4

     Section 1.40   "Skylights" .............................................  4

     Section 1.41   "Solid Polymer Matrix" ..................................  4

     Section 1.42   "Sun Roofs" .............................................  4

ARTICLE II     FORMATION OF LLC .............................................  5

     Section 2.01   Formation of LLC ........................................  5

     Section 2.02   LLC Interests; Distributions ............................  5

     Section 2.03   Name ....................................................  5

     Section 2.04   Offices .................................................  5

     Section 2.05   Initial Capital Contributions ...........................  5

ARTICLE III    CLOSING; DEFINITIVE AGREEMENTS; OTHER MATTERS ................  6

     Section 3.01   Closing; Definitive Agreements ..........................  6

     Section 3.02   Other Licensing Matters .................................  6

     Section 3.03   Government and Customer Funding .........................  6

     Section 3.04   Additional Financing ....................................  6

     Section 3.05   Party Services ..........................................  7

ARTICLE IV     BUSINESS OF THE COMPANY ......................................  7

     Section 4.01   Purposes ................................................  7

     Section 4.02   Employees ...............................................  7

     Section 4.03   Customers ...............................................  7

     Section 4.04   Skylight and Sun Roof Businesses ........................  7

     Section 4.05   DC Project; Automotive Glazing Business .................  8

     Section 4.06   Requested Automotive Glazing Business Offer .............  8

                                       ii
<PAGE>
                               TABLE OF CONTENTS
                                  (continued)

                                                                            Page

     Section 4.07   Partner in Automotive Glazing Business ..................  9

     Section 4.08   Automotive Mirrors ...................................... 10

     Section 4.09   Capitalization of Other Businesses ...................... 10

     Section 4.10   Product Distribution .................................... 11

     Section 4.11   Non-Competition ......................................... 11

     Section 4.12   Patent Applications ..................................... 12

ARTICLE V      REPRESENTATIONS AND WARRANTIES ............................... 12

     Section 5.01   Representations by Schott ............................... 12

     Section 5.02   Representations by Donnelly ............................. 13

     Section 5.03   Survival of Representations and Warranties .............. 16

ARTICLE VI     CONDITIONS TO CLOSING ........................................ 16

     Section 6.01   Schott .................................................. 16

     Section 6.02   Donnelly ................................................ 17

ARTICLE VII    MANAGEMENT ................................................... 18

ARTICLE VIII   WITHDRAWAL; DISSOLUTION AND TERMINATION ...................... 18

ARTICLE IX     PROPRIETARY INFORMATION ...................................... 18

     Section 9.01   Exchange ................................................ 18

     Section 9.02   Usage ................................................... 18

     Section 9.03   Permitted Disclosure .................................... 18

     Section 9.04   Nondisclosure and Nonuse ................................ 18

     Section 9.05   Exceptions .............................................. 18

     Section 9.06   No License Obligation ................................... 19

     Section 9.07   Specific Performance .................................... 19

ARTICLE X      INDEMNIFICATION .............................................. 19

     Section 10.01  Indemnification by Schott ............................... 19

     Section 10.02  Indemnification by Donnelly ............................. 19

     Section 10.03  Notices ................................................. 20

     Section 10.04  Defense of Claims ....................................... 20

     Section 10.05  Sole Remedy ............................................. 20

ARTICLE XI     TERM AND TERMINATION ......................................... 21

     Section 11.01  Termination ............................................. 21

                                      iii
<PAGE>
                               TABLE OF CONTENTS
                                  (continued)
                                                                            Page

     Section 11.02  Term .................................................... 21

     Section 11.03  Effect of Termination ................................... 21

ARTICLE XII    MISCELLANEOUS ................................................ 21

     Section 12.01  Public Announcements .................................... 21

     Section 12.02  Dispute Resolution ...................................... 21

     Section 12.03  Construction ............................................ 22

     Section 12.04  Severability ............................................ 22

     Section 12.05  Further Assurances ...................................... 22

     Section 12.06  Representations, Warranties, Covenants and Obligations .. 22

     Section 12.07  Expenses ................................................ 22

     Section 12.08  Benefit ................................................. 22

     Section 12.09  Entire Agreement and Amendment .......................... 22

     Section 12.10  Delays or Omissions ..................................... 22

     Section 12.11  Successors and Assigns .................................. 22

     Section 12.12  Headings ................................................ 23

     Section 12.13  Governing Law ........................................... 23

     Section 12.14  Notices ................................................. 23

     Section 12.15  Counterparts ............................................ 24

     Section 12.16  Amendment ............................................... 24

Exhibit A. DONNELLY LICENSED PATENTS......................................... 26

Exhibit B. DONNELLY LICENSED KNOWHOW......................................... 27

Exhibit C. ATC ASSETS; ATC OBLIGATIONS....................................... 28

Exhibit E. SCHOTT LICENSED PATENTS AND KNOWHOW............................... 32

Exhibit F. FORM OF LLC AGREEMENT............................................. 33

Exhibit G. FORM OF DONNELLY LICENSE AGREEMENT................................ 34

Exhibit H. FORM OF SCHOTT LICENSE AGREEMENT.................................. 35

Exhibit I. FORM OF SERVICES AGREEMENT........................................ 36

Exhibit J. FORM OF VRS&H OPINION............................................. 38

Exhibit K. FORM OF R&W OPINION............................................... 40

                                       iv
<PAGE>
                             JOINT VENTURE AGREEMENT


     THIS  JOINT  VENTURE  AGREEMENT,  dated as of April 5,  1999,  by and among
     Schott   Corporation,   a  Maryland   corporation,   Schott  North  America
     Manufacturing,  Inc.,  a Maryland  corporation  ("Schott  North  America"),
     Schott  Glas,  a  German   entity  under  the  German  civil  code  (Schott
     Corporation, Schott North America and Schott Glas are collectively referred
     to herein as "Schott" or the "Schott Parties") and Donnelly Corporation,  a
     Michigan corporation ("Donnelly"),

                              W I T N E S S E T H :

WHEREAS,  the  Parties  have  agreed  to enter  into the Joint  Venture  for the
purposes  herein  described,  which Joint Venture shall be operated  principally
through a limited  liability  company to be formed in the State of Delaware,  as
provided herein,

WHEREAS,  except as otherwise provided herein, the Parties intend that the Joint
Venture   shall  be  the   exclusive   vehicle  for  either   Party  to  develop
electrochromic products;

NOW  THEREFORE,  in  consideration  of the premises,  mutual  covenants,  terms,
conditions,  representations and warranties herein set forth, the Parties hereby
agree as follows:

                                   ARTICLE I
                                   DEFINITIONS

     The following terms shall have the following  meanings for purposes of this
Agreement:

     Section 1.01 "Affiliate" shall mean, with respect to any Person, any Person
directly or indirectly  controlling,  controlled by, or under control with, such
other Person. The word  "Affiliated," when capitalized,  shall mean related to a
Person as an "Affiliate".  For the purposes of this definition,  "control" shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the  management  and policies of such Person,  whether  through the
ownership  of  voting  securities,  by  contract  or  otherwise;  and the  terms
"controlling" and "controlled" have meanings correlative to the foregoing.

     Section 1.02  "Agreement"  shall mean this Joint Venture  Agreement and the
Exhibits and Schedules appended hereto.

     Section 1.03 "Annual Business Plan" shall have the meaning ascribed to such
term in the LLC Agreement.

     Section 1.04  "Architectural  Glazing" shall mean panels of  electrochromic
glass or other transparent or translucent materials that are used in interior or
exterior applications in office,  commercial,  industrial,  residential or other
buildings or structures but specifically excluding Skylights.

     Section 1.05 "Assumed ATC Obligations"  shall mean the debts,  liabilities,
payables  and  obligations  of the ATC  Operation,  whether  accrued,  absolute,
contingent,  unasserted or otherwise, of Donnelly relating to the ATC Assets, as
and to the extent  existing at April 5, 1999, and as specified in Exhibit C, and
reflected in the Statement of Net Assets attached thereto.
<PAGE>
     Section 1.06 "ATC  Operation"  shall mean  Donnelly's  Advanced  Technology
Center business and operations in Tucson, Arizona.

     Section 1.07 "ATC Assets" shall mean the assets, properties and business of
every  kind,  wherever  located,  of the  ATC  Operation,  whether  tangible  or
intangible,  real,  personal or mixed,  as described on Exhibit C, including but
not limited to the Statement of Net Assets attached thereto.

     Section 1.08  "Automobile"  shall mean passenger  vehicles and light trucks
(including  vans,  mini-vans  and sport  utility  vehicles),  as those terms are
commonly used in the automotive industry.

     Section 1.09 "Automotive  Glazing" shall mean all EC automotive  glazing of
windows except Sun Roofs.

     Section 1.10  "Automotive  Glazing  Business  Offer" shall have the meaning
ascribed to such term in Section 4.05(a).

     Section 1.11 "Background  Technology" shall mean either Donnelly Background
Technology or Schott Background Technology, as the case may be.

     Section  1.12  "Closing"  shall  mean  the  closing  of  the   transactions
contemplated  by this Agreement,  which shall take place at a location  mutually
agreed by the Parties.

     Section 1.13 "Closing Date" shall mean a date within five (5) business days
of the  satisfaction  or waiver of all of the conditions set forth in Article VI
hereof, or such later business day as shall be agreed by the Parties.

     Section 1.14 "Company" means the limited  liability company to be formed in
the State of Delaware, as provided herein.

     Section 1.15 "Daimler  Chrysler" shall mean  DaimlerChrysler  AG and/or its
Affiliates.

     Section 1.16  "Definitive  Agreements"  shall have the meaning  ascribed to
such term in Section 3.01(b) hereof

     Section  1.17 "DC  Project"  shall  mean the  existing  Automotive  Glazing
project of Schott with Daimler Chrysler.

     Section 1.18 "Donnelly Background  Technology"shall  mean any EC technology
conceived by Donnelly prior to April 5, 1999, and evidenced as follows:  (a) all
concepts documented in "ideas books" maintained by Donnelly,  including those at
Donnelly's  Advanced  Technology  Center,  Tucson,  Arizona  (including  but not
limited to the Ideas Book  maintained from October 18, 1989 to October 17, 1994,
and the Ideas Book  maintained  from January 3, 1995 to April 1, 1998),  (b) all
concepts  recorded in laboratory  notebooks prior to April 5, 1999 at Donnelly's
Advanced  Technology  Center,  Tucson,  Arizona,  and (c) the patent application
under  preparation  as of the  date  of  this  Agreement  at  the  law  firm  of
Fitzpatrick,  Cella,  Harper & Scinto under the title "Infrared Light Modulating
Device"  Ref:  690.30  and the  application  under  preparation  under the title
"Improved Electrochromic Devices" Ref: 690.31.

     Section  1.19  "Donnelly  Licensed  Knowhow"  shall  mean the  non-patented
knowhow of Donnelly relating to electrochromic  glazing, as more fully described
in Exhibit B hereto and

                                       2
<PAGE>
subsequent  non-patented  knowhow arising from Donnelly's  Improvements (as such
term is defined in the Donnelly License Agreement).

     Section 1.20 "Donnelly  Licensed Patents" shall mean the patents and patent
applications  of  Donnelly,  as more fully  described  in Exhibit A hereto,  and
subsequent patents and patent applications arising from Donnelly's  Improvements
(as such term is defined in the Donnelly License Agreement).

     Section 1.21 "EC" shall mean electrochromic.

     Section 1.22 "EC Product"  shall mean any product or component of a product
utilizing  Electrochromic  Material to vary its  transmission  or  reflection of
radiation,   specifically   excluding   automotive  mirrors,   other  automotive
rear-vision devices and the components unique to automotive rear-vision devices.

     Section 1.23 "Electrochromic Material" shall mean any material that changes
its radiation  transmission by applying an electrical  current  inducing a redox
reaction, including but not limited to Solid Polymer Matrix.

     Section 1.24  "Execution  Date" shall mean the date when this Agreement has
been duly executed and delivered by the  authorized  representatives  of each of
the Parties.

     Section 1.25 "Initial Business Plan" shall mean the business plan set forth
in Exhibit D hereto.

     Section 1.26 "Joint  Venture"  shall mean the joint venture  created by the
Parties pursuant to this Agreement.

     Section  1.27  "Joint  Venture  Fields"  shall mean  Skylights,  Sun Roofs,
Automotive Glazing, Architectural Glazing and all other EC Product areas, at any
given time, in which the Company is then  manufacturing  or actively  developing
other  than EC  Products  that  Schott,  independent  and  apart  from the Joint
Venture, is actively developing or commercializing, as provided in Section 4.05,
Section 4.06 or Section 4.07 hereof, or that Schott or Donnelly  independent and
apart from the Joint  Venture,  is actively  developing or  commercializing,  as
provided in Section 4.09 hereof.

     Section  1.28  "Knowhow"  shall mean all of that  technical  knowledge  and
experience  necessary to practice industrial  technologies or to market and sell
the commercial products resulting from the practice of such technologies and may
include formulae,  processes, and technical expertise, as well as a knowledge of
marketing  strategies,  customer  information,  and laws and customs  related to
products marketing and distribution.

     Section  1.29 "LLC  Agreement"  shall mean the  Limited  Liability  Company
Agreement,  effective as of the Closing Date, to be entered into by the Members,
as provided in Section 2.01, substantially in the form set forth as Exhibit F.

     Section  1.30  "Member"  shall have the  meaning  ascribed  to such term in
Section 2.01(b) hereof.

     Section 1.31 "New Product" shall have the meaning  ascribed to such term in
Section 4.09(a) hereof.

                                       3
<PAGE>
     Section 1.32 "Party" shall mean Schott  Corporation,  Schott North America,
Schott Glass or Donnelly and  "Parties"  shall mean Schott  Corporation,  Schott
North America, Schott Glass and Donnelly collectively.

     Section  1.33  "Person"  shall mean any  individual,  corporation,  limited
liability  company,   membership,   association,   trust,  or  other  entity  or
organization,  including a government or political  subdivision  or an agency or
instrumentality thereof.

     Section  1.34  "Proprietary  Information"  shall  mean  all  written  data,
knowhow, methods, processes, specifications,  instructions, formulae, protocols,
trade secrets, customer lists, sales and pricing data, financial information and
all similar information, written or oral, which is non-public,  confidential, or
proprietary  to a Party hereto.  All  information  delivered by any Party hereto
under any previous  written  confidentiality  agreement or undertaking  shall be
deemed  Proprietary  Information  hereunder  to the same extent as if  delivered
after the Execution Date.

     Section  1.35  "Ramp-Up  Period"  shall mean the time  period  between  the
Closing Date and the date on which Schott,  subject to the terms and  conditions
of the LLC Agreement,  completes the initial  $9,500,000 in contributions to the
Company described in Section 3.04(a) of the LLC Agreement.

     Section 1.36 "Schott" and the "Schott Parties" means, collectively,  Schott
Corporation, Schott North America and Schott Glas.

     Section 1.37 "Schott  Background  Technology"shall  mean any EC  technology
conceived by Schott prior to April 5, 1999.

     Section 1.38 "Schott Licensed Knowhow" shall mean the non-patented  knowhow
of Schott relating to electrochromic glazing, as more fully described in Exhibit
E hereto and subsequent  non-patented knowhow arising from Schott's Improvements
(as such term is defined in the Schott License Agreement).

     Section 1.39 "Schott  Licensed  Patents"  shall mean the patents and patent
applications of Schott, if any, as more fully described in Exhibit E hereto, and
subsequent patents and patent  applications  arising from Schott's  Improvements
(as such term is defined in the Schott License Agreement).

     Section 1.40 "Skylights" shall mean electrochromic windows smaller than ten
(10)  square  feet  made of  glass  or other  transparent,  semi-transparent  or
translucent  material  located in the roof or ceiling of a building,  or between
the roof and  ceiling of a building  through  which  natural  light  passes from
outside the building to inside the building,  including but not limited to light
pipe skylights, sky tunnels and sun pipes.

     Section 1.41 "Solid Polymer Matrix" shall mean a polymeric material wherein
the polymer chain molecules are covalently cross-linked.

     Section  1.42 "Sun  Roofs"  shall  mean EC  windows  made of glass or other
transparent,  semi-transparent or translucent material located in the roof of an
Automobile, whether fixed or movable.

                                       4
<PAGE>
                                   ARTICLE II
                                FORMATION OF LLC

     Section 2.01 Formation of LLC.

          (a) The  Parties  hereby  agree to create as of the  Closing  Date the
     Joint Venture for the purposes herein described.  The business of the Joint
     Venture shall be conducted principally through a limited liability company.


          (b) Schott North America and Donnelly (each, a "Member" of the Company
     and, collectively, the "Members" of the Company) shall cause the Company to
     be organized as a limited  liability  company,  effective as of the Closing
     Date,  pursuant  to the  Limited  Liability  Company  Act of the  State  of
     Delaware (the "Delaware Act"). On the Closing Date, the Members shall enter
     into the LLC Agreement, the effective date of which shall be April 5, 1999.

     Section 2.02 LLC Interests; Distributions.

          (a) As of the Closing  Date,  each Member  shall have a fifty  percent
     (50%) interest in the Company and its properties, assets, and capital.

          (b) The Parties  acknowledge  and agree that generally all earnings of
     the  Company  not  required  to  fund   operations  and  capital  shall  be
     distributed to the Members in the manner provided in the LLC Agreement.

          (c) Profits and losses for any fiscal  year,  and each item of income,
     gain,  loss,  or deduction  comprising  such  profits and losses,  shall be
     allocated between the Members in the manner provided in the LLC Agreement.

     Section 2.03 Name.  The name of the Company shall be  "Schott-Donnelly  LLC
Smart Glass  Solutions."  The Parties  shall take such steps as are necessary to
obtain  registration of the Company's name and  trademark(s)  and to qualify the
Company to do business in every relevant national,  state,  provincial and local
jurisdiction.

     Section 2.04 Offices.

          (a) During the initial phases of the Joint Venture,  the Company shall
     operate at Donnelly's ATC facility in Tucson.  The Company shall enter into
     a new lease of the ATC facility  pursuant to a separate  agreement  between
     the Company and the  landlord.  The Parties  intend that a location for the
     initial  production  of Skylights and Sun Roofs shall be agreed upon in the
     future by the Parties based upon the best  interests of the Company and its
     customers.

          (b) The name of the Company's  registered agent for service of process
     shall be  Corporation  Service  Company,  and the address of the  Company's
     registered agent and the address of the Company's  registered office in the
     State of Delaware shall be 1013 Centre Road, Wilmington, New Castle County,
     Delaware 19805-1297.  The registered agent and the registered office of the
     Company may be changed from time to time by the  Management  Committee,  as
     provided in the LLC Agreement.

     Section 2.05 Initial Capital Contributions.  The Members shall make initial
capital  contributions  to the Company in the manner set forth herein and in the
LLC Agreement.

                                       5
<PAGE>
                                  ARTICLE III
                  CLOSING; DEFINITIVE AGREEMENTS; OTHER MATTERS

     Section 3.01 Closing; Definitive Agreements.

          (a) On the Closing Date, Schott North America and Donnelly shall enter
     into the LLC Agreement and make the initial  capital  contributions  to the
     Company as described therein.

          (b) On the Closing Date, the Schott Parties, Donnelly and the Company,
     as the case may be,  shall  enter  into  each of the  following  agreements
     (collectively  with this Agreement and the LLC Agreement,  the  "Definitive
     Agreements"):

               (i) The Donnelly  Technology  License  Agreement  (the  "Donnelly
          License Agreement") by and among Donnelly,  the Schott Parties and the
          Company,  dated the Closing Date,  substantially in the form set forth
          in Exhibit G hereof;

               (ii) The Schott Technology License Agreement (the "Schott License
          Agreement") by and among the Schott Parties, Donnelly and the Company,
          dated the Closing Date, substantially in the form set forth in Exhibit
          H hereof;

               (iii) A services  agreement  (the  "Services  Agreement")  by and
          among  Donnelly,  Schott  and the  Company,  dated the  Closing  Date,
          substantially in the form set forth in Exhibit I hereof.

          (c) Each Party shall, upon request, furnish, execute, and deliver such
     documents, instruments,  certificates, notices, or other further assurances
     as any other Party may  reasonably  require as necessary or  appropriate to
     effect the purposes of this  Section 3.01 or to confirm the rights  created
     or arising hereunder.

     Section 3.02 Other Licensing  Matters.  As of the date hereof,  the Parties
believe that the Company will not  manufacture  Architectural  Glazing except in
small sizes.  The Parties  hereby  acknowledge  and agree that after the Closing
Date the Company may license its technology for Architectural Glazing to a float
glass  manufacturer  or  manufacturers.  Any such licensing of technology by the
Company shall require the unanimous  approval of both Members,  considering  the
best  interests of the Company.  A Member may withhold its approval based solely
on its own interests, but its approval shall not be unreasonably withheld.

     Section 3.03  Government  and  Customer  Funding.  After the  Closing,  the
Parties shall cooperate to obtain  appropriate  government and customer  funding
for research and  development and other  activities of the Company.  Any funding
obtained by either party shall be deemed to be funding  obtained by the Company,
and shall not be deemed to be a capital contribution to the Company by a Party.

     Section 3.04 Additional  Financing.  After the Ramp-Up Period,  the Members
shall   make  or  extend   additional   capital   contributions   or   financial
accommodations to the Company,  whether for operations or capital  expenditures,
in the manner provided in the LLC Agreement.

                                       6
<PAGE>
     Section 3.05 Party Services.

          (a) The Parties acknowledge and agree that after the Closing Date each
     Party and its  Affiliates may provide  services to the Company,  subject to
     the approval of the Management Committee.

          (b) At its sole option,  the Company may solicit services from outside
     vendors.

                                   ARTICLE IV
                             BUSINESS OF THE COMPANY

     Section 4.01  Purposes.  The purpose of the Company shall be to develop and
manufacture or license EC Products.  Except as otherwise  provided  herein,  the
Company  shall be the  exclusive  vehicle  for any  Party of this  Agreement  to
develop or sell EC Products; provided, however, that Donnelly shall be permitted
to  develop  products  comprising  Solid  Polymer  Matrix as the  Electrochromic
Material but will not sell or license such products in any Joint Venture  Fields
except  Architectural  Glazing.  Initially,  the  Parties  anticipate  that  the
principal business of the Company will be Skylights and Sun Roofs.

     Section 4.02 Employees. As soon as reasonably practical, but not later than
December 31, 1999,  Donnelly's  existing  employees at the ATC  Operation  shall
become employees of the Company.

     Section 4.03 Customers.  The Parties acknowledge and agree that the Company
shall market EC Products to customers  independently  from the Parties although,
at the discretion of the Company, the Parties' connections and relationships may
be utilized.

     Section 4.04 Skylight and Sun Roof Businesses.

          (a) The Parties hereby agree to use their  reasonable  best efforts to
     pursue, to the extent feasible,  the  commercialization of the Skylight and
     Sun Roof  businesses  through  the Company in  accordance  with the Initial
     Business  Plan  and  Annual   Business  Plans  adopted  by  the  Management
     Committee.

          (b)  During  the  term of this  Agreement,  the  Company  shall be the
     exclusive  means by which any Party shall develop  Skylights and Sun Roofs.
     Neither  the  Schott  Parties  nor  Donnelly  nor any of  their  respective
     Affiliates  shall use or license any EC  technology  for  Skylights  or Sun
     Roofs outside the Company.

          (c) As of the date hereof, the Parties  acknowledge and agree that the
     Initial  Business Plan  represents a reasonable  projection with respect to
     pursuing such goal.  However,  the Parties also  recognize that there are a
     number of unknowns and that additional or different actions may be required
     in order to achieve the desired  results.  The  Parties  hereby  agree that
     their senior  management  personnel shall use their reasonable best efforts
     to be actively  involved on a  continuing  basis to monitor the progress of
     the Initial Business Plan.

          (d) If  the  Parties  believe  that  the  commercialization  of  these
     businesses is not being  accomplished  under the Initial Business Plan, the
     Parties shall use their reasonable best efforts to work together to attempt
     to  determine  what  action,  if any, is required  to  commercialize  those
     businesses,  to  agree  on  modifications  to  the  Initial  Business  Plan
     necessary to accommodate  such action,  and to provide the funding required
     for the Initial  Business  Plan,  in each case,  as  mutually  agreed by th
     Parties.  The  modification of the Initial  Business Plan shall require the
     agreement of all Parties.

                                       7
<PAGE>
     Section 4.05 DC Project; Automotive Glazing Business.

          (a) Prior to September 1, 1999,  subject to all required  approvals of
     Daimler  Chrysler,  Schott  shall  offer to assign the DC  Project  and its
     Automotive  Glazing  business to the  Company.  Any such offer at any given
     time of the DC Project  (if then still in  existence  and  active) and such
     Automotive  Glazing  business,   if  any,  is  referred  to  herein  as  an
     "Automotive Glazing Business Offer."

          (b) If the Company accepts such Automotive  Glazing Business Offer and
     agrees to assume all  obligations of Schott  thereunder,  each Party hereby
     agrees, in addition to any funding required by either party pursuant to the
     LLC Agreement,  to provide fifty percent (50%) of the required funding of a
     mutually  agreed  business  plan,  subject to the  achievement  of targeted
     milestones to be set forth therein.

     Section 4.06 Requested Automotive Glazing Business Offer.

          (a) Subject to Schott's  not having  withdrawn  from the DC Project or
     terminated its  Automotive  Glazing  business,  and subject to Section 4.07
     hereof,  if at any time  subsequent  to  September  1,  1999  but  prior to
     December  31, 2004,  Donnelly so requests,  Schott shall once again make an
     Automotive Glazing Business Offer to the Company.

          (b) If (1) Schott makes the  Automotive  Glazing  Business  Offer,  as
     provided in Section  4.06(a),  and (2) the Management  Committee,  with the
     assent of Donnelly's  representatives on the Management Committee,  accepts
     the  Automotive  Glazing  Business Offer and assumes  Schott's  obligations
     thereunder,  then Schott  shall  assign the DC Project  and its  Automotive
     Glazing Business  (including all assets  associated with it) to the Company
     if all of the following conditions are fulfilled:

               (i) the Company  develops a business plan for Automotive  Glazing
          acceptable to both Members;

               (ii)  Donnelly  agrees  to  assume  50%  of  the  future  capital
          requirement of such business plan;

               (iii)  Donnelly  contributes  to the Company,  and the Members in
          turn cause the Company to pay to Schott:


               (a) fifty  percent (50%) of Schott's  unreimbursed  net after-tax
               expenditures  with  respect to the DC Project and its  Automotive
               Glazing  business after the date of this Agreement  (exclusive of
               royalties  paid to  Donnelly  pursuant  to the  Donnelly  License
               Agreement).

               (b) a rate of return  on such  investment  commensurate  with the
               risk, which rate shall be thirty-five percent (35%) per annum for
               all  expenditures  prior to 2002,  thirty percent (30%) per annum
               for all  expenditures  in 2002 and 2003, and a rate thereafter to
               be agreed upon by the Parties based on market  interest rates and
               the relative risk of the venture over the applicable period; and

               (iv) Donnelly  repays the aggregate  amount of all royalties paid
          by Schott to Donnelly  with  respect to  Automotive  Glazing  products
          pursuant to the Donnelly  License  Agreement,  plus interest at 6% per
          annum.

                                       8
<PAGE>
     Section  4.07  Partner  in  Automotive  Glazing  Business.  Notwithstanding
Section 4.06, if Schott  determines,  at any time on or after July 1, 2002, that
it is necessary to obtain a partner to invest cash,  technology  or other assets
in the DC Project and/or Schott's  Automotive Glazing business,  then Schott may
make an Automotive  Glazing Business Offer, in which case Donnelly shall have no
more than  ninety  (90)  days to  decide  whether  Donnelly  will  assent to the
Company's acceptance of thh Automotive Glazing Business Offer.

          (a) If (1) Schott makes the  Automotive  Glazing  Business  Offer,  as
     provided  above in the first  paragraph of this Section  4.07,  and (2) the
     Management Committee, with the assent of Donnelly's  representatives on the
     Management  Committee,  accepts such Automotive  Glazing Business Offer and
     the Company  assumes  Schott's  obligations  thereunder,  then Schott shall
     assign the DC Project and its Automotive Glazing Business to the Company if
     all of the following conditions are fulfilled:

               (i) the Company  develops a business plan for Automotive  Glazing
          acceptable to both Members;

               (ii)  Donnelly  agrees  to  assume  50%  of  the  future  capital
          requirement of such business plan;

               (iii)  Donnelly  contributes  to the Company,  and the Members in
          turn cause the Company to pay to Schott:


               (a) fifty  percent (50%) of Schott's  unreimbursed  net after-tax
               expenditures  with  respect to the DC Project and its  Automotive
               Glazing  business after the date of this Agreement  (exclusive of
               royalties  paid to  Donnelly  pursuant  to the  Donnelly  License
               Agreement).

               (b) a rate of return  on such  investment  commensurate  with the
               risk, which rate shall be thirty-five percent (35%) per annum for
               all  expenditures  prior to 2002,  thirty percent (30%) per annum
               for all  expenditures  in 2002 and 2003, and a rate thereafter to
               be agreed upon by the Parties based on market  interest rates and
               the relative risk of the venture over the applicable period; and

               (iv) Donnelly  repays the aggregate  amount of all royalties paid
          by Schott to Donnelly  with  respect to  Automotive  Glazing  products
          pursuant to the Donnelly  License  Agreement,  plus interest at 6% per
          annum.

          (b) If Schott makes the Automotive Glazing Business Offer, as provided
     above in the first paragraph of this Section 4.07, but the Company declines
     to  accept  the  Automotive   Glazing  Business  Offer  because  Donnelly's
     representatives  on the Management  Committee decline to approve same, then
     Schott  may  negotiate  with third  parties to find a bona fide  partner to
     invest  in  the  DC  Project  and  Schott's  Automotive  Glazing  Business;
     provided,  however,  that Schott shall use its  reasonable  best efforts to
     include  Donnelly as a partner in such  enterprise.  If Schott is unable to
     obtain  a bona  fide  partner  to  invest  in the DC  Project  and/or  such
     Automotive  Glazing Business,  Donnelly's right to request that Schott make
     an  Automotive  Glazing  Business  Offer  pursuant to Section 4.06 shall be
     revived and remain in effect to its  original  term  expiring  December 31,
     2004.

          (c) If the Company declines to accept such Automotive Glazing Business
     Offer  because  Donnelly's  representatives  on  the  Management  Committee
     decline to approve same, then the licensing  arrangements  described herein
     shall not be affected;  provided,  however, that if Schott does not make an

                                       9
<PAGE>
     Automotive Glazing Business Offer because Daimler Chrysler does not approve
     the assignment of the DC Project to the Company, then the royalties payable
     to Donnelly with respect to Automotive  Glazing products shall be modified,
     as provided in the Donnelly License Agreement.

          (d)  Notwithstanding  the foregoing,  (i) if Schott does not make such
     Automotive Glazing Business Offer because Daimler Chrysler does not approve
     the  assignment of the DC Project to the Company or (ii) Schott enters into
     an  arrangement  with a third  party  in the  Automotive  Glazing  business
     without  the  participation  of  Donnelly,  then the  royalties  payable to
     Donnelly with respect to Automotive Glazing products shall be modified,  as
     provided in the Donnelly License Agreement.

     Section  4.08  Automotive  Mirrors.  Because  Schott  will  have  access to
Donnelly's   confidential  knowhow  and  that  knowhow  may  be  useful  in  the
development  of EC devices,  Schott shall not use or license EC  technology  for
automotive  mirrors  except as  permitted  herein.  Schott shall be permitted to
develop, manufacture, have manufactured,  advertise for sale and sell automotive
mirrors using its existing EC  technologies,  and  Improvements (as such term is
defined in the Donnelly License Agreement and Schott License Agreement) thereof,
that do not incorporate or utilize technologies of Donnelly or the Company.

     Section 4.09 Capitalization of Other Businesses.

          (a) If at any time either Member or an Affiliate of a Member  proposes
     that the Company  develop,  manufacture or sell any EC Product not included
     in the  Initial  Business  Plan or Annual  Business  Plans  adopted  by the
     Management  Committee (each such EC Product, a "New Product"),  that Member
     (or an  Affiliate  of a Member)  (a  "Proposing  Member")  shall  propose a
     business plan for such New Product to the Management Committee.

          (b) The other  Member (a  "Consulting  Member")  shall  have the right
     through  its  representatives  on the  Management  Committee,  at its  sole
     option, to accept or reject any New Product proposed by a Proposing Member.
     If both Parties  agree that the Company  shall adopt the business  plan for
     such New Product, the Proposing Member and the Consulting Member shall each
     commit  to fund  fifty  percent  (50%) of the  cash  flow  required  by the
     business plan.

          (c) With respect to any New Product,  if Schott North  America (or its
     Affiliate)  is the  Proposing  Member and  Donnelly  declines,  through its
     representatives  on the  Management  Committee,  to accept a business  plan
     proposed  by Schott  North  America  (or its  Affiliate),  then  Schott may
     proceed with the  development  and sale of such New Product  independent of
     the  Company  but shall pay to  Donnelly  a  royalty,  as  provided  in the
     Donnelly License Agreement.

          (d) With respect to any proposed New Product,  if a Consulting  Member
     declines,  through its  representatives  on the  Management  Committee,  to
     accept a business plan proposed by a Proposing Member,  then such Proposing
     Member  may  proceed  with the  development  and  sale of such New  Product
     independent of the Company;  provided,  however,  that at any time prior to
     the fifth anniversary of a Proposing Member's proposal of a New Product, at
     the request of the Consulting  Member,  such  Proposing  Member shall again
     offer such New Product to the Company by proposing a new business plan with
     respect  to  such  product.   If  the   Consulting   Member,   through  its
     representatives on the Management Committee,  agrees that the Company shall
     accept such new business plan,  the Proposing  Member shall transfer to the
     Company the business and assets  associated  with the New Product,  and the
     Company shall proceed with the development and sale of such New Product if:

               (i) the Consulting  Member commits to fund fifty percent (50%) of
          the cash flow required by such new business plan; and

                                       10
<PAGE>
               (ii) the Consulting  Member  contributes to the Company,  and the
          Parties cause the Company to pay to the Proposing Member:

                    (a) fifty percent 50% of the Proposing Member's unreimbursed
                    net after-tax  expenditures incurred to date with respect to
                    such New Product  (excluding  royalties  paid to Donnelly by
                    Schott pursuant to the Donnelly License Agreement); and

                    (b) a rate of return on such  investment  commensurate  with
                    the risk,  which rate shall be agreed  upon by the  Parties,
                    based  on  the  status  of  product   development   and  the
                    associated risk; and

               (iii) if Schott North America (or its Affiliate) is the Proposing
          Member,  Donnelly repays to Schott the amount of the royalties paid to
          Donnelly by Schott pursuant to the Donnelly  License  Agreement,  plus
          interest at 6% per annum.

     Notwithstanding  the  foregoing  provisions of this Section  4.09(d),  if a
Proposing  Member  ceases  to be a Member  of the  Company  prior  to the  fifth
anniversary of a Proposing Member's proposal of a New Product, at the request of
the Company, such Proposing Member shall license to the Company,  subject to the
payment of a commercially  reasonable  royalty pursuant to a separate  agreement
negotiated  in good faith,  all  Background  Technology  and other  intellectual
property required for the Company to commercialize such New Product.

     Section 4.10 Product Distribution. The Company shall distribute EC Products
manufactured  by it or for  which it has  acquired  distribution  rights  in the
manner determined by the Management Committee.

     Section 4.11 Non-Competition.

          (a) Subject to any applicable law,  regulation,  decree or order, from
     the Closing  Date until Schott North  America and its  Affiliates  cease to
     have any direct or indirect  ownership  interest in the Company,  and for a
     period of five calendar  years  thereafter,  neither  Schott nor any of its
     Affiliates shall:

               (i)  manufacture  or sell, or license to manufacture or sell, any
          EC Product  other than (1) New  Products  developed  or sold by Schott
          independently  of the Company  pursuant to Section  4.09(c) or Section
          4.09(d) or (2) Automotive Glazing products developed or sold by Schott
          or its  Affiliates  independently  of the Company  pursuant to Section
          4.05, Section 4.06 or Section 4.07; or

               (ii)  manufacture  or sell, or license to  manufacture or sell in
          competition with Donnelly or its Affiliates any New Product  developed
          or sold by Donnelly  independently  of the Company pursuant to Section
          4.09(d).

          (b) Subject to any applicable law,  regulation,  decree or order, from
     the Closing Date until Donnelly and its Affiliates cease to have any direct
     or indirect  ownership  interest in the  Company,  and for a period of five
     calendar  years  thereafter,  neither  Donnelly  nor any of its  Affiliates
     shall:

               (i) manufacture or sell, or license to manufacture or sell any EC
          Product  other  than  New  Products  developed  or  sold  by  Donnelly
          independently of the Company pursuant to Section 4.09(d); or

                                       11
<PAGE>
               (ii)  manufacture  or sell, or license to  manufacture or sell in
          competition  with Schott or any of its  Affiliates (1) any New Product
          that Schott or any of its Affiliates is  manufacturing or selling as a
          New Product  pursuant to Section 4.09(c) or Section 4.09(d) or (2) any
          Automotive  Glazing  Product that Schott or any of its  Affiliates  is
          manufacturing  or selling  pursuant to Section  4.05,  Section 4.06 or
          Section 4.07.

          (c) The Parties shall  cooperate  with one another to make all filings
     required to be made by them from time to time,  if any,  and  provide  such
     information  as may be  requested  under  the  Hart-Scott-Rodino  Antitrust
     Improvements  Act of  1976,  as  amended,  and the  rules  and  regulations
     promulgated   thereunder,   in  order  to   consummate   the   transactions
     contemplated  by this Agreement and to make all other  required  regulatory
     filings,  whether  domestic  or  foreign,  which may be  applicable  to the
     transactions contemplated hereby.

     Section 4.12 Patent Applications.

          (a)  Donnelly  shall have the right to file patent  applications  with
     respect to the Donnelly Background Technology at any time prior to April 5,
     2000.  Donnelly  hereby  agrees  promptly  to notify  Schott of any  patent
     applications  that it files  on or after  April 5,  1999  with  respect  to
     Donnelly Background Technology.

          (b)  Schott  shall  have the right to file  patent  applications  with
     respect to the Schott  Background  Technology at any time prior to April 5,
     2000.  Schott  hereby  agrees  promptly  to notify  Donnelly  of any patent
     applications that it files on or after April 5, 1999 with respect to Schott
     Background Technology.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

     Section  5.01  Representations  by Schott.  Schott  hereby  represents  and
warrants to Donnelly as follows, with effect as of the Execution Date:

          (a) Organization  and Standing.  Each of the Schott Parties is a legal
     entity duly  organized,  validly  existing,  and in good standing under the
     laws of the jurisdiction in which it was organized.

          (b) Corporate Power and Authority.  Each of the Schott Parties has all
     requisite  corporate  power and authority to carry on its business as it is
     now being  conducted;  to own and operate the properties  which it now owns
     and operates; and to execute,  deliver, and perform this Agreement, the LLC
     Agreement and the other Definitive Agreements to which it is a party.

          (c)  Authorization,  Execution,  and  Delivery.  The execution of this
     Agreement,  the LLC Agreement and the other Definitive  Agreements to which
     each Schott Party is a party, the delivery thereof by such Schott Party and
     the consummation of the transactions  contemplated hereby and thereby, will
     have been duly and validly  authorized by all necessary  corporate or other
     legal action as of the Closing Date. This Agreement,  the LLC Agreement and
     the other Definitive  Agreements to which each Schott Party is a party have
     been duly executed and delivered by each Schott Party, and each constitutes
     a valid and legally  binding  obligation  of each Schott Party  enforceable
     against such Schott Party in accordance with its terms except as limited by
     applicable bankruptcy,  insolvency,  reorganization,  moratorium,  or other
     similar laws of general application relating to or affecting enforcement of
     creditors' rights, and by general equitable principles.

                                       12
<PAGE>
          (d) Effect of this  Agreement.  Neither the  execution and delivery of
     this Agreement the LLC  Agreement,  or the other  Definitive  Agreements to
     which  each  Schott  Party  is  a  party,   nor  the  consummation  of  the
     transactions  contemplated hereby or thereby, nor compliance by each Schott
     Party with any of the provisions  hereof or thereof will: (i) conflict with
     or result in a breach of any  provision of any Schott  Party's  articles of
     incorporation  or bylaws or other  constitutive  documents;  (ii)  violate,
     breach,  or,  with the giving of notice or passage of time,  constitute  an
     event of default (or give rise to any right of  termination,  cancellation,
     or acceleration) under any of the terms,  conditions,  or provisions of any
     note, bond, mortgage, indenture, license, agreement, or other instrument or
     obligation  to which such Schott Party is a party,  or by which such Schott
     Party or any  material  portion of its  properties  or assets may be bound,
     except for such violations, breaches, or defaults (or right of termination,
     cancellation,  or  acceleration):  (A) as to  which  requisite  waivers  or
     consents shall have been obtained by the Execution Date, or (B) which taken
     as a whole are not material to the business or financial  condition of such
     Schott Party or any of its properties or assets.

          (e) Schott Licensed Patents and Knowhow.

               (i) Schott has the right,  power, and authority to license to the
          Company and to Donnelly, pursuant to this Agreement, the LLC Agreement
          and the  Schott  License  Agreement,  its  rights in and to the Schott
          Licensed Patents and Schott Licensed Knowhow and improvements thereto.

               (ii) Schott owns the Schott Licensed  Patents and Schott Licensed
          Knowhow and such rights are not  subject to any lien,  encumbrance  or
          claim of ownership of any kind by any third party.

               (iii) The Schott Licensed Patents have been issued or applied for
          as indicated in Exhibit E hereof.

               (iv) To the  knowledge  of Schott,  Schott has not engaged in any
          conduct,  or omitted to perform any necessary act, the result of which
          could  invalidate  any of the Schott  Licensed  Patents  or  adversely
          affect the enforceability of any of the Schott Licensed Patents.

               (v) To the  knowledge of Schott,  no trade  secrets,  inventions,
          licenses, copyrights,  patents, or patent applications embodied in the
          Schott  Licensed  Patents  or Schott  Licensed  Knowhow  (1) are being
          contested  or  infringed  upon  or (2)  would  in the  conduct  of the
          business of the Company  infringe upon or violate the United States or
          foreign patents, trade secrets, or copyrights of any other Person, and
          neither  Schott nor any of its Affiliates  has,  within the last three
          years, received any notice of any such contest or infringement.

          (f) Disclosure.  No  representation or warranty by any Schott Party in
     this Agreement contains any untrue statement of a material fact or omits to
     state a material fact  necessary to make the  statements  made therein,  in
     light of the circumstances under which they are made, not misleading.

     Section 5.02  Representations  by Donnelly.  Donnelly hereby represents and
warrants to Schott as follows, with effect as of Effective Date:

          (a)  Organization  and  Standing.  Donnelly  is  a  corporation,  duly
     organized,  validly  existing,  and in good standing  under the laws of the
     State of Michigan.

                                       13
<PAGE>
          (b)  Corporate  Power  and  Authority.   Donnelly  has  all  requisite
     corporate  power and  authority to carry on its business as it is now being
     conducted;  to own and operate the  properties and assets which it now owns
     and operates;  and to execute,  deliver, and perform the provisions of this
     Agreement, the LLC Agreement and each of the other Definitive Agreements to
     which Donnelly is a party.

          (c)  Authorization,  Execution,  and  Delivery.  The execution of this
     Agreement,  the LLC Agreement,  and each of the other Definitive Agreements
     to which Donnelly or any of its Affiliates is a party, the delivery thereof
     by Donnelly,  and the consummation of the transactions  contemplated hereby
     and  thereby  have  been  duly  and  validly  authorized  by all  necessary
     corporate action. This Agreement,  the LLC Agreement, and each of the other
     Definitive  Agreements to which Donnelly is a party have been duly executed
     and  delivered by Donnelly  and  constitute  the valid and legally  binding
     obligations of Donnelly,  enforceable  against  Donnelly in accordance with
     their  respective  terms  except  as  limited  by  applicable   bankruptcy,
     insolvency,  reorganization,  moratorium,  or other similar laws of general
     application relating to or affecting  enforcement of creditors' rights, and
     by general equitable principles.

          (d) Effect of this  Agreement.  Neither the  execution and delivery of
     this  Agreement,  the LLC  Agreement or any other  Definitive  Agreement to
     which  Donnelly  is a  party,  nor  the  consummation  of the  transactions
     contemplated  hereby and thereby nor compliance by Donnelly with any of the
     provisions hereof and thereof, will (i) conflict with or result in a breach
     of any provision of Donnelly's  certificate of incorporation or bylaws;  or
     (ii)  violate,  breach,  or,  with the giving of notice or passage of time,
     constitute  an event of default (or give rise to any right of  termination,
     cancellation,  or  acceleration)  under  any of the  terms,  condition,  or
     provisions of any note, bond, mortgage,  indenture,  license, agreement, or
     other  instrument or obligation to which  Donnelly is a party,  or by which
     Donnelly or any material  portion of its properties or assets may be bound,
     except  for  such   violations,   breaches,   or  defaults  (or  rights  of
     termination,  cancellation,  or  acceleration):  (A) as to which  requisite
     waivers or consents shall have been obtained by the Execution  Date, or (B)
     which  taken as a whole  are not  material  to the  business  or  financial
     condition of Donnelly or any of its properties or assets.

          (e) Donnelly Licensed Patents and Knowhow.

               (i) Donnelly has the right,  power,  and  authority to license to
          the  Company  and to  Schott,  pursuant  to  this  Agreement,  the LLC
          Agreement and the Donnelly License Agreement, its rights in and to the
          Donnelly   Licensed   Patents  and  Donnelly   Licensed   Knowhow  and
          improvements thereto.

