SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
GENTEX CORP
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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GENTEX
CORPORATION
600 N. Centennial Street
Zeeland, Michigan 49464
NOTICE OF 2002 ANNUAL MEETING
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The Annual Meeting of the Shareholders of Gentex Corporation, a
Michigan corporation, will be held at the Amway Grand Plaza Hotel, Ambassador
Ballroom, Pearl at Monroe, Grand Rapids, Michigan, on Thursday, May 9, 2002, at
4:30 p.m. E.D.S.T., for the following purposes:
1. To elect three directors as set forth in the Proxy Statement.
2. To act upon a proposal to approve the 2002 Nonemployee
Director Stock Option Plan
3. To transact any other business that may properly come before
the meeting, or any adjournment thereof.
Shareholders of record as of the close of business on March 15, 2002,
are entitled to notice of, and to vote at the meeting. Whether or not you expect
to be present at the meeting, you are urged to sign the enclosed Proxy and
return it promptly in the enclosed, self-addressed envelope. If you do attend
the meeting and wish to vote in person, you may withdraw your Proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Connie Hamblin
April 2, 2002 Connie Hamblin
Secretary
GENTEX CORPORATION
600 N. Centennial Street
Zeeland, Michigan 49464
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD MAY 9, 2002
SOLICITATION OF PROXIES
This Proxy Statement is being furnished on or about April 2, 2002, to
the shareholders of Gentex Corporation ("the Company") in connection with the
solicitation by the Board of Directors of the Company of Proxies to be used at
the Annual Meeting of Shareholders to be held on Thursday, May 9, 2002, at 4:30
p.m., at the Amway Grand Plaza Hotel, Ambassador Ballroom, Pearl at Monroe,
Grand Rapids, Michigan.
Each shareholder, as an owner of the Company, is entitled to vote on
matters to come before the Annual Meeting. The use of Proxies allows a
shareholder of the Company to be represented at the Annual Meeting if he or she
is unable to attend in person.
If the form of Proxy accompanying this Proxy Statement is properly
executed and returned to the Company, the shares represented by the Proxy will
be voted at the Annual Meeting of Shareholders and at any adjournment of the
meeting. Where shareholders specify a choice, the Proxy will be voted as
specified. If no choice is specified, the shares represented by Proxy will be
voted for the election of all nominees named in the Proxy and for the proposal
described in this Proxy Statement. A Proxy may be revoked prior to its exercise
by (1) delivering a written notice of revocation to the Secretary of the
Company, (2) executing a subsequent proxy or (3) attending the meeting and
voting in person.
VOTING SECURITIES AND RECORD DATE
March 15, 2002, has been fixed by the Board of Directors as the record
date for determining shareholders entitled to vote at the Annual Meeting. On
that date, 75,493,374 shares of the Company's common stock, par value $.06 per
share, were issued and outstanding. Shareholders are entitled to one vote for
each share of the Company's common stock registered in their names at the close
of business on the record date.
2
ELECTION OF DIRECTORS
The Company's Articles of Incorporation specify that the Board of
Directors shall consist of at least six, but not more than nine members, with
the exact number to be determined by the Board. The Board has fixed the number
of directors at eight. The Articles of Incorporation also specify that the Board
be divided into three classes, with the classes to hold office for staggered
terms of three years each. The Board has nominated Arlyn Lanting, Kenneth La
Grand and Ted Thompson for election as directors at the Annual Meeting, each to
serve a three-year term expiring in 2005. Each of these nominees has previously
been elected as a director by the Company's shareholders.
Unless otherwise specifically directed by a shareholder's marking on
the Proxy card, the persons named as proxy voters in the accompanying Proxy will
vote for the nominees described below. If any of these nominees becomes
unavailable, which is not now anticipated, the Board may designate a substitute
nominee, in which case the accompanying Proxy will be voted for the substituted
nominee. Proxies cannot be voted for a greater number of persons than the number
of nominees named.
A plurality of votes cast by shareholders at the meeting is required to
elect directors of the Company under Michigan law. Accordingly, the three
nominees who receive the largest number of affirmative notes will be elected,
regardless of the number of votes received. Broker nonvotes, votes withheld, and
votes cast against any nominee will not have a bearing on the outcome of the
election. Votes will be counted by Inspectors of Election appointed by the
presiding officer at the Annual Meeting.