               (ii)  Donnelly  owns the Donnelly  Licensed  Patents and Donnelly
          Licensed  Knowhow  and  such  rights  are  not  subject  to any  lien,
          encumbrance or claim of ownership of any kind by any third party.

               (iii) The Donnelly  Licensed  Patents have been issued or applied
          for as indicated in Exhibit A hereof.

               (iv) To the  knowledge of  Donnelly,  Donnelly has not engaged in
          any conduct,  or omitted to perform any  necessary  act, the result of
          which  could  invalidate  any  of the  Donnelly  Licensed  Patents  or
          adversely affect the  enforceability  of any of the Donnelly  Licensed
          Patents.

               (v) To the knowledge of Donnelly,  no trade secrets,  inventions,
          licenses, copyrights,  patents, or patent applications embodied in the
          Donnelly  Licensed Patents or Donnelly  Licensed Knowhow (1) are being
          contested  or  infringed  upon  or (2)  would  in the  conduct  of the
          business of the Company  infringe upon or violate the United States or
          foreign patents, trade secrets, or copyrights

                                       14
<PAGE>
          of any other Person,  and neither  Donnelly nor any of its  Affiliates
          has,  within the last  three  years,  received  any notice of any such
          contest or infringement.

          (f) ATC Assets and ATC Operation.

               (i)  Donnelly  has  good and  marketable  title to all of the ATC
          Assets, free and clear of all liens,  pledges,  charges,  restrictions
          and  encumbrances,  whether  legal or  equitable,  except  as noted in
          Schedule C. The ATC Assets and the ATC facility in Tucson, Arizona are
          in normal  operating  condition  and repair,  normal wear and tear and
          down-time  excepted,  permit the operations of the ATC Operation to be
          conducted as they are presently  conducted,  and have been  adequately
          maintained. The tangible ATC Assets will, in all material respects, be
          transferred  as of the  Closing  Date to the  Company,  in an operable
          condition, normal wear and tear and down-time excepted.

               (ii)  Upon  the  consummation  of this  Agreement  and the  other
          Definitive  Agreements,  as of the Closing  Date the Company will hold
          substantially  all of the assets  relating or pertaining in any way to
          the  operations  of the ATC  Operation  in Tucson and the research and
          development of EC Products by Donnelly,  and no other assets  relating
          or  pertaining  in any way to the ATC  Operation  or the  research and
          development  of EC  Products  by  Donnelly  will be held by any  other
          person  whatsoever,  including  but not limited to Donnelly and any of
          its Affiliates.

               (iii) The ATC Assets and the ATC Operation in Tucson are fully in
          compliance with any applicable  federal,  state,  local or foreign law
          (including common law), statute,  rule, ordinance,  rule regulation or
          other  requirement,  including any judicial or  administrative  order,
          consent  decree  or  judgment  relating  to the  environment,  natural
          resources, or public or employee health and safety.

               (iv) All applicable foreign,  U.S. federal,  state, and local tax
          returns and reports  with  respect to income,  sales,  use,  property,
          value-added,  excise and all other taxes and assessments of every kind
          have been filed with  respect to the ATC Assets and the ATC  Operation
          with  the  appropriate   governmental   agencies  in  each  and  every
          applicable jurisdiction.

               (v) With respect to the ATC Assets and the ATC Operations,  there
          exist no liabilities  or claims  relating or pertaining to the sale or
          sales of goods shipped,  any failure or alleged  failure of such goods
          to  conform  to  customer  or  product  specifications  or  warranties
          applicable  to such goods by  contract  or under law or any failure to
          provide adequate warnings or instructions for such goods.

               (vi) On or prior to the Closing  Date,  Donnelly  will deliver to
          Schott a net asset  statement as at April 5, 1999,  and related notes,
          for the ATC Operation (together with such notes, the "Statement of Net
          Assets"),  a copy of which is annexed to Schedule C. As of the Closing
          Date,  the  Statement  of Net Assets will be  complete,  accurate  and
          current in all material respects. All of the ATC Assets and all of the
          Assumed ATC Obligations  will be completely,  accurately and currently
          described in the Statement of Net Assets.

          (g)  Disclosure.  No  representation  or  warranty by Donnelly in this
     Agreement  contains any untrue  statement of a material  fact,  or omits to
     state a material fact  necessary to make the  statements  made therein,  in
     light of the circumstances under which they were made, not misleading.)

                                       15
<PAGE>
     Section   5.03   Survival   of   Representations   and   Warranties.    The
representations  and  warranties set forth in this Article V shall survive until
the fourth (4th) anniversary of the Closing Date.

                                   ARTICLE VI
                              CONDITIONS TO CLOSING

     Section 6.01 Schott.  The  obligations  of Schott to proceed to the Closing
shall be subject to the following conditions:

          (a) LLC Agreement.  Donnelly shall have executed and delivered the LLC
     Agreement,  and the Company shall have been  organized and shall be validly
     existing under the laws of the State of Delaware.

          (b)  Definitive  Agreements.  Donnelly and the Company,  respectively,
     shall have  executed and  delivered  each of the  Definitive  Agreements to
     which either of them is a party.

          (c) ATC Assets and ATC Operation.

               (i) Donnelly shall have  transferred all of the ATC Assets to the
          Company.

               (ii)  Since  the  execution  date  of  this  Agreement,  the  ATC
          Operation  shall  have  been  conducted  in  the  ordinary  course  as
          conducted by Donnelly and there shall not have been (A) any materially
          adverse  change in the  condition  (financial or  otherwise),  assets,
          liabilities,  business,  operations  or prospects of the ATC Operation
          and  no  fact  or  condition   shall  exist,  or  be  contemplated  or
          threatened,  which would result in any such materially adverse change;
          (B) any  material  damage o  destruction  of any ATC Assets by fire or
          other casualty (whether or not covered by insurance), or the taking of
          any material part of the ATC Assets by condemnation or eminent domain;
          (C) any mortgage,  pledge,  lien, charge or other  encumbrance,  other
          than workmen's, materialmen's or similar liens arising in the ordinary
          course of the conduct of the ATC  Operation,  placed upon or attaching
          to any ATC Assets (except as disclosed in Schedule C) unless  Donnelly
          shall have provided for the  satisfaction  or discharge of the same on
          or prior to the Closing Date; or (D) any bonus,  stock option,  profit
          sharing, pension,  retirement or other similar arrangement or plan, or
          employment  contract for any  employee,  affiliate or agent of the ATC
          Operation  instituted or entered into or amended by Donnelly,  or, any
          increase in the compensation  payable to any such employee,  affiliate
          or agent other than in the  ordinary  course of business  conducted in
          accordance with past practice.

               (iii)  Since  the  execution  date  of  this  Agreement,  no  key
          employees shall have left the ATC Operation.

          (d) Consents, Waivers, and Authorizations.  Schott shall have obtained
     any  and  all  consents,   waivers,   and  authorizations   (including  any
     governmental,    judicial   or   administrative   consents,   waivers,   or
     authorizations) necessary for consummation of the transactions contemplated
     by this Agreement, the LLC Agreement and the other Definitive Agreements.

          (e)  Authorization of Transaction.  All actions necessary to authorize
     the  execution,  delivery,  and  performance  of  this  Agreement,  the LLC
     Agreement and each of the other Definitive Agreements, and the consummation
     of the transactions  contemplated hereby and thereby,  shall have been duly
     and validly taken, respectively, by Donnelly and by the Company.

          (f) Absence of Challenge.  Schott shall have determined that no action
     or proceeding has been  instituted  before any court or other  governmental
     body, the result of which is substantially likely to

                                       16
<PAGE>
     prevent or make illegal the consummation of the  transactions  contemplated
     by  this  Agreement,  the  LLC  Agreement  or any of the  other  Definitive
     Agreements.

          (g)  Opinion of  Counsel.  Schott  shall  have  received  an  opinion,
     addressed  to  Schott  and  dated  as of the  Closing  Date,  from  Varnum,
     Riddering,  Schmidt & Howlett LLP,  Donnelly's outside counsel, in form and
     substance reasonably satisfactory to Schott,  substantially in the form set
     forth in Exhibit J hereof.

          (h) Review of  Agreements.  Donnelly shall have completed the thorough
     and complete review of all agreements relating or pertaining to EC Products
     or Electrochromic  Material to which Donnelly or any of its Affiliates is a
     party and delivered the required  written notice to Schott,  as provided in
     Section 4.2(b) of the Donnelly License Agreement.

          (i) Representations and Warranties. Each of Donnelly's representations
     and  warranties set forth in Article V shall be true and correct as if made
     as of the Closing Date.

          Section 6.02  Donnelly.  The  obligation of Donnelly to proceed to the
     Closing shall be subject to the following conditions:

          (a) LLC  Agreement.  Schott  North  America  shall have  executed  and
     delivered the LLC Agreement,  and the Company shall have been organized and
     shall be validly existing under the laws of the State of Delaware.

          (b)  Definitive  Agreements.  The  Schott  Parties  and  the  Company,
     respectively,  shall have  executed and  delivered  each of the  Definitive
     Agreements to which either of them is a party.

          (c) Company's Assumption of Assumed ATC Obligations. The Company shall
     have  assumed,  effective  as of the Closing  Date,  all of the Assumed ATC
     Obligations, as provided in the LLC Agreement.

          (d)  Consents,  Waivers,  and  Authorizations.   Donnelly  shall  have
     obtained any and all consents,  waivers, and authorizations  (including any
     governmental,    judicial   or   administrative   consents,   waivers,   or
     authorizations) necessary for consummation of the transactions contemplated
     by this Agreement, the LLC Agreement and the other Definitive Agreements.

          (e)  Authorization of Transaction.  All actions necessary to authorize
     the  execution,  delivery,  and  performance  of  this  Agreement,  the LLC
     Agreement and each of the other Definitive Agreements, and the consummation
     of the transactions  contemplated hereby and thereby,  shall have been duly
     and validly taken, respectively, by Schott and by the Company.

          (f)  Absence of  Challenge.  Donnelly  shall have  determined  that no
     action  or  proceeding  has  been  instituted  before  any  court  or other
     governmental  body, the result of which is substantially  likely to prevent
     or make illegal the consummation of the  transactions  contemplated by this
     Agreement, the LLC Agreement or any of the other Definitive Agreements.

          (g)  Opinion of  Counsel.  Donnelly  shall have  received  an opinion,
     addressed to Donnelly and dated as of the Closing Date, from Rogers & Wells
     LLP,   Schott's   outside  counsel,   in  form  and  substance   reasonably
     satisfactory to Donnelly,  substantially in the form set forth in Exhibit K
     hereof.

          (h) Representations and Warranties.  Each of Schott's  representations
     and  warranties set forth in Article V shall be true and correct as if made
     as of the Closing Date.

                                       17
<PAGE>
          (i) Schott  Payment on Closing  Date.  Schott North America shall have
     made the  $2,000,000  payment on the Closing  Date,  as provided in Section
     3.01(a).

                                  ARTICLE VII
                                   MANAGEMENT

The Company shall be governed and managed as provided in the LLC Agreement.

                                  ARTICLE VIII
                     WITHDRAWAL; DISSOLUTION AND TERMINATION

All matters relating or pertaining to a Member's withdrawal or deemed withdrawal
from the  Company,  the  dissolution  or  liquidation  of the  Company,  and the
transfer of its  interest in the Company to third  parties  shall be governed by
the LLC Agreement.

                                   ARTICLE IX
                             PROPRIETARY INFORMATION

     Section 9.01  Exchange.  It is  contemplated  that the Parties prior to the
Closing  Date,  and  the  Members  and  the  Company,  during  the  term of this
Agreement,  will exchange Proprietary  Information among themselves as necessary
to effectuate the purposes of this Agreement.

     Section 9.02 Usage.  Except to the extent otherwise agreed upon, each Party
and the Company may use Proprietary Information received from the other Party or
its Affiliates or from the Company  solely for the purpose of LLC business,  and
for no other purpose.

     Section 9.03 Permitted Disclosure. The Parties and the Company may disclose
Proprietary Information received from the other Party, an Affiliate of the other
Party,  or the Company only to their  Affiliates and to the Company,  and to the
counsel,  consultants,  and  contractors  of the  Company,  provided  that  such
disclosure and use by the recipient is in  furtherance of the Company  business,
and as  permitted  under the  Donnelly  License  Agreement  and  Schott  License
Agreement.  The Parties hereby agree for themselves and on behalf of the Company
and any  Affiliate to be bound by all of the  confidentiality  obligations  with
respect  to  Proprietary   Information  set  forth  herein,  and  to  cause  any
consultant,  or contractor receiving Proprietary Information to agree in writing
to be similarly bound.

     Section 9.04 Nondisclosure and Nonuse.  Other than as set forth in Sections
9.02  and  9.03  hereof,  (i)  Donnelly  shall  not use,  divulge,  or  disclose
Proprietary  Information  received  from  the  Schott  Parties  or any of  their
Affiliates,  or from the  Company  and (ii) Schott  shall not use,  divulge,  or
disclose   Proprietary   Information  received  from  Donnelly  or  any  of  its
Affiliates,  or  from  the  Company;  provided,   however,  that  disclosure  of
Proprietary  Information shall be permitted to the extent compelled by the valid
legal process of a court or governmental agency having jurisdiction,  so long as
the  Party  receiving  such  legal  process  gives  prompt  notice  to the Party
originally  providing such  Proprietary  Information so that the providing Party
may seek an appropriate  protective  order or other relief,  or waive compliance
with  this  requirement.  The  obligations  set forth in this  Article  IX shall
survive the termination of this Agreement.

     Section 9.05 Exceptions.  The obligations set forth in this Article IX with
respect to the treatment of Proprietary Information are not applicable to:

                                       18
<PAGE>
          (a)  Information  which  becomes  known or available to the  receiving
     Party on a  non-confidential  basis from a source other than the disclosing
     Party  without  breach  of this  Agreement  or any other  agreement  by the
     recipient or the person disclosing such information to the recipient;

          (b)   Information   which  is  known  by  the  receiving  Party  on  a
     non-confidential  basis at the time of  disclosure as documented in writing
     antedating the disclosure by a Party hereunder;

          (c) Information which is approved for release by written authorization
     of a representative of the disclosing Party;

          (d) Information which is or becomes publicly  available without breach
     of this Agreement by the receiving Party.

     Section 9.06 No License Obligation. Except as expressly set forth herein or
in any other Definitive Agreement, nothing in this Agreement shall grant, imply,
or constitute a license,  or obligation to license,  to the Company or any Party
any  intellectual  or  industrial  property  owned  by a  Party  or  any  of its
Affiliates.

     Section 9.07  Specific  Performance.  The Parties  hereby  declare that the
respective  rights of the Parties under this Article IX are of a unique  nature,
the loss of which may cause  irreparable  harm, and that it may be impossible to
measure in money the damages  which shall  accrue to a Party hereto by reason of
the loss of such  rights or a failure to perform  any of the  obligations  under
this Article IX.  Accordingly,  in the event of a breach or threatened breach of
this Article IX,  notwithstanding  any other  provision of this  Agreement,  the
Party whose rights are jeopardized shall be entitled, as a matter of right, to a
final  order from a court of  competent  jurisdiction  of  injunctive  and other
equitable  relief;  and if any  Party  hereto  shall  institute  any  action  or
proceeding  to enforce by specific  performance  or other  equitable  relief the
provisions  hereof, any person against whom such action or proceeding is brought
hereby waives the claim or defense in such action that an adequate remedy at law
is  available,  and such person shall not urge in any such action or  proceeding
the claim or defense that such remedy at law exists.

                                   ARTICLE X

                                 INDEMNIFICATION

     Section 10.01  Indemnification  by Schott.  Schott shall indemnify and hold
Donnelly and Donnelly's  Affiliates and their  respective  directors,  officers,
managers,  employees  and  agents  (collectively,  the  "Donnelly  Indemnitees")
harmless from any and all liabilities,  fines, penalties,  obligations,  claims,
contingencies,  damages,  costs and  expenses,  including  all  court  costs and
reasonable attorneys' fees and disbursements (collectively,  "Losses"), that any
Donnelly  Indemnitee  may  suffer  incur  as a  result  of or  relating  to  the
inaccuracy in or breach of any representation or warranty,  or the breach of any
covenant or agreement, of Schott made pursuant to this Agreement.

     Section 10.02 Indemnification by Donnelly.

          (a) Donnelly  shall  indemnify and hold each of the Schott Parties and
     their  Affiliates  and  their  respective  directors,  officers,  managers,
     employees and agents (collectively, the "Schott Indemnitees") harmless from
     any and all  Losses,  that any Schott  Indemnitee  may suffer or incur as a
     result of or relating to the inaccuracy in or breach of any  representation
     or warranty,  or the breach of any covenant or agreement,  of Donnelly made
     pursuant to this Agreement.

                                       19
<PAGE>
          (b) Donnelly shall  indemnify and hold each of the Schott  Indemnitees
     and  the  Company,  and  its  managers,   officers,  employees  and  agents
     (collectively, the "Company Indemnitees") harmless from any and all Losses,
     that any Schott Indemnitee or Company  Indemnitee,  as the case may be, may
     suffer or incur as a result of or  relating to any  liability,  obligation,
     contract or  commitment  (whether  known or unknown,  contingent or fixed),
     arising  out of the  ownership  or  operation  of the ATC Assets or the ATC
     Operation  on or prior to the  Closing  Date,  except for the  Assumed  ATC
     Obligations.

     Section 10.03 Notices. Any Party entitled to receive  indemnification under
this Article X (the "Indemnified Party") agrees to give prompt written notice (a
"Claim Notice") to the party or parties required to provide such indemnification
(the  "Indemnifying  Parties") upon the occurrence of any indemnifiable  Loss or
the  assertion of any claim or the  commencement  of any action or proceeding in
respect of which such a Loss may  reasonably be expected to occur (such a claim,
action or  proceeding  being  referred  to as a  "Claim"),  but the  Indemnified
Party's  failure to give such  notice  shall not affect the  obligations  of the
Indemnifying  Party  under  this  Article  X  except  to  the  extent  that  the
Indemnifying  Party is prejudiced  thereby.  Such written notice shall include a
description  of the event or events  forming the basis of such Loss or Claim and
the amount  involved,  unless such amount is uncertain or  contingent,  in which
event the  Indemnified  Party shall give an additional  written  notice when the
amount becomes fixed or reasonably determinable.

     Section 10.04 Defense of Claims. The Indemnifying Party may elect to assume
and  control  the  defense of any Claim,  including  the  employment  of counsel
reasonably  satisfactory  to the  Indemnified  Party and the payment of expenses
related thereto,  if (i) the Indemnifying  Party  acknowledges its obligation to
indemnify the  Indemnified  Party for any Losses  resulting  from such Claim and
provides  reasonable  evidence to the Indemnified Party of its financial ability
to  satisfy  such  obligation,  and (ii) the Claim  does not seek to impose  any
material  liability or obligation on the Indemnified  Party other than for money
damages.  If such conditions are satisfied and the Indemnifying  Party elects to
assume and control the defense of a Claim,  then (x) the Indemnified Party shall
not be liable for any  settlement  of such Claim  effected  without its consent,
which consent shall not be unreasonably withheld; (y) the Indemnifying Party may
not settle such Claim  without the consent of the  Indemnified  Party (not to be
unreasonably  withheld) unless such settlement includes a full and unconditional
release  of the  Indemnified  Party;  and (z) the  Indemnified  Party may employ
separate  counsel and  participate in the defense  thereof,  but the Indemnified
Party shall be responsible  for the reasonable fees and expenses of such counsel
unless (1) the Indemnifying Party has failed to assume the defense of such Claim
or to employ counsel with respect  thereto or (2) a conflict of interest  exists
between the interests of the Indemnified  Party and the Indemnifying  Party that
requires  representation by separate counsel,  in which case the reasonable fees
and expenses of such separate counsel shall be paid by the  Indemnifying  Party.
If such  conditions  are not  satisfied,  the  Indemnified  Party may assume and
control  the  defense  of the Claim at the  expense of the  Indemnifying  Party;
provided  that the  Indemnified  Party may not settle any such Claim without the
consent of the Indemnifying Party (not to be unreasonably  withheld) unless such
settlement includes a full and unconditional  release of the Indemnifying Party;
and  further  provided  that  the  Indemnifying  Party  is  given  a  reasonable
opportunity  to  participate  in  such  defense  (at  the  Indemnifying  Party's
expense).

     Section 10.05 Sole Remedy. The indemnification provisions set forth in this
Article X constitute the Schott Indemnitees' and the Donnelly  Indemnitees' sole
and exclusive remedy in respect of the breach of any  representation,  warranty,
covenant  or  agreement  made  in  this  Agreement  or  pursuant  hereto  or any
allegation by a third party that, if true, would  constitute such a breach.  The
indemnification  provisions  set  forth  in this  Article  X shall  survive  the
termination of this Agreement.

                                       20
<PAGE>
                                   ARTICLE XI
                              TERM AND TERMINATION

     Section  11.01  Termination.  This  Agreement may be terminated at any time
prior to the Closing:

          (a) by mutual written consent of the Parties; or

          (b) by any Party if the Closing  shall not have  occurred on or before
     July 1, 1999;  provided,  however,  that that the right to  terminate  this
     Agreement  under this  paragraph  (b) shall not be  available  to any Party
     whose gross  negligence or willful  misconduct has resulted in such Party's
     failure to fulfill any obligation  under this Agreement  which has been the
     cause of, or resulted  in, the failure of the Closing to occur on or before
     such date.

     Section 11.02 Term. Unless terminated  earlier by the mutual consent of the
Parties,  this  Agreement  shall remain in effect until the withdrawal of either
Member from the Company.

     Section 11.03 Effect of  Termination.  If this  Agreement is terminated for
any reason,  Section 4.08,  Section 4.11,  Article IX, Article X, Section 12.01,
Section 12.02, Section 12.07, Section 12.13 and Section 12.14 shall survive such
termination; provided, however, that Section 4.11 shall survive such termination
only if the Company has been organized pursuant to the LLC Agreement and the LLC
shall not have been terminated prior to June 30, 1999; provided,  further,  that
nothing set forth in this Section 11.03 shall  relieve any Party from  liability
for any material breach hereof.

                                  ARTICLE XII
                                  MISCELLANEOUS

     Section 12.01 Public Announcements.  Subject to any applicable requirements
of any federal,  state,  provincial or local laws or  regulations  of the United
States and of the Federal Republic of Germany (including without limitation, all
applicable  securities  and  antitrust  laws  or  regulations  and  any  listing
agreement with, or rules and regulations of, any stock exchange),  neither Party
shall  make or  cause to be made or take  any  action  that  would  require  the
issuance of, any press release,  public announcement,  or statement with respect
to the  transactions  contemplated  by this  Agreement or any of the  provisions
hereof  without  the prior  written  consent of the other  Party as to the form,
content,  and timing of such announcement or disclosure.  If a disclosure is, in
the reasonable  judgment of any Party,  required by the laws  applicable to such
Party,  the  proposed  disclosure  shall be submitted to the other Party for its
review and  approval,  and the  submitting  Party shall  exercise  good faith in
making changes to the disclosure  reasonably  requested by the other Party.  Any
proposed  changes from the receiving Party shall be provided within  forty-eight
(48) hours of such Party's receipt of the proposed disclosure.

     Section  12.02  Dispute  Resolution.  Subject to Section 9.07  hereof,  all
disputes  ("Disputes")  arising  out of,  or in any way  connected  to the Joint
Venture,  this Agreement or the performance of the Parties  hereunder,  shall be
resolved  by  arbitration  under  the  Rules  of  Arbitration  of  the  American
Arbitration  Association by three arbitrators  appointed in accordance with said
Rules. The Parties  relinquish their right to seek court relief for any Dispute,
except as may be  required  to enforce  an  arbitration  award.  The seat of the
arbitration  shall be New York, New York, and the arbitration shall be conducted
in the English language. The Parties shall be entitled to call witnesses,  cross
examine the other Party's  witnesses,  and to file legal briefs. The arbitrators
shall be bound by the express  intentions of the Parties as set forth herein and
shall render their  decision in writing based on this Agreement and the facts as
proven at the arbitration hearing. Construction.

                                       21
<PAGE>
     Section 12.03 Construction

          (a) Words.  All  references  in this  Agreement to the singular  shall
     include the plural where  applicable,  and all  references  to gender shall
     include both genders and the neuter.

          (b) No  Presumption.  In  interpreting  and  applying  the  terms  and
     provisions  of this  Agreement,  no  presumption  shall be made against the
     Party that drafted such terms and provisions.

     Section 12.04  Severability.  If any part of this  Agreement for any reason
shall be declared invalid,  such invalidity shall not affect the validity of any
remaining portion, which shall remain in full force and effect.

     Section 12.05 Further Assurances.  Each Party shall, upon request, furnish,
execute,  and deliver such documents,  instruments,  certificates,  notices,  or
other further  assurances as any other Party may reasonably require as necessary
or appropriate to effect the purposes of this Agreement or to confirm the rights
created or arising hereunder.

     Section 12.06 Representations,  Warranties,  Covenants and Obligations. The
representations and warranties,  and all covenants,  agreements, and obligations
of the Parties  contained in this  Agreement,  as well as in any  certificate or
other  instrument  delivered  by or on  behalf of any  Party,  shall be true and
correct in all material respects and have effect as of the Execution Date and as
of the Closing Date.

     Section 12.07 Expenses.  Each Party shall pay its own expenses  incident to
this Agreement and the transactions contemplated hereby.

     Section 12.08 Benefit. No person who is not a party to this Agreement shall
have any rights or derive any benefit hereunder.

     Section 12.09 Entire Agreement and Amendment.  This Agreement and the other
Definitive  Agreements  constitute the entire  agreement among the Parties other
than the  Confidentiality  Agreement  and  supersedes  all prior oral or written
agreements or  understandings  of the Parties with regard to the subject  matter
hereof, including,  without limitation,  the Letter of Intent dated February 15,
1999. No  modification,  waiver,  termination,  or  cancellation of any right or
claim under this  Agreement  shall be effective  unless in writing and signed by
the Party against which it is sought to be enforced.

     Section  12.10 Delays or  Omissions.  Except as expressly  provided in this
Agreement, no delay or omission to exercise any right, power, or remedy accruing
to a Party  hereunder  upon any  breach  or  default  of any  Party  under  this
Agreement  shall impair any such right,  power,  or remedy,  neither shall it be
construed  to be a waiver of any such  breach or  default,  nor an  acquiescence
therein  or a  waiver  of or  acquiescence  in any  similar  breach  or  default
thereafter  occurring;  neither shall any waiver of any single breach or default
be deemed a waiver of any other  breach or  default  theretofore  or  thereafter
occurring.

     Section  12.11  Successors  and  Assigns.  Except  as  otherwise  expressly
provided herein, the provisions of this Agreement shall inure to the benefit of,
and be binding  upon,  the  successors  and  assigns of the  Parties;  provided,
however,  that no Party may assign or transfer its interest  hereunder or any of
its rights or obligations hereunder, except in accordance with the terms hereof.

                                       22
<PAGE>
     Section 12.12 Headings.  Article,  Section, and subsection headings of this
Agreement are for  convenience  only and are not to be construed as part of this
Agreement  or as  defining  or  limiting  in any way the  scope or intent of the
provisions hereof.

     Section 12.13  Governing  Law. The terms and  conditions of this  Agreement
shall be interpreted in accordance with and governed by the laws of the State of
New York and of the  United  States of  America,  without  giving  effect to the
doctrine of conflict or laws.

     Section  12.14  Notices.  All notices and other  communications  under this
Agreement  shall be in writing  and shall be deemed to have been duly given when
delivered (i) in person,  (ii) to the extent receipt is confirmed,  by telecopy,
facsimile  or other  electronic  transmission  service,  (iii)  by a  nationally
recognized  overnight  courier service,  or (iv) by registered or certified mail
(postage  prepaid  return  receipt  requested),  to the parties at the following
address:

          (a) If to Schott:

                      Schott Corporation
                      Schott North America Manufacturing, Inc.
                      3 Odell Plaza
                      Yonkers, New York 10701
                      Attention: Manfred Jaeckel, Esq.
                      Facsimile: (914) 986-8585

     and

                      Schott Glas
                      Legal Department
                      Hattenbergstrabe 10
                      P.O. Box 2480
                      D-55014 Mainz
                      Federal Republic of Germany
                      Attention: Dr. Wilhelm Niemeier
                      Facsimile: 011-49-61-31-66-2098

     and a required copy to:

                      Rogers & Wells LLP
                      200 Park Avenue
                      New York, New York 10166
                      Attention: Richard T. McDermott, Esq.
                      Facsimile: (212) 878-8375.


                                       23
<PAGE>
          (b) If to Donnelly:

                      Donnelly Corporation
                      49 West Third Street
                      Holland, Michigan 49423
                      Attention: Niall Lynam
                      Facsimile: (616) 786-5185

With a copy to:
                      Varnum, Riddering, Howlett & Schmidt LLP
                      Bridgewater Place
                      333 Bridge Street, N.W., P.O. Box 352
                      Grand Rapids, Michigan 49504
                      Attention: Daniel Molhoek, Esq.
                      Facsimile: (616) 336-7000.

     Section 12.15  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall constitute an original document.

     Section  12.16  Amendment.  This  Agreement  may not be modified or amended
without the written consent of each of the Parties.



                                       24
<PAGE>
     IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement,
intending for it to have legal and binding effect, as of the date and year first
above written.



                               SCHOTT CORPORATION



                               By: /s/ Guy Pierre De Conincx
                                  Name: Guy Pierre De Conincx
                                  Title: Vice Chairman, Pres & CEO



                               SCHOTT NORTH AMERICA MANUFACTURING, INC.



                               By: /s/ Guy Pierre De Conincx
                                  Name: Guy Pierre De Conincx
                                  Title: Pres.



                               SCHOTT GLAS



                               By: /s/ Dr. Ungeheuer         /s/ R. Langfeld
                                  Name: Dr. Ungeheuer        Dr. Roland Langfeld
                                  Title: Member of the       Vice President R&D
                                         Board of
                                         Management




                                DONNELLY CORPORATION



                                By: /s/ Scott E. Reed
                                   Name: Scott E. Reed
                                   Title: Sr VP & CFO
<PAGE>
EXHIBIT 10.29

                       LIMITED LIABILITY COMPANY AGREEMENT
                                       of
                    SCHOTT-DONNELLY LLC SMART GLASS SOLUTIONS

                                 by and between

                    SCHOTT NORTH AMERICA MANUFACTURING, INC.

                                       And

                              DONNELLY CORPORATION




                            Dated as of April 5, 1999
<PAGE>
                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I      DEFINITIONS ..................................................  1

     Section 1.01   Definitions .............................................  1

     Section 1.02   Definitions Generally ...................................  3

ARTICLE II     GENERAL PROVISIONS ...........................................  4

     Section 2.01   Formation ...............................................  4

     Section 2.02   Name ....................................................  4

     Section 2.03   Term ....................................................  4

     Section 2.04   Purpose .................................................  4

     Section 2.05   Registered Office/Agent .................................  4

     Section 2.06   Principal Office ........................................  4

ARTICLE III    CAPITAL CONTRIBUTIONS; ISSUANCE OF SHARES ....................  4

     Section 3.01   Initial Capital Contributions ...........................  4

     Section 3.02   Consents of Third Parties ...............................  5

     Section 3.03   Issuance of Additional Shares ...........................  5

     Section 3.04   Additional Capital Contributions ........................  5

     Section 3.05   Company's Assumption of Assumed ATC Obligations .........  6

     Section 3.06   Withdrawals, Interest and Capital Accounts ..............  6

     Section 3.07   Value of Contributions ..................................  6

ARTICLE IV     DISTRIBUTIONS ................................................  7

     Section 4.01   Distributions ...........................................  7

     Section 4.02   Distributions in Kind ...................................  7

     Section 4.03   Tax Withholding .........................................  7

ARTICLE V      ALLOCATIONS AND OTHER TAX MATTERS ............................  7

     Section 5.01   Capital Accounts ........................................  7

     Section 5.02   Allocation of Net Profits and Net Losses ................  8

     Section 5.03   Definition of Net Profits and Net Losses ................  8

     Section 5.04   Federal Income Tax Allocations ..........................  9

     Section 5.05   Elections ...............................................  9

     Section 5.06   Fiscal Year .............................................  9

     Section 5.07   Substantial Economic Effect .............................  9

     Section 5.08   Other Tax Matters .......................................  9

ARTICLE VI     MANAGEMENT ................................................... 10

                                      -i-
<PAGE>
                               TABLE OF CONTENTS
                                   (continued)

                                                                            Page

     Section 6.01   Delegation of Authority ................................. 10

     Section 6.02   Management Committee .................................... 10

          (a)       Voting and Members ...................................... 10

          (b)       Meetings and Notices .................................... 11

          (c)       Power of Members ........................................ 11

          (d)       Enforcement of Company's Rights ......................... 11

          (e)       Deadlock ................................................ 12

     Section 6.03   Employees; Officers ..................................... 12

     Section 6.04   Annual Business Plan and Budget ......................... 12

     Section 6.05   Members' Consents or Approvals .......................... 13

     Section 6.06   Major Actions ........................................... 13

ARTICLE VII    BOOKS AND RECORDS ............................................ 13

     Section 7.01   Books and Records ....................................... 13

     Section 7.02   Reports to Members ...................................... 14

ARTICLE VIII   WITHDRAWAL OF INITIAL MEMBERS; TRANSFERS;
               PARTICIPATION RIGHTS ......................................... 14

     Section 8.01   Withdrawal in First Five Years .......................... 14

     Section 8.02   Withdrawal After Five Years ............................. 16

     Section 8.03   Admission of Substitute or Additional Members ........... 17

     Section 8.04   Restrictions on Transfer ................................ 18

     Section 8.05   Right of First Refusal; Right of First Offer ............ 18

ARTICLE IX     EXCULPATION AND INDEMNIFICATION .............................. 19

     Section 9.01   Exculpation and Indemnification ......................... 19

     Section 9.02   Indemnification by Initial Members ...................... 19

     Section 9.03   Liability of the Members ................................ 20

ARTICLE X      DISSOLUTION, LIQUIDATION AND TRANSFER ........................ 21

     Section 10.01  Dissolution ............................................. 21

     Section 10.02  Liquidation ............................................. 21

     Section 10.03  Claims of Members ....................................... 22

     Section 10.04  Intellectual Property ................................... 22

ARTICLE XI     MISCELLANEOUS ................................................ 23

     Section 11.01  Amendments .............................................. 23

     Section 11.02  Notices ................................................. 23

                                      -ii-
<PAGE>
                               TABLE OF CONTENTS
                                  (continued)

     Section 11.03  Counterparts ............................................ 24

     Section 11.04  No Third-Party Beneficiaries ............................ 24

     Section 11.05  Governing Law ........................................... 24

     Section 11.06  Publicity ............................................... 24

     Section 11.07  Dispute Resolution ...................................... 24

     Section 11.08  Headings ................................................ 25

     Section 11.09  Survival ................................................ 25

     Section 11.10  No Waiver ............................................... 25

     Section 11.11  Entire Agreement ........................................ 25

     Section 11.12  Further Assurances ...................................... 25

EXHIBIT A - INITIAL CAPITAL CONTRIBUTIONS OF INITIAL MEMBERS ................ 27

EXHIBIT B - INITIAL MANAGEMENT COMMITTEE, PRESIDENT AND CHAIRMAN ............ 28

                                      -iii-
<PAGE>
     This LIMITED  LIABILITY COMPANY AGREEMENT dated as of April 5, 1999, by and
between  SCHOTT  NORTH  AMERICA  MANUFACTURING,  INC.,  a  Maryland  corporation
("Schott"), and DONNELLY CORPORATION, a Michigan corporation ("Donnelly"),

                              W I T N E S S E T H :

     WHEREAS,   having  formed  a  limited   liability  company  with  the  name
Schott-Donnelly  LLC Smart Glass  Solutions (the  "Company")  under the Delaware
Limited  Liability Company Act, as in effect from time to time, or any successor
statute thereto (the "Act") by the filing of a Certificate of Formation with the
Secretary  of State of the State of  Delaware  on the date  hereof,  the parties
hereto  now  desire to enter  into this  Agreement  to govern  their  rights and
obligations as members of the Company;

     WHEREAS,  Schott and Donnelly  have entered into that certain Joint Venture
Agreement, dated as of April 5, 1999 (the "Joint Venture Agreement");

     NOW, THEREFORE,  in consideration of the premises and the mutual agreements
herein, and for other good and valuable consideration,  the receipt and adequacy
of which are hereby  acknowledged,  the parties hereto,  intending to be legally
bound by the terms hereof applicable to each of them, hereby agree as follows:


                                   ARTICLE I

                                  Definitions

     SECTION 1.01.  Definitions.  When used herein, the following terms have the
meanings  set  forth  below.  Capitalized  terms  used but not  defined  in this
Agreement  shall have the meanings  ascribed to such terms in the Joint  Venture
Agreement.

     "Agreed Fair Market Value" shall mean the fair market value of an asset, as
agreed upon from time to time by the Members.  If the Members  cannot agree on a
value of such asset,  they shall attempt to agree upon an independent  qualified
party to value the same. If the Members cannot agree upon such a party,  each of
the Members shall specify a qualified  independent  person or entity to evaluate
such asset,  and the two persons or entities so appointed  shall appoint a third
person or entity to appraise the value  thereof.  The "Agreed Fair Market Value"
shall  then  be the  value  of  such  asset  as  agreed  upon by any two of such
appraisers. If the asset is a Member's Interest in the Company, the "Agreed Fair
Market  Value"  thereof  shall be the Agreed  Fair  Market  Value of the Company
multiplied by that Member's Membership Percentage.

     "Agreement"  means this Limited  Liability  Company  Agreement as it may be
amended, supplemented or otherwise modified from time to time.

     "Annual  Business  Plan" has the  meaning  ascribed to that term in Section
6.04.

     "Business" means the businesses  conducted by the Company,  as contemplated
under the  Joint  Venture  Agreement,  as such  businesses  may be  expanded  or
otherwise changed from time to time by the Management  Committee pursuant to the
terms hereof.

                                       1
<PAGE>
     "Business  Day" means a day that is not a Saturday,  Sunday or other day on
which banking  institutions  in the State of New York are authorized or required
by law, regulation or executive order to be closed.

     "Capital Account" has the meaning ascribed to that term in Section 5.01.

     "Certificate  of  Formation"  means the  Certificate  of  Formation  of the
Company as filed with the Secretary of State of the State of Delaware, effective
as of the date  hereof,  as the  same  may be  amended,  modified  or  otherwise
supplemented from time to time in accordance with the terms hereof.

     "Claim" has the meaning ascribed to that term in Section 9.02(c).

     "Claim Notice" has the meaning ascribed to that term in Section 9.02(c).

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

     "Company" has the meaning ascribed to that term in the preamble.

     "Definitive  Documents" means this Agreement,  the Joint Venture  Agreement
and all other agreements and documents contemplated by any of the foregoing,  as
the same may be amended,  supplemented or otherwise  modified in accordance with
the terms hereof or thereof, as applicable.

     "Donnelly  Indemnitees"  has the  meaning  ascribed to that term in Section
9.02(a).

     "Exit  Milestone" has the meaning ascribed to that term in Section 8.01(d).

     "Expiration  Date"  shall mean,  with  respect to the  representations  and
warranties set forth herein, the fourth (4th) anniversary of this Agreement.

     "Indemnified  Party"  has the  meaning  ascribed  to that  term in  Section
9.02(c).

     "Indemnifying  Parties"  has the  meaning  ascribed to that term in Section
9.02(c).

     "Initial  Capital  Contributions"  has the meaning ascribed to that term in
Section 3.01.

     "Initial Members" means Schott and Donnelly.

     "Interest"  means the interest of a Member in the Company at any particular
time,  including  the right of such Member to any and all benefits to which such
Member  may be  entitled  as  provided  in this  Agreement,  together  with  the
obligations  of such Member to comply with all the terms and  provisions of this
Agreement.

     "Losses"  means any losses,  liabilities,  fines,  penalties,  obligations,
claims, contingencies, damages, costs or expenses, including all court costs and
attorneys' fees and disbursements.

     "Management  Committee"  has the  meaning  ascribed to that term in Section
6.01.

     "Member  Nonrecourse Debt" means any Company liability (or portion thereof)
that is a "partner  nonrecourse debt" within the meaning of Treasury  Regulation
Section 1.704-2(b)(4).

     "Members" means the Initial Members and any Persons  admitted as additional
or substitute Members of the Company pursuant to Section 8.03.

                                       2
<PAGE>
     "Membership  Percentage"  means, with respect to each Member, the number of
such Member's  Shares in the Company  divided by the total number of outstanding
Shares of the Company, expressed as a percentage.

     "Net Losses" has the meaning ascribed to that term in Section 5.03.

     "Net Profits" has the meaning ascribed to that term in Section 5.03.

     "Remaining  Member"  has  the  meaning  ascribed  to that  term in  Section
8.02(a).

     "Schott  Indemnitees"  has the  meaning  ascribed  to that term in  Section
9.02(b).

     "Section  704(c)  Property"  means any property that is  contributed to the
Company at a time when its adjusted tax basis differs from its fair market value
and any  Company  property  that is the  subject of a  revaluation  pursuant  to
Treasury Regulation Section 1.704-1(b)(2)(iv)(f) at a time when its adjusted tax
basis differs from its fair market value.

     "Shares"  means a  fractional,  undivided  share  of the  Interests  of all
Members.  The number of Shares outstanding and the holders thereof are set forth
on Exhibit A hereof,  as such Exhibit may be amended from time to time  pursuant
to Article III. If  determined  by the  Management  Committee,  the ownership of
Shares shall be evidenced by a certificate  in a form approved by the Management
Committee.

     "Transfer"  means,  with  respect  to any item of  property,  any direct or
indirect  sale,  assignment,   disposition  of  or  other  transfer,  pledge  or
encumbrance of such item,  and  "Transferred"  has a meaning  correlative to the
foregoing.

     "Withdrawing  Member"  has the  meaning  ascribed  to that term in  Section
8.02(d) hereof.

     SECTION 1.02. Definitions Generally.

     (a)  Definitions in this  Agreement  apply equally to both the singular and
plural forms of the defined terms,  and shall apply to capitalized  terms in the
exhibits  and  schedules  attached  hereto,  unless  otherwise  defined  in such
exhibits and schedules.  The words "include" and "including"  shall be deemed to
be  followed  by the  phrase  "without  limitation"  when such  phrase  does not
otherwise appear.  The terms "herein",  "hereof" and "hereunder" and other words
of similar import n refer to this Agreement (of which the attached  exhibits and
schedules  shall  be  considered  a part) as a whole  and not to any  particular
section,  paragraph or  subdivision.  The article and section titles appear as a
matter of  convenience  only and shall not  affect  the  interpretation  of this
Agreement.  All  article,  section,  paragraph,   clause,  exhibit  or  schedule
references not  attributed to a particular  document shall be references to such
parts of this Agreement.

     (b)  Capitalized  terms used but not defined  herein shall have the meaning
ascribed to such terms in the Joint Venture Agreement.

                                       3
<PAGE>
                                   ARTICLE II

                               General Provisions

     SECTION 2.01. Formation. The Company has been formed as a limited liability
company  pursuant to the provisions of the Act by the filing of the  Certificate
of Formation  with the Secretary of State of the State of Delaware.  Each Member
hereby adopts,  confirms and ratifies the  Certificate of Formation and all acts
taken in connection therewith.

     SECTION 2.02. Name. The name of the Company is  "Schott-Donnelly  LLC Smart
Glass Solutions." The Management Committee may change the name of the Company or
adopt such trade or  fictitious  names as it may  determine  with the  unanimous
approval of the Members.

     SECTION  2.03.  Term.  The term of the Company began on the date hereof and
shall  continue in perpetuity or until  terminated in accordance  with the terms
hereof.

     SECTION 2.04. Purpose. The purpose of the Company shall be to carry out the
Business  contemplated in the Joint Venture  Agreement and to carry on any other
lawful business,  purpose or activity for a limited  liability company under the
Act.

     SECTION 2.05. Registered Office/Agent. The name of the Company's registered
agent for  service of process  shall be  Corporation  Service  Company,  and the
address of the  Company's  registered  agent and the  address  of the  Company's
registered  office  in  the  State  of  Delaware  shall  be  1013  Centre  Road,
Wilmington, New Castle County, Delaware 19805-1297. The registered agent and the
registered  office  of the  Company  may be  changed  from  time  to time by the
Management Committee.

     SECTION 2.06.  Principal Office. The Company's  principal place of business
shall be at  Donnelly's  Advanced  Technology  Center at 4545 East Fort  Lowell,
Suite 30,  Tucson,  Arizona  85712,  or such  other  address  as the  Management
Committee shall specify from time to time by written notice to the Members.

                                  ARTICLE III

                   Capital Contributions; Issuance of Shares

     SECTION 3.01. Initial Capital Contributions.

     (a) On the date  hereof,  the Initial  Members  shall each make the capital
contributions to the Company specified in this Section 3.01  (collectively,  the
"Initial Capital Contributions").

     (b) Schott's Initial Capital Contributions shall consist of:

          (i) On the  Closing  Date,  Schott  shall grant to the  Company,  as a
     capital  contribution,  a license to the Schott  Licensed  Patents  and the
     Schott Licensed Knowhow on the terms of the Schott License Agreement; and

          (ii) A commitment  to make certain  contributions  to the Company,  in
     each case as requested by the Management  Committee in accordance  with the
     then-current  Annual Business Plan, and subject to the continuing  survival
     and operation of the Company, in order to fund up to

                                       4
<PAGE>
     nine million five hundred thousand U.S. dollars ($9,500,000) of the initial
     expenditures of the Company, as more fully described in Section 3.04(a).

     (c) Donnelly's Initial Contribution shall consist of:

          (i) On the Closing Date,  Donnelly shall contribute to the Company the
     ATC Assets, free and clear of all liens and encumbrances,  whether legal or
     equitable  (except as  otherwise  provided  herein or in the Joint  Venture
     Agreement), as a capital contribution; and

          (ii) On the Closing Date,  Donnelly  shall grant to the Company,  as a
     capital contribution, certain licenses to the Donnelly Licensed Patents and
     the  Donnelly  Licensed  Knowhow,  as  provided  in  the  Donnelly  License
     Agreement.

     (d) In exchange for the Initial Capital Contributions and the contributions
to be made by Schott  pursuant to Section  3.04(a),  each  Initial  Member shall
receive 1,000 Shares,  which shall be equal to 50% of the issued and outstanding
Shares as of the Closing Date.

     (e) For purposes of the Initial Members' Capital Accounts, the value of the
Initial Members' Initial Capital Contributions are agreed to be as follows:

        Donnelly:        ATC Assets                      $450,000
                         Donnelly License Agreement    $1,300,000

        Schott: Schott License Agreement                 $450,000

     SECTION 3.02. Consents of Third Parties.  Notwithstanding  anything in this
Agreement to the contrary,  this Agreement  shall not constitute an agreement to
assign any asset or any claim or right or any benefit arising under or resulting
from such asset if an  attempted  assignment  thereof,  without the consent of a
third party,  would constitute a breach or other  contravention of the rights of
such third party, would be ineffective with respect to any party to an agreement
concerning  such  asset,  or would in any way  adversely  affect the rights of a
Member or,  upon  transfer,  the  Company  with  respect to such  asset.  If any
transfer or assignment by a Member to, or any  assumption by the Company of, any
interest in, or liability,  obligation or commitment  with respect to, any asset
requires the consent of a third party,  then such assignment or assumption shall
be made subject to such consent being obtained.

     SECTION  3.03.  Issuance  of  Additional  Shares.  From  time to time,  the
Management Committee,  may cause the Company to issue additional Shares or other
Interests to existing or newly-admitted Members in exchange for the contribution
by a Member of  additional  contributions  to the Company.  Upon the issuance of
additional  Shares,  the  Membership  Percentages of all of the Members shall be
adjusted  so that  the  Membership  Percentage  of each  Member  is equal to the
quotient (expressed as a percentage) arrived at by dividing the number of Shares
held by a Member by the total number of Shares then outstanding.

     SECTION 3.04. Additional Capital Contributions.

     (a) Subject to the terms and conditions of the Joint Venture  Agreement and
this Agreement,  Schott shall from time to time make additional contributions to
the Company, in each case as requested by the Management Committee in accordance
with  the then  current  Annual  Business  Plan and  subject  to the  continuing
survival and operation of the Company,  in order to fund up to nine million five
hundred  thousand U.S. dollars  ($9,500,000) of the initial  expenditures of the
Company,  with  respect  to its ) research  and  development  and  manufacturing
activities, including but not limited to expenditures for the purchase

                                       5
<PAGE>
of equipment and procurement of services provided to the Company,  including but
not limited to services provided to the Company by the Parties. Schott's Capital
Account shall be adjusted from time to time, as provided herein, to reflect such
Capital Contributions as they are made by Schott.

     (b) Subject to Section  3.2(b)(iv)(B)  of the Donnelly  License  Agreement,
each Initial  Member  hereby agrees to contribute in any given fiscal year after
the Ramp-Up  Period fifty percent (50%) of the total required  contributions  to
fund the  then-current  Annual  Business  Plan. If the Initial  Members have not
agreed on an Annual  Business  Plan for the current  fiscal  year,  each Initial
Member  hereby  agrees  to  contribute  in that  fiscal  year 50% of the  amount
required  to operate the  Company  but not more than the  respective  percentage
amounts  indicated  below of the  "Free  Cash  Flow"  specified  in the  Initial
Business Plan:

<TABLE>
       Fiscal Year             Percentage of
                              "Free Cash Flow"
          <S>                      <C>
          1999                     60.0%

          2000                     60.0%

          2001                     67.5%

          2002                     75.0%

          2003                     75.0%
</TABLE>

     (c) In addition to the capital  contributions  described in subsections (a)
and (b) of this Section 3.04,  upon request from the Management  Committee,  and
subject to the unanimous consent and approval of the Members,  the Members shall
make additional capital contributions to the Company pro rata in accordance with
their respective Membership Percentages.

     SECTION 3.05. Company's  Assumption of Assumed ATC Obligations.  Subject to
the terms and conditions of this Agreement and the Joint Venture Agreement,  the
Initial Members hereby agree,  effective as of the Closing, to cause the Company
to assume and agree to pay and perform and discharge the Assumed ATC Obligations
as of April 5, 1999. The Initial  Members shall cause the Company to execute and
deliver all such other and additional  instruments and documents and do all such
other acts and things as may be necessary to effectuate the Company's assumption
of the Assumed ATC Obligations,  as contemplated herein and in the Joint Venture
Agreement.

     SECTION 3.06.  Withdrawals,  Interest and Capital Accounts. No Member shall
have the right to withdraw  any part of its capital  contribution  or to receive
any distribution except in accordance with the provisions of this Agreement.  No
interest shall be paid on any capital  contribution to the Company except as may
be set forth in this  Agreement.  A Member shall not have any  obligation to the
Company or to any other  Member to restore any  negative  balance in the Capital
Account of such Member.

     SECTION 3.07. Value of Contributions.

     (a) The  Initial  Members  acknowledge  and  agree  that  (i) the  value of
Schott's  contribution of the DC Project to the Company pursuant to Section 4.06
of the Joint Venture  Agreement,  for purposes of Schott North America's Capital
Account, shall be equal to two times the amount described in

                                       6
<PAGE>
Section  4.06(b)(iii)  of the  Joint  Venture  Agreement,  and (ii) the value of
Schott's  contribution of the DC Project to the Company pursuant to Section 4.07
of the Joint Venture  Agreement,  for purposes of Schott North America's Capital
Account,   shall  be  equal  to  two  times  the  amount  described  in  Section
4.07(a)(iii) of the Joint Venture Agreement.

     (b) The Initial  Members  acknowledge  and agree that the value of Schott's
contributions  to the  Company  pursuant  to Section  4.09 of the Joint  Venture
Agreement,  for purposes of Schott North  America's  Capital  Account,  shall be
equal to two times the  amount  described  in Section  4.09(d)(ii)  of the Joint
Venture Agreement.

                                   ARTICLE IV

                                 Distributions

     SECTION  4.01.  Distributions.  Except as provided in Section 10.02 hereto,
the Company  shall make cash  distributions  to the Members in  accordance  with
their Membership Percentages at such times and in such amounts as the Management
Committee shall determine in its sole discretion.

     SECTION 4.02.  Distributions  in Kind. The Company shall not distribute any
assets  in  kind  unless   approved  by  all  of  the  Members.   Such  property
distributions  shall be distributed based upon their Agreed Fair Market Value in
the same proportions as if cash were distributed.

     If cash and  property  in kind are to be  distributed  simultaneously,  the
Company shall  distribute  such cash and property in kind in the same proportion
to each Member, unless otherwise agreed by the Members.

     SECTION 4.03. Tax Withholding.  Notwithstanding any provision herein to the
contrary,  the  Management  Committee  may  take  any  and all  actions  that it
determines to be necessary or appropriate  to ensure that the Company  satisfies
any and all withholding and tax payment  obligations under Section 1441, 1445 or
1446 of the Code or any other  provision  of the Code or other  applicable  law.
Without limiting the generality of the foregoing,  the Management  Committee may
withhold  any amount of taxes it  determines  is required  to be  withheld  from
amounts  otherwise  distributable  to any Member  pursuant  to this  Article IV;
provided,  however, that such amount shall be deemed to have been distributed to
such Member for purposes of applying the provisions of this Agreement.

                                   ARTICLE V

                       Allocations and Other Tax Matters

     SECTION 5.01. Capital Accounts.

     (a) There shall be established  for each Member on the books of the Company
an account (a "Capital  Account") to be maintained  pursuant to this  Agreement.
The Capital  Account of each Member shall be credited with (i) the amount of all
cash  contributed by a Member to the Company,  (ii) the fair market value of any
property  contributed  to the Company  (net of any  liabilities  secured by such
property  that the  Company  is  considered  to assume or take  subject to under
Section  752 of the Code) and (iii) the amount of any Net  Profits  (or items of
income)  allocated to a Member  pursuant to Section 5.02, and shall be decreased
by (A) the amount of any cash  distributed  to a Member by the Company,  (B) the
fair market value of any property distributed to a Member by the Company (net of
any  liabilities  secured  by such

                                       7
<PAGE>
distributed property that such Member is considered to assume or take subject to
under Section 752 of the Code), (C) the amount of any expenditure of the Company
described  in  Section  705(a)(2)(B)  o  the  Code  (or  treated  as  a  Section
705(a)(2)(B)  expenditure  for  purposes of Section  704(b) of the Code) that is
allocable  to a Member  and (D) the amount of any Net Losses (or item of loss or
deduction)  allocated to a Member pursuant to Section 5.02. The Capital Accounts
of the Members shall also be adjusted  appropriately for their respective shares
of any other adjustment  required under Treasury  Regulation Sections 1.704-1(b)
and 1.704-2.

     (b) In the event  that any  Interest  in the  Company is  Transferred,  the
transferee  of such  Interest  shall  succeed  to the pro  rata  portion  of the
transferor's Capital Account attributable to such Interest.

     (c) Upon the  occurrence  of any event  specified  in  Treasury  Regulation
Section 1.704-1(b) (2) (iv) (f), the Management  Committee may cause the Capital
Accounts of the  Members to be adjusted to reflect the fair market  value of the
Company's property at such time, as provided in such regulation.

     SECTION 5.02. Allocation of Net Profits and Net Losses.

     (a) Subject to Sections 5.02(b) and 5.02(c), the Net Profits and Net Losses
of the Company for each  taxable  year shall be  allocated  among the Members in
proportion to their Interests.

     (b) During the Ramp-Up  Period,  all Net  Profits,  Net Losses and specific
items of income, gain, loss and deduction shall be allocated to Schott.

     (c) Notwithstanding Section 5.02(a) or Section 5.02(b), special allocations
of Net Profits,  Net Losses or specific items of income, gain, loss or deduction
may be required for any taxable year as follows:

          (i) The Company shall  allocate items of Company income and gain among
     the Members at such times and in such  amounts as  necessary to satisfy the
     minimum  gain  chargeback  requirements  of  Treasury  Regulation  Sections
     1.704-2(f) and 1.704-2(i)(4).

          (ii) Any deductions  attributable to Member  Nonrecourse Debt shall be
     allocated  among the Members that bear the  economic  risk of loss for such
     Member Nonrecourse Debt in accordance with the ratios in which such Members
     share  such  economic  risk of loss  and in a  manner  consistent  with the
     requirements of Treasury Regulation Sections 1.704-2(c),  1.704-2(i)(2) and
     1.704-2(j)(1).

          (iii) The Company  shall  specially  allocate  Net Losses and items of
     income and gain when and to the extent  required to satisfy the  "qualified
     income  offset"  requirement  within  the  meaning of  Treasury  Regulation
     Section 1.704-1(b)(2)(ii) (d).

          (iv) In the event a Member's  contribution  to the Company  causes any
     Member to recognize income for U.S. federal income tax purposes, the entire
     amount  of any  deductions  associated  with  such  contribution  shall  be
     allocated to the Member that recognizes  income or, if more than one Member
     recognizes income as a result of such  contributions to the Company,  shall
     be allocated  proportionately based upon the amount of income so recognized
     by each Member.

     SECTION 5.03.  Definition of Net Profits and Net Losses.  The "Net Profits"
or "Net Losses" of the Company,  as appropriate,  shall be the taxable income or
tax loss of the Company as determined for U.S. federal income tax purposes for a
given taxable year, taking into account any separately  stated items,  increased
by the amount of any tax exempt  income of the Company  during such taxable year
and

                                       8
<PAGE>
decreased by the amount of any Code Section  705(a)(2)(B)  expenditures  (within
the meaning of Treasu Regulation  Section  1.704-1(b)(2)(iv)(i))  of the Company
during such taxable year;  provided,  however,  that items of income, gain, loss
and deduction  attributable  to Section  704(c)  Property shall be determined in
accordance    with   the    principles    of   Treasury    Regulation    Section
1.704-1(b)(2)(iv)(g).   Each  Member's   Capital   Account  shall  be  otherwise
maintained  and  adjusted  in  accordance  with  Treasury   Regulations  Section
1.704-1(b)(iii).

     SECTION 5.04. Federal Income Tax Allocations. Section 5.02 provides for the
allocation  of Net Profits  and Net Losses for  accounting  and Capital  Account
maintenance purposes. The Company's ordinary income and losses and capital gains
and losses as determined for U.S.  federal income tax purposes (and each item of
income,  gain, loss or deduction entering into the computation thereof) shall be
allocated to the Members in the same  proportions  as the  corresponding  "book"
items are  allocated  pursuant to the  preceding  provisions  of this Article V;
provided,  however,  that items of income,  gain, loss and deduction relating to
Section  704(c)   Property  shall  be  allocated  in  accordance   with  Section
704(c)(1)(A)  of the Code using the  "traditional  method"  pursuant to Treasury
Regulation  Section  1.704-3(b).  Items  described  in this  Section  5.04 shall
neither be credited nor charged to the Members' Capital Accounts.

     SECTION 5.05. Elections.

     (a) The Members  intend that the Company  shall be treated as a partnership
for U.S.  federal  income tax  purposes.  Accordingly,  neither  the  Management
Committee  nor any Member  shall file any election on behalf of the Company that
is inconsistent with that intent.

     (b)  Except as  otherwise  expressly  provided  herein,  any tax  elections
required  or  permitted  to be made by the Company  under the Code or  otherwise
shall be made in such manner as may be reasonably  determined by the  Management
Committee.

     SECTION 5.06.  Fiscal Year. The fiscal year of the Company shall end on the
last day of September of each year.

     SECTION 5.07. Substantial Economic Effect. Notwithstanding anything in this
Agreement to the contrary,  if the allocation of any item of income,  gain, loss
or expense pursuant to this Article V does not have substantial  economic effect
under  Treasury  Regulationss.1.704(b)(2)  and  is not in  accordance  with  the
Interests    of    the    Members     within    the    meaning    of    Treasury
Regulationss.1.704-1(b)(3),  then for purposes of United  States income tax only
such  item  shall be  reallocated  in such  manner  as to (i)  have  substantial
economic effect or be in accordance with such Members'  Interests in the Company
and (ii) result as nearly as possible in the respective  balances of the Capital
Accounts that would have been  obtained if such item had instead been  allocated
under the provisions of this Article V.

     SECTION 5.08. Other Tax Matters.  The Members agree to treat  contributions
made  pursuant to this  Agreement as governed by Section 721 of the Code. In the
event  that  any  taxing  authority   contests  such  agreed  treatment  of  the
contributions or the treatment of any other item as agreed to by the Members,  a
Member  receiving  notice of such  contest  from  such  taxing  authority  shall
promptly give written  notice of such contest to each other  Member.  Such other
Members may, at their own expense,  participate  in the defense of such contest.
The Members shall  reasonably  cooperate in defending  any such contest,  and no
Member shall settle or otherwise  compromise  such a contest without the written
consent  of the other  Members  (which  shall  not be  unreasonably  delayed  or
withheld).  In the event of a Member's refusal to consent to a settlement,  such
Member shall,  to the extent  permitted by law, assume control of the defense of
such contest,  and such Member shall bear any legal fees incurred by such Member
in undertaking such defense to the extent incurred after the assumption.

                                       9
<PAGE>
                                   ARTICLE VI

                                   Management

     SECTION 6.01. Delegation of Authority. Except as otherwise provided herein,
each of the  Members  agrees  that the power to direct and  control  the Company
shall be delegated to certain  managers,  elected in the manner provided herein,
who  together  shall   constitute  a  management   committee  (the   "Management
Committee").  Approval or action taken by the Management Committee in accordance
with this Agreement shall constitute approval or action by the Company and shall
be binding on each Member.

     SECTION 6.02. Management Committee.

     (a) Voting and Members.

          (i) Initially, the Management Committee shall consist of four persons.
     As long as each Initial Member's  Membership  Percentage equals 50%, Schott
     and Donnelly  shall each appoint two members of the  Management  Committee,
     each such person to serve on the  Management  Committee  at the pleasure of
     the Initial Member  appointing  such person.  Each member of the Management
     Committee shall be an officer, director or executive employee of the Member
     making  such  appointment  or  such  appointing  Member'  Affiliate,  or an
     officer,  director  or employee  of the  Company.  The names of the initial
     members  of the  Management  Committee  are set forth in  Exhibit B hereof.
     After the  Ramp-Up  Period,  each  Member  shall have the right to maintain
     representation on the Management Committee commensurate with its Membership
     Percentage.

          (ii) For purposes of any  approval or action  taken by the  Management
     Committee,  each member of the  Management  Committee  shall have one vote.
     Each member of the Management  Committee  designated by a Member shall, for
     purposes of  determining a quorum and taking any actions or  approvals,  be
     entitled to represent and cast the votes of any other Management  Committee
     member designated by such Member who is not otherwise represented in person
     or by proxy when any  action or  approvals  are taken.  Except as set forth
     herein,  a majority  vote of all of the voting  power of the members of the
     Management Committee shall constitute action on that matter that is binding
     upon the Company and the Members.

          (iii) The quorum necessary for any meeting of the Management Committee
     shall be 100% of the members of the  Management  Committee,  represented in
     person, by proxy or by representative,  as provided in Section 6.02(a)(ii).
     A quorum  shall be deemed not to be present at any meeting for which notice
     was not properly given as provided for herein, unless the member or members
     as to whom such notice was not properly  given attend such meeting  without
     protesting  the lack of notice or duly execute and deliver a written waiver
     of notice or a written consent to the holding of such meeting.

          (iv) Any action taken by a member of the Management  Committee in such
     member's  capacity as such shall,  so far as the Members are concerned,  be
     deemed to have been duly  authorized  by the  Member  that  appointed  such
     member;  provided,  however, that any such action shall not be deemed to be
     an  approval,  consent or agreement of such Member for any purposes of this
     Agreement  for which  approval,  consent or  agreement  must be  separately
     obtained from such Member pursuant to the terms of this Agreement.

                                       10
<PAGE>
          (v) The initial President shall be appointed by Schott, subject to the
     approval of Donnelly,  which approval shall not be  unreasonably  withheld.
     Subsequently,  the  President  shall  be  elected  by  and  report  to  the
     Management  Committee.  The  initial  President  shall  be  the  person  so
     designated in Exhibit B hereof.

          (vi) The initial Chairman of the Management Committee, who shall serve
     for two years,  shall be the person so designated in Exhibit B hereof.  The
     initial Chairman shall be appointed by Donnelly, subject to the approval of
     Schott,  which  approval  shall  not be  unreasonably  withheld;  upon  the
     expiration of such two-year  term,  the next Chairman shall be appointed by
     Schott,  subject to the approval of Donnelly,  which  approval shall not be
     unreasonably withheld.  Thereafter, the right to appoint the Chairman shall
     alternate  between the Members,  subject to the reasonable  approval of the
     non-appointing Member.

          (vii) The Secretary of the Company shall be elected by the  Management
     Committee.  The  Secretary  may be a  person  who is  not a  member  of the
     Management Committee.

     (b) Meetings and Notices.

          (i)  Meetings  of  the  Management  Committee  shall  be  held  at the
     principal  offices  of  the  Company  or at  such  other  place  as  may be
     determined  by the  Management  Committee.  A  meeting  of  the  Management
     Committee  may be held by  conference  telephone or similar  communications
     equipment by means of which all members participating in the meeting can be
     heard  by  all  other  participants.  Unless  otherwise  determined  by the
     Management Committee, regular meetings of the Management Committee shall be
     held at  least  quarterly  on such  dates  and at such  times  as  shall be
     determined by the Management Committee. Notice of any regular meeting shall
     be given to each member of the  Management  Committee by the Company or any
     Member at least twenty (20) Business  Days prior to such  meeting.  Special
     meetings  of the  Management  Committee  may be called by any  Member on at
     least twenty (20) Business Days' notice to each member and alternate member
     thereof,  which  notice  shall state the purpose or purposes for which such
     meeting is being called.

          (ii) The actions  taken by the  Management  Committee  at any meeting,
     however called and noticed,  shall be as valid as though taken at a meeting
     duly held after regular call and notice if (but not until),  either before,
     at or after the meeting, the member or members as to whom it was improperly
     held duly  executes  and  delivers a written  waiver of notice or a written
     consent to the holding of such meeting. A vote of the Management  Committee
     may be taken  either in a meeting of the  members  thereof or by  unanimous
     written consent without a meeting.

          (iii) The  Management  Committee  may establish  reasonable  rules and
     regulations  to  provide  for the  keeping of  minutes  and other  internal
     Management  Committee  governance not  inconsistent  with the terms of this
     Agreement.

     (c) Power of Members. Nothing in this Section shall derogate from the power
of the  Members,  which is absolute,  to mutually  agree in writing to cause the
Company to act or refrain from acting.

     (d) Enforcement of Company's Rights. Notwithstanding anything herein to the
contrary, the Company may enforce its rights under any agreement with any Member
without  such  Member's  consent and without the  approval of the members of the
Management Committee appointed by such Member.

                                       11
<PAGE>
     (e)  Deadlock.  In the event that a decision  cannot be reached  within the
Management  Committee because of deadlock,  the principal  executive officers of
each Member,  or their  designees,  shall use reasonable  efforts to resolve the
dispute in good faith.

     SECTION 6.03. Employees; Officers.

     (a) General.

          (i)  The  Management  Committee  shall  retain  and  employ  officers,
     including a President, and such other officers as shall be deemed necessary
     or advisable to operate the Company.

          (ii) The  President  shall  appoint the key  personnel  of the Company
     other than the  President,  subject,  in each case,  to the approval by the
     Management  Committee.  The  officers  of the  Company  shall be subject to
     removal with or without cause by the  Management  Committee  subject to the
     terms of any agreements between the Company and the employee.

          (iii) All officers of the Company (other than the President) shall (A)
     report to the President or another officer  designated by the President and
     (B) attend meetings of the Management Committee as requested.

     (b) The President shall be the most senior officer of the Company and shall
be  responsible  for the  day-to-day  operation of the  Company,  subject to the
control  of  the  Management  Committee,  and  he or  she  shall  report  to the
Management Committee.

     (c) All  employees and officers of the Company,  other than the  President,
shall be "at will" unless otherwise determined by the Management Committee.

     SECTION 6.04. Annual Business Plan and Budget.

     (a) Not later than two (2) months before the end of each fiscal year of the
Company,  the President shall prepare and recommend to the Management  Committee
an annual  business plan and budget,  which shall  include,  among other things,
performance  milestones for such fiscal year (each,  an "Annual  Business Plan")
for the next  succeeding  fiscal year. The members of the  Management  Committee
shall review each proposed  Annual Business Plan in a reasonable and expeditious
manner.

     (b) The Initial Business Plan shall be formally ratified and adopted by the
Management Committee at its first meeting.

     (c) The President shall be deemed  authorized,  without further approval of
the Management Committee,  to conduct the operations and Business of the Company
during any fiscal year, and to pay the expenses thereof out of Company funds, in
accordance with the then current Annual Business Plan, provided,  however,  that
the Management Committee shall approve capital expenditures in excess of $25,000
if not included in the current Annual Business Plan and in excess of $100,000 if
included in the current Annual Business Plan.

     (d) In the event the  Management  Committee is unable to agree on an Annual
Business  Plan by  September  30 of any given  year,  or such  later date as the
Management  Committee may designate,  the principal  executive  officers of each
Member, or their designees,  shall use reasonable efforts to resolve the dispute
in good faith; provided,  however, that the President shall remain authorized to
conduct the  Business  and  operations  of the Company as  aforesaid  during the
resolution process. During such time a such dispute shall continue, the business
and operations of the Company, and the contributions required

                                       12
<PAGE>
by Section  3.01(b)(ii) and Section 3.04(a),  shall be carried out to the extent
feasible in conformity with the Initial  Business Plan and prior mutually agreed
Annual Business Plans.

     SECTION 6.05. Members' Consents or Approvals.

     (a) Each  Member  shall  designate  one or more  individuals  who  shall be
authorized  to act on  behalf of such  Member in  connection  with  consents  or
approvals  necessary  or  appropriate  pursuant to the terms of this  Agreement;
provided, however, that all such acts on behalf of a Member shall be in writing.
Members may change such designees by notifying the Company and each of the other
Members in writing.

     (b) Each Member  hereby  agrees to give any  consent or  approval  required
pursuant to the terms of this  Agreement,  or to indicate  that such  consent or
approval  shall not be given,  within 30 days of  written  request  by the other
Member or Members or by the Company.

     SECTION 6.06. Major Actions

     (a) The Management  Committee shall not, without the unanimous  affirmative
vote of the Management Committee:

          (i) undertake the  acquisition of a controlling  interest in any other
     Person;

          (ii)  undertake  any merger,  consolidation,  joint venture or sale of
     assets with or to any other Person,

          (iii) issue or transfer additional Shares to any other Person;

          (iv) dissolve or liquidate the Company (other than pursuant to Section
     8.01 or Section 8.02);

          (v)  undertake  any  significant  change  in  the  Company's  Business
     activities, including but not limited to EC Products and the license of new
     products;

          (vi) enter into an agreement with a Member; or

          (vi)  transfer  or license any  technology  or  intellectual  property
     rights; provided,  however, that a Member may withhold its approval of such
     transfer or license  based  solely on its own  interests,  but its approval
     shall not be unreasonably withheld.

     (b) The Company shall take any action necessary or appropriate to carry out
the purposes of this Section 6.06.


                                  ARTICLE VII

                               Books and Records

     SECTION 7.01.  Books and Records.  The Management  Committee  shall keep or
cause to be kept complete and accurate books of account and records with respect
to the  Company's  business.  The  books of the  Company  shall at all  times be
maintained  by the  Management  Committee.  Each Member and its duly  authorized
representatives  shall have the right to examine and copy the  Company's  books,
records and  documents  during normal  business  hours.  The Company's  books of
account shall be kept in

                                       13
<PAGE>
accordance with generally accepted accounting principles,  consistently applied.
The Company's  independent  auditors shall be an independent  public  accounting
firm, which shall not be the accounting firm for either Initial Member,  that is
selected by the Management Committee.

     SECTION 7.02. Reports to Members.

     (a) Within 60 days after the end of each of the first three fiscal quarters
of each year,  the Company  shall  prepare and mail to the Members an  unaudited
report setting  forth:  (i) a balance sheet of the Company as of the end of such
fiscal  quarter  and (ii) an income  statement  of the  Company  for such fiscal
quarter, comparing actual results to the budget for such period.

     (b) The  Company  shall use  diligent  efforts to  prepare  (or cause to be
prepared)  and mail to the Members,  within 60 days after the end of each fiscal
year, a report setting  forth:  (i) a balance sheet of the Company as of the end
of such fiscal  year,  (ii) an income  statement  of the Company for such fiscal
year,  and (iii) a statement of such Member's  Capital  Account as of the end of
such fiscal year. After the end of the second fiscal year of the Company, at the
request of either Initial Member, such report shall be audited.

     (c) The  Company  shall use  reasonable  efforts  to  prepare  or cause the
Company's independent  accountants to prepare and transmit to each Member within
90 days following each calendar year a U.S. federal income tax schedule and such
other tax  information  as may be reasonably  necessary to enable such Member to
prepare its U.S.  federal,  state and local income tax returns as they relate to
the Company for such fiscal year.  The Company  shall  provide  estimates of the
Company's taxable income as may be reasonably requested by any Member in writing
from time to time.

                                  ARTICLE VIII

         Withdrawal of Initial Members; Transfers; Participation Rights



     SECTION 8.01. Withdrawal in First Five Years.

     (a) Neither Initial Member may voluntarily  withdraw from the Company prior
to the fifth  (5th)  anniversary  of the  Closing  Date,  except as  provided in
Section 8.01(b).

     (b) If during the first five years of this Agreement:

     (W) either  Initial  Member  becomes owned or controlled by an entity which
     either directly or through an Affiliate or joint venture  competes with the
     Company, then the Initial Member not undergoing such change of control may,

     (X) either Initial Member becomes insolvent or suspends its usual business,
     or enters into an agreement with its creditors to reduce its obligations to
     them or to defer their  fulfillment,  or makes a general assignment for the
     benefit of its creditors,  or commences any proceeding relating to it under
     any Chapter of Title 11 of the United  States Code, or seeks any other form
     of  relief  from  its  creditors  or from a court  or  governmental  agency
     pursuant  to any law,  statute or  procedure  of any  jurisdiction  for the
     relief of  financially  distressed  debtors,  or a debtor relief  procedure
     shall be  commenced  against such Initial  Member,  then the other  Initial
     Member may,

     (Y) the Company fails to achieve any Exit  Milestone,  then either  Initial
     Member may, or

                                       14
<PAGE>
     (Z) Donnelly  shall be permitted to treat Schott's  withdrawal  from the DC
     Project  or  termination  of its  Automotive  Glazing  Business  as an Exit
     Milestone  pursuant  to  Section  3.2(b)(iv)(A)  of  the  Donnelly  License
     Agreement, then Donnelly may:

          (i) Give notice of its  intention  to withdraw  from the  Company,  in
     which case the other Initial  Member may, at its option,  within 60 days of
     the receipt of such notice:

               (a) agree to purchase the withdrawing  Initial Member's  Interest
          for Agreed Fair Market Value,  determined  at the time of  withdrawal,
          but payable on December 31, 2005, without interest, or

               (b)  not  agree  to  acquire  the  withdrawing  Initial  Member's
          Interest,  but provide all additional  funding required by the Company
          under  the  Initial  Business  Plan  and/or  the  then-current  Annual
          Business  Plan,  in  which  case the  Initial  Member  providing  such
          additional  funding  shall  be  entitled  to  an  adjusted  Membership
          Percentage,   which  shall  be   determined  by  dividing  the  amount
          contributed  by the  sum of the  value  of the  Company  prior  to the
          contribution plus the amount of the contribution, or

               (c) withdraw,  in which case the Company shall be liquidated,  in
          the manner provided herein; or

          (ii) Remain as an Initial  Member of the Company but provide notice to
     the  other  Initial  Member  that it will not  make  any pro  rata  capital
     contributions,  in which  case the other  Initial  Member may  provide  the
     required cash flow by loan or capital contribution to the Company. If funds
     are  provided to the Company as a capital  contribution,  the  contributing
     Initial  Member  shall be entitled to an  adjusted  Membership  Percentage,
     which shall be determined by dividing the amount  contributed by the sum of
     the value of the Company prior to the  contribution  plus the amount of the
     contribution.

     (c) If prior to the fifth  anniversary of the Closing either Initial Member
fails to make  contributions  required in Article III for ninety (90) days after
notice that such  contributions are due, that Initial Member's Interest shall be
deemed to be forfeited  unless (i) the  Company's  deficit cash flow exceeds the
deficit  cash flow in the  Initial  Business  Plan by the  following  respective
percentages for two consecutive years:

<TABLE>
            Fiscal Year             Percentage of
                                   "Free Cash Flow"
               <S>                      <C>
               1999                     60.0%

               2000                     60.0%

               2001                     67.5%

               2002                     75.0%

               2003                     75.0%
</TABLE>
      or (ii) the Company has failed to achieve an Exit Milestone.

                                       15
<PAGE>
     (d) As used in this  Agreement,  "Exit  Milestone"  shall  mean  any of the
milestones described below:

          (i) With respect to Skylights:

<TABLE>
           Fiscal Year Ending                 Company's
             September 30                 Cumulative Total
                                        Sales Through Fiscal
                                          Year Less Than
                 <S>                       <C>
                 2000                       4,000 units

                 2001                      11,500 units

                 2002                      23,000 units

                 2003                      41,000 units
</TABLE>

          (ii) With respect to Sun Roofs:
<TABLE>

  Milestone Date               Milestone Not Achieved
  <S>               <C>
June 1, 2001       System  design  developed;  positive  customer  feedback  and
                   acceptance.

January 1, 2002    All specifications defined with lead customer and feasibility
                   proven;   partner/lead  customer  for  Sunroofs  defined  and
                   contractual agreements finalized.

April 1, 2002      Evaluation samples delivered to customer.

June 1, 2003       Start of production of Sunroofs.

June 1, 2004       Cumulative 5,000 units sold since start of production.
</TABLE>

     SECTION 8.02. Withdrawal After Five Years.

     (a) Either Initial Member may voluntarily  withdraw subsequent to the fifth
anniversary  of the  Closing  Date,  and  shall be  deemed  voluntarily  to have
withdrawn  if that  Initial  Member (X) had a change of control  under  which it
becomes  owned or  controlled  by an entity which either  directly or through an
Affiliate or joint venture competes with the Company or (Y) becomes insolvent or
suspends its usual  business,  or enters into an agreement with its creditors to
reduce its obligations to them or to defer their fulfillment, or makes a general
assignment  for the  benefit  of its  creditors,  or  commences  any  proceeding
relating to it under any Chapter of Title 11 of the United States Code, or seeks
any other  form of relief  from its  creditors  or from a court or  governmental
agency  pursuant to any law,  statute or procedure of any  jurisdiction  for the
relief of financially  distressed debtors, or a debtor relief procedure shall be
commenced  against such Initial  Member.  Before any Transfer of its Interest to
third party, a

                                       16
<PAGE>
Withdrawing  Member  shall first offer its  Interest  to the  remaining  Initial
Member ("Remaining Member").

     (b) An Initial Member shall have been deemed to give a notice of withdrawal
in the event it remains in material default of any of its obligations under this
Agreement for sixty (60) days after notice.

     (c) A withdrawing  Initial  Member under  paragraphs  8.02(a) or (b) shall,
within sixty (60) days after such withdrawal,  specify a price at which it would
be  willing  to sell its  Interest  to the  Remaining  Member  or  purchase  the
Remaining Member's Interest.

     (d) If an Initial  Member gives notice that it wishes to withdraw  from the
Company  or  desires  to  Transfer  its  Interest  to a  bona  fide  third-party
Transferee (a "Withdrawing Member") the Remaining Member may, at its option:

          (i) cause the Company to be dissolved,  as provided herein;  provided,
     however,  that if the  Company is  dissolved  pursuant  to this  subsection
     (d)(i),  neither Initial Member shall be permitted to purchase any business
     or any  material  assets of the  Company  without  the consent of the other
     Initial Member; or

          (ii) purchase the Withdrawing Member's Interest, at its option, at (A)
     85% of the  price  specified  by the  Withdrawing  Member  under  paragraph
     8.02(c),  (B)  85% of the  Agreed  Fair  Market  Value  of the  Withdrawing
     Member's  Interest,  (C) 85% of the price that a bona fide  third  party is
     willing to pay for such  Interest in an arm's length  transaction  with the
     Withdrawing Member or (D) 85% of the price stated by the Withdrawing Member
     in  its  notice  under  Section  8.05(a)(ii);  provided,  however,  that  a
     Withdrawing  Member  shall have the right to withdraw its offer to sell its
     Interest at the price stated in its notice under Section 8.05(a)(ii) if the
     Agreed Fair Market Value of such  Interest is  subsequently  appraised  and
     determined  to be lower than such stated  price.  If the  Remaining  Member
     purchases a  Withdrawing  Member's  Interest,  as provided in this  Section
     8.02, the Remaining Member shall pay 25% of the total purchase price at the
     time of the closing of such purchase from the Withdrawing Member and 25% of
     the  total  purchase  price  on  each  of  the  first,   second  and  third
     anniversaries of such closing, together with interest thereon, at an annual
     interest rate equal to the Withdrawing Member's  then-current cost of funds
     or

          (iii) not purchase the Withdrawing Member's Interest,  but provide all
     additional  funding required by the Company under the Initial Business Plan
     and/or the  then-current  Annual  Business  Plan, in which case the Initial
     Member  providing such additional  funding shall be entitled to an adjusted
     Membership  Percentage,  which shall be  determined  by dividing the amount
     contributed  by the Agreed  Fair Market  Value of the Company  prior to the
     contribution plus the amount of the contribution.

     SECTION 8.03. Admission of Substitute or Additional Members.

     (a) No  substitute  or  additional  Member shall be admitted to the Company
without the prior written approval of each of the other Members. Each substitute
or  additional  Member  shall agree to become a party to this  Agreement,  which
shall be  appropriately  amended to reflect to admission of such  substitute  or
additional Member.

     (b) The Initial  Members  acknowledge  and agree that if any  substitute or
Members  are  admitted  to the  Company  this  Article  VIII shall be amended to
provide for mutually  acceptable  withdrawal  provisions binding on all Members,
effective as of the date on which additional or substitute Members are admitted.

                                       17
<PAGE>
     SECTION 8.04. Restrictions on Transfer.

     (a) All  Transfers  of  Interests  shall be  effected  by a Transfer of the
Shares evidencing such Interests.  The Transferring Member shall provide written
notice of such Transfer to the Company.

     (b) No Member shall Transfer its Shares in the Company except for:

          (i) Transfers in accordance with Section 8.03, Section 8.04 or Section
     8.05; or

          (ii) Transfers from a Member to such transferring Member's Affiliate.

     Any purported Transfer of all or any part of any Interest in the Company in
violation  of this  Section  8.04(b)  shall be null and void ab initio and of no
force or effect.

     (c) The  Interest of a Member in the Company  may be  Transferred,  only in
whole and not in part  (except  to an  Affiliate  of such  Member)  by a sale or
exchange of such Shares  representing a Member's  entire Interest in the Company
following the fifth  anniversary  of the date hereof.  A Member may Transfer its
Shares only  pursuant to a sale after such  Member has fully  complied  with the
provisions of this Section 8.04 with respect to such sale. Regardless of whether
a Transfer of Shares in the Company is permitted hereunder,  such Transfer shall
not release the  transferor  from any liability  under this  Agreement,  whether
arising  before or after  such  Transfer,  unless  and until the  transferee  is
admitted as a Member of the Company in accordance with Section 8.03.

     (d)  In  no  event  shall  any  Member  transfer  its  Interest  to  Gentex
Corporation (or any of its  Affiliates),  without the prior written  approval of
Donnelly, or to Corning Inc. (or any of its Affiliates) or to Denton Corporation
(or any of its Affiliates) without the prior written approval of Schott.

     SECTION 8.05. Right of First Refusal; Right of First Offer .

     (a) If a  Withdrawing  Member has  received  an  unsolicited  offer for the
purchase of all of its Interest  from a bona fide third party and  determines to
entertain such offer, or wishes to seek a third-party purchaser of its Interest,
then such  Withdrawing  Member shall notify the  Remaining  Member of either (i)
that an unsolicited offer has been received from a bona fide third party for the
purchase of the Withdrawing  Member's Interest,  which the Withdrawing Member is
considering  accepting  or (ii) tha it wishes to sell its  Interest.  The notice
shall state the price,  terms and  conditions of payment and the identity of the
bona fide  third  party,  or if there is at that time no  prospective  bona fide
third party, the price at which such Withdrawing Member would be willing to sell
its Interest to a bona fide third party purchaser.

     (b) Subject to Section 8.02(d),  the Remaining Member shall have sixty (60)
days in which to offer to purchase from the Withdrawing Member all, but not less
than  all,  of  its  Interest  at  the  purchase  price   described  in  Section
8.02(d)(ii).  If the Remaining  Member  decides not to purchase the  Withdrawing
Member's  Interest,  or if the Remaining  Member fails to notify the Withdrawing
Member in writing of its  intentions  within  sixty (60) days of the notice from
the Withdrawing Member,  then, subject to the other terms and conditions of this
Agreement,  the  Withdrawing  Member may sell all, but not less than all, of its
Interest  to any  bona  fide  third  party  for a  price  and on the  terms  and
conditions  no less  favorable  than the price set forth in the notice  during a
period which is one hundred eighty (180) days if no filing is required under the
Hart Scott  Rodino  Antitrust  Act ("HSR") or similar  antitrust  provisions  in
applicable  foreign  countries  or the  European  Union or if such a  filing  is
required,  the shorter of two hundred  forty (240) days or sixty (60) days after
the expiration of early  termination of the HRS pre-merger  notification  period
and such other similar  period(s) for other  applicable  statutes,  provided the
Withdrawing Member sends a

                                       18
<PAGE>
written notice to the Remaining Member stating the name of the purchaser and the
price and the  terms of the  transactions  at least  sixty  (60)  days  prior to
closing and provided further that the Purchaser agrees to be bound by all of the
terms and conditions of this Agreement.

     (c) The closing of any  purchase by one Initial  Member of another  Initial
Member's  Interest  under this Section 8.05 shall occur within  ninety (90) days
after  written  notice  to the  Withdrawing  Member  of the  Remaining  Member's
election to purchase if no filing is required under the HSR Act or other similar
applicable statutes, or if such a filing is required, the shorter of two hundred
forty (240) days or thirty (30) days after the  expiration or early  termination
of the HSR  pre-merger  notification  period  and  similar  provisions  of other
applicable statutes.

     (d)  Notwithstanding  the foregoing,  in the event that a Withdrawing Party
finds a third party willing to purchase its Interest,  the Remaining Party shall
have the right to demand that such third-party  purchaser also offer to purchase
the Remaining  Party's  Interest at the same price and on the same terms so that
100% of the Interests shall be offered for sale to such third person.


                                   ARTICLE IX

                         Exculpation and Indemnification

     SECTION 9.01. Exculpation and Indemnification.

     (a) No Member shall be liable to the Company or to any other Member for any
Losses arising from,  relating to, or in connection  with, this Agreement or the
business or affairs of the Company,  except (i) for any Losses as are determined
by final arbitral decision to have resulted from such Member's gross negligence,
willful  misconduct  or from  the  failure  by  such  Member  to make a  capital
contribution  required to be made by it pursuant to Article III or (ii) pursuant
to Section 9.02.

     (b) The Company shall,  to the fullest extent  permitted by applicable law,
indemnify and hold harmless each Member against any and all Losses to which such
Member may become subject in connection  with any matter arising from,  relating
to, or in connection with actions taken or services  performed  pursuant to this
Agreement  or at the  request of the  Company,  except (i) for any Losses as are
determined by final arbitral  decision or final judgment of a court of competent
jurisdiction,   as  applicable,   t  have  resulted  from  such  Member's  gross
negligence,  willful  misconduct  or from the  failure by such  Member to make a
capital  contribution  required to be made by it pursuant to Article III or (ii)
pursuant to Section 9.02.

     (c)  Donnelly  shall  indemnify  and hold Schott and the  Company,  and its
managers,  officers,  employees and agents (each, an "Indemnitee") harmless from
any and all Losses,  that any  Indemnitee  may suffer or incur as a result of or
relating to any liability,  obligation, contract or commitment (whether known or
unknown,  contingent or fixed), arising out of the ownership or operation of the
ATC Assets or the ATC facility in Tucson,  except as  otherwise  provided in the
Joint Venture Agreement, on or prio to the Closing Date.

     (d) The foregoing  provisions of this Section shall survive any termination
of this Agreement.

     SECTION 9.02. Indemnification by Initial Members.

     (a)  Indemnification  by Schott.  Schott shall indemnify and hold Donnelly,
its Affiliates and their respective directors, officers, managers, employees and
agents (collectively, the "Donnelly Indemnitees")

                                       19
<PAGE>
and the Company harmless from any and all Losses that any Donnelly Indemnitee or
the Company may suffer or incur as a result of or relating to Schott's breach of
any covenant or agreement made pursuant to this Agreement.

     (b) Indemnification by Donnelly.  Donnelly shall indemnify and hold Schott,
its Affiliates and their respective directors, officers, managers, employees and
agents  (collectively,  the "Schott  Indemnitees") and the Company harmless from
any and all Losses,  that any Schott  Indemnitee may suffer or incur as a result
of or relating to Donnelly's  breach of any covenant or agreement  made pursuant
to this Agreement.

     (c)  Notice.  Any party  entitled  to  receive  indemnification  under this
Section 9.02 (the  "Indemnified  Party") agrees to give prompt written notice (a
"Claim Notice") to the party or parties required to provide such indemnification
(the  "Indemnifying  Parties") upon the occurrence of any indemnifiable  Loss or
the  assertion of any claim or the  commencement  of any action or proceeding in
respect of which such a Loss may  reasonably be expected to occur (such a claim,
action or proceeding being referre to as a "Claim"), but the Indemnified Party's
failure to give such notice shall not affect the obligations of the Indemnifying
Party under this Section 9.02 except to the extent that the  Indemnifying  Party
is prejudiced  thereby.  Such written  notice shall include a description of the
event or events forming the basis of such Loss or Claim and the amount involved,
unless such amount is uncertain or  contingent,  in which event the  Indemnified
Party shall give a later additional written notice when the amount becomes fixed
or reasonably determinable.

     (d)  Defense  of  Claims.  The  Indemnifying  Party may elect to assume and
control the defense of any Claim, including the employment of counsel reasonably
satisfactory  to the  Indemnified  Party and the  payment  of  expenses  related
thereto,  if (i) the Indemnifying Party acknowledges its obligation to indemnify
the  Indemnified  Party for any Losses  resulting  from such Claim and  provides
reasonable evidence to the Indemnified Party of its financial ability to satisfy
such  obligation,  and (ii) the  Claim  does not  seek to  impose  any  material
liability or obligation on the  Indemnified  Party other than for money damages.
If such conditions are satisfied and the Indemnifying Party elects to assume and
control the  defense of a Claim,  then (x) the  Indemnifying  Party shall not be
liable for any  settlement  of such Claim  effected  without its consent,  which
consent shall not be unreasonably  withheld;  (y) the Indemnifying Party may not
settle  such  Claim  without  the  consent of the  Indemnified  Party (not to be
unreasonably  withheld) unless such settlement includes a full and unconditional
release  of the  Indemnified  Party;  and (z) the  Indemnified  Party may employ
separate  counsel and  participate in the defense  thereof,  but the Indemnified
Party shall be responsible  for the fees and expenses of such counsel unless (1)
the  Indemnifying  Party has  failed to assume  the  defense of such Claim or to
employ counsel with respect thereto or (2) a conflict of interest exists between
the interests of the Indemnified  Party an the Indemnifying  Party that requires
representation by separate counsel,  in which case the fees and expenses of such
separate counsel shall be paid by the Indemnifying Party. If such conditions are
not satisfied,  the Indemnified  Party may assume and control the defense of the
Claim at the expense of the  Indemnifying  Party;  provided,  however,  that the
Indemnified  Party may not  settle  any such Claim  without  the  consent of the
Indemnifying  Party (not to be  unreasonably  withheld)  unless such  settlement
includes  a full and  unconditional  release  of the  Indemnifying  Party;  and,
provided further, that the Indemnifying Party is given a reasonable  opportunity
to participate in such defense (at the Indemnifying Party's expense).