The Board of Directors recommends a vote FOR the election of all
persons nominated by the Board.
The content of the following table relating to age and business
experience is based upon information furnished to the Company by the nominees
and directors.
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NAME, (AGE) AND POSITION BUSINESS EXPERIENCE PAST FIVE YEARS
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NOMINEES FOR TERMS TO EXPIRE IN 2005
Arlyn Lanting (61) Mr. Lanting is the Vice President - Finance of Aspen
Director since 1981 Enterprises, Ltd., Grand Rapids, MI (real estate
investments), and he has held that position for more
than five years.
Kenneth La Grand (61) Mr. La Grand is the Executive Vice President of Gentex
Director since 1987 Corporation, and he has held that position for more
than five years.
Ted Thompson (72) Mr. Thompson was the Chairman of X-Rite, Incorporated,
Director since 1987 Grandville, MI (a manufacturer of light and
color-measuring instruments) from May 1989 to September
2001. Mr. Thompson is a Director Emeritus of X-Rite,
Incorporated.
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3
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NAME, (AGE) AND POSITION BUSINESS EXPERIENCE PAST FIVE YEARS
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DIRECTORS WHOSE TERMS EXPIRE IN 2004
Mickey Fouts (70) Mr. Fouts has been Chairman of the Board, Equity
Director since 1982 Services Company (investment services), Castle Rock,
CO, for more than five years.
John Mulder (65) Mr. Mulder is the Vice President - Customer Relations
Director since 1992 of Gentex Corporation, and has held that position
since February 2000. Previously, he was Senior Vice
President - Automotive Marketing from September 1998 to
February 2000. Prior to September 1998, he was Vice
President - Automotive Marketing for more than five
years.
Frederick Sotok (67) Mr. Sotok was Executive Vice President and Chief
Director since 2000 Operating Officer of Prince Corporation (manufacturer
of automotive interior parts that was acquired by
Johnson Controls, Inc, in 1996) from October 1977 to
October 1996. Mr. Sotok is also a director of Clarion
Technologies, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2003
Fred Bauer (59) Mr. Bauer is the Chairman and Chief Executive Officer
Director since 1981 of Gentex Corporation, and he has held that position
for more than five years.
Leo Weber (72) Since 1990, Mr. Weber has been engaged in the
Director since 1991 consulting business as L. L. Weber & Associates, West
Bloomfield, MI. Previously, he was the President of
Robert Bosch Corporation, Farmington Hills, MI
(manufacturer of sophisticated automotive components).
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Arlyn Lanting and Kenneth La Grand are brothers-in-law. There are no
other family relationships between the nominees, directors, and executive
officers of the Company.
During 2001, the Board of Directors met on three occasions. All
directors attended at least seventy-five percent of the aggregate number of
meetings of the Board and Board committees on which they served, except for Mr.
Thompson who attended seven of ten meetings, or 70 percent.
4
The Company has a Compensation Committee comprised of Messrs. Bauer,
Lanting and Thompson. The Compensation Committee is responsible for
administering the Company's stock-based incentive plans and supervising other
compensation arrangements for executive officers of the Company. The
Compensation Committee met four times during the fiscal year ended December 31,
2001.
In addition, the Company has an Executive Committee comprised of
Messrs. Bauer, Lanting and La Grand. The Executive Committee is authorized to
act on behalf of the Board between full Board meetings, to the extent permitted
by law. This Committee met once during the fiscal year ended December 31, 2001.
The Company also has an Audit Committee, which during the fiscal year
ending December 31, 2001, was comprised of Messrs. Weber, Sotok and Thompson.
Each of these individuals qualifies as an "independent director" as determined
in accordance with the current listing standards of the Nasdaq National Market.
Information regarding the functions performed by the Committee, its membership,
and the number of meetings held during the fiscal year, is set forth in the
following "Report of the Audit Committee." The Audit Committee is governed by a
written charter approved by the Board of Directors.
The Company does not have a standing nominating committee.
REPORT OF THE AUDIT COMMITTEE
The Committee has reviewed and discussed with management the Company's
financial statements as of and for the year ended December 31, 2001.