     (e) The  foregoing  provisions  of this  Section  9.02  shall  survive  any
termination of this Agreement.

     SECTION  9.03.  Liability  of the Members.  Except as  otherwise  expressly
provided in the Act,  the debts,  obligations  and  liabilities  of the Company,
whether  arising  in  contract,  tort or  otherwise,  shall be solely the debts,
obligations  and  liabilities  of the Company,  and no Member shall be obligated
personally

                                       20
<PAGE>
for any such debt,  obligation  or liability of the Company  solely by reason of
being a Member. Except as otherwise expressly provided in the Act, the liability
of each  Member  for  capital  contributions  shall be  limited to the amount of
capital contributions  required to be made by such Member in accordance with the
provisions  of this  Agreement,  but only when and to the  extent the same shall
become due pursuant to the provisions of this  Agreement.  In no event shall any
Member enter into any  agreement or  instrument  that would create or purport to
create  personal  liability  on the  part of any  other  Member  for any  debts,
obligations or  liabilities  of the Company  without the prior written consen of
such other Member.

                                   ARTICLE X

                      Dissolution, Liquidation and Transfer

     SECTION 10.01. Dissolution.  The Company shall be dissolved and its affairs
shall be wound up:

     (a) upon the bankruptcy or dissolution of any Member, unless within 90 days
of such event  either  Initial  Member or a majority  of the  Members  holding a
majority of the  remaining  Membership  Interests  determines  to  continue  the
business of the Company;

     (b) upon the vote of all the Members to dissolve the Company; or

     (c) upon the  liquidation  of the Company  pursuant  to Section  8.01(b) or
Section 8.02(d).

     SECTION 10.02. Liquidation.

     (a) Upon a dissolution  pursuant to Section 10.01,  the Company's  business
and assets shall be liquidated in a prompt and orderly  manner.  The  Management
Committee  shall act as the  liquidator  to wind up the  affairs of the  Company
pursuant to this  Agreement.  If there  shall be no  Management  Committee,  the
remaining  Member or Members may approve one or more  liquidators  to act as the
liquidator  in carrying out such  liquidation.  In  performing  its duties,  the
liquidator  shall be  authorized  to sell,  distribute,  exchange  or  otherwise
dispose  of Company  assets  (except  knowhow,  patents  and other  intellectual
property)  in  accordance  with  the  Act  in any  reasonable  manner  that  the
liquidator  shall determine to be in the best interest of the Members,  provided
that no business  of the Company or material  group of assets of the Company may
be  transferred  to any Member  without the approval of the other Members and no
Member shall  purchase such  business or assets  without such  approval.  Upon a
dissolution of the Company and prior to making any  distribution  of property to
Members in liquidation,  the Company's  assets shall be deemed to have been sold
at their  fair  market  values and the  resulting  deemed Net Profit or Net Loss
shall be allocated  to the  Members'  Capital  Accounts in  accordance  with the
provisions of Section 5.02.

     (b) The proceeds of the  liquidation of the Company shall be distributed in
the following order and priority:

          (i) first,  to  creditors  of the  Company  that are not  Members  (or
     Affiliates  of  Members) in order of priority as provided by law in payment
     of unpaid liabilities of the Company to the extent required by law or under
     agreement with such creditors;

          (ii)  second,  to the  setting of any  reserves  which the  liquidator
     reasonably  deems necessary for any  anticipated,  contingent or unforeseen
     liabilities or  obligations of the Company  arising out of or in connection
     with the conduct of the Company's business, provided that at the

                                       21
<PAGE>
     expiration  of such  period the balance  thereof  shall be  distributed  in
     accordance with the balance of this Section 10.02(b);

          (iii)  third,  to any Member (or  Affiliate of a Member) for any other
     loans  or  debts  owing  to  such  Member  (or  Affiliate)  by the  Company
     (including  reimbursement  of costs or  expenses  incurred on behalf of the
     Company in accordance with the terms hereof); and

          (iv)  fourth,  the  balance,  if  any,  pro  rata to  each  Member  in
     accordance with its Membership Percentage.

     SECTION  10.03.  Claims of Members.  The  Members  shall look solely to the
Company's  assets  for the  return of their  capital  contributions  and for any
amount  payable  pursuant  to Section  10.02,  and if the assets of the  Company
remaining  after  payment  of or  reasonable  provision  for the  payment of all
liabilities   of  the  Company   are   insufficient   to  return  such   capital
contributions, the Member shall have no recourse against the Company.

     SECTION 10.04. Intellectual Property.

     (a) To  the  extent  permitted  by  applicable  law,  the  assets  sold  or
distributed in any liquidation shall exclude any technology, knowhow, patents or
other intellectual  property of the Company,  or technology  licenses granted to
the Company by either Schott or Donnelly.

     (b) If Schott and Donnelly  are both still  Members of the Company upon the
liquidation  of the Company  under this  Article X, to the extent  permitted  by
applicable  law,  Schott and Donnelly  shall own jointly,  or each of Schott and
Donnelly shall receive a non-exclusive,  paid-up,  royalty-free  license to, all
intellectual  property  developed  by  the  Company  as  of  the  date  of  such
liquidation.   Schott  shall  be  permitted  to  license  or   sublicense   such
intellectual  property  to third  parties but shall be required to remit half of
the royalty for any such  license or licenses  to  Donnelly.  Donnelly  shall be
permitted to license or sublicense such  intellectual  property to third parties
but shall be  required  to remit  half of the  royalty  for any such  license or
licenses to Schott.  Schott  shall not use,  and neither  Initial  Member  shall
license or sublicense (except to their respective  Affiliates) such intellectual
property for the  manufacture or sale of automotive  mirrors or automotive  rear
vision systems or their components.

     (c)  Notwithstanding  any other  provision of this Article X, to the extent
permitted by  applicable  law,  any  Background  Technology  belonging to either
Schott or Donnelly shall revert to that Member upon  liquidation of the Company,
and any licenses of such  Background  Technology to the Company shall  terminate
upon liquidation. Each of Schott and Donnelly shall, effective as of the date of
such liquidation, grant the other a license (with no right to sublicense) to the
Background  Technology  and to Donnelly  Licensed  Patents  and Schott  Licensed
Patents  that it then  owns,  in each  case,  only to the  extent  necessary  or
convenient to permit the other Member to use the intellectual property developed
by the Company. The terms of such licenses shall be reasonable and customary for
similar licenses with respect to similar intellectual property.

     (d) If the Company is  liquidated  prior to the  completion  of the Ramp-Up
Period,  Donnelly  shall be  required  to grant a license  to Schott  for all of
Donnelly's Background Technology and Donnelly's Licensed Patents, as provided in
Section  10.04(c),  and  Schott  shall  be  entitled  to  any  interest  in  the
intellectual  property developed by the Company, only if Schott pays to Donnelly
one  half  of  the  difference  between  $9,500,000  and  the  aggregate  amount
contributed to the Company by Schott  pursuant to Section 3.04(a) as of the date
of liquidation of the Company.

                                       22
<PAGE>
                                   ARTICLE XI

                                  Miscellaneous

     SECTION 11.01. Amendments.  This Agreement and the Certificate of Formation
may be amended,  supplemented or otherwise  modified only by written  instrument
executed by each Member.

     SECTION 11.02.  Notices.  All notices and other  communications  under this
Agreement  shall be in writing  and shall be deemed to have been duly given when
delivered (i) in person,  (ii) to the extent receipt is confirmed,  by telecopy,
facsimile  or other  electronic  transmission  service,  (iii)  by a  nationally
recognized  overnight  courier service,  or (iv) by registered or certified mail
(postage  prepaid  return  receipt  requested),  to the parties at the following
address:

          (a) If to Schott:

                           Schott Corporation
                           Schott North America Manufacturing, Inc.
                           3 Odell Plaza
                           Yonkers, New York 10701
                           Attention:  Manfred Jaeckel
                           Facsimile:  (914) 968-8585

     with a required copy to:

                           Schott Glas
                           Legal Department
                           Hattenbergstrabe 10
                           P.O. Box 2480
                           D-55014 Mainz
                           Federal Republic of Germany
                           Attention: Dr. Wilhelm Niemeier
                           Facsimile: 011-49-61-31-66-2098

     and a required copy to:

                           Rogers & Wells LLP
                           200 Park Avenue
                           New York, New York 10166
                           Attention: Richard T. McDermott
                           Facsimile: (212) 878-8375.

          (b) If to Donnelly:

                           Donnelly Corporation
                           49 West Third Street
                           Holland, Michigan 49423
                           Attention: Niall Lynam
                           Facsimile: (616) 786-5185,
                                       23
<PAGE>
         With a required copy to:

                           Varnum, Riddering, Howlett & Schmidt LLP
                           Bridgewater Place
                           333 Bridge Street, N.W., P.O. Box 352
                           Grand Rapids, Michigan 49504
                           Attention: Daniel Molhoek
                           Facsimile: (616) 336-7000.

     SECTION 11.03. Counterparts.  This Agreement may be executed in one or more
counterparts,  all of which shall be considered one and the same agreement,  and
shall become  effective when one or more such  counterparts  have been signed by
each of the parties and delivered to each of the other parties.

     SECTION 11.04. No Third-Party Beneficiaries.  Except as provided in Article
XI this  Agreement  is for the sole  benefit  of the  parties  hereto  and their
permitted  assigns  and nothing  herein  expressed  or implied  shall give or be
construed to give to any Person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.

     SECTION  11.05.  Governing  Law. The terms and conditions of this Agreement
shall be interpreted in accordance with and governed by the laws of the State of
New York and of the  United  States of  America,  without  giving  effect to the
doctrine of conflict or laws.

     SECTION  11.06.  Publicity.  No  advertisement,   press  release  or  other
publicity  concerning  this Agreement or the  transactions  contemplated by this
Agreement shall be made or disseminated without the consent of the Members.

     SECTION  11.07.  Dispute  Resolution.  Any  dispute,  controversy  or claim
(hereinafter  "Dispute")  between the Members of any kind or nature  whatsoever,
arising under or related to this Agreement, whether arising in contract, tort or
otherwise,  shall be resolved according to the following procedure. If a Dispute
(excluding  business  decisions  to be voted on by  Members  or  members  of the
Management  Committee)  arises  among  the  Members  under or  relating  to this
Agreement  which is not resolved by good faith  negotiation,  then such Dispute,
upon 30 days'  prior  notice  from one  Member  to the  other of its  intent  to
arbitrate  (an  "Arbitration  Notice"),  shall be  submitted  to and  settled by
arbitration; provided, however, that nothing contained herein shall preclude any
Member from seeking or obtaining  (a)  injunctive  relief,  or (b)  equitable or
other judicial relief to enforce the provisions hereof or to preserve the status
quo  pending  resolution  of  disputes  hereunder.  Such  arbitration  shall  be
conducted in accordance  with the commercial  arbitration  rules of the American
Arbitration Association existing at the time of submission,  except the decision
shall be rendered by one arbitrator.  The Members shall attempt to agree upon an
arbitrator.  If one cannot be agreed  upon,  the  Member  which did not give the
Arbitration  Notice may request the Chief  Judge of the United  States  District
Court for the  Western  District  of  Michigan  or the Chief Judge of the United
States  District  Court for the  Southern  District  of New York to  appoint  an
arbitrator.  If he or she will not,  the  arbitrator  shall be  appointed by the
American Arbitration Association. If an arbitrator so selected becomes unable to
serve,  his or her  successor  shall be  similarly  selected or  appointed.  All
arbitration hearings shall be conducted in English on an expedited schedule, and
all  proceedings  shall be  confidential.  Any Member may at its expense  make a
stenographic  record  thereof.  The  arbitrator  shall  apportion  all costs and
expenses of arbitration  (including the arbitrator's fees and expenses, the fees
and expenses of experts,  and the fees and expenses of counsel to the  Members),
between the prevailing and  non-prevailing  Member as the arbitrator  deems fair
and reasonable.  Any arbitration award shall be binding and enforceable  against
the Members hereto and judgment may be entered thereon in any court of competent
jurisdiction.  The  arbitration  will take place at New York, New York, or Grand
Rapids,  Michigan,  at the  election  of the Member  not giving the  Arbitration
Notice. The

                                       24
<PAGE>
Members shall be entitled to call  witnesses,  cross examine the other  Member's
witnesses,  and to file  legal  briefs.  The  arbitrator  shall  be bound by the
express  intentions  of the Members as set forth  herein and shall render his or
her decision in writing  based on this  Agreement and the facts as proven at the
arbitration hearing.

     SECTION 11.08. Headings.  The headings contained in this Agreement,  in any
Exhibit or Schedule  hereto and in the table of contents to this  Agreement  are
for  reference  purposes  only and shall not  affect in any way the  meaning  or
interpretation of this Agreement.


     SECTION 11.09.  Survival.  The covenants contained in this Agreement which,
by their terms, require their performance after the expiration or termination of
this  Agreement  shall be  enforceable  notwithstanding  the expiration or other
termination of this Agreement.


     SECTION 11.10. No Waiver. The failure of any Member to insist in any one or
more instances upon the strict performance of any one or more of the agreements,
terms,  covenants,  conditions or obligations of this Agreement,  or to exercise
any right,  remedy or election  herein  contained,  shall not be  construed as a
waiver or relinquishment for the future of the performance of any one or more of
said  obligations  of this  Agreement or of the right to exercise such election,
but the same  shall  continue  in full  force and  effect  with  respect  to any
subsequent breach, act or omission, whether of a similar nature or otherwise.

     SECTION  11.11.  Entire  Agreement.   This  Agreement  and  the  Definitive
Documents, along with the Schedules and Exhibits hereto and thereto, contain the
entire  agreement and  understanding  between the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and  understandings
relating to such subject  matter.  Neither party shall be liable or bound to any
other  party in any  manner  by any  representations,  warranties  or  covenants
relating to such subject matter excep as specifically set forth herein.

     SECTION  11.12.  Further  Assurances.  Each party hereto shall  execute and
deliver all such other and additional  instruments and documents and do all such
other acts and things as may be necessary  more fully to effectuate the terms of
this Agreement.

                                       25
<PAGE>
     IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first above written.


                                        SCHOTT NORTH AMERICA MANUFACTURING, INC.
                                        by


                                        /s/ Guy Pierre De Conincx
                                        Name: Guy Pierre De Conincx
                                        Title:



                                        DONNELLY CORPORATION
                                        by


                                        /s/ Scott E. Reed
                                        Name: Scott E. Reed
                                        Title: Sr VP & CFO
<PAGE>
          EXHIBIT A - INITIAL CAPITAL CONTRIBUTIONS OF INITIAL MEMBERS

<TABLE>
Member                               Initial Capital Contributions              No. of Shares    Membership Percentage
<S>                   <C>                                                           <C>                  <C>
Schott                Commitment for $9.5 million expenditure, pursuant             1,000                50%
                      to Section 3.01(b) and Section 3.04(a).
                      Contribution of license or licenses pursuant to
                      Section 3.01(b) and Schott License Agreement
Donnelly              Contribution of ATC Assets, pursuant to                       1,000                50%
                      Section 3.01(c).
                      Contribution of license pursuant to Section 3.01(c)
                      and Donnelly License Agreement.
</TABLE>

                                       27
<PAGE>
                                    Exhibit B

        EXHIBIT B - INITIAL MANAGEMENT COMMITTEE, PRESIDENT AND CHAIRMAN

Schott Appointees to Management Committee:

         1.  Guy De Coninck
         2.  Dr. Roland Langfeld


Donnelly Appointees to Management Committee:

         1.  Scott Reed
         2.  Dr. Niall Lynam


Initial President: Stefan Hansen


Initial Chairman of the Management Committee:  Niall Lynam


                                       28
<PAGE>
EXHIBIT 10.30

                       SCHOTT TECHNOLOGY LICENSE AGREEMENT

     THIS TECHNOLOGY LICENSE AGREEMENT (this  "Agreement"),  dated and effective
as of as of the 5th day of April,  1999  (the  "Effective  Date"),  by and among
DONNELLY CORPORATION, a Michigan corporation with its principal offices at 49 W.
Third Street, Holland, Michigan 49423 ("Donnelly"), SCHOTT GLAS, a German entity
organized under the German civil code ("Schott  Glas"),  SCHOTT  CORPORATION,  a
Maryland  corporation with its principal offices at 3 Odell Plaza,  Yonkers, New
York 10701-1405 ("Schott Corporation"),  and SCHOTT NORTH AMERICA MANUFACTURING,
INC.,  a Maryland  Corporation  with its  principal  offices  at 3 Odell  Plaza,
Yonkers,  New York  10701-1405  ("Schott North  America")  (Schott Glas,  Schott
Corporation  and Schott North America are sometimes  referred to collectively as
"Schott"),  and  SCHOTT-DONNELLY  LLC SMART GLASS SOLUTIONS,  a Delaware limited
liability company (the "Company").

                                    RECITALS:

     WHEREAS, Donnelly, Schott Glas, Schott Corporation and Schott North America
have executed a Joint Venture Agreement,  dated April 5, 1999,  creating a joint
venture among the parties thereto;

     WHEREAS,  Schott North America and Donnelly, as the members of the Company,
have executed a Limited Liability Company  Agreement,  dated as of April 5, 1999
(the "LLC Agreement") on the Closing Date;

     WHEREAS,  Schott  is the  owner of  certain  intellectual  property  rights
principally covering and/or principally used in the manufacture of EC Products;

     WHEREAS, the parties desire to enter into this Agreement to provide certain
rights for the Company to license certain specified intellectual property rights
from Schott; and

     WHEREAS, the Company may develop Improvements to the intellectual  property
rights licensed from Schott and may develop other  intellectual  property rights
and the parties  desire to enter into this  Agreement to provide  certain rights
for Schott to license such Improvements from the Company;

     NOW  THEREFORE,  for good and valuable  consideration  including the mutual
promises  contained  herein,  the  receipt and  sufficiency  of which are hereby
acknowledged, the parties agree as follows:

                                    ARTICLE 1
                                  DEFINITIONS

     Capitalized  terms  used but not  defined  herein  shall  have the  meaning
ascribed to them in the Joint  Venture  Agreement or the LLC  Agreement,  as the
case may be.
<PAGE>
     1.1   "Improvement"   shall  mean  (i)  any   development   or  alteration,
modification  or  enhancement  to Technology or  Intellectual  Property  Rights,
whether  patentable  or  not,  which  improves  the  effectiveness,  efficiency,
performance  or other  attribute  of, or  otherwise  relates to,  Technology  or
Intellectual Property Rights, or any element thereof, or (ii) any new product or
material  which  performs  substantially  the same  function  as  Technology  or
Intellectual  Property Rights,  whether patentable or not, but does so through a
different method or process.

     1.2 "Intellectual Property Rights" shall mean United States,  international
and foreign patents and patent applications (including United States provisional
applications  and all PCT  patent  applications),  any and all  patents  issuing
therefrom or otherwise corresponding thereto, and all divisions,  continuations,
continuations-in-part,  reissues,  restorations,  reexamination certificates and
extensions thereof,  describing and/or claiming Technology,  and all mask works,
industrial design registrations and applications for such registrations, and all
other  proprietary  rights  covering or otherwise  related to Technology  and/or
processes for manufacture and/or use of EC Products embodying Technology arising
prior to or during the term of this Agreement.  Schott's  Intellectual  Property
Rights existing on the date hereof are set forth on Schedule A.

     1.3 "Licensed  Product"  shall mean an EC Product  licensed  hereunder that
could not be manufactured  and sold by a Licensee  without  infringing  Schott's
Intellectual Property Rights or using Schott's Technology.

     1.4 "Licensee" shall mean the Person licensed hereunder in the field of the
applicable EC Product.

     1.5 "Licensor"  shall mean the Company  and/or Schott,  as the case may be,
whichever is licensing in the field of the applicable EC Product.

     1.6  "Substantial  Notice" shall have the meaning  ascribed to such term in
Section 7.2(c).

     1.7 "Technology" shall mean technological developments principally covering
or principally  used in the  manufacture of EC Products,  including,  but not be
limited to, the  technology  described  on Schedule B hereto,  ideas,  concepts,
inventions,  processes,  principles of operation,  formulae, patterns, drawings,
prints,  proposals,  devices,  software,  compilations  of related  information,
records, specifications, trade secrets and the knowhow, arising before or during
the term of this Agreement.

                                    ARTICLE 2
                                 LICENSE GRANTS

     2.1 License Grants to the Company.  Schott hereby grants unto the Company a
worldwide,  exclusive  (except as provided in this  Section 2.1 and Section 2.2)
license of Schott's  Technology and  Intellectual  Property Rights to make, have
made, use, offer to sell and sell EC Products;  provided,  however,  that Schott
reserves the exclusive  right to utilize  Schott's  Technology and  Intellectual
Property Rights with respect to (a) Automotive Glazing products

                                       2
<PAGE>
unless and until  Schott  makes an  Automotive  Glazing  Business  Offer and the
Company  accepts such offer,  as provided in Section 4.05 or Section 4.06 of the
Joint Venture Agreement, (b) New Products developed by Schott independent of the
Company in  compliance  with  Section  4.09(c)  or Section  4.09(d) of the Joint
Venture  Agreement,  and (c)  all  other  products  that  are  not EC  Products;
provided, however, that if Schott makes an Automotive Glazing Business Offer and
the Company  accepts such offer,  as provided in Section 4.05 or Section 4.06 of
the Joint Venture Agreement,  the Company shall have an exclusive license to all
Automotive Glazing products.  The term of this license is described in Article 9
of this Agreement.

     2.2 Limitation on Company  Exclusivity.  The license granted in Section 2.1
shall be non-exclusive with respect to the following:

          (a) Architectural Glazing;

          (b) Skylights,  if the Company  determines to abandon the development,
     manufacture and sale of Skylights;

          (c) Sun Roofs, if the Company  determines to abandon the  development,
     manufacture and sale of Sun Roofs.

     2.3  Sublicenses by the Company.  The Company may not  sublicense  Schott's
Technology  or  Intellectual  Property  Rights  without  Schott's  prior written
consent,  which consent shall not be unreasonably withheld;  provided,  however,
that the Company  shall have the right to  sublicense  Schott's  Technology  and
Intellectual   Property  Rights  to  the  Company's   Affiliates.   The  parties
acknowledge  and agree  that the  Company  shall  have the  right to grant  such
sublicenses as may be necessary or convenient to have Licensed  Products made by
third parties for sale by the Company and its Affiliates.

                                    ARTICLE 3
                                  IMPROVEMENTS

     3.1  Ownership  and  Licensing of  Improvements.  The Company shall own and
shall have all rights,  including  Intellectual  Property Rights,  in and to all
Improvements  conceived  and in the  process  of  development  by the  Company's
personnel  or by third party  personnel  working on the  Company's  behalf.  The
Company  hereby  grants  and  shall  grant to  Schott a  royalty-free,  paid-up,
worldwide,  non-exclusive license without the right to sublicense (other than to
its  Affiliates)  to all  Technology  and  Intellectual  Property  Rights of the
Company and Improvements  thereto,  except in the fields of Automotive  Glazing,
and New Products manufactured and/or sold by Schott, as long as:

          (a) Schott (or any of its Affiliates) is a Member of the Company; or

          (b) the use, manufacture,  advertising or sale is of a non-EC Product;
     or

          (c) Schott (or any of its  Affiliates) is paying a royalty to Donnelly
     (or any of its Affiliates).

                                       3
<PAGE>
If the  conditions  described  in  subsections  (a),  (b) or (c)  above  are not
fulfilled, the license granted pursuant to this Section 3.1 shall not be royalty
free,  and  Schott  shall  pay to the  Company  a  reasonable  royalty  based on
prevalent  market  conditions (to be negotiated by the parties) for any products
manufactured  and/or sold by Schott that would infringe a patent of the Company.
If the parties cannot agree upon a royalty rate after good faith negotiations, a
commercially  reasonable  royalty rate shall be determined by arbitration in the
manner provided in Section 10.10.

The parties acknowledge and agree that Schott shall have the right to grant such
sublicenses  as may be necessary or convenient  to have the products  covered by
this  Section  3.1 made by third  parties for sale by Schott.  This  Section 3.1
shall be subject to Section 3.3 of this Agreement.

     3.2 Improvements.

          (a) Schott  hereby  grants and shall grant to the Company  licenses to
     all Improvements  owned or developed by or licensed to Schott,  on the same
     terms and  conditions  of the licenses  granted  hereunder  with respect to
     Schott's Technology and Intellectual  Property Rights;  provided,  however,
     that Schott  shall not be required to license any of Schott's  Improvements
     if it is  precluded  from  doing so under any  agreement  with any  Person.
     Should  Schott North  America (or an  Affiliate  of Schott  North  America)
     withdraw as a Member of the Company,  all Improvements  developed by Schott
     after the date of such withdrawal shall remain royalty free until the third
     anniversary  of the date of such  withdrawal,  after which time the Company
     shall pay Schott a reasonable  royalty based on prevalent market conditions
     (to be negotiated by the parties) for any products manufactured and/or sold
     by the  Company  that  would  infringe  a patent  of Schott  covering  such
     Improvements.  If the parties  cannot  agree upon a royalty rate after good
     faith  negotiations,  a  commercially  reasonable  royalty  rate  shall  be
     determined by arbitration in the manner provided in Section 10.10.

          (b) Schott hereby represents, to the best of its knowledge, that as of
     the date hereof Schott is not a party to any agreement with any Person that
     would   preclude   Schott  from   licensing  to  the  Company  of  Schott's
     Improvements to Schott's  Technology or  Intellectual  Property Rights that
     are (i) owned by Schott,  (ii)  developed  by Schott or (iii)  licensed  to
     Schott.  Schott  hereby  agrees to  undertake  prior to the Closing  Date a
     thorough and complete review of all agreements relating or pertaining to EC
     Products  or  Electrochromic  Material  to  which  Schott  or  any  of  its
     Affiliates  is a party and, on a  confidential  basis,  to notify  Donnelly
     prior to the Closing Date in writing of any such  agreements that would, or
     reasonably  could be expected  to,  preclude  Schott from  licensing to the
     Company any of Schott's Improvements to Schott's Technology or Intellectual
     Property  Rights that are (i) owned by Schott,  (ii) developed by Schott or
     (iii) licensed to Schott, identifying the date, the parties thereto and the
     EC Product or  Electrochromic  Material that is subject thereto;  provided,
     however,  that Schott shall not be required to provide specific information
     about  such  agreement  if  Schott  is  precluded  from  doing so under any
     agreement with any party to such agreement.

          (c) Schott hereby agrees that as of the date hereof it shall not enter
     into  any  agreement  with any  Person  that  would  preclude  Schott  from
     licensing to the Company any Improvements to

                                       4
<PAGE>
     Schott's  Technology or Intellectual  Property Rights that (i) are owned or
     at any time have been owned by Schott and (ii) are developed by Schott.

          (d) Schott hereby agrees to use its reasonable  commercial  efforts to
     obtain  rights  for the  Company  to any  Improvements  encompassed  by any
     agreement  between  Schott and any Person  covering  the subject  matter of
     Schott's Technology or Intellectual Property Rights.

          (e)  Schott  further  agrees  that  prior to  entering  into any other
     agreement with any Person that would preclude  Schott from licensing to the
     Company any of Schott's Improvements to Schott's Technology or Intellectual
     Property Rights, it shall, on a confidential  basis,  notify the Company of
     such  prospective  agreement  and identify the parties  thereto;  provided,
     however,  that Schott shall not be required to provide such notice if it is
     precluded from doing so under any agreement with any Person.

     3.3 License Grant.

          (a) The  Company  hereby  grants  and  agrees  to  grant  to  Schott a
     worldwide,  non-exclusive,  royalty-free, paid-up license without the right
     to sublicense (other that to its Affiliates) to make, have made, use, offer
     to sell and sell New Products  manufactured  by Schott in  compliance  with
     Section  4.09  of  the  Joint  Venture  Agreement  using  the  non-patented
     Technology of the Company and Improvements thereto.

          (b) If either  Schott  does not make an  Automotive  Glazing  Business
     Offer to the Company,  as provided in Section  4.05(a) of the Joint Venture
     Agreement,  prior to  September  1,  1999,  or Schott  makes an  Automotive
     Glazing  Business Offer, as provided in Section 4.05 or Section 4.06 of the
     Joint Venture  Agreement,  and the Company does not accept such offer,  the
     Company hereby grants and agrees to grant to Schott a worldwide, exclusive,
     royalty-free,  paid-up license without the right to sublicense  (other that
     to Schott's  Affiliates)  to make,  have made,  use, offer to sell and sell
     Automotive  Glazing products  manufactured by Schott using the non-patented
     Technology of the Company and Improvements thereto; provided, however, that
     should Schott North America (or its Affiliate)  withdraw as a Member of the
     Company,  the license granted  pursuant to this Section 3.3(b) shall become
     non-exclusive.

          (c) The  Company  hereby  grants  and  agrees  to  grant  to  Schott a
     worldwide,  non-exclusive  license  without the right to sublicense  (other
     that to its Affiliates) to make, have made, use, offer to sell and sell New
     Products  manufactured  by Schott in  compliance  with  Section 4.09 of the
     Joint  Venture  Agreement  using the  Intellectual  Property  Rights of the
     Company and Improvements  thereto.  In exchange for such license Schott, if
     it should stop paying to  Donnelly a  licensing  fee for use of  Donnelly's
     Intellectual  Property  Rights and  Improvements  thereto  pursuant  to the
     Donnelly  Technology License  Agreement,  dated as of April 5, 1999, by and
     among Donnelly,  Schott Glas, Schott Corporation,  Schott North America and
     the Company (the "Donnelly License Agreement"),  shall pay to the Company a
     reasonable  royalty based on prevalent market  conditions (to be negotiated
     by the  parties)  for any such New  Products  manufactured  and/or  sold by
     Schott that would  infringe a patent of the Company.  If the parties cannot
     agree upon a royalty  rate after good faith  negotiations,  a  commercially
     reasonable  royalty rate shall be determined by  arbitration  in the manner
     provided in Section 10.10.

                                       5
<PAGE>
          (d) If either  Schott  does not make an  Automotive  Glazing  Business
     Offer to the Company,  as provided in Section  4.05(a) of the Joint Venture
     Agreement,  prior to  September  1,  1999,  or Schott  makes an  Automotive
     Glazing  Business Offer, as provided in Section 4.05 or Section 4.06 of the
     Joint Venture  Agreement,  and the Company does not accept such offer,  the
     Company hereby grants and agrees to grant to Schott a worldwide,  exclusive
     license without the right to sublicense (other that to Schott's Affiliates)
     to make, have made, use, offer to sell and sell Automotive Glazing products
     manufactured  by  Schott  using  the  Intellectual  Property  Rights of the
     Company and Improvements  thereto.  In exchange for such license Schott, if
     it should stop paying to  Donnelly a  licensing  fee for use of  Donnelly's
     Intellectual  Property  Rights and  Improvements  thereto  pursuant  to the
     Donnelly License  Agreement,  shall pay to the Company a reasonable royalty
     based on prevalent market  conditions (to be negotiated by the parties) for
     any such Automotive  Glazing  products  manufactured  and/or sold by Schott
     that would infringe a patent of the Company; provided, however, that should
     Schott  North  America  (or its  Affiliate)  withdraw  as a  Member  of the
     Company,  the license granted  pursuant to this Section 3.3(d) shall become
     non-exclusive.  If the parties  cannot agree upon a royalty rate after good
     faith  negotiations,  a  commercially  reasonable  royalty  rate  shall  be
     determined by arbitration in the manner provided in Section 10.10.

The parties acknowledge and agree that Schott shall have the right to grant such
sublicenses  as may be necessary or convenient  to have the products  covered by
this Section 3.3 made by third parties for sale by Schott.

Notwithstanding  the  foregoing,  the  obligations  to pay such royalties to the
Company  pursuant to Section 3.3(c) or Section  3.3(d) shall  terminate upon the
expiration of the  last-to-expire  Company patent that would be infringed by the
manufacture and sale of such Automotive Glazing products or New Products, as the
case may be, by Schott and its Affiliates.

                                    ARTICLE 4
                         PROSECUTION AND MAINTENANCE OF
                          INTELLECTUAL PROPERTY RIGHTS

     4.1  Knowledge  of  Infringement.   If  any  party  has  knowledge  of  any
infringement of a claim of a patent under this Agreement,  the party having such
knowledge shall promptly inform the other party of such infringement.

     4.2 Prosecution.

          (a) Schott shall  retain the right to (but shall not be obligated  to)
     prosecute  and/or  maintain  all of Schott's  Technology  and  Intellectual
     Property Rights licensed by Schott to the Company  pursuant to Article 2 of
     this Agreement.

          (b) The Company shall have the right to prosecute  and/or  maintain at
     the Company's expense any of Schott's Intellectual Property Rights licensed
     hereunder in any country when the Company has been  notified by Schott that
     Schott no longer wishes to prosecute or maintain such Intellectual Property
     Rights in such  country,  and Schott hereby agrees to notify the Company of

                                       6
<PAGE>
     its intent to cease prosecution or payment of maintenance fees with respect
     to any of such Intellectual  Property Rights in any such country,  at least
     ninety (90) days prior to the date of any  abandonment  of any right or the
     date of any required payment or filing which Schott does not intend to make
     or file.

                                   ARTICLE 5.
                              TECHNICAL ASSISTANCE

     Schott shall furnish to the Company all of the  Technology  and any and all
technical information, data, drawings, plans, specifications and other pertinent
information prepared by or for, used by, or in the possession of Schott that may
be useful for the development,  manufacture or sale of Licensed Products. Schott
shall begin  furnishing such Technology and technical  information and technical
assistance promptly following the date of this Agreement.

                                    ARTICLE 6
                         COOPERATION AND CONFIDENTIALITY

     6.1 Exchange of Information. During the term of this Agreement, Schott, the
Company,  Donnelly and their respective  Affiliates  shall exchange  information
concerning  all  Technology  and  Intellectual   Property  Rights  conceived  or
developed  by any of them  relating to EC Products and  processes or  techniques
used in the manufacture of EC Products.

     6.2 Cooperation.  The Company,  Schott and Donnelly agree to cooperate with
each  other  in  the   prosecution  of  pending   applications   concerning  any
Intellectual Property Rights or any new applications based upon any Improvements
thereto  by  providing,  upon  request,  technical  information  and  data in an
appropriate  form  relating  to the  subject  matter  or any  pending  or issued
applications and/or Improvements.

     6.3 Confidentiality.  The Company, Schott and Donnelly acknowledge that the
Intellectual  Property Rights,  Technology and Improvements licensed pursuant to
this  Agreement or developed by Schott,  Donnelly  and/or the Company  after the
date of this Agreement relate or will relate to information which is not or will
not be  publicly  available  ("Confidential  Information"),  including,  without
limitation,  information  exchanged  pursuant to Section 6.1 hereof and Schott's
Technology  listed or described in Schedule B. The Company,  Schott and Donnelly
hereby agree not to disclose the  Confidential  Information to any third parties
for a  period  of  ten  (10)  years  after  the  receipt  of  such  Confidential
Information,  except to only (a) those of their  respective  employees  having a
legitimate business need-to-know,  (b) consultants engaged by them respectively,
(c) permitted  sub-licensees  hereunder or (d) Daimler Chrysler, but only to the
extent that such  disclosure  to Daimler  Chrysler is  reasonably  necessary for
Daimler  Chrysler  to  determine  whether  it  will  grant  its  consent  to the
assignment of the DC Project to the Company,  as  contemplated  in Section 4.05,
Section 4.06 and Section  4.07 of the Joint  Venture  Agreement,  subject to the
prior approval of Donnelly,  which approval shall not be unreasonably  withheld.
The Company,  Schott and Donnelly agree that prior to making  disclosures to any
consultant  or  employee,  they  shall  obtain  a  confidentiality  and  non-use
agreement.

                                       7
<PAGE>
     6.4  Confidentiality  Exceptions.  Notwithstanding  the  provisions of this
Article 6,  Confidential  Information  shall not include (a) information that is
known to the public or is generally  known within the industry or business,  (b)
information  that the  Company,  Schott  or  Donnelly,  as the  case may be,  is
required to disclose  pursuant  to law or order of a court  having  jurisdiction
(provided that the party required so to disclose such  Confidential  Information
shall offer the party owning such  Confidential  Information  the opportunity to
obtain  an  appropriate   protective  order  or  administrative  relief  against
disclosure  of such  Confidential  Information),  and (c)  information  that was
legally acquired by the Company,  Schott or Donnelly, as the case may be, from a
third party in good faith,  provided that such disclosure by the third party was
not in breach of any agreement between such third party and the Company,  Schott
or Donnelly, as the case may be.

     6.5  Protection  of Rights.  The parties  hereto agree that it shall be the
policy of the Company to protect the Intellectual  Property  Rights,  Technology
and  Improvements  licensed  hereunder and not to infringe upon the intellectual
property rights of third parties.


                                    ARTICLE 7
                          WARRANTY AND INDEMNIFICATION

     7.1 Warranty.  Schott  represents  and warrants that to its  knowledge,  no
claim has been asserted that the products and/or processes covered by the rights
or  licenses  transferred  or intended  to be  transferred  or granted by Schott
pursuant  to this  Agreement  infringe  upon  any  third  party  rights.  Schott
represents that it owns Schott's Technology and Intellectual Property Rights and
that such rights are not subject to any encumbrance,  lien or claim of ownership
by any third party.  Schott  further  represents  that it has not engaged in any
conduct,  or omitted to perform  any  necessary  act,  the result of which could
invalidate  Schott's  Intellectual  Property  Rights or  adversely  affect their
enforceability or publicly disclose Schott's Technology.

     7.2 No Representation or Indemnification.

          (a) Nothing in this Agreement is intended to state or otherwise  imply
     that the  exercise  of any right or license  granted by Schott  pursuant to
     this  Agreement to the Company will not infringe  rights of third  parties.
     Schott  does not  undertake  any  obligation  to  indemnify  the Company or
     Donnelly  against,   or  assume  any  responsibility   for,  any  claim  of
     infringement  by any third party relating to or arising out of any exercise
     of any right or license granted in this Agreement;  provided,  however,  if
     any third  party  shall  deliver a  Substantial  Notice to the  Company  or
     Donnelly, or commence litigation against the Company or Donnelly,  alleging
     that the use of Schott's Technology or Intellectual  Property Rights or the
     manufacture  or sale of  Licensed  Products  infringes  such third  party's
     intellectual or industrial property rights by a method or apparatus covered
     by the  Technology or  Intellectual  Property  Rights,  then the Company or
     Donnelly,  as the case may be,  shall be  entitled  immediately  to suspend
     payment of  royalties  to Schott  with  respect  to sales of the  allegedly
     infringing  Licensed Products,  and to pay such amounts into escrow,  until
     such time as any  settlement  with such third party is entered  into or the
     outcome of such litigation is finally known; provided, however, that if the
     Company or Donnelly,  as the case may be, suspends the payment of royalties
     to  Schott  and  pays  such  amounts  into  escrow  upon the  receipt  of a
     Substantial Notice, as provided above, if within one

                                       8
<PAGE>
     year of the receipt of such Substantial Notice, Donnelly or the Company, as
     the  case  may  be,  has  neither  begun  negotiations   relating  to  such
     Substantial Notice nor sought a declaratory  judgment and no litigation has
     been commenced by such third party, all such amounts paid into escrow shall
     be released to Schott;  provided,  however,  if  litigation  does  commence
     within  three years of the  original  delivery of the  Substantial  Notice,
     Schott shall restore any amounts that have been released to Schott pursuant
     to the immediately  preceding proviso and any additional  amounts paid from
     such release date by Donnelly and/or the Company to such escrow account. If
     the Company or  Donnelly,  as the case may be,  enters into any  settlement
     agreement  or is found to  infringe  any such  third  party  rights  by the
     exercise  of any  right or  license  granted  by  Schott  pursuant  to this
     Agreement (as described above):

          (1) any royalties with respect to (A) such infringing Licensed Product
          and/or (B) such Licensed  Products covered by, or manufactured  using,
          such infringing process licensed  hereunder,  paid to Schott or any of
          its  Affiliates on or prior to the date of the  Substantial  Notice of
          such  infringement  or  commencement  of the litigation  alleging such
          infringement  shall be promptly repaid by Schott to the Company and/or
          Donnelly,  as the  case  may  be,  to the  extent  of any  damages  or
          royalties  owing by the Company or Donnelly in excess of that received
          in sub-paragraph (2) below;

          (2) any amounts with respect to royalties held in escrow,  as provided
          above,  shall be released to the Company or to  Donnelly,  as the case
          may  be,  to the  extent  of any  settlement  and/or  any  damages  or
          royalties owing by the Company or Donnelly;

          (3) any  future  royalties  with  respect  to sales  of such  Licensed
          Products  and/or use of such process to  manufacture  or covering such
          Licensed Products that was the subject of such settlement agreement or
          litigation  that will be payable to Schott by the Company or Donnelly,
          as the case may be, after the date of  determination  by a court, or a
          settlement  of such  alleged  infringement,  shall be  reduced  by the
          amount of any  royalties  payable to a third party as a result of such
          determination by a court or such settlement;

Any  settlement  of such  alleged  infringement  shall be  subject  to  Schott's
reasonable  approval;  provided,  however,  that  Schott  may not  withhold  its
approval of any license or settlement  agreement  unless it agrees to defend the
Company and/or Donnelly, and agrees to reimburse the Company and/or Donnelly, as
the case may be, for fifty percent  (50%) of the costs of defending  such claims
or bringing a declaratory judgment action relating to such claims.

Upon the determination by a court, or a settlement, of such alleged infringement
action,  all  amounts  paid into  escrow  pursuant  to Section  7.2(a)  shall be
released  to  the  respective   parties  in  order  equitably  to  reflect  such
determination  or  settlement.  If the parties  cannot  mutually agree as to the
equitable release of such amounts paid into escrow,  notwithstanding  good faith
negotiations,  the issue of the release of such escrowed funds shall be resolved
by means of arbitration, as provided in Section 10.10 hereof.

                                       9
<PAGE>
          (b) Neither the Company nor  Donnelly  undertakes  any  obligation  to
     indemnify Schott against,  or assume any  responsibility  for, any claim of
     infringement  by any third party relating to or arising out of any exercise
     of any right or license granted to Schott, the Company or Donnelly,  as the
     case may be, under this Agreement.

          (c) As used in  this  Agreement,  "Substantial  Notice"  shall  mean a
     written  notice  from a third party that  alleges  that the use of Schott's
     Technology or  Intellectual  Property  Rights or the manufacture or sale of
     Licensed  Products  infringes a third  party's  intellectual  or industrial
     property  rights by a method or  apparatus  covered  by the  Technology  or
     Intellectual  Property Rights and constitutes  grounds for the recipient of
     such written  notice to seek a  declaratory  judgment  with respect to such
     allegation(s) or challenge(s).

                                    ARTICLE 8
              INFRINGEMENT OF LICENSED INTELLECTUAL PROPERTY RIGHTS

     8.1 Action by a Licensee.  Except as  provided  in Section  8.2, a Licensee
shall have the right but shall not be obligated to institute  proceedings in its
own name or in the name of the Licensor  against any third party  infringer,  in
the Licensee's field of use of Licensed Products,  of any Intellectual  Property
Rights licensed by the Licensor to the Licensee  pursuant to this Agreement.  If
the Licensor or a Licensee becomes aware of any actual,  threatened, or apparent
infringement of any of the licensed  Intellectual  Property Rights by any Person
in the field of use of Licensed Products, such party agrees to provide the other
parties  with  written  notice  prior  to suit of such  actual,  threatened,  or
apparent  infringement  and agrees to furnish to the other  party any  available
evidence of such  actual,  threatened,  or apparent  infringement.  The Licensor
agrees to cooperate in any  proceedings  instituted by a Licensee  against third
party infringers and to provide  information  relating to such proceedings which
the Licensor may  reasonably  request.  In the event that a Licensee  determines
that it lacks  standing to commence  such a proceeding,  the Licensor  agrees to
execute such  documents  and take such  actions as the  Licensee may  reasonably
request  for the  purpose  of  commencing  such  infringement  proceedings.  The
Licensee  shall  have  the  right to  control  prosecution  of such  proceedings
regardless of whether the proceedings are commenced in the Licensor's name or in
the  name  of the  Licensee;  provided,  however,  that  (a) in the  event  of a
counterclaim   against  the  Licensor,   or  a  challenge  to  the  validity  or
enforceability  of any  Intellectual  Property  Rights,  the litigation shall be
jointly  managed by a Licensor and the Licensee so long as the Licensor pays all
costs and  expenses  relating to such  counter  claim  and/or  challenge  to the
validity  or  enforceability  of any  Intellectual  Property  Rights;  provided,
however,  that in the event of disagreements  between a Licensor and Licensee in
such  jointly  managed   litigation,   (1)  the  final  decision  of  issues  in
disagreement  relating to alleged  infringements of third-party  rights shall be
made by the  Licensee  and (2) the final  decision  of  issues  in  disagreement
related  to  challenges  to the  validity  and  enforceability  of  Intellectual
Property  Rights shall be made by the Licensor;  and (b) the Licensee  shall not
settle any claim or  counterclaim  in any manner  agreeing to the  invalidity or
limitation of any Intellectual  Property Right without the prior written consent
of the Licensor.  Any recovery awarded in such proceedings  shall be retained by
the Licensee;  provided,  however,  that the respective expenses of the Licensor
and  Licensee  shall  first be  paid,  pro  rata,  out of the  proceeds  of such
recovery.

                                       10
<PAGE>
     8.2 Action by the Licensor. In the event the Licensor notifies the Licensee
or  receives  notice  from the  Licensee  of  actual,  threatened,  or  apparent
infringement of any licensed  rights or Intellectual  Property Rights by a third
party and the Licensee does not institute proceedings against such a third party
within  sixty  (60)  days of  notification,  then  the  Licensor  may  institute
proceedings  against  such  a  third  party,  at  its  own  expense,  and in the
Licensee's name,  subject to the Licensor's  prompt  reimbursement of Licensee's
costs and expenses  with  respect to such  proceedings.  The Licensee  agrees to
cooperate fully with the Licensor in such  proceedings.  Any recovery awarded in
such proceedings shall be retained by the Licensor.

                                    ARTICLE 9
                              TERM AND TERMINATION

     9.1 Term. Unless otherwise terminated as provided herein:

          (a) The  licenses  granted  hereunder  to the Company  shall remain in
     place and shall continue  notwithstanding  the withdrawal of either Initial
     Member (or its  Affiliate)  or both  Initial  Members (or their  respective
     Affiliates) from the Company;

          (b) The licenses granted hereunder from the Company to Donnelly and/or
     Schott  (and their  Affiliates),  respectively,  shall  continue so long as
     either Schott (or an Affiliate of Schott) or Donnelly  North America (or an
     Affiliate of Donnelly North  America) is a member of the Company,  and upon
     the  withdrawal  from the  Company  by either  Schott (or an  Affiliate  of
     Schott) or Donnelly  North  America  (or an  Affiliate  of  Donnelly  North
     America),  as the case may be, such licenses to the withdrawing  member (or
     its  Affiliates)  shall continue under the same terms and scope existing as
     of the date of such  withdrawal,  including but not limited to Improvements
     existing as of the date of such withdrawal.

     9.2  Default.  If any  party  fails to comply  with any of its  obligations
hereunder,  and after notice from another party such failure continues for sixty
(60) days, such action shall constitute a default hereunder;  provided, however,
if a default under this Agreement  cannot  reasonably and with due diligence and
good faith be cured  within  said 60-day  period,  and if the  defaulting  party
promptly  commences  and  proceeds to complete the cure of such default with due
diligence  and in good faith,  the 60-day  period with  respect to such  default
shall be extended to include such additional period of time as may be reasonably
necessary to cure such default.

                                   ARTICLE 10
                                  CONSTRUCTION

     10.1 Governing  Law. This  Agreement  shall be governed by and construed in
accordance  with the laws of the State of New York without  giving effect to any
applicable principles of conflicts of laws.

     10.2 Notices.  All notices and other  communications  under this  Agreement
shall be in writing  and shall be deemed to have been duly given when  delivered
(i) in person, (ii) to the extent receipt is confirmed,  by telecopy,  facsimile
or other electronic transmission service, (iii)

                                       11
<PAGE>
by a nationally  recognized  overnight courier service, or (iv) by registered or
certified mail (postage prepaid return receipt requested), to the parties at the
following address:

                  To Donnelly:          Donnelly Corporation
                                        49 W. Third Street
                                        Holland, Michigan 49423
                                        Attention: Niall Lynam
                                        Fax No. (616) 786-786-5185

                  With a copy to:       Varnum, Riddering, Howlett & Schmidt LLP
                                        Bridgewater Place
                                        333 Bridge Street, N.W., P.O. Box 352
                                        Grand Rapids, Michigan 49504
                                        Attention: Daniel Molhoek
                                        Fax No.  (616) 336-7000

                  To the Company:

                  To:                   Schott Corporation
                                        Schott North America Manufacturing, Inc.
                                        3 Odell Plaza
                                        Yonkers, New York 10701
                                        Attention: Manfred Jaeckel
                                        Fax No. (914) 968-8585; and

                                        Schott Glas
                                        Legal Department
                                        Hattenbergstra(beta)e 10
                                        P.O. Box 2480
                                        D-55014 Mainz
                                        Federal Republic of Germany
                                        Attention: Dr. Wilhelm Niemeier
                                        Facsimile: 011-49-61-31-66-2098.

                  With a copy to:       Rogers & Wells LLP
                                        200 Park Avenue
                                        New York, New York 10166
                                        Attention: Richard T. McDermott
                                        Facsimile: (212) 878-8375.

     10.3 Severability. If any provision of this Agreement shall be conclusively
determined by a court of competent  jurisdiction to be invalid or  unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby.

                                       12
<PAGE>
     10.4 Binding Effect.  Except as otherwise  provided herein,  this Agreement
shall inure to the benefit of and be binding upon the parties,  their respective
successors, legal representatives and permitted assigns.

     10.5  No  Third  Party  Rights.   This  Agreement  is  intended  to  create
enforceable rights between the parties hereto only, and creates no rights in, or
obligations to, any other Persons whatsoever.

     10.6  Schedules  Included in  Exhibits;  Incorporation  by  Reference.  Any
reference to an Exhibit or Schedule to this Agreement  contained herein shall be
deemed to include any Exhibits or Schedules to such Exhibit or  Schedules.  Each
of the Exhibits and Schedules referred to in this Agreement, and each Exhibit or
Schedule  thereto,  is hereby  incorporated by reference in this Agreement as if
such Schedules and Exhibits were set out in full in the text of this Agreement.

     10.7  Amendments.  This  Agreement  may not be  amended  except by  written
agreement executed by duly authorized officers of all of the parties hereto.

     10.8 Entire Agreement;  Section Headings. This Agreement, the Joint Venture
Agreement,  the  LLC  Agreement  and  the  agreements  contemplated  by the  LLC
Agreement  constitute the entire  agreement among the parties hereto relating to
the subject  matter hereof and supersede all prior  agreements,  understandings,
and arrangements, oral or written, among the parties with respect to the subject
matter hereof. The Section headings in this Agreement are for reference purposes
only and  shall not  affect in any way the  meaning  or  interpretation  of this
Agreement.

     10.9  Assignment.   Except  as  otherwise  specifically  provided  in  this
Agreement,  the Joint  Venture  Agreement,  or the LLC  Agreement,  neither this
Agreement  nor any rights or  obligations  hereunder  shall be  assignable or be
delegated  directly or  indirectly  by any party hereto to a third party without
the prior written consent of all the parties to this Agreement.

     10.10 Arbitration.

          (a) Any dispute,  controversy or claim (hereinafter "Dispute") between
     the parties of any kind or nature  whatsoever,  arising under or related to
     this Agreement  whether  arising in contract,  tort or otherwise,  shall be
     resolved  according to the following  procedure.  If a Dispute arises among
     the parties  under or relating to this  Agreement  which is not resolved by
     good faith negotiation,  then such Dispute, upon 30 days' prior notice from
     one  party  to the  other  of its  intent  to  arbitrate  (an  "Arbitration
     Notice"),  shall be  submitted  to and  settled by  arbitration;  provided,
     however, that nothing contained herein shall preclude any party hereto from
     seeking or  obtaining  (a)  injunctive  relief,  or (b)  equitable or other
     judicial relief to enforce the provisions  hereof or to preserve the status
     quo pending  resolution of disputes  hereunder.  Such arbitration  shall be
     conducted  in  accordance  with  the  commercial  arbitration  rules of the
     American Arbitration Association existing at the time of submission, except
     the decision shall be rendered by one arbitrator. The parties shall attempt
     to  agree  upon  an  arbitrator.   The  arbitrator   shall  be  a  licensed
     attorney-at-law, experienced and knowledgeable in the field of intellectual
     property,

                                       13
<PAGE>
     with  technical  knowledge  sufficient to understand  and render a reasoned
     written  opinion with respect to this  Agreement,  the  Technology  and the
     Intellectual  Property Rights.  If an arbitrator cannot be agreed upon, the
     party that did not give the Arbitration  Notice may request the Chief Judge
     of the United States District Court for the Western District of Michigan or
     the Chief  Judge of the  United  States  District  Court  for the  Southern
     District of New York to appoint an arbitrator.  If he or she cannot or does
     not appoint  such  arbitrator,  the  arbitrator  shall be  appointed by the
     American  Arbitration  Association.  If an arbitrator  so selected  becomes
     unable  to serve,  his or her  successor  shall be  similarly  selected  or
     appointed.  All  arbitration  hearings  shall be conducted in English on an
     expedited schedule, and all proceedings shall be confidential.

          (b) The parties shall use their  reasonable  best efforts to limit the
     total time period of any arbitration to a maximum of six months.  Discovery
     shall be limited to a maximum time period of four months,  unless  extended
     by the  arbitrator,  and any  party's  failure  to  deliver  documents  for
     discovery  in a timely  manner  shall  preclude  such party from relying on
     other  documents  that  support its  position  with respect to the issue in
     question.  The arbitrator  shall use his or her reasonable  best efforts to
     decide any dispute  hereunder  within the six-month time period referred to
     in the first sentence of this paragraph (b).

          (c) Any party may at its  expense  make a  stenographic  record of any
     arbitration  proceeding.  The  arbitrator  shall  apportion  all  costs and
     expenses of arbitration  (including the arbitrator's fees and expenses, the
     fees and  expenses of experts,  and the fees and expenses of counsel to the
     parties), between the prevailing and non-prevailing party as the arbitrator
     deems fair and  reasonable.  Any  arbitration  award  shall be binding  and
     enforceable  against the parties hereto and judgment may be entered thereon
     in any court of competent jurisdiction. The arbitration shall take place at
     New York, New York, or Grand Rapids,  Michigan at the election of the party
     not giving the Arbitration Notice.

                                       14
<PAGE>
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                                   DONNELLY CORPORATION

                                   By /s/ Scott E. Reed

                                     Its Sr. VP & CFO


                                   SCHOTT GLAS

                                   By /s/ Dr. Ungeheuer       /s/ R. Langfeld

                                   Its  Member of the         Vice President R&D
                                               Board of
                                               Management



                                   SCHOTT CORPORATION

                                   By /s/ Guy Pierre De Conincx

                                     Its ___________________________


                                   SCHOTT NORTH AMERICA
                                   MANUFACTURING, INC.

                                   By /s/ Guy Pierre De Conincx

                                     Its ___________________________


                                   SCHOTT-DONNELLY LLC
                                   SMART GLASS SOLUTIONS


                                   By /s/ Niall Lynam

                                      Its Chairman
<PAGE>
                                   SCHEDULE A
   Intellectual Property Rights, as defined in Section 1.2 of this Agreement.

As of the date of this Agreement, none.
<PAGE>
                                   SCHEDULE B
            Technology, as defined in Section 1.7 of this Agreement.

-   Commercialization of EC products

-   EC material selection, purification and synthesis

-   Accelerated testing/reliability assurance

-   Sealing techniques/seal integrity testing

-   Substrate preparation & cleaning

-   Diagnostic testing

-   Troubleshooting/PFMEA

-   Equipment design

-   Process design

-   Customization for automotive applications

-   Production scale-up of EC products

-   Quality systems for EC products

-   Component, material and equipment selection & procurement

-   Electrical connectors and interfaces

-   Automotive development, supply and quality systems

-   Failure analysis and countermeasure implementation

-   Competitive benchmarking

-   Manufacturing flow and production control for EC products

-   Costing & pricing for EC products

-   Supplier development & quality control for EC products
<PAGE>
EXHIBIT 10.31

                      DONNELLY TECHNOLOGY LICENSE AGREEMENT

     THIS TECHNOLOGY LICENSE AGREEMENT (this  "Agreement"),  dated and effective
as of as of the 5th day of April,  1999  (the  "Effective  Date"),  by and among
DONNELLY CORPORATION, a Michigan corporation with its principal offices at 49 W.
Third Street, Holland, Michigan 49423 ("Donnelly"), SCHOTT GLAS, a German entity
organized under the German civil code ("Schott  Glas"),  SCHOTT  CORPORATION,  a
Maryland  corporation with its principal offices at 3 Odell Plaza,  Yonkers, New
York 10701-1405 ("Schott Corporation"),  and SCHOTT NORTH AMERICA MANUFACTURING,
INC.,  a Maryland  Corporation  with its  principal  offices  at 3 Odell  Plaza,
Yonkers,  New York  10701-1405  ("Schott North  America")  (Schott Glas,  Schott
Corporation  and Schott North America are sometimes  referred to collectively as
"Schott"),  and  SCHOTT-DONNELLY  LLC SMART GLASS SOLUTIONS,  a Delaware limited
liability company (the "Company").

                                    RECITALS:

     WHEREAS, Donnelly, Schott Glas, Schott Corporation and Schott North America
have executed a Joint Venture Agreement,  dated April 5, 1999,  creating a joint
venture among the parties thereto;

     WHEREAS,  Schott North America and Donnelly, as the members of the Company,
have executed a Limited Liability Company  Agreement,  dated as of April 5, 1999
(the "LLC Agreement") on the Closing Date;

     WHEREAS,  Donnelly  is the owner of certain  intellectual  property  rights
principally covering and/or principally used in the manufacture of EC Products;

     WHEREAS, the parties desire to enter into this Agreement to provide certain
rights for the  Company  and Schott to license  certain  specified  intellectual
property rights from Donnelly; and

     WHEREAS, the Company may develop Improvements to the intellectual  property
rights licensed from Donnelly and may develop other intellectual property rights
and the parties  desire to enter into this  Agreement to provide  certain rights
for Donnelly to license such Improvements from the Company;

     NOW  THEREFORE,  for good and valuable  consideration  including the mutual
promises  contained  herein,  the  receipt and  sufficiency  of which are hereby
acknowledged, the parties agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

     Capitalized  terms  used but not  defined  herein  shall  have the  meaning
ascribed to them in the Joint  Venture  Agreement or the LLC  Agreement,  as the
case may be.
<PAGE>
     1.1   "Improvement"   shall  mean  (i)  any   development   or  alteration,
modification  or  enhancement  to Technology or  Intellectual  Property  Rights,
whether  patentable  or  not,  which  improves  the  effectiveness,  efficiency,
performance  or other  attribute  of, or  otherwise  relates to,  Technology  or
Intellectual Property Rights, or any element thereof, or (ii) any new product or
material  which  performs  substantially  the same  function  as  Technology  or
Intellectual  Property Rights,  whether patentable or not, but does so through a
different method or process.

     1.2 "Intellectual Property Rights" shall mean United States,  international
and foreign patents and patent applications (including United States provisional
applications  and all PCT  patent  applications),  any and all  patents  issuing
therefrom or otherwise corresponding thereto, and all divisions,  continuations,
continuations-in-part,  reissues,  restorations,  reexamination certificates and
extensions thereof,  describing and/or claiming Technology,  and all mask works,
industrial design registrations and applications for such registrations, and all
other  proprietary  rights  covering or otherwise  related to Technology  and/or
processes for manufacture and/or use of EC Products embodying Technology arising
prior to or during the term of this Agreement.  Donnelly's Intellectual Property
Rights existing on the date hereof are set forth on Schedule A.

     1.3 "Licensed  Product"  shall mean an EC Product  licensed  hereunder that
could not be manufactured and sold by a Licensee without  infringing  Donnelly's
Intellectual Property Rights or using Donnelly's Technology.

     1.4 "Licensee" shall mean the Person licensed hereunder in the field of the
applicable EC Product.

     1.5 "Licensor" shall mean the Company and/or Donnelly,  as the case may be,
whichever is licensing in the field of the applicable EC Product.

     1.6 "Minimum Automotive Glazing Royalty" shall have the meaning ascribed to
such term in Section 3.2(b).

     1.7 "Net Sales" shall mean the total invoiced amount relating to sales of a
given  product by a Licensee  and its  Affiliates  to any Person  that is not an
Affiliate of such Licensee, less the following:

     (a)  customary or usual trade or quantity  discounts or other  charge-backs
     actually taken by the customer and not already credited on an invoice;

     (b)  sales,  use,  value-added  or other  excise  taxes,  imposed  and paid
     directly with respect to the sale,  and included  within the invoice price,
     and separately stated on the invoice;

     (c) refunds for customer returns, not already credited on an invoice; and

     (d) customs,  duties,  transportation  charges and other  similar  expenses
     separately invoiced.

                                       2
<PAGE>
     1.8 "Schott License Grant Date" shall mean:

          (a) if Schott fails to make an Automotive  Glazing  Business  Offer to
     the Company by September 1, 1999,  as  contemplated  in Section 4.05 of the
     Joint Venture Agreement, September 1, 1999;

          (b) if  Schott  makes  an  Automotive  Glazing  Business  Offer to the
     Company,  pursuant to Section 4.05 of the Joint Venture Agreement, the date
     on which  the  Company  delivers  to Schott  its  written  refusal  of such
     Automotive Glazing Business Offer.

     1.9  "Substantial  Notice" shall have the meaning  ascribed to such term in
Section 8.2(d).

     1.10  "Technology"  shall  mean  technological   developments   principally
covering or principally used in the manufacture of EC Products,  including,  but
not be limited  to,  the  technology  described  on  Schedule  B hereto,  ideas,
concepts,  inventions,  processes,  principles of operation, formulae, patterns,
drawings,  prints,  proposals,   devices,  software,   compilations  of  related
information,  records,  specifications,  trade secrets and the knowhow,  arising
before or during the term of this Agreement.

                                    ARTICLE 2
                                 LICENSE GRANTS

     2.1 License Grants to the Company.  Donnelly hereby grants unto the Company
a worldwide, exclusive (except as provided in Section 2.2) license of Donnelly's
Technology and  Intellectual  Property  Rights to make, have made, use, offer to
sell and sell EC  Products.  The term of this license is described in Article 10
of this Agreement.

     2.2 Limitation on Company  Exclusivity.  The license granted in Section 2.1
shall be non-exclusive with respect to the following:

          (a) Architectural Glazing, provided,  however, that Donnelly shall not
     license its  Intellectual  Property Rights or Technology for  Architectural
     Glazing to:

               (i)  Denton  Corporation  or  any  of  its  Affiliates  or  joint
          ventures.

               (ii) Any float glass  manufacturer  which commercially uses a Sol
          Gel process.

               (iii) Any float glass  manufacturer  unless the license  includes
          specific  prohibition  of and  penalties  for using any of  Donnelly's
          Technology or Intellectual Property Rights for Automotive Glazing.

               (iv) Any Person to make,  have made,  use,  offer to sell or sell
          any windows  smaller than ten (10) square feet unless such window is a
          part of a wall;

                                       3
<PAGE>
          (b) Automotive Glazing, to the extent Donnelly licenses its Technology
     and/or Intellectual Property Rights to Schott as set forth below;

          (c) Skylights,  if the Company  determines to abandon the development,
     manufacture and sale of Skylights;

          (d) Sun Roofs, if the Company  determines to abandon the  development,
     manufacture and sale of Sun Roofs.

     2.3 Sublicenses by the Company.  The Company may not sublicense  Donnelly's
Technology or  Intellectual  Property  Rights without  Donnelly's  prior written
consent,  which consent shall not be unreasonably withheld;  provided,  however,
that the Company shall have the right to sublicense  Donnelly's  Technology  and
Intellectual   Property  Rights  to  the  Company's   Affiliates.   The  parties
acknowledge  and agree  that the  Company  shall  have the  right to grant  such
sublicenses as may be necessary or convenient to have Licensed  Products made by
third parties for sale by the Company and its Affiliates.

     2.4 License Grants to Schott.

          (a) Effective on the Schott License Grant Date, Donnelly hereby grants
     to Schott a worldwide,  exclusive (subject to Section 2.5 below) license of
     Donnelly's  Technology,  to make,  have made,  use,  offer to sell and sell
     Automotive Glazing products.  In addition,  Donnelly hereby grants Schott a
     worldwide,  exclusive license of Donnelly's Intellectual Property Rights to
     make, have made, use, offer to sell and sell  Automotive  Glazing  products
     subject to the terms of this  Agreement,  including  the  royalty  payments
     provided in Section 3.2 below.

          (b) Donnelly hereby grants to Schott a worldwide  exclusive license of
     Donnelly's  Technology and Intellectual Property Rights to make, have made,
     offer to sell and sell New Products,  effective  immediately  upon Schott's
     proceeding with the development and sale of any New Product  independent of
     the  Company  that has been  offered to and  declined  by the  Company,  as
     provided in Section 4.09(c) of the Joint Venture Agreement,  subject to the
     terms of the Joint Venture  Agreement and the royalty payments  provided in
     Section 3.2(d) below.

     2.5 Exclusivity.  For as long as Donnelly  receives the Minimum  Automotive
Glazing  Royalty from Schott,  as provided in Section  3.2,  Donnelly  shall not
license its Technology or  Intellectual  Property Rights to any party other than
Schott and the Company for Automotive Glazing.

     2.6 Sublicenses by Schott.  Schott may not sublicense Donnelly's Technology
or  Intellectual  Property  Rights,  except to an Affiliate  of Schott,  without
Donnelly's prior written consent.  The parties acknowledge and agree that Schott
shall have the right to grant such sublicenses as may be necessary or convenient
to have made Automotive Glazing products or New Products (as provided in Section
4.09(c) of the Joint Venture  Agreement) by third parties for sale by Schott and
its Affiliates.

                                       4
<PAGE>
                                    ARTICLE 3
                                    ROYALTIES

     3.1 Company Royalties.  In consideration of the license granted herein, the
Company agrees to pay Donnelly royalties as follows:

          (a) With respect to Skylights or Sun Roofs that are Licensed Products,
     five  percent  (5%) of Net Sales of such  Skylights  and Sun Roofs that are
     Licensed  Products  manufactured  and sold by the  Company  until the total
     payments under this Section 3.1(a) are Ten Million  Dollars  ($10,000,000).
     Thereafter,  sales by the Company of all  Skylights  and Sun Roofs shall be
     royalty free. Notwithstanding the foregoing, payments of royalties pursuant
     to this  paragraph (a) shall  terminate upon the occurrence of the later of
     (i) the  expiration of the  last-to-expire  Donnelly  Licensed  Patent that
     would be infringed by the  Company's  manufacture  and sale of Skylights or
     Sun  Roofs  that  are  Licensed  Products  or  (ii)  the  twentieth  (20th)
     anniversary of the date of this Agreement.

          (b) With respect to  Automotive  Glazing  Licensed  Products,  two and
     one-half percent  (2-1/2%) of Net Sales of all Automotive  Glazing Licensed
     Products manufactured and sold by the Company.

          (c) With respect to Architectural Glazing Licensed Products, a royalty
     rate  shall  be  negotiated  in  good  faith  by  the  parties  based  on a
     commercially   reasonable  royalty  rate  with  respect  to  Net  Sales  of
     Architectural  Glazing  Licensed  Products  manufactured  and  sold  by the
     Company,  beginning  at such  time as  commercial  production  and sales of
     Architectural  Glazing Licensed Products by the Company commence, at a rate
     not less than one and one-half  percent (1-1/2%) or more than three percent
     (3%)  of  the  Net  Sales  of  Architectural   Glazing  Licensed   Products
     manufactured  and sold by the Company.  If the parties  cannot agree upon a
     royalty  rate after  good faith  negotiations,  a  commercially  reasonable
     royalty rate shall be determined by arbitration  in the manner  provided in
     Section 11.10.

          (d) With respect to all other  Licensed  Products,  three and one-half
     percent (3- 1/2%) of the Net Sales of such  Licensed  Product  manufactured
     and sold by the Company.

     Notwithstanding the foregoing, payments of royalties pursuant to paragraphs
(b), (c) and (d) of this Section 3.1 shall  terminate upon the expiration of the
last-to-expire Donnelly Licensed Patent that would be infringed by the Company's
manufacture and sale of the Licensed Products.

     3.2 Schott  Royalties.  In consideration of the licenses granted herein and
the agreement by Donnelly not to grant any other license to any party other than
the  Company in  Donnelly's  Intellectual  Property  Rights for the  manufacture
and/or sale of Automotive Glazing Licensed Products, Schott agrees:

          (a) To pay  Donnelly  Two  Million  Dollars  ($2,000,000)  on the date
     hereof;

                                       5
<PAGE>
          (b) To pay Donnelly  Sixty-Two Thousand Five Hundred Dollars ($62,500)
     per quarter (the  "Minimum  Automotive  Glazing  Royalty").  The first such
     payment  is due and  payable on the  thirtieth  (30th) day after the Schott
     License Grant Date, and subsequent  payments shall be due on each March 31,
     June 30,  September 30 and December 31 thereafter,  for a minimum of twenty
     (20) payments and for such time thereafter as elected by Schott in order to
     preserve its exclusivity under Section 2.5 above;  provided,  however, that
     the Minimum  Automotive  Glazing  Royalty shall be increased to One Hundred
     Twenty- five Thousand Dollars ($125,000) per quarter upon the occurrence of
     the events and for the periods provided in Section 4.06(a), the proviso set
     forth  in  Section  4.07(c),  and  Section  4.07(d)  of the  Joint  Venture
     Agreement;  provided,  further, that Schott's obligation to pay the Minimum
     Automotive  Glazing Royalty shall cease at such time as the Company accepts
     the assignment of the DC Project,  as provided in Section 4.05(b),  Section
     4.06(b), or Section 4.07(a) of the Joint Venture Agreement.

Notwithstanding  any other  provision of this  Agreement,  if at any time Schott
determines  to withdraw  from the DC Project  and to  terminate  its  Automotive
Glazing  business,  Schott  shall  deliver to Donnelly a written  notice of such
withdrawal  and  termination  ("Termination  Notice").  Effective as of the date
occurring nine (9) months after Donnelly's receipt of the Termination Notice:

(i) Schott's  obligation to make payments with respect to the Minimum Automotive
Glazing Royalties shall cease (a "Termination of Minimum Royalties");

(ii) All licenses with respect to Automotive  Glazing  granted to the Company or
to Schott by Donnelly  hereunder  shall  terminate and Donnelly shall be free to
negotiate licenses with respect to Automotive Glazing with third parties;

(iii)  Schott  and its  Affiliates  shall not for a period of five (5)  calendar
years,  beginning on the  Termination  Date,  manufacture or sell, or license to
manufacture or sell, any Automotive Glazing product; and

(iv) (A) If Schott has not made an  Automotive  Glazing  Business  Offer because
Daimler  Chrysler  did not  approve  the  assignment  of the DC  Project  to the
Company,  or if the  Termination  Notice is  received by Donnelly on or prior to
July 1, 2002,  then  Donnelly  shall be permitted to treat such  withdrawal  and
termination by Schott as an Exit Milestone  under Section 8.01(b) of the Limited
Liability Company Agreement; or

     (B) If Schott has made an Automotive Glazing Business Offer and the Company
declined to accept the  Automotive  Glazing  Business  Offer because  Donnelly's
representatives  on the Management  Committee  declined to approve the same, and
the Termination  Notice is received by Donnelly after July 1, 2002, then Section
3.04(b)  of the  Limited  Liability  Agreement  shall  be  modified  so that the
limitation  of  contributions  for each  fiscal  year  specified  in the  column
thereunder  shall be that  percentage  of "Free Cash Flow"  shown in such column
decreased by an amount equal to (X) the amount of the Minimum Automotive Glazing
Royalty that would have been payable to Donnelly in such fiscal year but for the
Termination of

                                       6
<PAGE>
Minimum  Royalties,  minus (Y) the amount actually paid by Schott in such fiscal
year with respect to Minimum Automotive Glazing Royalties, if any.

          (c) Only if Schott  proceeds  with the DC Project  and its  Automotive
     Glazing  business  separate  and apart from the Joint  Venture,  but cannot
     produce   Automotive   Glazing  Products  without   infringing   Donnelly's
     Intellectual  Property  Rights,  then Schott  shall pay  Donnelly a royalty
     equal to two and one-half  percent  (2-1/2%) of the Net Sales of Automotive
     Glazing Products manufactured and sold by Schott or an Affiliate of Schott.

          (d)  Only if  Schott  proceeds  with the  development  and sale of New
     Products  independent of the Company, as provided in Section 4.09(c) of the
     Joint  Venture  Agreement,  Schott  shall pay to Donnelly a royalty of five
     percent (5%) of Net Sales of New Products  manufactured and sold by Schott,
     the  manufacture  or sale of  which  would  but  for the  licenses  granted
     hereunder infringe Donnelly's Intellectual Property Rights.

Notwithstanding the foregoing, payments of the royalties described in paragraphs
(b), (c) and (d) of this Section 3.2 shall  terminate upon the expiration of the
last-to-expire  Donnelly  Licensed  Patent that would be  infringed  by Schott's
manufacture and sale of EC Products, including but not limited to New Products.

     3.3 Reporting and Royalty Payments.

          (a) The Company and Schott shall render to Donnelly  quarterly reports
     to be  delivered to Donnelly on or before the 30th day after each March 31,
     June 30, September 30, and December 31 of each year during the term of this
     Agreement  when  royalty  payments  are due.  Such report  shall  include a
     breakdown  of the Net  Sales  of each  type of  Licensed  Product  for each
     customer. Each quarterly report shall be accompanied by payment to Donnelly
     in US dollars of the royalty due for Licensed Products shipped to customers
     in the previous quarter.  In case of any delay in payment,  interest at the
     rate of one percent (1%) per month shall be payable from the due date.

          (b) Donnelly and Schott shall render to the Company  quarterly reports
     to be  delivered  to the Company on or before the 30th day after each March
     31, June 30,  September 30, and December 31 of each year during the term of
     this Agreement  when royalty  payments are due. Such report shall include a
     breakdown  of the Net  Sales  of each  type of  Licensed  Product  for each
     customer.  Each  quarterly  report shall be  accompanied  by payment to the
     Company in US dollars of the royalty due for Licensed  Products  shipped to
     customers  in the  previous  quarter.  In case  of any  delay  in  payment,
     interest  at the rate of one percent  (1%) per month shall be payable  from
     the due date.

                                    ARTICLE 4
                                  IMPROVEMENTS

     4.1  Ownership  and  Licensing of  Improvements.  The Company shall own and
shall have all rights,  including  Intellectual  Property Rights,  in and to all
Improvements conceived and

                                       7
<PAGE>
in the  process of  development  by the  Company's  personnel  or by third party
personnel working on the Company's  behalf.  The Company hereby grants and shall
grant to Donnelly a  royalty-free,  paid-up,  worldwide,  non-exclusive  license
without the right to sublicense (other than to its Affiliates) to all Technology
and Intellectual Property Rights of the Company and Improvements thereto, except
in the field of New Products manufactured and/or sold by Donnelly, as long as:

          (a) Donnelly (or any of its Affiliates) is a Member of the Company; or

          (b) the use, manufacture,  advertising or sale is of a non-EC Product;
     or

          (c) Donnelly ( or any of its Affiliates) is paying a royalty to Schott
     (or any of its Affiliates).

If none of the  conditions  described  in  subsections  (a), (b) or (c) above is
fulfilled, the license granted pursuant to this Section 4.1 shall not be royalty
free,  and  Donnelly  shall pay to the  Company a  reasonable  royalty  based on
prevalent  market  conditions  (to be  negotiated  by the  parties)  for  any EC
Products  manufactured  and/or sold by Donnelly that would  infringe a patent of
the  Company.  If the parties  cannot agree upon a royalty rate after good faith
negotiations,  a  commercially  reasonable  royalty rate shall be  determined by
arbitration in the manner provided in Section 11.10.

The parties  acknowledge  and agree that Donnelly  shall have the right to grant
such  sublicenses as may be necessary or convenient to have the products covered
by this Section 4.1 made by third parties for sale by Donnelly. This Section 4.1
shall be subject to Section 4.3 of this Agreement.

     4.2 Improvements.

          (a)  Donnelly  hereby  grants and shall  grant to the  Company  and to
     Schott, as the case may be, licenses to all Improvements owned or developed
     by or  licensed  to  Donnelly,  on the same  terms  and  conditions  of the
     licenses  granted  hereunder  with  respect to  Donnelly's  Technology  and
     Intellectual Property Rights; provided, however, that Donnelly shall not be
     required to license any of Donnelly's  Improvements if it is precluded from
     doing so under any agreement with any Person.

          (b) Donnelly hereby represents,  to the best of its knowledge, that as
     of the date hereof Donnelly is not a party to any agreement with any Person
     that would  preclude  Donnelly from  licensing to the Company and/or Schott
     any of Donnelly's  Improvements  to Donnelly's  Technology or  Intellectual
     Property Rights that are (i) owned by Donnelly,  (ii) developed by Donnelly
     or (iii) licensed to Donnelly. Donnelly hereby agrees to undertake prior to
     the Closing Date a thorough and complete review of all agreements  relating
     or pertaining to EC Products or  Electrochromic  Material to which Donnelly
     or any of its Affiliates is a party and, on a confidential basis, to notify
     Schott  prior to the Closing  Date in writing of any such  agreements  that
     would, or reasonably could be expected to, preclude Donnelly from licensing
     to the Company and/or Schott any of Donnelly's  Improvements  to Donnelly's
     Technology or Intellectual  Property Rights that are (i) owned by Donnelly,
     (ii) developed by Donnelly or (iii)

                                       8
<PAGE>
     licensed to Donnelly,  identifying the date, the parties thereto and the EC
     Product  or  Electrochromic  Material  that is subject  thereto;  provided,
     however,   that  Donnelly  shall  not  be  required  to  provide   specific
     information  about such  agreement if Donnelly is  precluded  from doing so
     under any agreement with any party to such agreement.

          (c)  Donnelly  hereby  agrees  that as of the date hereof it shall not
     enter into any agreement with any Person that would preclude  Donnelly from
     licensing  to the Company  and/or  Schott any  Improvements  to  Donnelly's
     Technology  or  Intellectual  Property  Rights that (i) are owned or at any
     time have been owned by Donnelly and (ii) are developed by Donnelly.

          (d) Donnelly hereby agrees to use its reasonable commercial efforts to
     obtain  rights  for  the  Company  and  for  Schott  to  any   Improvements
     encompassed by any agreement  between  Donnelly and any Person covering the
     subject matter of Donnelly's Technology or Intellectual Property Rights.

          (e)  Donnelly  further  agrees that prior to  entering  into any other
     agreement  with any Person that would  preclude  Donnelly from licensing to
     the Company  and/or  Schott any of  Donnelly's  Improvements  to Donnelly's
     Technology or  Intellectual  Property  Rights,  it shall, on a confidential
     basis,  notify the Company  and Schott of such  prospective  agreement  and
     identify the parties thereto; provided, however, that Donnelly shall not be
     required to provide such notice if it is precluded  from doing so under any
     agreement with any Person.

     4.3 License Grant.

          (a) The  Company  hereby  grants  and  agrees to grant to  Donnelly  a
     worldwide,  non-exclusive,  royalty-free, paid-up license without the right
     to sublicense (other that to its Affiliates) to make, have made, use, offer
     to sell and sell New Products  manufactured  by Donnelly in compliance with
     Section  4.09  of  the  Joint  Venture  Agreement  using  the  non-patented
     Technology of the Company and Improvements thereto.

          (b) The  Company  hereby  grants  and  agrees to grant to  Donnelly  a
     worldwide,  non-exclusive  license  without the right to sublicense  (other
     that to its Affiliates) to make, have made, use, offer to sell and sell New
     Products  manufactured  by Donnelly in compliance  with Section 4.09 of the
     Joint  Venture  Agreement  using the  Intellectual  Property  Rights of the
     Company and Improvements  thereto.  In exchange for such license,  Donnelly
     shall pay to the Company a reasonable  royalty  based on  prevalent  market
     conditions  (to be  negotiated  by the  parties)  for any such New Products
     manufactured  and/or sold by Donnelly  that would  infringe a patent of the
     Company.  If the parties  cannot agree upon a royalty rate after good faith
     negotiations, a commercially reasonable royalty rate shall be determined by
     arbitration in the manner provided in Section 11.10.

Notwithstanding the foregoing, the obligation to pay such royalty to the Company
shall  terminate upon the expiration of the  last-to-expire  Company patent that
would be infringed by the  manufacture and sale of such New Products by Donnelly
or its Affiliates.

                                       9
<PAGE>
The parties  acknowledge  and agree that Donnelly  shall have the right to grant
such  sublicenses as may be necessary or convenient to have the products covered
by this  Section  4.3 made by third  parties  for sale by  Donnelly  (and/or its
Affiliates).

                                    ARTICLE 5
                         PROSECUTION AND MAINTENANCE OF
                          INTELLECTUAL PROPERTY RIGHTS

     5.1  Knowledge  of  Infringement.   If  any  party  has  knowledge  of  any
infringement of a claim of a patent under this Agreement,  the party having such
knowledge shall promptly inform the other party of such infringement.

     5.2 Prosecution.

          (a) Donnelly shall retain the right to (but shall not be obligated to)
     prosecute  and/or  maintain all of Donnelly's  Technology and  Intellectual
     Property  Rights licensed by Donnelly to the Company and/or Schott pursuant
     to Article 2 of this Agreement.

          (b) The Licensee shall have the right to prosecute  and/or maintain at
     the  Licensee's  expense any of  Donnelly's  Intellectual  Property  Rights
     licensed  hereunder in any country  when the Licensee has been  notified by
     Donnelly  that  Donnelly no longer  wishes to  prosecute  or maintain  such
     Intellectual Property Rights in such country, and Donnelly hereby agrees to
     notify  the  Licensee  of its  intent to cease  prosecution  or  payment of
     maintenance fees with respect to any of such  Intellectual  Property Rights
     in any such  country,  at least  ninety  (90) days prior to the date of any
     abandonment  of any  right or the date of any  required  payment  or filing
     which Donnelly does not intend to make or file.  Notwithstanding  any other
     provision of this  Agreement,  as of the date of such notice,  all sales by
     the  Company  or by  Schott  or  their  Affiliates,  in  any  such  country
     (excluding sales for purposes of export out of such country) where Donnelly
     no longer  wishes to  prosecute  or  maintain  such  Intellectual  Property
     Rights, of Licensed Products  manufactured in such country shall be royalty
     free.

                                   ARTICLE 6.
                              TECHNICAL ASSISTANCE

     6.1 Technical  Information.  Donnelly shall furnish to the Company,  and to
Schott,  if  requested,  all  of  the  Technology  and  any  and  all  technical
information,   data,  drawings,   plans,   specifications  and  other  pertinent
information  prepared by or for, used by, or in the  possession of Donnelly that
may be useful for the  development,  manufacture  or sale of Licensed  Products.
Donnelly shall begin  furnishing such  Technology and technical  information and
technical assistance promptly following the date of this Agreement.

     6.2 Technical Personnel. Donnelly's ATC technical personnel with applicable
knowledge and  information  concerning the  development of EC Products shall, as
soon as practical after the closing under the Joint Venture  Agreement,  but not
later than December 31, 1999,  become  employees of the Company.  Donnelly shall
exert  reasonable  commercial  efforts to provide  the  Company  with such other
technical  personnel and information as is agreed by the

                                       10
<PAGE>
parties to be necessary or useful to develop EC Products,  and the Company shall
reimburse Donnelly for its costs related thereto.

                                    ARTICLE 7
                         COOPERATION AND CONFIDENTIALITY

     7.1 Exchange of Information.  During the term of this Agreement,  Donnelly,
the Company,  Schott and their respective  Affiliates shall exchange information
concerning  all  Technology  and  Intellectual   Property  Rights  conceived  or
developed  by any of them  relating to EC Products and  processes or  techniques
used in the manufacture of EC Products.

     7.2 Cooperation.  The Company,  Donnelly and Schott agree to cooperate with
each  other  in  the   prosecution  of  pending   applications   concerning  any
Intellectual Property Rights or any new applications based upon any Improvements
thereto  by  providing,  upon  request,  technical  information  and  data in an
appropriate  form  relating  to the  subject  matter  or any  pending  or issued
applications and/or Improvements.

     7.3 Confidentiality.  The Company, Donnelly and Schott acknowledge that the
Intellectual  Property Rights,  Technology and Improvements licensed pursuant to
this  Agreement or developed by Donnelly,  Schott  and/or the Company  after the
date of this Agreement relate or will relate to information which is not or will
not be  publicly  available  ("Confidential  Information"),  including,  without
limitation,  information exchanged pursuant to Section 7.1 hereof and Donnelly's
Technology  listed or described in Schedule B. The Company,  Donnelly and Schott
hereby agree not to disclose the  Confidential  Information to any third parties
for a  period  of  ten  (10)  years  after  the  receipt  of  such  Confidential
Information,  except to only (a) those of their  respective  employees  having a
legitimate business need-to-know,  (b) consultants engaged by them respectively,
(c) permitted sub-licensees  hereunder, or (d) Daimler Chrysler, but only to the
extent that such  disclosure  to Daimler  Chrysler is  reasonably  necessary for
Daimler  Chrysler  to  determine  whether  it  will  grant  its  consent  to the
assignment of the DC Project to the Company,  as  contemplated  in Section 4.05,
Section 4.06 and Section  4.07 of the Joint  Venture  Agreement,  subject to the
prior approval of Donnelly,  which approval shall not be unreasonably  withheld.
The Company,  Donnelly and Schott agree that prior to making  disclosures to any
consultant,  employee or permitted sub- licensee, as the case may be, they shall
obtain a confidentiality and non-use agreement.

     7.4  Confidentiality  Exceptions.  Notwithstanding  the  provisions of this
Article 7,  Confidential  Information  shall not include (a) information that is
known to the public or is generally  known within the industry or business,  (b)
information  that the  Company,  Donnelly  or  Schott,  as the  case may be,  is
required to disclose  pursuant  to law or order of a court  having  jurisdiction
(provided that the party required so to disclose such  Confidential  Information
shall offer the party owning such  Confidential  Information  the opportunity to
obtain  an  appropriate   protective  order  or  administrative  relief  against
disclosure  of such  Confidential  Information),  and (c)  information  that was
legally acquired by the Company,  Donnelly or Schott, as the case may be, from a
third party in good faith,  provided that such disclosure by the third party was
not in  breach of any  agreement  between  such  third  party  and the  Company,
Donnelly or Schott, as the case may be.

                                       11
<PAGE>
     7.5  Protection  of Rights.  The parties  hereto agree that it shall be the
policy of the Company to protect the Intellectual  Property  Rights,  Technology
and  Improvements  licensed  hereunder and not to infringe upon the intellectual
property rights of third parties.

                                    ARTICLE 8
                          WARRANTY AND INDEMNIFICATION

     8.1 Warranty.  Donnelly  represents and warrants that to its knowledge,  no
claim has been asserted that the products and/or processes covered by the rights
or licenses  transferred  or intended to be  transferred  or granted by Donnelly
pursuant  to this  Agreement  infringe  upon any third  party  rights.  Donnelly
represents that it owns Donnelly's  Technology and Intellectual  Property Rights
and that  such  rights  are not  subject  to any  encumbrance,  lien or claim of
ownership  by any  third  party.  Donnelly  further  represents  that it has not
engaged in any conduct,  or omitted to perform any necessary  act, the result of
which could  invalidate  Donnelly's  Intellectual  Property  Rights or adversely
affect their enforceability or publicly disclose Donnelly's Technology.

     8.2 No Representation or Indemnification.

          (a) Nothing in this Agreement is intended to state or otherwise  imply
     that the exercise of any right or license  granted by Donnelly  pursuant to
     this  Agreement to the Company or Schott will not infringe  rights of third
     parties.  Donnelly  does not  undertake  any  obligation  to indemnify  the
     Company or Schott against,  or assume any responsibility  for, any claim of
     infringement  by any third party relating to or arising out of any exercise
     of any right or license granted in this Agreement;  provided,  however,  if
     any third  party  shall  deliver a  Substantial  Notice to the  Company  or
     Schott, or commence litigation against the Company or Schott, alleging that
     the use of Donnelly's  Technology or  Intellectual  Property  Rights or the
     manufacture  or sale of  Licensed  Products  infringes  such third  party's
     intellectual or industrial property rights by a method or apparatus covered
     by the  Technology or  Intellectual  Property  Rights,  then the Company or
     Schott,  as the  case may be,  shall be  entitled  immediately  to  suspend
     payment of  royalties  with  respect to sales of the  allegedly  infringing
     Licensed Products,  and to pay such amounts into escrow, until such time as
     any settlement with such third party is entered into or the outcome of such
     litigation  is finally  known;  provided,  however,  that if the Company or
     Schott, as the case may be, suspends the payment of royalties and pays such
     amounts into escrow upon the receipt of a Substantial  Notice,  as provided
     above, if within one year of the receipt of such Substantial Notice, Schott
     or the Company, as the case may be, has neither begun negotiations relating
     to such  Substantial  Notice  nor  sought  a  declaratory  judgment  and no
     litigation  has been  commenced by such third party,  all such amounts paid
     into escrow shall be released to Donnelly; provided, however, if litigation
     does  commence  within  three  years  of  the  original   delivery  of  the
     Substantial  Notice,  Donnelly  shall  restore any  amounts  that have been
     released to Donnelly pursuant to the immediately  preceding proviso and any
     additional amounts paid from such release date by Schott and/or the Company
     to such  escrow  account.  If the  Company or  Schott,  as the case may be,
     enters into any settlement agreement or is found to infringe any such third
     party  rights by the  exercise of any right or license  granted by Donnelly
     pursuant to this Agreement (as described above):

                                       12
<PAGE>
               (1) any royalties  with respect to (A) such  infringing  Licensed
               Product  and/or  (B)  such  Licensed   Products  covered  by,  or
               manufactured  using, such infringing process licensed  hereunder,
               paid to Donnelly or any of its Affiliates on or prior to the date
               of the Substantial Notice of such infringement or commencement of
               the  litigation  alleging  such  infringement  shall be  promptly
               repaid by Donnelly to the Company and/or Schott,  as the case may
               be,  to the  extent  of any  damages  or  royalties  owing by the
               Company or Schott in excess of that received in sub-paragraph (2)
               below;

               (2) any amounts  with  respect to  royalties  held in escrow,  as
               provided above, shall be released to the Company or to Schott, as
               the case may be,  to the  extent  of any  settlement  and/or  any
               damages or royalties owing by the Company or Schott;

               (3) any future  royalties  with respect to sales of such Licensed
               Products  and/or use of such process to  manufacture  or covering
               such Licensed  Products  that was the subject of such  settlement
               agreement  or  litigation  that will be payable by the Company or
               Schott,  as the case may be, after the date of determination by a
               court,  or a settlement  of such alleged  infringement,  shall be
               reduced by the amount of any  royalties  payable to a third party
               as a result of such determination by a court or such settlement;

Any  settlement  of such  alleged  infringement  shall be subject to  Donnelly's
reasonable  approval;  provided,  however,  that  Donnelly  may not withhold its
approval of any license or settlement  agreement  unless it agrees to defend the
Company and/or Schott, and agrees to reimburse the Company and/or Schott, as the
case may be, for fifty  percent  (50%) of the costs of defending  such claims or
bringing a declaratory judgment action relating to such claims.