The Committee has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended, by the Auditing Standards
Board of the American Institute of Certified Public Accountants.
The Committee has received and reviewed the written disclosures and the
letter from the independent auditors required by Independence Standard No. 1,
Independence Discussions with Audi Committees, as amended, by the Independence
Standards Board. The Committee has also discussed with the auditors the
auditor's independence. The Committee held two meetings during calendar year
2001.
5
Management is responsible for the Company's financial reporting process
including its system of internal control, and for the preparation of financial
statements in accordance with accounting principles generally accepted in the
United States of America. The Company's independent auditors are responsible for
auditing those financial statements. The Committee's responsibility is to
monitor and review these processes. It is not the Committee's duty or
responsibility to conduct auditing or accounting reviews or procedures. No
member of the Committee is an employee of the Company and the members of the
Committee may not be, and may not represent ourselves to be or to serve as,
accountants or auditors by profession or experts in the fields of accounting or
auditing. Therefore, the Committee has relied, without independent verification,
on management's representation that the financial statements have been prepared
with integrity and objectivity and in conformity with accounting principles
generally accepted in the United States of America and on the representations of
the independent auditors included in their report on the Company's financial
statements. The Committee's oversight does not provide us with an independent
basis to determine that management has maintained appropriate accounting and
financial reporting principles or policies, or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Committee's considerations and
discussions with management and the independent auditors do not assure that the
Company's financial statements are presented in accordance with accounting
principles generally accepted in the United States of America, that the audit of
the Company's financial statements has been carried out in accordance with
auditing standards generally accepted in the United States of America, or that
the Company's independent accountants are in fact "independent."
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2001, and Annual Report to Shareholders for
filing with the Securities and Exchange Commission. The Committee and the Board
have also selected Ernst & Young LLP as the Company's independent auditors for
the year ending December 31, 2002.
Audit Committee Members:
Leo Weber, Audit Committee Chair
Fred Sotok, Audit Committee Member
Ted Thompson, Audit Committee Member
March 5, 2002
6
Proposal to Adopt Nonemployee Director Stock Option Plan
Subject to approval by the Company's shareholders, the Board of
Directors of the Company adopted the 2002 Gentex Corporation Nonemployee
Director Stock Option Plan (the "Plan") to replace a comparable plan that was
scheduled to expire this year. The shareholders will be asked to consider and
approve the Plan at the Annual Meeting. The following paragraphs summarize the
principal features of the Plan, and the full text of the Plan is appended to
this Proxy Statement as Appendix A.
Purpose. The purpose of the Plan is to make service on the Board more
attractive to present and prospective outside directors, since the continued
services of qualified nonofficer, or outside directors, are considered essential
to the sustained progress of the Company. In addition, the Plan encourages stock
ownership by outside directors. If the Plan is approved, each newly elected
director, at the time of election, will receive an option for six thousand
(6,000) shares of the Company's common stock, and incumbent directors and
nominees listed in the table under the caption "Election of Directors" will be
eligible to receive an annual option in that same amount under the Plan, except
for those directors who are also employees of the Company.
Shares Subject to the Plan. The aggregate number of shares of the
Company's common stock, par value $.06 per share, which may be issued under the
Plan will not exceed five hundred thousand (500,000) shares, subject to certain
adjustments to prevent dilution. If any option or any portion of an option is
terminated or surrendered for any reason without being exercised, the shares
subject to the unexercised portion of the option shall be available for
subsequent option grants under the Plan.
Eligibility and Administration. Only the Company's outside directors
are eligible to participate in the Plan. The Plan will be administered by the
entire Board of Directors.
Terms of Options. All options granted under the Plan will be
nonstatutory stock options, evidenced by an agreement between the Company and
the director in a form approved by the Board of Directors. Upon exercise of an
option, the Company will satisfy the requirements of the options out of
authorized but unissued shares.
Each annual option will be for six thousand (6,000) shares and will be
exercisable at a price equal to the fair market value as of the date of grant.