Upon the determination by a court, or a settlement, of such alleged infringement
action,  all  amounts  paid into  escrow  pursuant  to Section  8.2(a)  shall be
released  to  the  respective   parties  in  order  equitably  to  reflect  such
determination  or  settlement.  If the parties  cannot  mutually agree as to the
equitable release of such amounts paid into escrow,  notwithstanding  good faith
negotiations,  the issue of the release of such escrowed funds shall be resolved
by means of arbitration, as provided in Section 11.10 hereof.

          (b) Section  8.2(a) shall not apply to Schott's  obligation to pay the
     Minimum Automotive Glazing Royalty.  Notwithstanding any other provision of
     this  Agreement,  if at any time the validity  and/or  enforceability  of a
     substantial portion of Donnelly's  Intellectual Property Rights relating to
     Automotive Glazing, including but not limited to U.S. Patents Nos. 5220317,
     5384578,  5252354,  5457218, 5424865, 5472643, 5239406, 5680245 and 5864419
     and  International  Publication  No.  WO97/3850,  have  been  substantially
     impaired as the result of a challenge to the validity or  enforceability of
     such Intellectual  Property Rights,  then, as of the earlier of the date of
     the receipt of Substantial Notice by Schott or the Company, as the case may
     be, from a third party, or the  commencement of any litigation  relating to
     such  challenge to the invalidity or  unenforceability,  Schott may suspend
     the payment of the Minimum Automotive

                                       13
<PAGE>
     Glazing  Royalty and pay such amounts  into escrow,  until such time as the
     challenge  to the  validity  and  enforceability  of such  patents has been
     settled or adjudicated,  and upon such  settlement or  adjudication  Schott
     may, at its option:

               (1) notify  Donnelly  that it will stop  making  payments  of the
               Minimum  Automotive  Glazing  Royalty,  in which case  Donnelly's
               obligation not to license its Technology or Intellectual Property
               Rights  to any  party  other  than  Schott  and the  Company  for
               Automotive  Glazing, as provided in Section 2.5, shall terminate;
               or

               (2) offer to negotiate a lower Minimum Automotive Glazing Royalty
               with  Donnelly,  in which case Schott and Donnelly shall promptly
               enter into good faith  negotiations and use their reasonable best
               efforts to reach agreement as to the amount of future  Automotive
               Glazing  Royalties  that will  equitably  reflect the  diminished
               value of  Donnelly's  Intellectual  Property  Rights  relating to
               Automotive   Glazing   resulting  from  the   invalidity   and/or
               unenforceability  of such  Intellectual  Property Rights.  If the
               parties  cannot  mutually  agree as to the  amount  payable  with
               respect to future Automotive Glazing  Royalties,  notwithstanding
               such good faith  negotiations,  the issue of the amount of future
               payments with respect to the Minimum  Automotive  Glazing Royalty
               shall be resolved by means of arbitration, as provided in Section
               11.10 hereof.

At such time as such challenge to the validity and enforceability of patents has
been  settled or  adjudicated,  as the case may be, all amounts paid into escrow
pursuant to this Section 8.2(b) shall be released to the  respective  parties in
order equitably to reflect the value of Donnelly's  Intellectual Property Rights
relating  to  Automotive  Glazing as the result of, and  remaining  after,  such
challenge.  If the parties  cannot  mutually agree as to the amount payable with
respect  to  amounts  of  Automotive   Glazing   Royalties   paid  into  escrow,
notwithstanding  such good faith negotiations,  the issue of the release of such
escrowed funds shall be resolved by means of arbitration, as provided in Section
11.10 hereof.

          (c)  Neither  the  Company nor Schott  undertakes  any  obligation  to
     indemnify Donnelly against,  or assume any responsibility for, any claim of
     infringement  by any third party relating to or arising out of any exercise
     of any right or license granted to Donnelly,  the Company or Schott, as the
     case may be, under this Agreement.

          (d) As used in  this  Agreement,  "Substantial  Notice"  shall  mean a
     written  notice from a third party that either (i) alleges  that the use of
     Donnelly's Technology or Intellectual Property Rights or the manufacture or
     sale of  Licensed  Products  infringes  a  third  party's  intellectual  or
     industrial  property  rights  by a  method  or  apparatus  covered  by  the
     Technology  or  Intellectual  Property  Rights  or (ii)  challenges  to the
     validity or enforceability of Intellectual Property Rights, and constitutes
     grounds for the  recipient  of such  written  notice to seek a  declaratory
     judgment with respect to such allegation(s) or challenge(s).

                                       14
<PAGE>
                                    ARTICLE 9
              INFRINGEMENT OF LICENSED INTELLECTUAL PROPERTY RIGHTS

     9.1 Action by a Licensee.  Except as  provided  in Section  9.2, a Licensee
shall have the right but shall not be obligated to institute  proceedings in its
own name or in the name of the Licensor  against any third party  infringer,  in
the Licensee's field of use of Licensed Products,  of any Intellectual  Property
Rights licensed by the Licensor to the Licensee  pursuant to this Agreement.  If
the Licensor or a Licensee becomes aware of any actual,  threatened, or apparent
infringement of any of the licensed  Intellectual  Property Rights by any Person
in the field of use of Licensed Products, such party agrees to provide the other
parties  with  written  notice  prior  to suit of such  actual,  threatened,  or
apparent  infringement  and agrees to furnish to the other  party any  available
evidence of such  actual,  threatened,  or apparent  infringement.  The Licensor
agrees to cooperate in any  proceedings  instituted by a Licensee  against third
party infringers and to provide  information  relating to such proceedings which
the Licensor may  reasonably  request.  In the event that a Licensee  determines
that it lacks  standing to commence  such a proceeding,  the Licensor  agrees to
execute such  documents  and take such  actions as the  Licensee may  reasonably
request  for the  purpose  of  commencing  such  infringement  proceedings.  The
Licensee  shall  have  the  right to  control  prosecution  of such  proceedings
regardless of whether the proceedings are commenced in the Licensor's name or in
the  name  of the  Licensee;  provided,  however,  that  (a) in the  event  of a
counterclaim   against  the  Licensor,   or  a  challenge  to  the  validity  or
enforceability  of any  Intellectual  Property  Rights,  the litigation shall be
jointly  managed by a Licensor and the Licensee so long as the Licensor pays all
costs and  expenses  relating to such  counter  claim  and/or  challenge  to the
validity  or  enforceability  of any  Intellectual  Property  Rights;  provided,
however,  that in the event of disagreements  between a Licensor and Licensee in
such  jointly  managed   litigation,   (1)  the  final  decision  of  issues  in
disagreement  relating to alleged  infringements of third-party  rights shall be
made by the  Licensee  and (2) the final  decision  of  issues  in  disagreement
related  to  challenges  to the  validity  and  enforceability  of  Intellectual
Property  Rights shall be made by the Licensor;  and (b) the Licensee  shall not
settle any claim or  counterclaim  in any manner  agreeing to the  invalidity or
limitation of any Intellectual  Property Right without the prior written consent
of the Licensor.  Any recovery awarded in such proceedings  shall be retained by
the Licensee;  provided,  however,  that the respective expenses of the Licensor
and  Licensee  shall  first be  paid,  pro  rata,  out of the  proceeds  of such
recovery.

          9.2 Action by the  Licensor.  In the event the  Licensor  notifies the
     Licensee or receives  notice from the  Licensee of actual,  threatened,  or
     apparent  infringement  of any  licensed  rights or  Intellectual  Property
     Rights  by a third  party,  and (a) the  infringement  is in the  field  of
     automotive  mirrors or automotive rear vision systems,  or (b) the Licensee
     does not institute proceedings against such a third party within sixty (60)
     days of notification,  then the Licensor may institute  proceedings against
     such a third party, at its own expense, and in the Licensee's name, subject
     to the Licensor's  prompt  reimbursement  of Licensee's  costs and expenses
     with respect to such  proceedings.  The Licensee  agrees to cooperate fully
     with  the  Licensor  in such  proceedings.  Any  recovery  awarded  in such
     proceedings shall be retained by the Licensor.

                                       15
<PAGE>
                                   ARTICLE 10
                              TERM AND TERMINATION

     10.1 Term. Unless otherwise terminated as provided herein:

          (a) The  licenses  granted  hereunder  to the Company  shall remain in
     place and shall continue  notwithstanding  the withdrawal of either Initial
     Member (or its  Affiliate)  or both  Initial  Members (or their  respective
     Affiliates) from the Company;

          (b) The licenses  granted  hereunder from the Company to Schott and/or
     Donnelly (and their  Affiliates),  respectively,  shall continue so long as
     either  Donnelly (or an Affiliate of Donnelly) or Schott North  America (or
     an Affiliate of Schott North America) is a member of the Company,  and upon
     the  withdrawal  from the Company by either  Donnelly  (or an  Affiliate of
     Donnelly)  or  Schott  North  America  (or an  Affiliate  of  Schott  North
     America),  as the case may be, such licenses to the withdrawing  member (or
     its  Affiliates)  shall continue under the same terms and scope existing as
     of the date of such  withdrawal,  including but not limited to Improvements
     existing as of the date of such withdrawal; and

          (c) The licenses  granted  hereunder  from Donnelly to Schott (and its
     Affiliates)  shall remain in place and shall continue  notwithstanding  any
     withdrawal of either Donnelly (or an Affiliate of Donnelly) or Schott North
     America  (or an  Affiliate  of  Schott  North  America)  from the  Company;
     provided, however, that such licenses to Schott (or its Affiliate) shall be
     terminated as of the date of the withdrawal by Schott if:

               (i)  Schott's  Interest is deemed  forfeited  pursuant to Section
          8.01(c) of the LLC Agreement, or

               (ii) Schott fails to pay to Donnelly,  within thirty (30) days of
          such withdrawal, one-half (1/2) of the difference between $9.5 million
          and the aggregate amount contributed to the Company by Schott pursuant
          to Section 3.04(a) of the LLC Agreement as of the date of withdrawal.


     10.2  Default.  If any party  fails to comply  with any of its  obligations
hereunder,  and after notice from another party such failure continues for sixty
(60) days, such action shall constitute a default hereunder;  provided, however,
if a default under this Agreement  cannot  reasonably and with due diligence and
good faith be cured  within  said 60-day  period,  and if the  defaulting  party
promptly  commences  and  proceeds to complete the cure of such default with due
diligence  and in good faith,  the 60-day  period with  respect to such  default
shall be extended to include such additional period of time as may be reasonably
necessary to cure such default.

                                       16
<PAGE>
                                   ARTICLE 11
                                  CONSTRUCTION

     11.1 Governing  Law. This  Agreement  shall be governed by and construed in
accordance  with the laws of the State of New York without  giving effect to any
applicable principles of conflicts of laws.

     11.2 Notices.  All notices and other  communications  under this  Agreement
shall be in writing  and shall be deemed to have been duly given when  delivered
(i) in person, (ii) to the extent receipt is confirmed,  by telecopy,  facsimile
or other  electronic  transmission  service,  (iii) by a  nationally  recognized
overnight  courier  service,  or (iv) by registered  or certified  mail (postage
prepaid return receipt requested), to the parties at the following address:

                  To Donnelly:     Donnelly Corporation
                                   49 W. Third Street
                                   Holland, Michigan 49423
                                   Attention: Niall Lynam
                                   Fax No. (616) 786-786-5185

                  With a copy to:  Varnum, Riddering, Howlett & Schmidt LLP
                                   Bridgewater Place
                                   333 Bridge Street, N.W., P.O. Box 352
                                   Grand Rapids, Michigan 49504
                                   Attention: Daniel Molhoek
                                   Fax No.  (616) 336-7000

                  To the Company:

                  To:              Schott Corporation
                                   Schott North America Manufacturing, Inc.
                                   3 Odell Plaza
                                   Yonkers, New York 10701
                                   Attention: Manfred Jaeckel
                                   Fax No. (914) 968-8585; and

                                   Schott Glas
                                   Legal Department
                                   Hattenbergstra(beta)e 10
                                   P.O. Box 2480
                                   D-55014 Mainz
                                   Federal Republic of Germany
                                   Attention: Dr. Wilhelm Niemeier
                                   Facsimile: 011-49-61-31-66-2098.

                  With a copy to:  Rogers & Wells LLP
                                   200 Park Avenue


                                       17
<PAGE>
                                   New York, New York 10166
                                   Attention: Richard T. McDermott
                                   Facsimile: (212) 878-8375

     11.3 Severability. If any provision of this Agreement shall be conclusively
determined by a court of competent  jurisdiction to be invalid or  unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby.

     11.4 Binding Effect.  Except as otherwise  provided herein,  this Agreement
shall inure to the benefit of and be binding upon the parties,  their respective
successors, legal representatives and permitted assigns.

     11.5  No  Third  Party  Rights.   This  Agreement  is  intended  to  create
enforceable rights between the parties hereto only, and creates no rights in, or
obligations to, any other Persons whatsoever.

     11.6  Schedules  Included in  Exhibits;  Incorporation  by  Reference.  Any
reference to an Exhibit or Schedule to this Agreement  contained herein shall be
deemed to include any Exhibits or Schedules to such Exhibit or  Schedules.  Each
of the Exhibits and Schedules referred to in this Agreement, and each Exhibit or
Schedule  thereto,  is hereby  incorporated by reference in this Agreement as if
such Schedules and Exhibits were set out in full in the text of this Agreement.

     11.7  Amendments.  This  Agreement  may not be  amended  except by  written
agreement executed by duly authorized officers of all of the parties hereto.

     11.8 Entire Agreement;  Section Headings. This Agreement, the Joint Venture
Agreement,  the  LLC  Agreement  and  the  agreements  contemplated  by the  LLC
Agreement  constitute the entire  agreement among the parties hereto relating to
the subject  matter hereof and supersede all prior  agreements,  understandings,
and arrangements, oral or written, among the parties with respect to the subject
matter hereof. The Section headings in this Agreement are for reference purposes
only and  shall not  affect in any way the  meaning  or  interpretation  of this
Agreement.

     11.9  Assignment.   Except  as  otherwise  specifically  provided  in  this
Agreement,  the Joint  Venture  Agreement,  or the LLC  Agreement,  neither this
Agreement  nor any rights or  obligations  hereunder  shall be  assignable or be
delegated  directly or  indirectly  by any party hereto to a third party without
the prior written consent of all the parties to this Agreement.

     11.10 Arbitration.

          (a) Any dispute,  controversy or claim (hereinafter "Dispute") between
     the parties of any kind or nature  whatsoever,  arising under or related to
     this Agreement  whether  arising in contract,  tort or otherwise,  shall be
     resolved  according to the following  procedure.  If a Dispute arises among
     the parties  under or relating to this  Agreement  which is not resolved by
     good faith negotiation,  then such Dispute, upon 30 days' prior notice from
     one party to the other of its

                                       18
<PAGE>
     intent to arbitrate (an  "Arbitration  Notice"),  shall be submitted to and
     settled by arbitration;  provided,  however,  that nothing contained herein
     shall  preclude any party hereto from seeking or obtaining  (a)  injunctive
     relief, or (b) equitable or other judicial relief to enforce the provisions
     hereof or to  preserve  the  status  quo  pending  resolution  of  disputes
     hereunder.  Such  arbitration  shall be  conducted in  accordance  with the
     commercial  arbitration  rules  of  the  American  Arbitration  Association
     existing at the time of  submission,  except the decision shall be rendered
     by one  arbitrator.  The parties shall attempt to agree upon an arbitrator.
     The  arbitrator  shall  be  a  licensed  attorney-at-law,  experienced  and
     knowledgeable  in  the  field  of  intellectual  property,  with  technical
     knowledge  sufficient to understand and render a reasoned  written  opinion
     with  respect  to this  Agreement,  the  Technology  and  the  Intellectual
     Property Rights. If an arbitrator cannot be agreed upon, the party that did
     not give the  Arbitration  Notice may request the Chief Judge of the United
     States  District  Court for the  Western  District of Michigan or the Chief
     Judge of the United States District Court for the Southern  District of New
     York to appoint an arbitrator. If he or she cannot or does not appoint such
     arbitrator,  the arbitrator shall be appointed by the American  Arbitration
     Association.  If an arbitrator so selected  becomes unable to serve, his or
     her successor  shall be similarly  selected or appointed.  All  arbitration
     hearings  shall be conducted in English on an expedited  schedule,  and all
     proceedings shall be confidential.

          (b) The parties shall use their  reasonable  best efforts to limit the
     total time period of any arbitration to a maximum of six months.  Discovery
     shall be limited to a maximum time period of four months,  unless  extended
     by the  arbitrator,  and any  party's  failure  to  deliver  documents  for
     discovery  in a timely  manner  shall  preclude  such party from relying on
     other  documents  that  support its  position  with respect to the issue in
     question.  The arbitrator  shall use his or her reasonable  best efforts to
     decide any dispute  hereunder  within the six-month time period referred to
     in the first sentence of this paragraph (b).

          (c) Any party may at its  expense  make a  stenographic  record of any
     arbitration  proceeding.  The  arbitrator  shall  apportion  all  costs and
     expenses of arbitration  (including the arbitrator's fees and expenses, the
     fees and  expenses of experts,  and the fees and expenses of counsel to the
     parties), between the prevailing and non-prevailing party as the arbitrator
     deems fair and  reasonable.  Any  arbitration  award  shall be binding  and
     enforceable  against the parties hereto and judgment may be entered thereon
     in any court of competent jurisdiction. The arbitration shall take place at
     New York, New York, or Grand Rapids,  Michigan at the election of the party
     not giving the Arbitration Notice.

                                       19
<PAGE>
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                                 DONNELLY CORPORATION

                                 By /s/ Scott E. Reed
                                    Scott E. Reed
                                  Its Sr. VP and CFO


                                 SCHOTT GLAS

                                 By  /s/ Dr. Ungeheuer       /s/ R. Langfeld
                                 Name: Dr. Ungeheuer         Dr. Roland Langfeld
                                 Its: Member of the          Vice President R&D
                                 Board of
                                 Management


                                 SCHOTT CORPORATION

                                 By /s/ Guy Pierre De Conincx

                                  Its ___________________________


                                 SCHOTT NORTH AMERICA
                                 MANUFACTURING, INC.

                                 By /s/ Guy Pierre De Conincx

                                  Its ___________________________


                                 SCHOTT-DONNELLY LLC
                                 SMART GLASS SOLUTIONS

                                 By /s/ Niall Lynam

                                  Its Chairman
<PAGE>
                                   SCHEDULE A

All of Donnelly's  Intellectual  Property  Rights and  Improvements,  and all of
Donnelly's  other  patents and patent  applications  relating to  electrochromic
glazing  existing on the date  hereof  which may be useful or  necessary  to the
Company in the Joint Venture Fields, including but not limited to the following:
Issued Patents
5838483 and 5604626 (which describe user controllable photochromic devices)
5,073,012
5,239,406
5,523,877
5,680,245
5,864,419
4,996,083
4,855,161
4,959,247
5,252,354
5,277,986
5,457,218
5,076,673
5,148,014
5,220,317
5,384,578
5,424,865
5,140,455
5,142,407
5,145,609
5,151,816
5,216,536
5,233,461
5,239,405
5,300,374
5,340,503
5,424,865
5,472,643
5,567,360
5,611,966
5,725,809
5,729,379

Patent Applications
 - WO97/3850
 - applications filed by Donnelly regarding the use of a roller coater to apply
   the sol-gel coatings
 - application regarding the use of additional bus bars

                                       21
<PAGE>
 - application called "Method and apparatus for filling the cavities of cells
   and laminated substrates with a fluid
<PAGE>
                                   SCHEDULE B

All of Donnelly's Technology and non-patented knowhow relating to electrochromic
glazing  existing on the date  hereof  which may be useful or  necessary  to the
Company in the Joint Venture Fields and Donnelly's  Improvements,  including but
not limited to the following:

 -  Commercialization of EC products

 -  Material selection, purification and synthesis

 -  Accelerated testing/reliability assurance

 -  Sealing techniques/seal integrity testing

 -  Substrate preparation & cleaning

 -  Diagnostic testing

 -  Troubleshooting/PFMEA

 -  Equipment design

 -  Process design

 -  Customization for automotive applications

 -  Production scale-up of EC products

 -  Quality systems for EC products

 -  Component, material and equipment selection & procurement

 -  Electrical connectors and interfaces

 -  Automotive development, supply and quality systems

 -  Failure analysis and countermeasure implementation

 -  Competitive benchmarking

 -  Manufacturing flow and production control for EC products

 -  Costing & pricing for EC products

 -  Supplier development & quality control for EC products
<PAGE>
EXHIBIT 13
                       DONNELLY CORPORATION AND SUBSIDIARIES

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

FORWARD-LOOKING STATEMENTS

This  report  contains  forward-looking  statements  within  the  meaning of the
Private  Securities   Litigation  Reform  Act  of  1995.  The  terms  "believe,"
"anticipate,"  "intend," "goal," "expect," and similar  expressions may identify
forward-looking  statements.  Investors are cautioned  that any  forward-looking
statements,  including  statements  regarding  the  intent,  belief  or  current
expectations  of the Company or its  management,  are not  guarantees  of future
performance  and involve risks and  uncertainties,  and that actual  results may
differ  materially  from  those in  forward-looking  statements  as a result  of
various factors including, but not limited to (i) general economic conditions in
the markets in which the Company  operates,  (ii)  fluctuation  in  worldwide or
regional  automobile  and light truck  production,  (iii)  changes in  practices
and/or policies of the Company's significant customers,  (iv) market development
of specific  products of the  Company,  including  electrochromic  mirrors,  (v)
whether the Company  successfully  implements its European  restructuring,  (vi)
effects of the year 2000 on the  Company's  business  and (vii)  other risks and
uncertainties.  The  Company  does not  intend to update  these  forward-looking
statements.

OVERVIEW

Donnelly Corporation ("the Company") is an international  supplier of automotive
parts and component systems through  manufacturing  operations and various joint
ventures in North and South  America,  Europe and Asia.  The  Company  primarily
supplies  automotive  customers  around the world with rear view mirror systems,
modular  window  systems  and  handle  products.  The  Company's  non-automotive
products  represent  less than 4% of total net sales for each of the last  three
years.

The Company is primarily  managed based on  geographic  segments and the product
markets they serve.  The Company has two  reportable  segments:  North  American
Automotive  Operations ("NAAO") and European Automotive  Operations ("EAO"). The
operating  segments are managed  separately  as they each  represent a strategic
operational  component  that offers the Company's  product lines to customers in
different geographical markets.

The  Company's  fiscal  year is the 52- or 53- week period  ending the  Saturday
nearest June 30.  Fiscal years ended July 3, 1999,  June 27, 1998,  and June 28,
1997,  included  53,  52 and 52 weeks,  respectively.  The  fiscal  years of the
Company's German and Spanish subsidiaries end on May 31. Effective July 4, 1999,
the  Company  will  change  the date  for the end of its  fiscal  year  from the
Saturday nearest June 30 to December 31. For the transition  period from July 4,
1999, to December 31, 1999, the Company's  fiscal quarter will end on October 2.
All year and quarter  references relate to the Company's fiscal years and fiscal
quarters, unless otherwise stated.

The  Company's  net  sales  and  net  income  may  be  subject  to   significant
fluctuations  attributable  primarily to  production  schedules of the Company's
major automotive customers.  In addition,  the Company has benefited from strong
product content on light trucks,  including sport utility vehicles,  as compared
to  automobiles.  These factors cause results to fluctuate from period to period
and year to year.  The  comparability  of the  Company's  results on a period to
period basis is also affected by the  Company's  formation  and  disposition  of
subsidiaries,  joint ventures and alliances, and acquisitions and investments in
new product lines.

In the second quarter of 1999,  the Company merged its wholly owned  subsidiary,
Donnelly Optics Corporation ("Optics") into a wholly owned subsidiary of Applied
Image Group, Inc. ("AIG"),  a New York Corporation.  In the merger,  the Company
received a 13% interest in AIG and a $5 million  convertible  note. AIG develops
and manufactures opto-imaging products for the lighting, automotive, optical and
photonics industries. As a result of this transaction,  the financial results of
Optics  are no longer  included  in the  Company's  financial  statements  after
December  1, 1998.  The  transaction  had no impact on the  Company's  operating
results.

On July 1, 1999, the Company signed a letter of intent to sell its investment in
Lear  Donnelly  Overhead  Systems,  LLC ("Lear  Donnelly")  to Lear  Corporation
("Lear") for an undisclosed  amount. The transaction is expected to be completed
in the  first  quarter  of the next  fiscal  period  and is  expected  to have a
one-time,  material  favorable  impact  on the net  income  and cash flow of the
Company. In addition, due to the transfer of the Company's interior lighting and
trim sales  contracts  included in the joint venture to Lear,  future annual net
sales will be reduced by approximately $65 to $70 million per year (see Note 2).

                                                                               2
<PAGE>
RESULTS OF OPERATIONS

Comparison of 1999 to 1998

North American Automotive Operations

Net sales for NAAO increased by  approximately  15.4% for the year and 18.3% for
the fourth quarter of 1999, compared to the same periods of 1998,  respectively.
The  increase  was  primarily  due to programs  launched in 1998 running at full
production  volumes in 1999,  new product  introductions  in the modular  window
product line,  stronger  North  American car and light truck build and a 53 week
versus  52 week  year.  North  American  car and  light  truck  build  increased
approximately  6% in 1999 compared to 1998 and increased 13% for the  comparable
fourth quarter periods.

NAAO gross  profit was higher for the year and fourth  quarter  compared  to the
previous year primarily due to the stronger sales levels.  However, gross profit
margins  have  decreased as a percent of net sales due to  significant  customer
pricing  pressures and a more rapid rate of revenue growth in modular window net
sales,  relative  to the net sales  growth of other  products,  such as mirrors,
which have higher gross profit margins. Improvements in purchased material costs
partially offset pressures on gross profit margins. The Company may experience a
change in gross profit margin from period to period based on the sales growth or
change in mix of higher- or  lower-margin  products.  It is expected that future
revenue growth will be more balanced between higher- and lower- margin products.
A  favorable   arbitration  award  in  1998  associated  with  Donnelly  Happich
Technology,  Inc.,  ("Donnelly  Happich"),  offset costs  associated  with visor
programs and improved margins in 1998.

The Company's  North  American  operating  margins were flat for both the fourth
quarter and twelve month period of 1999  compared to 1998.  Higher sales volumes
and lower  selling,  administrative  and  research  and  development  costs as a
percent to net sales were offset by an unfavorable  mix of lower margin products
and significant customer pricing pressures. During 1999, NAAO implemented a cost
reduction program to focus functional groups on best-in-class performance.  This
program allowed NAAO to leverage these expenses with increases in sales.

European Automotive Operations

Net sales for EAO were  approximately  7.3% higher in 1999  compared to 1998 and
increased 5.8% for the comparable fourth quarter periods. This was primarily due
to the  launch of new  electrochromic  business  and  product  content on strong
selling vehicles.  European car build, while relatively flat in 1999 compared to
1998,  remained  strong.  Exchange  rates did not have a material  effect on the
comparability of net sales between 1999 and 1998.

EAO gross profit margin  increased  slightly for the year and fourth  quarter of
1999 compared to 1998. Gross profit  performance at the Company's  operations in
Spain and France  continue  to remain  strong.  EAO gross  profit  margins  were
stronger  despite  inventory  write-offs and other expenses  associated with the
1999 European  turnaround  plan,  discussed  below,  and an increase to warranty
reserves.  Improvements  in  purchased  material  costs and a one-time  supplier
rebate in the third quarter of 1999 partially offset these expenses.

In  February  1999,  the  Company  announced  a European  turnaround  plan.  The
Company's  European  automotive segment recorded  unfavorable  operating results
over the last three years with  operating  income  (losses)  of $0.7  million in
1998, $2.1 million in 1997 (excluding restructuring charges), and ($3.7) million
in 1996,  despite strong automotive car build and overall sales increases in the
Company's European  operations.  Certain key operating units in Europe continued
to perform at an operating  loss. In September  1998, the Company  assigned four
senior  managers from its North  American  operations to this segment to improve
the Company's  overall  operating  performance  in Europe.  The objective of the
restructuring  plan is to improve the overall operating  efficiency and customer
service of the European  organization by 1) re-organizing  certain manufacturing
and  customer  service   functions  into  a  customer  focused   structure,   2)
consolidating two German manufacturing  facilities,  3) implementing  throughout
Europe  the  Donnelly   Production   System,  the  Company's  approach  to  lean
manufacturing  processes,  4)  re-negotiating  an existing labor contract and 5)
realigning sales and engineering functions throughout Europe.

In the third quarter of 1999, an $8.8 million pretax  restructuring  charge,  or
$3.5 million charge to net income, was recorded for this plan. The restructuring
charge  included $1.4 million for the impairment of assets and a reserve of $7.4
million for  anticipated  incremental  cash  expenditures  for the severance and
voluntary  incentive  programs  for  approximately  200  production,  production
support, sales and engineering employees.  The restructuring charge was recorded
in accordance  with Emerging  Issues Task Force ("EITF") 94-3. The impairment of
long-lived  assets  includes   adjustments  to  the  carrying-value  of  certain
facilities  and  operating  assets.  The  impairment  charge was  determined  by
comparing management's current estimate of the fair market value of the assets

                                                                               3
<PAGE>
based on existing or alternative  use of those assets impacted by the turnaround
plan with the  carrying-value  of the related assets.  The estimated  underlying
fair market value for these  assets is subject to change.  The Company will also
fund approximately $4.3 million for the construction of shipping and warehousing
facilities,  relocation  of  employees  and new  material  handling  and storage
equipment  associated with the 1999 European turnaround plan. These costs do not
qualify as  restructuring  under EITF 94-3 and  therefore  are  included  in the
Company's  capital and operating  budget for the next six to eight  months;  the
majority of the costs will be capitalized.

In July 1999, the Company completed the  re-negotiation of its labor contract in
Germany  allowing  for greater  work  flexibility  rules,  broader  productivity
guidelines  and  a  delay  in  certain  wage  increases   until  certain  income
profitability  targets are  accomplished.  As of July 3, 1999,  cash payments of
$0.6  million had been  incurred,  including  the  termination  of 10  employees
associated  with the plan. It is expected that all actions  associated  with the
plan will be completed by the end of calendar year 2000.

EAO  operating  income was lower in 1999  compared to 1998  primarily due to the
restructuring  charge,  inventory  write-offs and other expenses associated with
the 1999 European  turnaround  plan.  EAO operating  income was also impacted by
approximately  $0.9 million of costs  associated with the year 2000  remediation
process. EAO operating income in the fourth quarter of 1999 was higher than 1998
primarily due to stronger volumes during the period.

Company

Net sales were $905.0  million in 1999  compared to $763.3  million in 1998,  an
increase of approximately 19%. Net sales for the fourth quarter of 1999 and 1998
were $243.1 million and $209.7, respectively,  an increase of approximately 16%.
Suppliers in the automotive  industry  continue to experience  significant price
demands  from their  customers.  While  these  price  demands  continue to place
significant  pressure on the Company's gross profit and operating margins,  they
did not have a  material  impact  on net  sales  for  1999 or  1998.  Due to the
transfer to Lear of the  Company's  interior  lighting and trim sales  contracts
included  in the joint  venture,  future  annual  net sales  will be  reduced by
approximately  $65 to $70 million per year. The Company has announced its intent
to sell its investment in this joint venture (see Note 2).

Gross  profit  margin for 1999 was 14.8%  compared to 17.1% in 1998 and 14.2% in
the fourth  quarter of 1999  compared to 17.3% in the same  period of 1998.  The
lower  gross  profit  margins are  primarily  due to the  formation  of the Lear
Donnelly  joint  venture,  which is  accounted  for  under  the  equity  method,
relatively greater revenue growth of products with lower profit margins at NAAO,
significant global pricing pressures and inventory write-offs and other expenses
associated  with the 1999 European  turnaround  plan.  The Lear  Donnelly  joint
venture  unfavorably  impacts gross profit margins  because sales related to the
joint venture are included in the net sales of the Company, but the gross profit
is recorded by Lear  Donnelly,  which the Company  accounts for under the equity
method (see Note 2).

Selling,  general and administrative  expenses were flat at 9.2% of net sales in
1999 and 1998. In the fourth quarter of 1999,  these expenses were 9.1% of sales
compared  to 9.7% in the  same  period  of 1998  primarily  as a  result  of the
Company's  ability to  leverage  these  expenses  on higher  sales  volumes.  In
addition,  these  expenses were lower for the year and fourth quarter due to the
Optics merger.

Research and development  expenses were $34.2 million in 1999, compared to $36.4
million in 1998.  These  expenses  were lower for the year  primarily due to the
Lear Donnelly  joint  venture,  the  formation of the Schott  Donnelly LLC Smart
Glass  Solutions  ("Schott  Donnelly")  joint  venture,  Optics  merger  and the
formation of Donnelly  Electronics  LLC.  Operating  expenses for the respective
businesses  and  technologies  contributed by the Company to these ventures were
transferred to the new ventures which are accounted for under the equity or cost
method of accounting.

In the fourth  quarter of 1998,  Optics  recognized a $3.5 million pretax charge
against  operating income, or $2.3 million after tax, due to the cancellation of
a customer order related to market dynamics in the digital imaging sector of the
computer industry.  The charge primarily consisted of a write-off of tooling and
other  current  assets and  severance  of  approximately  25  manufacturing  and
administrative  personnel.  The severance  cash  payments were  completed in the
second  quarter of 1999.  This  business  was merged  into a new  company in the
second quarter of 1999 (see Note 2).

The Company reported  operating income of $8.1 million in 1999 compared to $20.4
million  in 1998 or 0.9% and 2.7% of net  sales,  respectively.  For the  fourth
quarter of 1999, the Company had operating  income of $6.9 million,  an increase
of $2.6 million  compared to the same period last year. The Company's  operating
margins were lower in 1999 primarily due to the  restructuring  charge and costs
associated with the 1999 European  turnaround plan and higher growth in sales at
NAAO of lower  margin  products.  Operating  income in 1998  benefited  from the
favorable  arbitration  settlement  related  to  the  Company's  joint  venture,
Donnelly Happich,  which offset costs on certain visor programs.  However,  1998
was  unfavorably  impacted by the charge at Optics.  The  formation  of the Lear
Donnelly joint venture did not have a material impact on the Company's operating
margins for the fourth quarter or twelve-month period.

Interest expense was $7.9 and $8.3 million in 1999 and 1998,  respectively,  and
slightly lower in the fourth quarter compared to 1998.

                                                                               4
<PAGE>
Interest  expense  was lower  primarily  due to lower  average  debt during 1999
compared to 1998.  Royalty  income was $0.8 million and $0.1 million in 1999 and
1998, respectively.

Other  income,  net  was  $2.6  million  and  $1.9  million  in 1999  and  1998,
respectively, and $3.0 million compared to $1.2 million in the fourth quarter of
1999 and 1998,  respectively.  In the fourth quarter of 1999, the Company formed
Schott Donnelly, a 50-50 joint venture with Schott North America  Manufacturing,
Inc., a wholly owned subsidiary of Schott  Corporation  ("Schott").  Schott is a
wholly owned  subsidiary of Schott Glas, which is based in Germany and is one of
the world's leading  producers of specialty  glass  products.  The joint venture
will  design  and   manufacture   electrochromic   glass  for   automotive   and
architectural  applications.  Upon the  formation  of this  joint  venture,  the
Company received $2 million,  which was recorded as a pretax gain. In accordance
with the LLC operating agreement,  losses generated by the joint venture will be
allocated to Schott until Schott has contributed $9.5 million.


In the second and third quarters of 1999,  the Company sold its entire  interest
in VISION Group plc ("VISION  Group").  As a result of these sales,  the Company
received  $8.6  million in proceeds  and  recognized  a combined  pretax gain of
approximately  $5.5 million,  or $0.35 per share after tax. The Company's equity
in the financial  results of VISION Group is no longer included in the Company's
financial statements after November 1999.

In the second  quarter of 1998,  the  Company  sold its 50%  interest in Applied
Films Corporation ("AFC") during an initial public offering. As a result of this
sale, the Company received $7.9 million in net proceeds, after taxes and related
out of pocket fees, and recognized a pretax gain of approximately  $4.6 million,
or $0.22 per share after tax.

The Company's  effective tax rate was 15.8% in 1999,  compared to 26.3% in 1998.
The  lower  effective  tax rate is the  result  of tax  benefits  recognized  on
domestic export sales and domestic U.S. research tax credits.  Where these items
were equal to 1998 levels,  the relative  percent to the Company's  lower pretax
earnings was higher. In addition,  local trade tax benefits in Germany favorably
impacted the Company's  effective tax rate. These benefits were partially offset
by foreign  operating losses in Asia for the Company's  Malaysian  operation for
which no net operating  loss  carryforward  can be utilized due to tax treatment
relating to start-up  companies  in  Malaysia.  The Company has  recorded  $12.4
million and $7.1 million of deferred tax assets on  non-expiring  net  operating
loss  carry-forwards  at July 3,  1999,  and  June  27,  1998,  respectively.  A
significant  portion of the loss  carryforwards  resulted from the 1997 and 1999
European restructuring charges.

Minority interest in net loss of subsidiaries increased to $3.2 million in 1999,
compared to $0.4 million in 1998,  primarily due to the restructuring charge and
operating losses at the Company's German operations.

Equity  in losses of  affiliated  companies  improved  to $0.8  million  in 1999
compared to $1.5 million in 1998, primarily related to the sale of the Company's
interest in VISION Group, which was incurring  operating losses, and operational
improvements at the Company's joint ventures in China.

Net income was $10.6 million in 1999 compared to $13.0 million in 1998.

During 1999,  the Company  continued to focus on  implementing  plans to improve
financial performance. In September 1998, four members from the Company's senior
management team began extended  assignments in Europe to bring greater speed and
effectiveness to the restructuring and turnaround needed in Europe. In the third
quarter of 1999,  this senior  management  team  developed a turnaround  plan to
restore the European operations to long-term profitability. This action combined
with the  impact of the  merger of Optics  into a new  company,  the sale of the
Company's  interest  in VISION  Group,  the  formation  of Schott  Donnelly  and
productivity  improvements  made in North  America  are  expected to improve the
overall operating  performance and financial  condition of the Company. In North
America,  the  Company's  management  has  implemented  an  effort  to  re-focus
functional   groups  on  best-in-class   performance  in  terms  of  operational
effectiveness   and  cost  efficiency.   This  initiative  has  led  to  setting
productivity improvement goals in North American administrative functions.

                                                                               5
<PAGE>
Comparison of 1998 to 1997

North American Automotive Operations

Net sales for NAAO increased by approximately  4.8% in 1998 compared to 1997 and
3.4% for the comparable  fourth quarter periods.  The increase was primarily due
to programs launched in 1997 running at full production  volumes in 1998 and new
product  introductions  in the modular  window,  door handle and  interior  trim
product lines.  The increase in North  American net sales  occurred  despite the
fact that automotive industry production increased less than 3%.

NAAO gross profit and operating margins were lower in 1998 due to stronger sales
on  products  with lower  margins,  primarily  modular  windows,  and  continued
customer pricing pressures.  In addition, a favorable  arbitration award in 1998
associated with Donnelly Happich offset costs associated with visor programs and
improved margins in 1998.

European Automotive Operations

Net sales for EAO  increased by  approximately  17.8% in 1998  compared to 1997,
primarily due to the consolidation of the Company's German subsidiary,  Donnelly
Hohe GmbH and Co. K.G. ("Donnelly Hohe"). As a result of acquiring a controlling
interest  in  the  general   partner  of  Donnelly   Hohe,   the  company  began
consolidating the financial statements of Donnelly Hohe, beginning in the second
quarter of 1997.  EAO net sales for the fourth  quarter of 1998,  increased 1.4%
compared to the same period in the prior year. Net sales for EAO, as reported in
the local  currencies for these  operations,  increased  moderately for the year
ended 1998 compared to 1997, including Donnelly Hohe for the entire twelve month
period for both  years.  However,  due to the  increased  strength of the dollar
relative to the German mark, Irish punt and French franc for the year ended 1998
as  compared to 1997,  the  reported  consolidated  net sales in dollars for the
Company's  European  operations were down slightly  compared to 1997,  including
Donnelly Hohe for the entire twelve month period for both years.

Gross  profit  for the  Company's  European  operations  was  higher  due to the
consolidation  of  Donnelly  Hohe in the second  quarter of 1997.  Gross  profit
margins  for the  Company's  European  Operations  were  slightly  lower in 1998
compared to 1997.  The inclusion of Donnelly  Hohe,  for a full twelve months in
1998,  unfavorably impacted margins due to the first quarter performance of this
operation  being included in 1998.  Margins for Donnelly Hohe are  traditionally
lower in the  first  quarter  due to lower  sales  volumes  caused  by  industry
shutdowns.  On a comparable  twelve-month  basis,  the gross  profit  margins at
Donnelly Hohe were flat.  Gross profit margins at the Company's Irish operations
improved  in 1998  compared  to 1997 due to  launch  issues  in 1997,  partially
offsetting the impact of Donnelly Hohe.

In May 1997,  the  Company  announced a European  restructuring  plan to realign
manufacturing  capacity,  improve  operating  efficiencies  and to reduce future
operating  costs.  The  Company's  strategy to  penetrate  European  markets was
through  acquisitions;  the most significant of which was Donnelly Hohe in March
1995. Donnelly Hohe, based in Germany, serves many of the main auto producers in
Europe  in  exterior  mirrors,   interior  mirrors,  door  handles  and  certain
non-automotive  products through four operating facilities in Germany and one in
Spain. The restructuring plan was primarily based on the decision to re-organize
product lines and  production  processes  within  operations of Donnelly Hohe at
Dorfprozelten,  Germany and other European locations in Schleiz,  Germany, Spain
and  Ireland.  In  addition,   the  plan  included  costs  associated  with  the
restructuring  of management  at Donnelly  Hohe and within the overall  European
management  structure.  The  strategic  intent  of the  plan  was  primarily  to
consolidate redundant manufacturing processes,  move certain assembly operations
to  lower  cost  areas  of  production   and  centralize   European   management
responsibility.

In the fourth quarter of 1997, a $10.0 million pretax  restructuring  charge, or
$4.0 million charge to net income, was recorded for this plan. The restructuring
charge consisted of a severance  program,  voluntary  separation  incentives and
administrative  costs associated with the plan in accordance with EITF 94-3. The
severance and separation incentive program includes approximately 230 personnel,
primarily personnel in manufacturing and European management functions.  Through
July 3, 1999, the Company had  terminated 129 employees  under the 1997 plan and
had incurred cumulative cash payments of $5.5 million. In addition, in 1998, the
Company recorded a reduction to the restructuring reserve of $1.1 million pretax
associated with changes to the plan.

Due  to  changes  in   management   at  the   Company's   European   operations,
implementation of the  restructuring  plan was delayed.  However,  the remaining
actions under this plan have not changed. The remaining reserve of $2.8 million,
as  adjusted  for  foreign  currency   changes,   has  been  combined  with  the
restructuring  charge taken in the third quarter of 1999. All remaining employee
separation  benefits and related  cash  payments are expected to be completed in
conjunction with the most recent European restructuring initiatives.

Operating income for the Company's  European  operations  increased for the year
and fourth  quarter of 1998 compared to 1997  primarily due to the impact of the
restructuring charge in 1997.

                                                                               6
<PAGE>
Company

Net sales were $763.3  million in 1998  compared to $671.3  million in 1997,  an
increase  of  approximately  13.7%,  which  was  primarily  the  result  of  the
consolidation  of Donnelly  Hohe for the entire twelve month period and stronger
sales at NAAO.  Pro forma net sales  for 1997 were  approximately  $720  million
including Donnelly Hohe's net sales for the first quarter. Net sales were $209.7
million in the fourth  quarter of 1998 compared to $188.2  million in the fourth
quarter of 1997,  an  increase of  approximately  11.4%,  due to stronger  North
American sales. While price pressures from the Company's  customers continued to
impact the  Company's  gross profit and operating  margins,  they did not have a
material impact on the Company's net sales for 1998 or 1997.

Gross  profit  margin for 1998 was 17.1%  compared to 18.9% in 1997 and 17.3% in
the fourth  quarter of 1998 compared to 18.8% in the same period of 1997.  Gross
Profit  margins are lower  primarily  due to the  formation of the Lear Donnelly
joint  venture,  lower gross  profit  margins at NAAO and the  consolidation  of
Donnelly Hohe.

Selling,  general and administrative  expenses decreased to 9.2% of net sales in
1998 from 9.9% of net sales in 1997,  primarily due to the formation of the Lear
Donnelly  joint  venture.  These  costs are  lower as a percent  to sales due to
certain  general and  administrative  functions to support the interior trim and
lighting business being transferred to the joint venture, which is accounted for
under the equity method. In the fourth quarter of 1998, these expenses were 9.7%
of sales compared to 10.2% in the same period of 1997.

Research and  development  expenses were $36.4 million in 1998 compared to $32.5
million in 1997. These expenses were flat as a percent of sales in 1998 compared
to 1997.

In the fourth  quarter of 1998,  Optics  recognized a $3.5 million pretax charge
against operating income, or $2.3 million after tax (see Note 4).

The Company's  operating  income  increased  from $17.7 million in 1997 to $20.4
million in 1998. However,  the Company's operating income was lower in 1998 as a
percent  of sales,  primarily  due to losses  associated  with the  start-up  of
Donnelly  Optics and an  unfavorable  product mix in NAAO.  In addition to these
factors,  the Company  experienced  lower operating income as a percent of sales
due to the $3.5  million  pretax  charge at Optics.  The  formation  of the Lear
Donnelly  joint  venture  did not have a  significant  impact  on the  Company's
operating margins.

Interest  expense  was $8.3 and $9.5  million  in 1998 and  1997,  respectively.
Interest  expense  was lower  primarily  due to lower  average  debt during 1998
compared to 1997.  In the second  quarter of 1997,  the Company  entered into an
agreement to sell an interest in a defined pool of trade accounts receivable. As
of the Company's combined  consolidated  balance sheets, dated June 27, 1998 and
June 28, 1997, a $40.3 million and $40.0 million interest in accounts receivable
were sold under  this  agreement,  respectively,  with  proceeds  used to reduce
revolving lines of credit. The discount expense associated with this transaction
is included in selling, general and administrative expenses.

Royalty income was $0.1 million and $1.5 million in 1998 and 1997, respectively.
Royalty  income is lower due to the completion of various  licensing  agreements
with companies in Asia.

Other income was $1.9  million and $0.8 million in 1998 and 1997,  respectively.
Other  income was higher in 1998  primarily  due to grant  income and  favorable
foreign currency  transaction gains recognized at some of the Company's European
operations.

In the second  quarter of 1997,  the Company  sold 2.5% of its holding in VISION
Group,  resulting in a $0.9 million  pretax gain. In the second quarter of 1998,
the Company sold its 50% interest in AFC during an initial public offering. As a
result of this sale,  the Company  received $7.9 million in net proceeds,  after
taxes  and  related  out of  pocket  fees,  and  recognized  a  pretax  gain  of
approximately $4.6 million, or $0.22 per share after tax.

The Company's  effective tax rate was 26.3% in 1998,  compared to 23.2% in 1997.
The lower tax rate in 1997 was due to operating  losses in Germany at higher tax
rates. The Company recognized lower taxes than expected in the fourth quarter of
1998 due to higher tax credits  than  expected  and tax exempt  income on higher
export sales, combined with a reduced pretax result from the charge at Optics.

Minority interest in net loss of subsidiaries was $0.4 million in 1998, compared
to $1.1 million in 1997.  Equity in losses of  affiliated  companies  was ($1.5)
million in 1998 compared to $(0.3)  million for the same period in 1997.  Equity
earnings of affiliated  companies were significantly lower in 1998 due to losses
incurred  at  VISION  Group.  The  losses  were  incurred  due  to  slower  than
anticipated  consumer  acceptance for VISION Group's integrated camera microchip
products.  In the second and third

                                                                               7
<PAGE>
quarters of 1999, the Company sold its entire interest in VISION Group (see Note
2). The Lear Donnelly  joint  venture did not have a  significant  impact on the
Company's equity earnings in 1998.

Net income was $13.0  million in 1998,  compared to $10.0  million in 1997.  Net
income for 1998 included a $2.2 million net gain after taxes associated with the
sale of AFC,  offset by a $2.3  million  charge  after  taxes,  at  Optics.  The
consolidation  of Donnelly Hohe did not impact the  comparability  of net income
from 1997 to 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  current ratio was 1.1 and 1.5 at July 3, 1999, and June 27, 1998,
respectively.  Working  capital  was $7.3  million on July 3, 1999,  compared to
$58.3  million on June 27, 1998.  Current  assets  decreased as compared to June
1998, despite the increase in overall sales volumes. The most significant factor
causing  the  decrease in working  capital  was the timing of customer  payments
relative to the ending  balance  sheet dates of July 3, 1999 and June 27,  1998,
respectively.  The Company's  North American  customers  provide  payment to the
Company on  pre-established  payment  dates ranging from the 28th to the 30th of
each month.  Therefore,  a number of customer payments were not received by June
27, 1998,  resulting in higher  accounts  receivable  balance on this date.  The
receipt  of  customer  payments,  combined  with  more  active  working  capital
management,  provided funds which were used to reduce  revolving lines of credit
as of July 3, 1999.  Working  capital  was also  impacted  by the  restructuring
charge  taken in the third  quarter  of 1999 and  improved  inventory  turnover.
Inventory turnover improved due to improved  operational  performance at EAO and
inventory  write-offs  associated  with the 1999 European  turnaround  plan. The
total  restructuring  reserve at July 3, 1999 was $10.1  million,  of which $7.7
million is classified as short-term.

At July 3, 1999, and June 27, 1998, a $40.4 million and $40.3 million  interest,
respectively,   had  been  sold   under  the   Company's   accounts   receivable
securitization. Proceeds sold under this agreement were used to reduce revolving
lines of credit. The sale is reflected as a reduction of accounts receivable and
as operating  cash flows.  The agreement  expires in December  1999,  however is
renewable for one-year periods at the option of the Company. The Company expects
to extend the current agreement or replace it on comparable terms.

Capital expenditures in 1999, 1998 and 1997 were $57.8, $46.2 and $35.2 million,
respectively.  Capital spending was higher in the twelve month period to support
new  business  orders and to support the  implementation  of new  manufacturing,
distribution and administrative  information systems.  Capital spending the next
twelve to eighteen  months is expected to remain at current  spending  levels to
support the continued launch of new business orders,  the  implementation of new
manufacturing,  distribution and administrative information systems globally and
capital expenditures related to the 1999 European turnaround plan.

The Company's $160 million  multi-currency global revolving credit agreement had
borrowings  against  it of $22.5  million  and $47.5  million  in the  Company's
Combined  Consolidated  Balance  Sheets  dated July 3, 1999,  and June 27, 1998,
respectively. The Company's total long-term borrowing decreased by $31.5 million
at July 3,  1999  compared  to June 27,  1998,  primarily  due to lower  working
capital and net cash provided by operating activities.

The Company has announced  significant  restructuring  plans in 1997 and 1999 to
improve the overall profitability of the Company's European operations (see Note
4). Cash payments of approximately $9.2 million are expected to be required over
the next  eighteen  months to support  these plans  primarily for the payment of
severance and voluntary termination benefits. In addition, the Company will also
require  approximately  $4.3  million  for  the  construction  of  shipping  and
warehousing  facilities,  relocation of employees and new material  handling and
storage  equipment  associated  with  the 1999  European  turnaround  plan,  the
majority of which will be capitalized.

The Company  believes that its long-term  liquidity and capital  resource  needs
will continue to be provided  principally  by funds from  operating  activities,
supplemented by borrowings under the Company's  existing credit  facilities.  In
addition,  the Company  expects the sale of its  investment  in Lear Donnelly to
have a material favorable impact on cash flows (see Note 2). This transaction is
expected to be completed  in the first  quarter of the next fiscal  period.  The
Company also considers  equity  offerings to properly manage the Company's total
capitalization  position.  The Company  considers,  from time to time, new joint
ventures,  alliances and acquisitions,  the implementation of which could impact
the liquidity and capital resource requirements of the Company.

The  Company's  primary  foreign  investments  are in Germany,  Ireland,  Spain,
France, Mexico, China, Brazil and Malaysia.  Except for the Company's subsidiary
in Mexico,  whose  functional  currency is the United States  dollar,  financial
statements of  international  companies are translated into United States dollar
equivalents at exchange rates as follows: (1) balance sheet accounts at year-end
rates and (2) income  statement  accounts at weighted  average monthly  exchange
rates prevailing during the year. Translation gains and losses are reported as a
separate component of shareholders' equity and are included in accumulated other
comprehensive income. For the subsidiary in Mexico,  transaction and translation
gains or losses are reflected in net income

                                                                               8
<PAGE>
for all  accounts  other than  intercompany  balances of a long-term  investment
nature  for which the  translation  gains or losses are  reported  as a separate
component of shareholders' equity. Foreign currency transaction gains and losses
included in other incom are not material.

The Company utilizes  interest rate swaps and foreign exchange  contracts,  from
time to time,  to manage  exposure  to  fluctuations  in  interest  and  foreign
currency  exchange  rates.  The  risk of loss to the  Company  in the  event  of
nonperformance by any party under these agreements is not material.

Recently Issued Accounting Standards

Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments and Hedging  Activities" amends SFAS Nos. 52 and 107 and
supersedes  SFAS Nos. 80, 105 and 119. SFAS No. 133  establishes  accounting and
reporting standards for derivative  instruments and for hedging  activities.  It
requires that an entity  recognize all  derivatives in the balance sheet at fair
value. It also requires that unrealized  gains and losses resulting from changes
in fair  value be  included  in income or  comprehensive  income,  depending  on
whether the instrument  qualifies as a hedge.  SFAS No. 133 is effective for all
fiscal  quarters of fiscal years beginning after June 15, 2000. The Company does
not expect the  implementation of this new standard to have a material impact on
results of operations or financial position of the Company.

Statement of Position ("SOP") 98-5, "Reporting on Costs of Start-Up Activities,"
requires costs of start-up  activities and organization  costs to be expensed as
incurred.  This SOP is effective for fiscal years  beginning  after December 15,
1998.  The impact of this  standard on the results of  operations  and financial
position of the Company is  estimated to be  approximately  $0.7 million to $0.9
million, net of tax.

No other recently  issued  accounting  standards are expected to have a material
impact on the Company.

Year 2000

The year 2000 issue is the result of computer programs written using two digits,
rather than four, to define the applicable year. Any of the Company's computers,
computer programs,  manufacturing and administration  equipment or products that
have  date-sensitive  software may  recognize a date using "00" as the year 1900
rather than the year 2000.  If any of the  Company's  systems or equipment  that
have   date-sensitive   software  use  only  two  digits,   system  failures  or
miscalculations  may result causing  disruptions of operations,  including among
other things, a temporary inability to process  transactions or send and receive
electronic  data  with  third  parties  or  engage in  similar  normal  business
activities.

During 1997, the Company formed an ongoing  internal  review team to address the
year 2000 issue  that  encompasses  operating  and  administrative  areas of the
Company.  A team of the  Company's  global  professionals  has been engaged in a
process to work with Company personnel to identify and resolve  significant year
2000 issues in a timely  manner.  In addition,  executive  management  regularly
monitors the status of the Company's year 2000  remediation  plans.  The process
includes an assessment of issues and  development  of remediation  plans,  where
necessary, as they relate to internally used software, computer hardware and use
of computer applications in the Company's  manufacturing processes and products.
In addition,  the Company has engaged in an  assessment  process with  suppliers
regarding the year 2000 issue.

The assessment, remediation and testing process has materially been completed at
the  Company's  North  American  and  European  operations  for all  facilities,
products, embedded systems and information systems. In addition, the Company has
initiated  formal  communications  with its joint ventures,  suppliers and large
customers  in North  America  and  Europe to  determine  the extent to which the
Company is vulnerable to  third-party  failure to remediate  their own year 2000
issues.  Joint ventures have been analyzed  utilizing the same process  employed
internally within the Company. All joint ventures are either year 2000 compliant
at the present  time or have plans in place  where they will  finish  their year
2000  remediation  by the end of the third  calendar  quarter of 1999.  Critical
suppliers have favorably  performed under interview and audit  procedures and in
management's   assessment  have  their  year  2000  remediation  underway  in  a
reasonable manner.

The Company's  operations in North America are in the process of both  replacing
their existing manufacturing,  distribution and administrative applications with
new  software  which is year 2000  compliant,  as well as making  their  current
legacy systems year 2000 compliant.  The decisions to replace these systems were
primarily based on the ongoing and expected future industry requirements and the
inability of the current  applications to meet these  expectations.  The Company
has not  accelerated the plans to replace these systems because of the year 2000
issue. A contingency  plan has been developed  which includes  continuing use of
current legacy system  manufacturing and distribution  software,  which has been
remediated and is currently year 2000 compliant. No significant issues have been
identified by management  that are expected to interrupt the Company's  business

                                                                               9
<PAGE>
systems,  product performance or supply to customers.  All necessary remediation
actions are expected to be completed by the end of the third quarter. Total cost
of all North  American year 2000  inventory,  analysis and testing was less than
$0.5 million.

In Europe,  the Company has completed the  remediation  process for  facilities,
embedded  systems and  information  systems.  The total cost of the  remediation
process was approximately $0.9 million.

The Company has utilized both internal and external  resources to reprogram,  or
replace and test,  the  software  for year 2000  modifications.  The Company has
substantially  completed its year 2000 assessment and  remediation.  The project
costs  attributable  to  software  developed  for  internal  use to meet  future
industry requirements will be capitalized. Any remaining year 2000 project cost,
anticipated  to be less than $1 million,  will be expensed as incurred  over the
next six months.  Year 2000  preparations have had no material impact other than
these costs.  The Company has received  several  audits of year 2000  compliance
from both  customers  and external  auditors at customer  requests.  The current
status of all such external  audits is a current  condition of  acceptable  year
2000 readiness.

In  addition  to the fact  that the  Company  has  substantially  completed  its
assessment,  remediation and testing efforts,  it has also initiated a year 2000
contingency  planning  process  to  identify,  reduce and manage the risk to our
business  and  Customers  of year  2000  failures  on the  part of  others.  The
contingency  planning process is intended to identify the most reasonable likely
worst case scenarios and develop  contingency  plans to address them.  While the
individual  contingency plans vary by facility, the common recurring theme for a
worst case scenario is failure of local utilities and  communications for 1 to 2
days.  Contingencies  planned by the Company  include such key items as adequate
local power generation  capability to ensure  continuous  operation of computers
and shipping,  as well as, adequate  on-hand finished goods to bridge such a gap
with  continuous   supply  to  customers.   The  anticipated   finalization  and
implementation of the year 2000 contingency plan is early fall 1999.

Management believes that the Company is devoting the necessary resources to keep
remediated and tested systems year 2000 compliant.

Euro Conversion

Effective  January 1, 1999,  eleven of fifteen member  countries of the European
Union  established  permanent  rates of exchange  between the members'  national
currency and a new common currency, the "euro." In this first phase, the euro is
available for non-cash transactions in the monetary,  capital,  foreign exchange
and  interbank  markets.  National  currencies  will  continue to exist as legal
tender and may  continue to be used in  commercial  transactions  until the euro
currency  is issued in  January  2002 and the  participating  members'  national
currency  is  withdrawn  by  July  2002.  The  Company's   significant  European
operations are all located in member  countries  participating  in this monetary
union.

The Company created an internal, pan-European, cross-functional team, as well as
internal teams at each operation  affected by the change to address  operational
implementation  issues  and  investigate  strategic  opportunities  due  to  the
introduction  of the euro.  The Company has  established  action  plans that are
currently being implemented to address the euro's impact on information systems,
currency  exchange  risk,  taxation,  contracts,  competition  and pricing.  The
Company  anticipates  benefiting  from the  introduction  of the euro  through a
reduction of foreign currency exposure and administration  costs on transactions
within Europe and increased  efficiency in centralized European cash management.
The Company does not presently  expect that the introduction and use of the euro
will materially affect the Company's foreign exchange hedging  activities or the
Company's  use  of  derivative  instruments.   Any  costs  associated  with  the
introduction  of the euro will be expensed  as  incurred.  The Company  does not
believe  that the  introduction  of the euro will have a material  impact on the
results of operations or financial position of the Company.

                                                                              10
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
                                                                         July 3,             June 27,             June 28,
In thousands, except share data                Year ended                 1999                 1998                 1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                 <C>                  <C>
Net sales                                                               $ 904,969           $ 763,311            $ 671,297
Cost of sales                                                             770,653             632,679              544,629
                                                                      -----------------------------------------------------
           Gross profit                                                   134,316             130,632              126,668
Operating expenses:
Selling, general and administrative                                        83,217              70,372               66,530
Research and development                                                   34,221              36,418               32,492
Restructuring and other charges                                             8,777               3,468                9,965
                                                                      -----------------------------------------------------
Total operating expenses                                                  126,215             110,258              108,987
                                                                      -----------------------------------------------------
           Operating income                                                 8,101              20,374               17,681
                                                                      -----------------------------------------------------
Non-operating (income) expenses:
Interest expense                                                            7,858               8,347                9,530
Interest income                                                              (547)               (560)                (648)
Royalty income                                                               (837)               (122)              (1,486)
Gain on sale of equity investments                                         (5,498)             (4,598)                (872)
Other income, net                                                          (2,568)             (1,872)                (848)
                                                                      -----------------------------------------------------
Non-operating (income) expenses                                            (1,592)              1,195                5,676
                                                                      -----------------------------------------------------
           Income before taxes on income                                    9,693              19,179               12,005
Taxes on income                                                             1,533               5,053                2,786
                                                                      -----------------------------------------------------
           Income before minority interest and
                equity earnings                                             8,160              14,126                9,219
Minority interest in net losses of subsidiaries                             3,214                 381                1,141
Equity in losses of affiliated companies                                     (782)             (1,498)                (340)
                                                                      -----------------------------------------------------
Net income                                                               $ 10,592            $ 13,009             $ 10,020
                                                                      =====================================================
Per share of common stock:
           Basic net income per share                                      $ 1.05              $ 1.30               $ 1.01

           Diluted net income per share                                    $ 1.04              $ 1.29               $ 1.00
</TABLE>
The accompanying notes are an integral part of these statements.

                                                                              11
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
COMBINED CONSOLIDATED BALANCE SHEETS
<TABLE>
                                                                 July 3,        June 27,
In thousands, except share data                                   1999            1998
----------------------------------------------------------------------------------------
<S>                                                              <C>            <C>
ASSETS
 Current assets:
 Cash and cash equivalents                                       $ 3,413        $ 5,628
 Accounts receivable, less allowance of $1,665 and $1,095         73,925         92,972
 Inventories                                                      42,722         44,146
 Recoverable customer tooling                                     20,478         19,211
 Prepaid expenses                                                  4,137          3,460
 Deferred income taxes                                             1,240          1,360
                                                             ---------------------------
          Total current assets                                   145,915        166,777
                                                             ---------------------------
 Property, plant and equipment:
 Land                                                              8,802          9,457
 Buildings                                                        76,506         79,721
 Machinery, equipment and software                               187,936        184,473
 Capital projects in progress                                     47,749         21,468
                                                             ---------------------------
                                                                 320,993        295,119
 Less accumulated depreciation                                   132,138        126,214
                                                             ---------------------------
          Net property, plant and equipment                      188,855        168,905
 Investments in and advances to affiliates                        28,588         19,590
 Other assets                                                     31,743         22,613
                                                             ---------------------------
          Total assets                                         $ 395,101      $ 377,885
                                                             ===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
 Accounts payable                                               $ 97,372       $ 77,595
 Current maturities of long-term debt                                 49             55
 Accruals:
 Compensation                                                     16,150         16,147
 Taxes                                                             8,288          7,278
 Other                                                            16,727          7,353
                                                             ---------------------------
          Total current liabilities                              138,586        108,428
                                                             ---------------------------
 Long-term debt, less current maturities                          92,166        123,706
 Postretirement plans                                             29,473         23,011
 Deferred income taxes and other                                  25,184         18,704
                                                             ---------------------------
          Total liabilities                                      285,409        273,849
                                                             ---------------------------
 Minority interest                                                 1,361            754
 Shareholders' equity:
 Series preferred stock:  1,000,000 shares authorized and unissued     -              -
 Preferred stock, 7 1/2% cumulative, $10 par: shares
         authorized 250,000, issued 53,112                           531            531
 Common stocks:
          Class A, $.10 par; shares authorized 30,000,000,
               issued 5,972,279 and 5,715,388                        597            572
          Class B, $.10 par; shares authorized 15,000,000,
               issued 4,162,502 and 4,353,349                        416            435
          Donnelly Export Corporation, $.01 par; shares
               authorized 600,000, issued 380,579 and 398,028          4              4
 Additional paid-in capital                                       31,869         31,268
 Accumulated other comprehensive income                          (10,157)        (8,083)
 Retained earnings                                                85,071         78,555
                                                             ---------------------------
          Total shareholders' equity                             108,331        103,282
                                                             ---------------------------
          Total liabilities and shareholders' equity           $ 395,101      $ 377,885
                                                             ===========================
</TABLE>
The accompanying notes are an integral part of these statements.

                                                                              12
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
                                                             July 3,           June 27,          June 28,
In thousands                             Year ended            1999              1998              1997
------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>               <C>
OPERATING ACTIVITIES
Net income                                                     $ 10,592          $ 13,009          $ 10,020
Adjustments to reconcile net income to net cash from
 (for) operating activities:
Depreciation and amortization                                    22,847            22,600            21,460
(Gain) loss on sale of property and equipment                       149               181              (605)
Gain on sale of equity investments                               (5,498)           (4,598)             (872)
Deferred pension cost and postretirement benefits                 6,462             5,670             5,315
Deferred income taxes                                             1,603             3,416            (4,723)
Minority interest loss                                           (4,902)             (841)           (1,646)
Equity in losses of affiliated companies                            782             1,498               765
Restructuring and other charges                                   8,777             3,468             9,965
Changes in operating assets and liabilities:
Sale (repayment) of accounts receivable                           2,402            (2,695)           44,604
Accounts receivable                                              13,479           (24,643)          (17,661)
Inventories                                                         384            (4,366)           (2,101)
Prepaid expenses and other current assets                        (2,968)            3,868            (2,074)
Accounts payable and other current liabilities                   24,564              (475)            9,416
Other                                                             3,443            (1,147)           (4,149)
                                                           -------------------------------------------------
           Net cash from operating activities                    82,116            14,945            67,714
                                                           -------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures                                            (57,807)          (46,164)          (35,151)
Investments in and advances to affiliates                        (6,957)           (1,045)           (4,537)
Proceeds from sale of property and equipment                        723               677             3,078
Proceeds from sale of equity investments                          8,636            11,067               974
Proceeds from sale-lease back                                         -             7,521                 -
Change in unexpended bond proceeds                                    -                 -             1,344
Cash increase due to consolidation of subsidiary                      -                 -             9,963
Other                                                            (1,028)             (856)             (884)
                                                           -------------------------------------------------
           Net cash for investing activities                    (56,433)          (28,800)          (25,213)
                                                           -------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt                                          -            13,798             8,433
Repayments on long-term debt                                    (28,767)             (429)          (39,887)
Investment and advances from minority partner                     4,482                 -                 -
Common stock issuance                                               533             2,128               925
Dividends paid                                                   (4,076)           (4,031)           (3,039)
Other financing                                                       -              (218)             (415)
                                                           -------------------------------------------------
           Net cash from (for) financing activities             (27,828)           11,248           (33,983)
                                                           -------------------------------------------------
Effect of foreign exchange rate changes on cash                     (70)             (333)           (1,253)
Increase (decrease) in cash and cash equivalents                 (2,215)           (2,940)            7,265
Cash and cash equivalents, beginning of year                      5,628             8,568             1,303
                                                           -------------------------------------------------
Cash and cash equivalents, end of year                          $ 3,413           $ 5,628           $ 8,568
                                                           =================================================
</TABLE>
The accompanying notes are an integral part of these statements.

                                                                              13
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
COMBINED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
                                                        Common Stock
                                                -----------------------------
                                                                                                        Accumulated
                                                                      Donnelly     Additional               other          Total
                                         Preferred  Class     Class     Export      paid-in   Retained  comprehensive  shareholders'
In thousands, except share data            stock      A         B     Corporation   capital   earnings     income        equity
-------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>      <C>       <C>      <C>          <C>        <C>            <C>       <C>
Balance, June 29, 1996                    $ 531    $ 425     $ 358    $    4       $ 25,158   $ 63,147       $ (771)   $ 88,852
Issuance of common stock in a five-for-
    four stock split                                 108        88                     (204)                                 (8)
Common stock issued under employee
    benefit plans                                      8                                925                                 933
Change in investment in VISION Group plc                                              2,886                               2,886
Cash dividends declared:
Preferred stock - $.75 per share                                                                   (40)                     (40)
Common stock:
     Class A - $.36 per share                                                                   (1,941)                  (1,941)
     Class B - $.36 per share                                                                   (1,608)                  (1,608)
Net income                                                                                      10,020
Other comprehensive income:
     Foreign currency translation adjustment                                                                    564
     Foreign currency transaction adjustments
         on long-term advances to affiliates                                                                 (5,831)
Total comprehensive income                                                                                                4,753
                                        ---------------------------------------------------------------------------------------
Balance, June 28, 1997                      531      541       446         4         28,765     69,578       (6,038)     93,827

Conversion of Class B to Class A Shares               11       (11)
Common stock issued under employee
     benefit plans                                    20                              2,107                               2,127
Change in investment in affiliate                                                        41                                  41
Income tax benefit arising from employee
     stock option plans                                                                 355                                 355
Cash dividends declared:
Preferred stock - $.75 per share                                                                   (40)                     (40)
Common stock:
     Class A - $.40 per share                                                                   (2,229)                  (2,229)
     Class B - $.40 per share                                                                   (1,763)                  (1,763)
Net income                                                                                      13,009
Other comprehensive income:
     Foreign currency translation adjustment                                                                    261
     Foreign currency transaction adjustments
         on long-term advances to affiliates                                                                 (2,306)
Total comprehensive income                                                                                               10,964
                                        ---------------------------------------------------------------------------------------
Balance, June 27, 1998                      531      572       435         4         31,268     78,555       (8,083)    103,282

Conversion of Class B to Class A Shares               19       (19)
Common stock issued under employee
     benefit plans                                     6                                527                                 533
Income tax benefit arising from employee
     stock option plans                                                                  74                                  74
Cash dividends declared:
Preferred stock - $.75 per share                                                                   (40)                     (40)
Common stock:
     Class A - $.40 per share                                                                   (2,344)                  (2,344)
     Class B - $.40 per share                                                                   (1,692)                  (1,692)
Net income                                                                                      10,592
Other comprehensive income:
     Foreign currency translation adjustment                                                                    943
     Foreign currency transaction adjustments
         on long-term advances to affiliates                                                                 (3,017)
Total comprehensive income                                                                                                8,518
                                        ---------------------------------------------------------------------------------------
Balance, July 3, 1999                     $ 531    $ 597     $ 416    $    4        $31,869    $85,071    $ (10,157)  $ 108,331
                                        =======================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.

                                                                              14
<PAGE>
NOTES TO THE COMBINED CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The combined consolidated  financial statements include the accounts of Donnelly
Corporation,  Donnelly Export Corporation,  and all majority owned or controlled
subsidiaries  (collectively,  "the Company"), after all significant intercompany
balances,  transactions and  shareholdings  have been eliminated and adjustments
for  minority  interests  have been made.  All other  investments  in 20% to 50%
owned,  non-controlled  companies  are  accounted for using the equity method of
accounting.  Investments in affiliates  representing less than 20% ownership are
accounted  for under the cost  method.  Cost in excess of net assets of acquired
companies  is being  amortized  on a  straight-line  basis  over no more  than a
15-year period.

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
combined in the financial statements as if they were a single entity.

FISCAL YEAR

The  Company's  fiscal  year is the 52- or 53- week period  ending the  Saturday
nearest June 30.  Fiscal years ended July 3, 1999,  June 27, 1998,  and June 28,
1997,  included  53,  52 and 52 weeks,  respectively.  The  fiscal  years of the
Company's German and Spanish subsidiaries end on May 31. Effective July 4, 1999,
the  Company  will  change  the date  for the end of its  fiscal  year  from the
Saturday nearest June 30 to December 31. For the transition  period from July 4,
1999, to December 31, 1999, the Company's  fiscal quarter will end on October 2.
All year and quarter  references relate to the Company's fiscal years and fiscal
quarters, unless otherwise stated.

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Although management's  estimates currently are not expected to change materially
in the foreseeable  future,  the costs the Company will  ultimately  incur could
differ from the amounts that are assumed to be incurred based on the assumptions
made.

FOREIGN CURRENCY TRANSLATION

The  Company's  primary  foreign  investments  are in Germany,  Ireland,  Spain,
France, Mexico, China, Brazil and Malaysia.  Except for the Company's subsidiary
in Mexico,  whose  functional  currency is the United States  dollar,  financial
statements of  international  companies are translated into United States dollar
equivalents at exchange rates as follows: (1) balance sheet accounts at year-end
rates and (2) income  statement  accounts at weighted  average monthly  exchange
rates prevailing during the year. Translation gains and losses are reported as a
separate component of shareholders' equity and are included in accumulated other
comprehensive income. For the subsidiary in Mexico,  transaction and translation
gains or  losses  are  reflected  in net  income  for all  accounts  other  than
intercompany balances of a long-term investment nature for which the translation
gains or losses are reported as a separate  component of  shareholders'  equity.
Foreign currency  transaction  gains and losses included in other income are not
material.

REVENUE RECOGNITION

The  Company's  primary  source of  revenue  is  generated  from the sale of its
products. Revenue is recognized when products are shipped.

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
first-in,  first-out  (FIFO) method for domestic  inventories and on the FIFO or
average cost basis for international inventories.

                                                                              15
<PAGE>
RECOVERABLE CUSTOMER TOOLING

Recoverable  customer tooling represents costs recoverable from customers at the
time of tool  completion  and approval or which are  recovered in the  program's
piece price over a period of three years or over the program's  expected  useful
life.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost.  Depreciation,  which includes
amortization  of assets  under  capital  leases,  is provided  primarily  by the
straight-line  method.  Depreciation is computed over the estimated useful lives
of the assets as follows:
<TABLE>
                                                         Years
        <S>                                            <C>
        Buildings...............................       10 to 50
        Machinery, equipment and software.......        3 to 15
</TABLE>
For tax purposes,  useful lives and accelerated methods are used as permitted by
the taxing authorities.

Certain  costs   associated  with  software   developed  for  internal  use  are
capitalized  in capital  projects  in progress  and once placed in service,  are
transferred to machinery, equipment and software and amortized over the expected
useful lives of the software.

LONG-LIVED ASSETS

The Company reviews long-lived  assets,  including goodwill and other intangible
assets, for impairment whenever events or changes in circumstances indicate that
the  carrying  amount  of an  asset  may  not  be  fully  recoverable.  If it is
determined  that an impairment  loss has occurred based on expected  future cash
flows, a current charge to income is recognized.

INCOME TAXES

Deferred income taxes reflect the tax effects of temporary  differences  between
the financial  statement and tax basis of assets and  liabilities  and operating
loss  carryforwards.  Deferred  tax assets are reduced by a valuation  allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be  realized.  Deferred  income taxes
are  not  provided  on   cumulative   undistributed   earnings  of  the  foreign
subsidiaries  and  affiliates  because  they  are  intended  to  be  permanently
reinvested.

EARNINGS PER SHARE OF COMMON STOCK

Basic  earnings  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, retroactively adjusted for stock dividends
and stock splits. Diluted earnings per share is computed including the effect of
dilutive stock options.

STOCK INCENTIVE PLANS

The Company  follows the  provisions  of  Accounting  Principles  Board  Opinion
("APB")  No.  25,  "Accounting  for Stock  Issued to  Employees,"  for its stock
incentive plans. Under APB No. 25,  compensation  expense is recognized when the
market  price of the  underlying  stock  award on the date of grant  exceeds any
related exercise price. Accordingly, no compensation expense has been recognized
in the accompanying financial statements.  The pro forma effects had the Company
followed the provisions of Statement of Financial  Accounting Standards ("SFAS")
No. 123 are included in Note 12.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company  estimates  the fair value of all  financial  instruments  where the
carrying  value  differs from the fair value,  primarily  long-term,  fixed-rate
debt,  interest rate swaps and foreign exchange currency  contracts,  based upon
quoted amounts, the current rates available for similar financial instruments or
based on  calculations  discounting  expected cash flows at the rates  currently
offered to the Company for debt of the same remaining  maturities.  The carrying
value of the Company's  variable rate debt and all other  financial  instruments
approximates their fair value.

                                                                              16
<PAGE>
COMPREHENSIVE INCOME

The Company has adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income,"   which   establishes   standards  for  reporting  and   displaying  of
comprehensive  income and its  components.  Comprehensive  income  reflects  the
change in equity of a business  enterprise during a period from transactions and
other  events  and  circumstances  from  non-owner  sources.  For  the  Company,
comprehensive  income  represents  net  income  adjusted  for  foreign  currency
translation  adjustments.  Comprehensive  income is reported in the accompanying
combined consolidated statements of shareholders' equity.

RECLASSIFICATIONS

Certain  reclassifications  have been made to prior  year data to conform to the
current  year  presentation  and had no effect on net  income  reported  for any
period.

2.   INVESTMENTS IN AND ADVANCES TO AFFILIATES

On November  3,1997,  the Company  formed Lear Donnelly  Overhead  Systems,  LLC
("Lear Donnelly),  as a 50% owned joint venture with Lear Corporation  ("Lear").
The  Company  and  Lear  each  contributed  certain  technologies,   assets  and
liabilities  for the creation of the joint venture.  In a non-cash  transaction,
the Company  transferred net assets of $7.9 million associated with its interior
trim and  lighting  businesses,  including  $10  million  of debt,  to the joint
venture for its 50% interest.  These assets were  transferred  at their net book
values.

Lear Donnelly is engaged in the design,  development  and production of overhead
systems for the global automotive  market,  including complete overhead systems,
headliners,   consoles  and   lighting   components,   vehicle   electrification
interfaces,  electronic components, visors and assist handles ("products"). Lear
Donnelly  manufactures these products for sale to both the Company and Lear, who
are each responsible for their customer sales efforts to the original  equipment
manufacturers.  Due to the supply agreement between Lear Donnelly and the parent
companies,  the sales are  reported  by the  parents;  however,  the related net
earnings of the joint  venture are being  accounted for by the Company using the
equity method of accounting.  This accounting  treatment for the venture results
in the dilution of gross profit margins as a percentage of sales for the periods
presented.  However, the comparability of net sales or net income of the Company
are not significantly impacted.

On July 1, 1999, the Company signed a letter of intent to sell its investment in
Lear Donnelly to Lear for an undisclosed  amount. The transaction is expected to
be completed in the first  quarter of the next fiscal  period and is expected to
have a one-time,  material  favorable  impact on the net income and cash flow of
the Company. In addition, due to the transfer of the Company's interior lighting
and trim sales  contracts  included in the joint venture to Lear,  future annual
net sales will be reduced by  approximately  $65 to $70 million per year. Due to
the joint venture operating at approximately break-even since its formation, the
sale of the  Company's  share of the joint  venture  is not  expected  to have a
material impact on the Company's  future results of operations.  However,  gross
profit and  operating  margins as a percent of sales for future  periods will be
favorably  impacted by the sale. The carrying value of the Company's  investment
in Lear Donnelly is $8.6 million at July 3, 1999.

In the fourth  quarter of 1999,  the Company  formed  Schott  Donnelly LLC Smart
Glass Solutions,  a 50-50 joint venture with Schott North America Manufacturing,
Inc.,  a wholly  owned  subsidiary  of  Schott  Corporation  ("Schott").  Schott
Corporation  is a wholly  owned  subsidiary  of Schott  Glas,  which is based in
Germany and is one of the world's leading producers of specialty glass products.
The  joint  venture  will  design  and  manufacture   electrochromic  glass  for
automotive  and  architectural  applications.  The Company  contributed  certain
assets and liabilities for the creation of the joint venture. Upon the formation
of this joint venture, the Company received $2 million,  which was recorded as a
pretax gain. In accordance with the LLC operating agreement, losses generated by
the joint venture will be allocated to Schott until Schott has contributed  $9.5
million.

In 1999, the Company began consolidating the financial  statements of Varitronix
EC (Malaysia) sdn. bhd.  ("Varitronix  EC").  Varitronix EC is based in Malaysia
and  is the  Company's  50-50,  controlled  joint  venture  with  the  Malaysian
subsidiary of Varitronix International Ltd. ("Varitronix"). Varitronix, based in
Hong Kong,  is a global  leader in the market for liquid  crystal  displays  and
electronic  systems.  Varitronix  EC  provides  support for  Donnelly's  growing
worldwide electrochromic mirror sales.

In the second and third quarters of 1999,  the Company sold its entire  interest
in VISION Group plc ("VISION  Group").  As a result of these sales,  the Company
received  $8.6  million in proceeds  and  recognized  a combined  pretax gain of
approximately $5.5 million,  or $0.35 per share after tax. In the second quarter
of quarter of 1997,  the  Company had also sold a portion of its  investment  in
VISION  Group in  conjunction  with a public  offering of VISION  Group  shares,
resulting in a $0.9 million  pretax gain.  Th Company's  equity in the financial
results  of  VISION  Group is no  longer  included  in the  Company's  financial
statements after November, 1999.

In the second quarter of 1999,  the Company merged its wholly owned  subsidiary,
Donnelly Optics Corporation ("Optics") into a wholly owned subsidiary of Applied
Image Group, Inc. ("AIG"),  a New York Corporation.  In the merger,  the Company
received

                                                                              17
<PAGE>
a 13%  interest  in AIG and a $5 million  convertible  note.  AIG  develops  and
manufactures  opto-imaging  products for the lighting,  automotive,  optical and
photonics industries. As a result of this transaction,  the financial results of
Optics  are no longer  included  in the  Company's  financial  statements  after
December 1, 1998.

In the second  quarter of 1998,  the  Company  sold its 50%  interest in Applied
Films Corporation  during an initial public offering.  As a result of this sale,
the Company  received $7.9 million in net proceeds,  after taxes and related out
of pocket fees, and recognized a pretax gain of approximately  $4.6 million,  or
$0.22 per share after tax.

In 1998,  Donnelly  formed a 50-50 joint venture with  Industrias  Arteb S.A. to
produce  interior  and  exterior  mirrors  for  the  South  American  automotive
industry. The new company, Donnelly/Arteb,  LTDA ("Donnelly/Arteb"),  is located
near Sao Paulo,  Brazil.  In 1999,  Donnelly/Arteb  began producing  replacement
parts for distribution within the South American market and is in the process of
launching new programs for the Brazilian  production of several  General Motors'
vehicles.  Donnelly/Arteb  is continuing to focus on  strategically  growing its
presence in the South American market.

Due to the  acquisition of a controlling  interest in the general partner of its
German  subsidiary,  Donnelly Hohe GmbH & Co. KG ("Donnelly  Hohe"), the Company
began  consolidating  Donnelly Hohe's  financial  statements  beginning with the
second quarter of 1997.  Donnelly Hohe, based in Collenberg,  Germany,  supplies
many of the leading  European  automakers  with  interior and exterior rear view
mirrors,  through  manufacturing  facilities in Germany and Spain. The unaudited
pro forma combined  consolidated net sales for 1997 were $719.5 million, and are
calculated as if the acquisition of a controlling  interest in Donnelly Hohe had
occurred at the beginning of 1997.

The Company has  advanced 80 million  German marks to Donnelly  Hohe,  valued at
$42.6  million  at July 3,  1999,  under  subordinated  loan  agreements,  which
included  advances  of 20 million  German  marks in 1998 and 20 million in 1999.
Amounts advanced to Donnelly Hohe under the subordinated loan agreements provide
for 5% to 10% interest per annum with no principal  payments due until maturity.
Outstanding  loan  maturities  range from  October 1, 2000,  to October 1, 2002.
These  advances  are  now  eliminated  as   intercompany   transactions  in  the
consolidation  of Donnelly Hohe with the  Company's  financial  statements.  The
terms of the  acquisition  transaction  allow Donnelly to purchase the remaining
ownership  interest in Donnelly  Hohe  through  various  options.  The  minority
partners  also have an option to require the Company to buy their  interests  at
any time based upon a predetermined  formula,  which is currently valued at less
than $2 million.

In the first  quarter  of 1997,  the  Company  created  an  affiliate,  Donnelly
Electronics, LLC ("Donnelly Electronics"),  with an individual with expertise in
automotive   electronics   technology.   The  Company  owns  18.9%  of  Donnelly
Electronics  with the option to acquire up to 100% , based upon a  predetermined
formula. The joint venture, based in Flint, Michigan,  specializes in the design
and  manufacture of electronic  components and  sub-assemblies  and produces the
electronic  components  that Donnelly  uses for products such as  electrochromic
rear view mirrors and electronic compass systems.  Donnelly  Electronics pursues
business with other automotive suppliers that are not competitors of the Company
as well as other business  opportunities.  At July 3, 1999, Donnelly Electronics
had borrowings  from the Company of $7.2 million under a $10 million  promissory
note,  that bears interest at 7%. The note is payable in quarterly  installments
of interest only until the entire principle is due at maturity on June 30, 2001.

Summarized 1999 and 1998 balance sheet and income statement  information for the
Company's  non-consolidated  affiliates accounted for using the equity method is
shown below and includes the following: Lear Donnelly (formed November 3, 1997);
Donnelly/Arteb  (included for 1999 only);  Shunde  Donnelly Zhen Hua  Automotive
Systems Co. Ltd.  ("Zhen  Hua"),  a 30% owned joint  venture  that  manufactures
exterior  mirrors for car makers in  southern  China;  Shanghai  Donnelly Fu Hua
Window  Systems  Company  Ltd.,  a 50% owned  joint  venture  that  manufactures
encapsulated  and framed glass products for the Asian automotive  industry;  and
VISION Group (included through November 1998 only).
<TABLE>
In thousands                                       1999             1998
---------------------------------------------------------------------------
<S>                                            <C>              <C>
Summarized Balance Sheet Information
     Current assets.........................   $  47,938        $   63,526
     Non-current assets.....................      40,379            49,895
     Current liabilities.................         34,757            30,822
     Non-current liabilities................      28,779            30,379
                                               ---------------------------
     Net equity.............................   $  24,781        $   52,220
                                               ===========================

Summarized Income Statement Information
     Net sales..............................   $ 217,858        $   96,752
     Costs and expenses.....................     221,237           103,818
                                               ---------------------------
     Net loss...............................   $  (3,379)       $   (7,066)
                                               ===========================
</TABLE>
                                                                              18
<PAGE>
3.   NATURE OF OPERATIONS

The Company is an  international  supplier  of  automotive  parts and  component
systems through manufacturing operations and various joint ventures in North and
South  America,  Europe and Asia.  The  Company  primarily  supplies  automotive
customers around the world with rear view mirror systems, modular window systems
and handle products. The Company's  non-automotive  products represent less than
4% of total net sales for each of the last three years.

For the year ended July 3, 1999,  the Company has adopted the provisions of SFAS
No.  131,  Disclosures  about  Segments  of a Business  Enterprise  and  Related
Information."  SFAS  No.  131  establishes  standards  for the way  that  public
enterprises  report  information  about operating  segments in annual  financial
statements  and  requires  reporting  of selected  information  about  operating
segments in interim financial  statements issued to the public after the initial
year of  adoption.  It also  establishes  standards  for  disclosures  regarding
products and services, geographic areas and major customers. Previously reported
information  has been  restated to conform to SFAS No.  131. In some  instances,
prior year data has been estimated to conform to the current presentation.

The Company is primarily  managed based on  geographic  segments and the product
markets they serve.  The Company has two  reportable  segments:  North  American
Automotive  Operations ("NAAO") and European Automotive  Operations ("EAO"). The
operating  segments are managed  separately  as they each  represent a strategic
operational  component  that offers the Company's  product lines to customers in
different  geographical markets.  Where each segment offers all of the Company's
automotive  product  lines,  the majority o the Company's net sales from modular
windows and handle products originate from NAAO. Operating financial information
is  available  that is  evaluated  regularly by the  Company's  chief  executive
officer, or corporate management team, in deciding how to allocate resources and
in assessing the segment's  performance.  The corporate  management  team, which
establishes the overall strategy and policy standards for the Company,  includes
the Company's chief executive officer and senior  executives in  administration,
engineering,  finance, operations and technology. The chief operating officer of
each  segment,  each of whom is a member of the  corporate  management  team, is
responsible  for  the  management  of  profitability  and  cash  flow  for  each
respective segment's operations.

The  accounting  polices of the  reportable  operating  segments are the same as
those described in the summary of significant  accounting  policies described in
Note 1. Revenues are  attributed to segments  based on the location of where the
sales  originate.  The Company  evaluates  performance  based on segment profit,
which  is  defined  as  earnings  before  interest,   taxes,   depreciation  and
amortization,  excluding  significant  special gains,  losses and  restructuring
charges. Due to the Company's corporate  headquarter being located in the United
States,  certain  estimates  are made  for  allocations  to NAAO of  centralized
corporate costs incurred in support of NAAO. Centralized European overhead costs
are included in EAO. The Company accounts for  intersegment  sales and transfers
at current market prices and intersegment services at cost.

                                                                              19
<PAGE>
A summary of the Company's operations by its business segments follows:
<TABLE>
                                                                          Other           Intersegment         Total
In thousands                              NAAO          EAO              Segments*        Eliminations        Segments
-------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>              <C>             <C>               <C>               <C>
1999
Revenues.............................   $523,830         $280,714          $104,778        $ (4,353)         $904,969
Segment profit.......................     53,443            7,394             2,026              --            62,863
Depreciation and amortization........     11,598            9,796               814              --            22,208
Identifiable assets..................    201,680          139,324            42,863          (9,612)          374,255
Investment in equity affiliates......         --               --            11,291              --            11,291
Capital expenditures.................     34,711           13,598             7,228              --            55,537

1998
Revenues.............................   $453,779         $261,635          $ 51,367        $ (3,470)         $763,311
Segment profit.......................     51,062           12,058             2,074              --            65,194
Depreciation and amortization........     11,066           10,321               641              --            22,028
Identifiable assets..................    184,985          146,342            37,703          (5,050)          363,980
Investment in equity affiliates......         --               --            16,730              --            16,730
Capital expenditures.................     22,954           14,257             7,129              --            44,340

1997
Revenues.............................   $432,973         $222,089          $ 17,389        $ (1,154)         $671,297
Segment profit.......................     52,200           11,220             3,957              --            67,377
Depreciation and amortization........     11,086            8,960               892              --            20,938
Identifiable assets..................    172,546          153,086            27,050          (6,067)          346,615
Investment in equity affiliates......         --               --            13,277              --            13,277
Capital expenditures.................     16,353           10,727             3,798              --            30,878
</TABLE>
*Other segments  category  includes the Company's  automotive joint ventures and
North American non-automotive businesses.

Reconciliations  of the  totals  reported  for  the  operating  segments  to the
applicable amounts in the combined  consolidated  financial  statements is shown
below:
<TABLE>

In thousands                        Year ended           1999              1998             1997
----------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>              <C>
Segment profit from reportable segments...........     $ 60,837          $ 63,120         $ 63,420
Segment profit from other segments................        2,026             2,074            3,957
Interest, net.....................................       (7,311)           (7,787)          (8,882)
Depreciation and amortization.....................      (22,847)          (22,600)         (21,460)
Restructuring and other charges...................       (8,777)           (3,468)          (9,965)
Gain on sale of equity investments................        5,498             4,598              872
Gain on formation of joint venture................        2,000                --               --
Corporate and other expenses*.....................      (21,733)          (16,758)         (15,937)
                                                       ---------------------------------------------
Income before taxes on income                          $  9,693          $ 19,179          $ 12,005
                                                       =============================================
</TABLE>
* Corporate and other expenses category includes centralized corporate functions
including  those  for  advanced  research,  corporate  administration  including
information  technology,  human resources and finance and other costs associated
with corporate development and financing initiatives.

<TABLE>
In thousands                                               1999              1998             1997
----------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>                <C>
Identifiable Assets:
Total assets of reportable segments...............     $ 341,004        $ 331,327         $ 325,632
Total assets of other segments....................        42,863           37,703            27,050
Elimination  of intersegment receivables..........        (9,612)          (5,050)           (6,067)
Corporate and other assets*.......................        20,846           13,905            11,678
                                                     -----------------------------------------------
Total Consolidated Assets                              $ 395,101        $ 377,885         $ 358,293
                                                     ===============================================
</TABLE>
* Corporate and other assets category includes tax related assets,  fixed assets
related to centralized  corporate and advanced  research  functions,  consisting
primarily of buildings and equipment, capitalized costs and financial assets.

                                                                              20
<PAGE>
The following summarizes the Company's sales by product line:
<TABLE>

In thousands                     Year ended             1999             1998            1997
------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>
Mirror systems and components.....................     $  414,981        $  355,823       $  313,860
Modular window systems............................        335,345           286,470          264,359
Interior lighting and trim........................         73,626            42,175           26,680
Handle products...................................         57,318            51,251           44,578
Non-automotive products...........................         23,699            27,592           21,820
                                                     -------------------------------------------------
                                                       $  904,969        $  763,311       $  671,297
                                                     =================================================
</TABLE>
Sales to major  automobile  manufacturers  as a percentage  of the Company's net
sales follows:
<TABLE>
Year ended                                      1999            1998              1997
---------------------------------------------------------------------------------------
<S>                                              <C>             <C>               <C>
Ford Motor Company..................             25%             27%               25%
DaimlerChrysler.....................             20              20                20
Honda...............................              7               8                11
BMW.................................              6               7                 7
VW..................................              6               6                 6
General Motors Corporation..........              5               5                 5
                                                ---------------------------------------
                                                 69%             73%               74%
                                                =======================================
</TABLE>
Additional information regarding geographic areas follows:
<TABLE>

In thousands                  Year Ended               1999             1998            1997
------------------------------------------------------------------------------------------------
<S>                                                <C>               <C>             <C>
Revenues:
North American:
   United States.............................      $  482,062        $ 420,544       $ 390,852
   Export:
      Americas...............................         122,513           76,433          54,302
      Asia...................................           6,847            3,313           2,825
      Europe.................................           1,355            2,002           1,829
      Other..................................             386              350              76
                                                   $  613,163        $ 502,642       $ 449,884

Germany......................................         177,196          173,857         138,215
Ireland......................................          61,682           43,245          43,076
Other Foreign................................          52,928           43,567          40,122
                                                 -----------------------------------------------
                                                   $  904,969        $ 763,311       $ 671,297
                                                 ===============================================
</TABLE>
<TABLE>
In thousands                                               1999             1998            1997
--------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>             <C>
Long-Lived Assets:
United States..................................      $  116,409        $  99,518       $  93,699
Germany........................................          46,944           47,923          50,342
Ireland........................................           8,203            8,522           8,894
Other Foreign..................................          18,076           13,962          13,289
                                                   -----------------------------------------------
                                                     $  189,632         $169,925        $166,224
                                                   ===============================================
</TABLE>
4.   RESTRUCTURING AND OTHER CHARGES

1999 Restructuring

In  February  1999,  the  Company  announced  a European  turnaround  plan.  The
Company's  European  automotive segment recorded  unfavorable  operating results
over the last three years, despite strong automotive car build and overall sales
increases  in the  Company's  European  operations.  In  addition,  certain  key
operating  units in  Europe  continued  to  perform  at an  operating  loss.  In
September  1998,  the  Company  assigned  four  senior  managers  from its North
American  operations to this segment to improve the Company'  overall  operating
performance in Europe. The objective of the restructuring plan is to improve the
overall operating  efficiency and customer service of the European  organization
by 1) re-organizing  certain manufacturing and customer service functions into a
customer  focused   structure,   2)  consolidating   two  German   manufacturing
facilities,  3) implementing  throughout Europe the Donnelly  Production System,
the Company's  approach to lean  manufacturing  processes,  4) re-negotiating an
existing  labor  contract  an 5)  re-aligning  sales and  engineering  functions
throughout  Europe.

                                                                              21
<PAGE>
In the third quarter of 1999, an $8.8 million pretax  restructuring  charge,  or
$3.5 million charge to net income, was recorded for this plan. The restructuring
charge  included $1.4 million for the impairment of assets and a reserve of $7.4
million for  anticipated  incremental  cash  expenditures  for the severance and
voluntary  incentive  programs  for  approximately  200  production,  production
support, sales and engineering employees.  The restructuring charge was recorded
in accordance  with Emerging  Issues Task Force ("EITF") 94-3. The impairment of
long-lived  assets  includes   adjustments  to  the  carrying-value  of  certain
facilities  and  operating  assets.  The  impairment  charge was  determined  by
comparing  management's  current estimate of the fair market value of the assets
based on existing or alternative  use of those assets impacted by the turnaround
plan with the carrying  value of the related  assets.  The estimated  underlying
fair market value for these  assets is subject to change.  The Company will also
require  approximately  $4.3  million  for  the  construction  of  shipping  and
warehousing  facilities,  relocation of employees and new material  handling and
storage equipment associated with the 1999 European turnaround plan. These costs
do not qualify as  restructuring  under EITF 94-3 and  therefore are included in
the Company's capital and operating budget for the next six to eight months; the
majority of the costs will be capitalized.

In July 1999, the Company completed the  re-negotiation of its labor contract in
Germany  allowing  for greater  work  flexibility  rules,  broader  productivity
guidelines  and  a  delay  in  certain  wage  increases   until  certain  income
profitability  targets are  accomplished.  As of July 3, 1999,  cash payments of
$0.6  million had been  incurred,  including  the  termination  of 10  employees
associated  with the plan. It is expected that all actions  associated  with the
plan will be completed by the end of calendar year 2000

1997 Restructuring

In May 1997,  the  Company  announced a European  restructuring  plan to realign
manufacturing  capacity,  improve  operating  efficiencies  and to reduce future
operating  costs.  The  Company's  strategy to  penetrate  European  markets was
through  acquisitions,  the most significant of which was Donnelly Hohe in March
1995. Donnelly Hohe, based in Germany, serves many of the main auto producers in
Europe  with  exterior  mirrors,  interior  mirrors,  door  handles  and certain
non-automotive  products through four operating facilities in Germany and one in
Spain. The restructuring plan was primarily based on the decision to re-organize
product lines and  production  processes  within  operations of Donnelly Hohe at
Dorfprozelten,  Germany and other European locations in Schleiz,  Germany, Spain
and  Ireland.  In  addition,   the  plan  included  costs  associated  with  the
restructuring  of management  at Donnelly  Hohe and within the overall  European
management  structure.  The  strategic  intent  of the  plan  was  primarily  to
consolidate redundant manufacturing processes,  move certain assembly operations
to  lower  cost  areas  of  production   and  centralize   European   management
responsibility.

In the fourth quarter of 1997, a $10.0 million pretax  restructuring  charge, or
$4.0 million charge to net income, was recorded for this plan. The restructuring
charge  consisted  entirely  of  a  severance  program,   voluntary   separation
incentives and administrative  costs associated with the plan in accordance with
EITF 94-3. The severance and separation incentive program includes approximately
230 personnel,  primarily  personnel in  manufacturing  and European  management
functions.  Through July 3, 1999, the Company had terminated 129 employees under
the 1997 plan and had incurred  cumulative  cash  payments of $5.5  million.  In
addition, in 1998, the Company recorded a reduction to the restructuring reserve
of $1.1 million pretax associated with changes to the plan.

Due  to  changes  in   management   at  the   Company's   European   operations,
implementation of the  restructuring  plan was delayed.  However,  the remaining
actions under this plan have not changed. The remaining reserve of $2.8 million,
as  adjusted  for  foreign  currency   changes,   has  been  combined  with  the
restructuring   charge  taken  in  the  third  quarter  of  1999.  The  combined
restructuring  reserve at July 3, 1999, was $10.1 million, of which $7.7 million
is classified as  short-term.  All remaining  employee  separation  benefits and
related cash flows are expected to be  completed  in  conjunction  with the most
recent European restructuring initiatives.

Other

In the fourth quarter of 1998,  Optics,  recognized a $3.5 million pretax charge
against  operating income, or $2.3 million after tax, due to the cancellation of
a customer  order,  relating to market dynamics in the digital imaging sector of
the computer  industry.  The charge primarily consists of a write-off of tooling
and other current assets and severance of  approximately  25  manufacturing  and
administrative  personnel.  The severance  cash  payments were  completed in the
second  quarter of 1999.  This  business  was merged  into a new  company in the
second quarter of 1999 (see Note 2).

                                                                              22
<PAGE>
5.   INVENTORIES

Inventories consist of:
<TABLE>
         In thousands                                            1999             1998
         -------------------------------------------------------------------------------
         <S>                                              <C>              <C>
         Finished products and work in process.......     $    18,871      $    16,987
         Raw materials...............................          23,851           27,159
                                                        --------------------------------
                                                          $    42,722      $    44,146
                                                        ================================
</TABLE>
6.   DEBT AND OTHER FINANCING ARRANGEMENTS

Debt consists of:
<TABLE>
In thousands                                                                                1999          1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>            <C>
Borrowings under revolving credit agreements at 3.56% and 4.61%.......................    $  24,728      $ 48,882
Senior Notes:
     $15,000 at 6.67%, due 2003, principal payable in installments beginning
     in 1999*.........................................................................       11,500        15,000
     $15,000 at 7.22%, due 2004, principal payable in installments beginning
     in 1999*.........................................................................       15,000        15,000
     $20,000 at 6.70%, due 2005, principal payable in installments beginning
     in 2000..........................................................................       20,000        20,000
Industrial revenue bonds:
     $9,500 at adjustable rates (3.62% at July 3, 1999, and 3.78% at June 27, 1998),
     due in 2008-2010.................................................................        9,500         9,500
     $5,000 at a fixed rate of  8.13%, due in 2012....................................        5,000         5,000
Capitalized lease obligations.........................................................        1,389         3,072
Other.................................................................................        5,098         7,307
                                                                                       --------------------------
Total.................................................................................      92,215        123,761
Less current maturities......................................................... .....          49             55
                                                                                       --------------------------
                                                                                       $    92,166       $123,706
                                                                                       ==========================
</TABLE>
*Refers to transition period ending December 31, 1999 (see Note 1).

The Company has an unsecured $160 million multi-currency global revolving credit
agreement  which bears interest,  at the election of the Company,  at a floating
rate  under  one of  three  alternative  elections.  A  variable  facility  fee,
currently at 0.225%, is paid on the credit line. This revolving credit agreement
terminates in September  2002, at which time the Company may extend for one-year
periods with the consent of all the participating banks.

The $9.5 million industrial revenue bonds are secured by letters of credit which
expire in 2000. All industrial revenue bonds are collateralized by the purchased
land, building and equipment. The senior notes are unsecured.

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.  At July 3, 1999, the Company was in compliance with
all related  covenants.  Retained  earnings  available  for dividends at July 3,
1999, are $15.8 million.

Certain  maturities  are  classified as long term due to the intent to refinance
these under the revolving credit agreement.  Annual principal maturities consist
of:
<TABLE>
Year ending           In thousands                     Amount
-------------------------------------------------------------
<S>                                             <C>
       1999*........................            $          25
       2000.........................                   12,397
       2001.........................                   12,146
       2002.........................                   13,221
       2003.........................                   21,795
       2004.........................                   13,962
       2005 and  thereafter.........                   18,669
                                                 ------------
                                                 $     92,215
                                                 ============
</TABLE>
*Refers to transition period ending December 31, 1999 (see Note 1).

Interest  payments of $7.8 million,  $8.6 million and $10.4 million were made in
1999, 1998 and 1997, respectively.

                                                                              23
<PAGE>
7.   ACCOUNTS RECEIVABLE SECURITIZATION

The Company has an agreement  to sell,  on a revolving  basis,  an interest in a
defined pool of trade  accounts  receivable of up to $50 million.  The agreement
expires in December  1999,  however is  renewable  for  one-year  periods at the
option of the Company.  The Company  expects to extend the current  agreement or
replace it on  comparable  terms.  At July 3, 1999,  and June 27,  1998, a $40.4
million  and $40.3  million  interest,  respectively,  had been sold  under this
agreement with proceeds used to reduce  revolving  lines of credit.  The sale is
reflected as a reduction of accounts  receivable and as operating cash flows. As
collections  reduce  previously  sold  interests,  new accounts  receivable  are
customarily  sold.  The  proceeds  of sales  are less  than the face  amount  of
accounts  receivable  sold  by  an  amount  that  approximates  the  purchaser's
financing  cost of issuing its own  commercial  paper  backed by these  accounts
receivable. Discount fees of $2.1 million in 1999, $2.1 million in 1998 and $1.1
million in 1997, are included in selling,  general and  administrative  expense.
The Company,  as agent for the purchaser,  retains collection and administrative
responsibilities for the participating interests of the defined pool.

8.       FINANCIAL INSTRUMENTS

The Company  utilizes  interest  rate swaps and foreign  exchange  contracts  to
manage exposure to fluctuations in interest and foreign currency  exchange rates
and  accordingly  accounts for them on a hedging rather than trading basis.  The
risk of loss to the  Company in the event of  nonperformance  by any party under
these  agreements  is not  material.  At July 3, 1999,  and June 27,  1998,  the
Company had interest rate swaps with an aggregate notional amount of $30 million
and $40 million,  $10 million of which were  offsetting at June 27, 1998.  These
effectively  converted $30 million of the Company's  variable interest rate debt
to fixed rates at July 3, 1999,  and June 27,  1998.  The  Company is  currently
paying a  weighted-average  fixed rate of  7.395%,  calculated  on the  notional
amounts.  These swap  agreements  have  varied  expirations  through  2003.  The
notional  amounts of interest rate swaps do not represent  amounts  exchanged by
the parties,  and thus are not a measure of the exposure to the Company  through
its use of these instruments.  Net receipts or payments under the agreements are
recognized as an adjustment to interest expense.

The Company's Irish  subsidiaries enter into foreign exchange contracts to hedge
against changes in foreign currency exchange rates.  Foreign exchange  contracts
outstanding  were $1.4  million and $1.1  million at July 3, 1999,  and June 27,
1998,  respectively.  The  foreign  exchange  contracts  require  the Company to
exchange  foreign  currencies  for Irish punts and  generally  mature  within 12
months.  Deferred  gains and losses are included on a net basis in the Company's
combined  consolidated  financial  statements  as either  other  assets or other
liabilities and are recognized in income as part of a sale  transaction  when it
is recognized.

The carrying  value and  estimated  fair value of all financial  instruments  in
which the fair value differs from carrying  value at July 3, 1999,  and June 27,
1998, are as follows:
<TABLE>
                                                     1999                                1998
In thousands                             Carrying Value   Fair Value       Carrying Value     Fair Value
---------------------------------------------------------------------------------------------------------
<S>                                         <C>           <C>                <C>               <C>
Liabilities:
     Long-term fixed rate debt              $51,500       $52,329            $  56,725          $ 58,540
Derivatives:
     Interest rate swaps                        --           (739)                  --            (1,140)
     Foreign exchange contracts                 --             (2)                  --               100
</TABLE>

Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments and Hedging  Activities" amends SFAS Nos. 52 and 107 and
supersedes  SFAS Nos. 80, 105 and 119. SFAS No. 133  establishes  accounting and
reporting standards for derivative  instruments and for hedging  activities.  It
requires that an entity  recognize all  derivatives in the balance sheet at fair
value. It also requires that unrealized  gains and losses resulting from changes
in fair  value be  included  in income or  comprehensive  income,  depending  on
whether the instrument  qualifies as a hedge.  SFAS No. 133 is effective for all
fiscal  quarters of fiscal years beginning after June 15, 2000. The Company does
not expect the  implementation of this new standard to have a material impact on
results of operations or financial position of the Company.

9.   BENEFIT PLANS

A.    Pension Benefits

The Company  sponsors defined benefit pension plans covering  substantially  all
domestic  employees  and  employees at the Company's  Donnelly  Mirrors  Limited
facility  in  Ireland.  Pension  costs for the plans are funded in amounts  that
equal or exceed  regulatory  requirements.  Plan assets are primarily  corporate
equity and debt securities.

                                                                              24
<PAGE>
The Company has adopted the provisions of SFAS No. 132, "Employer's  Disclosures
about Pensions and Other Postretirement  Benefits". SFAS No. 132 is an amendment
of  SFAS's  No.  87,  88 and  106  and  revises  the  standards  for  employers'
disclosures  about pension and other  postretirement  benefit plans. It does not
change the  measurement or the recognition of those plans.  Previously  reported
information has been restated to conform to SFAS No. 132.

Assumptions and net periodic pension cost are as follows:
<TABLE>
Year ended                                         1999          1998         1997
----------------------------------------------------------------------------------
<S>                                               <C>           <C>         <C>
Discount rate.......................              7.00%         7.75%        8.00%
Compensation increase...............              5.00%         5.00%        5.00%
Expected return on plan assets......              9.50%         9.50%        9.50%
In thousands:
Service cost........................            $ 5,085       $ 4,284      $ 3,545
Interest cost.......................              6,459         5,881        5,497
Expected return on plan assets......             (7,087)       (6,023)      (6,931)
Net amortization and deferral.......               (175)           84        2,270
                                               -----------------------------------
Net periodic benefit cost...........           $ 4,282       $  4,226     $  4,381
                                               ===================================
</TABLE>
The  following  tables  provide a  reconciliation  of the  changes in the plans'
benefit obligations, fair value of assets and funded status and reflects changes
made to the plan in the prior  year to  increase  the normal  retirement  age by
three years to match that used for social security:
<TABLE>
In thousands       Year ended                                                 1999           1998
--------------------------------------------------------------------------------------------------
<S>                                                                       <C>            <C>
Change in benefit obligation
Benefit obligation at beginning of year.......................            $ 88,373       $ 74,414
Service cost..................................................               5,085          4,230
Interest cost.................................................               6,459          5,881
Plan participants' contributions..............................                 161            161
Amendments....................................................                (344)        (5,073)
Actuarial losses (gains)......................................              (6,087)        11,053
Foreign exchange rate changes.................................                (876)          (841)
Benefits paid.................................................              (1,457)        (1,452)
                                                                          -----------------------
Benefit obligation at end of year.............................            $ 91,314       $ 88,373
                                                                          =======================

Change in plan assets
Fair value of plan assets at beginning of year................            $ 77,775       $ 66,671
Actual return on plan assets..................................               7,359         13,391
Foreign exchange rate changes.................................              (1,070)        (1,233)
Employer contribution.........................................                  --            237
Plan participants' contributions..............................                 161            161
Benefits paid.................................................              (1,414)        (1,452)
                                                                          -----------------------
Fair value of plan assets at end of year......................            $ 82,811       $ 77,775
                                                                          =======================

Funded status.................................................           $  (8,503)      $(10,598)
Unrecognized net actuarial (gain).............................              (8,614)        (1,990)
Unrecognized transition obligation............................                 166            349
Unrecognized prior service cost...............................              (4,246)        (4,709)
                                                                          -----------------------
Prepaid (accrued) benefit cost................................            $(21,197)      $(16,948)
                                                                          =======================
</TABLE>
B.   Postretirement Health Care Benefits

The  Company  provides  certain  health  care and life  insurance  benefits  for
eligible  active and retired  domestic  employees hired before July 1, 1998. The
plan  contains  cost-saving  features  such as  deductibles,  coinsurance  and a
lifetime  maximum and is unfunded.  The Company  accrues,  during the employee's
years of service, the expected cost of providing  postretirement benefits to the
employee and the employee's beneficiaries and covered dependents. Funding policy
for these benefits is to pay covered expenses as incurred.

                                                                              25
<PAGE>
Assumptions and net periodic postretirement benefit cost are as follows:
<TABLE>
Year ended                                         1999          1998         1997
----------------------------------------------------------------------------------
<S>                                             <C>           <C>          <C>
Discount rate.......................              7.00%         7.75%        8.00%
Health care cost trend (a)..........              8.00%         9.00%       10.00%
In thousands:
Service cost........................            $   650       $   504      $   445
Interest cost.......................                938           977          911
Expected return on plan assets......                 --            --           --
Amortization of transition obligation
over 22 years.......................                360           360          360
Net other amortization..............                 30             9            4
                                                ----------------------------------
Net periodic benefit cost...........            $ 1,978       $ 1,850      $ 1,720
                                                ==================================
</TABLE>
(a) Gradually declining to 6% in 2001 and remaining level thereafter.

The  following  tables  provide a  reconciliation  of the  changes in the plans'
benefit obligations, fair value of assets and funded status:
<TABLE>
In thousands                          Year ended                    1999          1998
------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>
Change in benefit obligation
Benefit obligation at beginning of year................            $ 14,559       $ 12,174
Service cost...........................................                 650            504
Interest cost..........................................                 938            977
Amendments.............................................                 588             --
Actuarial (gains) losses...............................              (3,178)         1,104
Benefits paid..........................................                (281)          (200)
                                                                   -----------------------
Benefit obligation at end of year......................            $ 13,276       $ 14,559
                                                                   =======================

Fair value of plan assets at beginning and end of year.                 --              --
                                                                   =======================

Funded status..........................................            $(13,276)       $(14,559)
Unrecognized net actuarial (gain) loss.................                (326)          2,294
Unrecognized transition obligation.....................               5,761           6,121
                                                                  -------------------------
Prepaid (accrued) benefit cost.........................           $ (7,841)        $ (6,144)
                                                                  =========================
</TABLE>
The  assumed  health  care cost  trend  rates have a  significant  effect on the
amounts  reported.  A 1-% change in assumed  health  care cost trend rates would
have the following effects:
<TABLE>
In thousands:                                                 1-%  Increase      1-% Decrease
-------------                                                 -------------      ------------
<S>                                                               <C>              <C>
Effect on service and interest cost components                    $103             $(123)
Effect on postretirement benefit obligation                       $660             $(731)
</TABLE>
10.  TAXES ON INCOME
<TABLE>
In thousands          Year ended                 1999            1998             1997
-----------------------------------------------------------------------------------------
<S>                                          <C>              <C>               <C>
Income before taxes on income consists of:
Domestic.......................              $   27,877       $    21,967       $ 23,833
Foreign........................                 (18,184)           (2,788)       (11,828)
                                             -------------------------------------------
                                             $    9,693       $    19,179       $ 12,005
                                             ===========================================
Tax expense (benefit) consists of:
Current:
Domestic.......................              $    1,243       $       828       $  6,256
Foreign........................                   1,840                79            950
                                             -------------------------------------------
                                             $    3,083       $       907       $  7,206
                                             -------------------------------------------
Deferred:
Domestic.......................              $    5,484       $     5,025       $    (23)
Foreign........................                  (7,034)             (879)        (4,397)
                                             -------------------------------------------
                                                 (1,550)            4,146         (4,420)
                                             -------------------------------------------
                                             $    1,533       $     5,053       $  2,786
                                             ============================================
</TABLE>
                                                                              26
<PAGE>
The  difference  between the Company's  income tax provision and 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>
In thousands          Year ended                    1999             1998          1997
---------------------------------------------------------------------------------------
<S>                                                 <C>              <C>            <C>
Income taxes at federal statutory rate..              34%             35%            35%
Impact of:
     Available tax credits..............              (9)             (6)            (5)
     Foreign subsidiary earnings........               5              (2)             4
     Export sale tax benefits...........             (14)             (4)            (5)
     Other..............................              --               3             (6)
                                                  -------------------------------------
Effective tax rate......................              16%             26%            23%
                                                  -------------------------------------
Income taxes paid.......................          $1,506           $2,164        $9,193
                                                  =====================================
</TABLE>
Deferred income taxes reflect the tax effects of temporary  differences  between
the amounts of assets and liabilities for financial reporting purposes and those
amounts as measured by income tax laws. The Company has grouped the  non-current
deferred  tax assets  with other  assets and the net  non-current  deferred  tax
liability with certain other liabilities on the accompanying balance sheets. The
tax effects of temporary  differences,  which give rise to a significant portion
of deferred tax assets (liabilities), are as follows:
<TABLE>
In thousands                                     1999            1998
-------------------------------------------------------------------------
<S>                                         <C>               <C>
Fixed assets........................        $  (11,034)       $   (9,750)
Retirement plans....................             7,472             5,904
Postretirement benefits.............             2,843             2,149
Loss carryforwards..................            12,425             7,137
Accrued expenses and other..........           (10,589)           (7,009)
Valuation allowance.................              (946)             (457)
                                            ----------------------------
Net deferred tax asset (liability)..        $      171        $   (2,026)
                                            ============================
</TABLE>

Deferred taxes are classified in the accompanying balance sheets as follows:
<TABLE>
In thousands                                     1999             1998
------------------------------------------------------------------------
<S>                                         <C>               <C>
Current income tax asset............        $    1,240        $    1,360
Non-current income tax asset........            10,873             5,706
Non-current income tax liability....           (11,942)           (9,092)
                                            ----------------------------
Net deferred tax asset (liability)..        $      171        $   (2,026)
                                            ============================
</TABLE>
At July 3, 1999,  the Company has $39.0  million of  consolidated  net operating
loss carryforwards, which do not expire.

11.  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 3, 1999. The preferred stock is redeemable in whole or
in part, if called by the Company, at $10.50 per share. Additionally,  there are
1,000,000  authorized shares of series preferred stock, no par value. At July 3,
1999, and June 27, 1998, no series preferred stock was outstanding.

On December 6, 1996, the Board of Directors declared a five-for-four stock split
in the form of a 25%  stock  dividend  distributed  on  January  30,  1997.  All
references  to  weighted-average  number  of  shares  outstanding  and per share
information have been adjusted to reflect the stock split.

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.

                                                                              27
<PAGE>
The following table sets forth the computation of basic and diluted earnings per
share for each period reported:
<TABLE>
In thousands, except per share data                    Year ended                 1999           1998           1997
----------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>            <C>
Net income.................................................................     $ 10,592        $13,009        $10,020
 Less:  Preferred stock dividends..........................................          (40)           (40)           (40)
                                                                                --------------------------------------
Income available to common stockholders....................................     $ 10,552        $12,969        $ 9,980
                                                                                ======================================

Weighted-average shares....................................................       10,091          9,961          9,836
 Plus:  Effect of dilutive stock options...................................           29            111            143
                                                                                --------------------------------------
 Adjusted weighted-average shares..........................................       10,120         10,072          9,979
                                                                                ======================================
Basic earnings per share...................................................        $1.05          $1.30          $1.01
                                                                                ======================================
Diluted earnings per share.................................................        $1.04          $1.29          $1.00
                                                                                ======================================
</TABLE>

12.  STOCK PURCHASE AND OPTION PLANS

The Company's  1998  Employees'  Stock  Purchase Plan permits the purchase in an
aggregate  amount  of up to  300,000  shares of Class A Common  Stock.  Eligible
employees  may purchase  stock at market  value,  or 85% of market value up to a
maximum of $25,000 per employee in any calendar  year. The Company issued 14,182
shares in 1999,  under this plan. The Company also issued 16,831 shares in 1999,
18,963 shares in 1998 and 11,540 shares in 1997 under the previous plan.

The Company's Stock Option Plans permit the granting of either  non-qualified or
incentive  stock  options to certain key  employees and directors to purchase an
aggregate  amount  of up to  1,150,593  shares of the  Company's  Class A Common
Stock. The options,  which become exercisable twelve months after date of grant,
expire  ten years  after  date of grant.  Although  the plan  administrator  may
establish the non-qualified 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. At July 3, 1999, 1,002,368 options were available for grant. A summary of
the Company's stock option activity and related information follows:
<TABLE>

                                                           Shares Under         Weighted-Average
In thousands                                                     Option           Exercise Price
------------------------------------------------------------------------------------------------
<S>                                                                 <C>                    <C>
Outstanding at June 29, 1996                                        511                    11.80
------------------------------------------------------------------------------------------------
Exercisable at June 29, 1996                                        421                    11.64
------------------------------------------------------------------------------------------------
Granted in 1997                                                      97                    14.20

Exercised                                                           (79)                   10.21

Canceled                                                             (6)                   14.53
------------------------------------------------------------------------------------------------
Outstanding at June 28, 1997                                        523                    12.45
------------------------------------------------------------------------------------------------
Exercisable at June 28, 1997                                        426                    12.05
------------------------------------------------------------------------------------------------
Granted in 1998                                                     164                    21.94

Exercised                                                          (171)                   10.64

Canceled                                                            (18)                   20.42
------------------------------------------------------------------------------------------------
Outstanding at June 27, 1998                                        498                    15.92
------------------------------------------------------------------------------------------------
Exercisable at June 27, 1998                                        350                    13.34
------------------------------------------------------------------------------------------------
Granted in 1999                                                     123                    16.98

Exercised                                                           (35)                    9.75

Canceled                                                            (23)                   19.81
------------------------------------------------------------------------------------------------
Outstanding at July 3, 1999                                         563                    16.38
------------------------------------------------------------------------------------------------
Exercisable at July 3, 1999                                         441                    16.21
------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
                                                                                       Weighted-Average
                                                                 --------------------------------------------------------
                                      Number of Options                     Option Price                  Remaining
                              ------------------------------------------------------------------
Exercise Price Range          Outstanding        Exercisable     Outstanding         Exercisable       Contractual Life
-------------------------------------------------------------------------------------------------------------------------
   <S>                            <C>                <C>            <C>                <C>                  <C>
   $8.48 - $14.30                 210                208            $12.79             $12.78               5.37yrs
   $14.81 - $22.69                353                233            $18.52             $19.29               7.25yrs
</TABLE>
The weighted-average, grant-date fair value was $5.76, $7.53 and $4.93 for stock
options granted in 1999, 1998 and 1997 respectively.

                                                                              28
<PAGE>
Pro forma  information  regarding  net  income and net income per share has been
determined  as if the Company had  accounted for its stock awards using the fair
value  method  consistent  with  SFAS No.  123 and had  recognized  compensation
expense. The fair value of these awards was estimated at the date of grant using
the  Black-Scholes  option  pricing  model with the  following  weighted-average
assumptions in 1999,  1998 and 1997,  respectively:  risk free interest rates of
6.07%, 5.45% and 6.23%;  dividend yield of 2.5%, 2.06% and 2.2%; expected market
price volatility  factor of 0.316,  0.311 and 0.303; and an expected option life
of seven years.

Pro forma information under SFAS No. 123 is as follows:
<TABLE>

 In thousands                     Year ended                      1999            1998              1997
------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>            <C>
Net income:
  As reported..............................................      $ 10,592       $  13,009       $   10,020
  Pro forma................................................         9,748          11,976            9,544

Basic net income per share of common stock:
  As reported..............................................      $   1.05       $    1.30       $     1.01
  Pro forma................................................           .96            1.20              .97

Diluted net income per share of common stock:
  As reported..............................................      $   1.04       $    1.29       $     1.00
  Pro forma................................................           .96            1.19              .95
</TABLE>
13.  COMMITMENTS AND CONTINGENCIES

A.   Litigation

On January 21, 1997, Midwest Manufacturing Holdings,  L.L.C. ("Midwest") filed a
lawsuit against the Company in Cook County,  Illinois Circuit Court with respect
to terminated  discussions regarding the possibility of Midwest's acquisition of
the Company's  Information Products business.  The litigation was removed to the
U.S. District Court for the Northern District of Illinois.  Midwest alleges that
a verbal  agreement  to purchase  the  Information  Products  business  had been
reached,  and has filed its  lawsuit  in an  attempt  to compel  the  Company to
proceed with the sale or to pay Midwest  damages.  On August 28, 1997, the court
granted the  Company's  motion to dismiss one of three counts and on February 5,
1998,  the court  granted  the  Company's  motion for  summary  judgment  on the
remaining  two counts.  Midwest then  appealed the court's  decision to the U.S.
Seventh  Circuit Court of Appeals.  While the appeal was pending,  on October 7,
1998, the U.S.  District Court for the Northern District of Illinois vacated its
earlier judgment and ruling on jurisdictional  grounds. The case was remanded to
the Illinois  Circuit Court of Cook County where the  litigation is now pending.
The  Company  believes  that the claim by  Midwest  will be  resolved  without a
material effect on the Company's financial  condition,  results of operations or
liquidity.

On May 12, 1998,  Metagal Industria E Cornercio Ltda (Metagal) filed a complaint
against  the  Company in the U.S.  District  Court for the  Eastern  District of
Michigan.  The complaint requests a declaratory judgment of non-infringement and
invalidity  of  certain  Company  patents  related  to  lights  integrated  into
automotive  mirrors.  The Company  believes that the litigation  will not have a
material  adverse  effect  on the  Company's  financial  condition,  results  of
operation or liquidity.


On October 6, 1998,  the Company filed a complaint  against  Metagal in the U.S.
District Court for the Western  District of Michigan.  The lawsuit  alleges that
the  production  and sale by  Metagal of certain  automotive  rear view  mirrors
incorporating  lights infringes one of the Company's patents.  The Company seeks
an injunction  against  Metagal,  as well as  unspecified  damages.  Metagal has
denied  infringement  and asserts  that the  Company's  patent is invalid.  This
lawsuit has recently been transferred to the Eastern District of Michigan, where
Metagal's  declaratory  judgment action described above is pending.  The Company
believes that this  litigation  will not have a material  adverse  effect on the
Company's financial condition and liquidity.

The Company and its subsidiaries are involved in certain other legal actions and
claims  incidental  to its  business,  including  those  arising  out of alleged
defects, breach of contracts, product warranties, employment-related matters and
environmental matters. An estimated loss from a legal action or claim is accrued
when events  exist that make the loss  probable  and the loss can be  reasonably
estimated.  Although  the  Company  maintains  accruals  for  such  claims  when
warranted,  there can be no assurance  that such  accruals  will  continue to be
adequate.  The Company  believes that accruals  related to such  litigation  and
claims are  sufficient  and that these items will be resolved  without  material
effect on the Company's financial position, results of operations and liquidity,
individually and in the aggregate.

                                                                              29
<PAGE>
B.   Other

As of July 3, 1999,  the Company had capital  expenditure  purchase  commitments
outstanding of approximately $11.9 million.

The Company  provides a guarantee for $7.2 million in municipal  funding for the
construction of a manufacturing facility.

14.  LEASES

Future minimum lease payments, excluding renewal options, consist of:
<TABLE>
Year ending                           In thousands          Capital Leases     Operating Leases
---------------------------------------------------------------------------------------------
<S>                                                         <C>                 <C>
1999*.............................................          $     1,093          $     2,282
2000..............................................                  237                3,423
2001..............................................                  116                2,171
2002..............................................                   14                1,894
2003..............................................                    2                1,665
2004..............................................                    1                1,984
2005 and thereafter...............................                    0                  616
                                                            --------------------------------
Total minimum lease payments......................                1,463          $    14,035
                                                                                 ===========
Less amount representing interest and other.......                   74
                                                            -----------
Present value of net minimum lease payments............      $    1,389
                                                            ===========
</TABLE>
*Refers to transition period ending December 31, 1999.

Donnelly  Hohe and Donnelly  Mirrors  Limited have  various  capital  leases for
manufacturing   and  warehouse   facilities   and   manufacturing,   office  and
transportation  equipment.  Included in property,  plant and  equipment  are the
following assets held under capital leases:
<TABLE>
In thousands                                     Year ended             1999
--------------------------------------------------------------------------------
<S>                                                                    <C>
Land........................................................           $      27
Buildings...................................................               4,397
Machinery and equipment.....................................               2,919
                                                                       ---------
Gross property, plant and equipment under capital leases....               7,343
Less accumulated depreciation...............................              (5,912)
Net property, plant and equipment under capital leases......           $   1,431
                                                                       =========
</TABLE>
The  Company  has  operating  leases for  office,  warehouse  and  manufacturing
facilities and  manufacturing  equipment.  Rental expense  charged to operations
amounted to approximately  $5.2 million for 1999, $4.3 million for 1998 and $3.8
million for 1997.  In 1998,  the Company  entered into an agreement for the sale
and leaseback of newly installed injection molding equipment.  The equipment was
sold at cost and no gain or loss was  recognized on the  transaction.  The lease
has an effective  6.4% fixed  interest  rat and a 40% balloon for the  Company's
option  to  purchase  the  equipment  after  the  full  seven-year  term  and is
classified as an operating lease.

15.  COMMON STOCK PRICE PER SHARE - UNAUDITED

The Company's  common stock is traded on the New York Stock  Exchange  under the
Symbol "DON." Market quotations regarding the range of high and low sales prices
of the Company's common stock were as follows:

<TABLE>
Fiscal                                       1999                            1998
--------------------------------------------------------------------------------------------
Quarter                                High          Low                 High         Low
--------------------------------------------------------------------------------------------
<S>                                    <C>         <C>                 <C>         <C>
First........................          $  18.88    $  14.13            $  23.75    $  16.75
Second.......................             16.00       12.50               22.44       17.50
Third........................             15.25       12.13               19.31       16.25
Fourth.......................             17.50       12.88               22.38       18.00
--------------------------------------------------------------------------------------------
</TABLE>
                                                                              30
<PAGE>
16.  QUARTERLY FINANCIAL DATA--UNAUDITED
<TABLE>
                                                                     First       Second       Third      Fourth      Total
In thousands, except per share data                                 Quarter      Quarter     Quarter     Quarter     Year
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>         <C>          <C>       <C>
1999
Net sales............................................              $189,603     $239,093    $233,154    $243,119   $904,969
Gross profit.........................................                26,761       35,089      37,963      34,503    134,316
Operating income.....................................                (1,112)       3,310        (944)      6,847      8,101
Net income...........................................                (1,990)       1,451       3,820       7,311     10,592
       Basic net income per share....................                  (.20)         .14         .38         .72       1.05
       Diluted net income per share..................                  (.20)         .14         .38         .72       1.04
Dividends declared per share of common stock.........                   .10          .10         .10         .10        .40

1998
Net sales............................................             $ 165,176     $194,800    $193,658    $209,677   $763,311
Gross profit.........................................                27,973       33,580      32,649      36,430    130,632
Operating income.....................................                 3,090        6,378       6,674       4,232     20,374
Net income...........................................                  986         5,169       3,373       3,481     13,009
     Basic net income per share......................                  .10           .52         .34         .35       1.30
     Diluted net income per share....................                  .10           .51         .33         .34       1.29
Dividends declared per share of common stock.........                  .10           .10         .10         .10        .40
</TABLE>
See Management's  Discussion and Analysis of Results of Operations and Financial
Condition for  discussion of the Company's  results of operations and Notes 2, 4
and 13 for a discussion  of the impact of certain  transactions  on the 1999 and
1998 quarterly results of operations.

                                                                              31
<PAGE>
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 judgments.

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, LLP, 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 with the  independent  public  accountants  and  management to
review and discuss  the major  audit  findings,  the  adequacy  of the  internal
control   structure  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.



/s/ J. Dwane Baumgardner
J. Dwane Baumgardner, Ph.D.
Chairman, Chief Executive Officer and President



/s/ Scott E. Reed
Scott E. Reed
Senior Vice President
and Chief Financial Officer

                                                                              32
<PAGE>
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 3, 1999 and June 27, 1998, and the related combined
consolidated statements of income,  shareholders' equity and cash flows for each
of the three years in the period ended July 3, 1999. 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  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 provide a reasonable basis for our opinion.

In our opinion, 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 3,  1999 and June 27,  1998,  and the
results of their  operations and their cash flows for each of the three years in
the period ended July 3, 1999, in conformity with generally accepted  accounting
principles.


BDO Seidman, LLP
Grand Rapids, Michigan
August 12, 1999

                                                                              33
<PAGE>
EXHIBIT 21
                             SCHEDULE OF AFFILIATES

AS OF JULY 3, 1999
<TABLE>
                                                                           PERCENTAGE OF
                 AFFILIATE                          INCORPORATION            OWNERSHIP
---------------------------------------------  ------------------------  ------------------
<S>                                            <C>                       <C>
DONNELLY MIRRORS LIMITED                       ORGANIZED UNDER THE             100%
                                               LAWS OF THE REPUBLIC
                                               OF IRELAND

DONNELLY VISION SYSTEMS                        ORGANIZED UNDER THE             100%
EUROPE LIMITED                                 LAWS OF THE REPUBLIC
                                               OF IRELAND

DONNELLY DE MEXICO, S.A. DE C.V.               ORGANIZED UNDER THE             100%
                                               LAWS OF MEXICO

DONNELLY EUROGLAS SYSTEMS,                     ORGANIZED UNDER THE             100%
S.A.R.L.                                       LAWS OF FRANCE

DONNELLY HOLDING GmbH                          ORGANIZED UNDER THE             100%
                                               LAWS OF GERMANY

DONNELLY INTERNATIONAL, INC.                   MICHIGAN                        100%

DONNELLY TECHNOLOGY, INC.                      MICHIGAN                        100%

DONN-TECH INC.                                 MICHIGAN                        100%

DONNELLY RECEIVABLES CORPORATION               MICHIGAN                        100%

INFORMATION PRODUCTS, INC.                     MICHIGAN                        100%

DONNELLY SCANDINAVIA A.B.                      ORGANIZED UNDER THE             100%
                                               LAWS OF SWEDEN

DONNELLY INVESTMENTS, INC.                     MICHIGAN                        100%

DONNELLY HOHE VERWALTUNGS GmbH                 ORGANIZED UNDER THE              74%
                                               LAWS OF GERMANY

DONNELLY HOHE ESPANA, S.A.                     ORGANIZED UNDER THE            68.6%*
                                               LAWS OF SPAIN

DONNELLY HOHE GmbH & CO. KG                    ORGANIZED UNDER THE             66.7%
                                               LAWS OF GERMANY

SHANGHAI DONNELLY FU HUA WINDOW                ORGANIZED UNDER THE              50%
SYSTEMS COMPANY, LTD.                          LAWS OF CHINA

SHUNDE DONNELLY ZHEN HUA                       ORGANIZED UNDER THE              50%
AUTOMOTIVE SYSTEMS CO. LTD.                    LAWS OF CHINA

DONNELLY YANTAI ELECTRONICS CO. LTD.           ORGANIZED UNDER THE              50%
                                               LAWS OF THE PEOPLES
                                               REPUBLIC OF CHINA

VARITRONIX EC (MALAYSIA) SDN. BHD.             ORGANIZED UNDER THE              50%
                                               LAWS OF MALAYSIA

LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.         MICHIGAN                        50%**

DONNELLY/ARTEB, LTDA                           ORGANIZED UNDER THE              50%
                                               LAWS OF BRAZIL

DONNELLY ELECTRONICS, L.L.C.                   MICHIGAN                         19%

KAM TRUCK COMPONENTS, INC.                     MICHIGAN                         17%

APPLIED IMAGE GROUP                            NEW YORK                         13%

SHOTT-DONNELLY LLC SMART GLASS SOLUTIONS       DELAWARE                         50%
</TABLE>
*  21.8% owned directly by Donnelly Corporation and 70.2% owned by
   Donnelly Hohe GmbH & CO. KG (66.7% of the equity of which is owned by
   Donnelly Corporation)

** Donnelly Corporation sold its interest in Lear Donnelly Overhead Systems,
   L.L.C. on September 14, 1999.
<PAGE>
EXHIBIT 23

Consent of Independent Certified Public Accountants

Donnelly Corporation
Holland, Michigan

We hereby consent to the  incorporation by reference of our reports dated August
12,  1999,  relating  to the  combined  consolidated  financial  statements  and
schedules of Donnelly  Corporation  appearing in the corporation's annual report
on Form 10-K for the year ended July 3, 1999, in that  corporation's  previously
filed Form S-8 Registration  Statements for that  corporation's  1998 Employees'
Stock Purchase Plan  (Registration  No.  333-67969),  1998 Employee Stock Option
Plan (Registration No. 333-67967), 1997 Employee Stock Option Plan (Registration
No.  333-40987),  1987 Stock  Option  Plan  (Registration  No.  33-26555),  1987
Employees'  Stock Purchase Plan  (Registration  No.  33-34746) and  Non-Employee
Directors' Stock Option Plan (Registration No. 33-55499).

/s/ BDO Seidman, LLP

Grand Rapids, Michigan
September 24, 1999