For purposes of this Plan, the fair market value of a share of common stock
shall be equal to the last reported sale price per share of common stock on the
date of grant or, if that date is not a trading date, then the trading date
immediately preceding the date of grant, or if there is no reported sale, the
mean between the highest closing bid and closing asked price, as quoted on the
Nasdaq Stock Market. Options may be exercised only during certain periods of ten
business days following the second business day after publication of the
Company's annual or quarterly financial reports, and only following the
expiration of six months after grant. Option agreements will require directors
to serve the term to which they are elected.
7
Transferability and Termination. Options created under the Plan are
nontransferable except to an optionee's spouse, an optionee's descendents, or a
trust created primarily for the benefit of the optionee, the optionee's spouse,
or the optionee's descendents. The rights and benefits of any option so
transferred, except any right to further transfer the option, and the
obligations, conditions, and limitations of any option so transferred are
determined as if the original optionee continued to hold the option. No option
may be exercised more than ten (10) years after the date of grant or more than
ninety (90) days after the optionee's status as a director terminates for any
reason other than death.
Modification of the Plan. The Board has the power to suspend,
discontinue, revise, or amend the Plan, except that no amendment may change the
number of shares subject to the Plan, change the designation of class of
directors eligible to receive options, materially increase the benefits accruing
to participants under the Plan, or alter or impair any rights or obligations of
any option previously granted without the consent of the optionee, unless
approval of the shareholders is obtained.
Tax Treatment. All options to be granted under the Plan are
nonstatutory stock options, not entitled to special treatment under Section 422
of the Internal Revenue Code of 1986, as amended. The grant of a stock option
does not result in taxable income to the recipient. Directors who exercise an
option recognize ordinary income in an amount equal to the difference between
the option price and the fair market value of the shares as of the date of
exercise. The Company is not entitled to an income tax deduction with respect to
the grant of a stock option or the sale of stock acquired pursuant hereto. The
Company is permitted to a deduction equal to the amount of ordinary income the
recipient is required to recognize as the result of the exercise of a stock
option.
Rules covering taxation of stock options are complex and the preceding
paragraph is only a summary of the basis federal income tax consequences with
respect to options granted under the Plan, based upon management's understanding
of existing federal income tax laws.
Other Incentive Plans. Other than the Nonemployee Director Stock Option
Plan (As Amended and Restated, Effective March 7, 1997), the Company does not
currently have, and has not had within the past five years, in effect any
provision for outside directors under any bonus, profit sharing, retirement,
stock option or purchase, deferred compensation, or other incentive plan.
A majority of votes cast at the annual meeting of shareholder in person
or by proxy on the proposal to adopt the 2002 Nonemployee Director Stock Option
Plan is required for approval.
The Board of Directors recommends a vote FOR approval of the 2002
Nonemployee Director Stock Option Plan.
8
SECURITIES OWNERSHIP OF MANAGEMENT
The following table contains information with respect to ownership of
the Company's common stock by all directors, nominees for election as directors,
executive officers named in the tables under the caption Executive Compensation,
and all directors and executive officers and directors as a group. The content
of this table is based upon information supplied by the Company's officers,
directors, and nominees for election as directors, and represents the Company's
understanding of circumstances in existence as of March 1, 2002.
AMOUNT AND NATURE OF OWNERSHIP
---------------------------------------------
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY EXERCISABLE PERCENT
OWNED (1) OPTIONS (2) OF CLASS
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Dennis Alexejun 21,815 13,440 *
Fred Bauer 3,478,865 208,401 4.6%
John Carter 34,520 12,020 *
Garth Deur 14,400 3,400 *
Mickey E. Fouts 35,000 35,000 *
Arlyn Lanting 591,000 (3) 165,000 *
Kenneth La Grand 621,231 (4) 148,401 *
John Mulder 153,426 26,598 *
Frederick Sotok 14,938 (5) 8,590 *
Ted Thompson 215,000 175,000 *
Leo Weber 96,300 75,000 *
All directors and executive officers
as a group (12 persons) 5,379,298 918,393 7.1%
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*Less than one percent.
(1) Except as otherwise indicated by footnote, each named person claims
sole voting and investment power with respect to the shares indicated.
(2) This column reflects shares subject to options exercisable within 60
days, and these shares are included in the column captioned "Shares
Beneficially Owned."
(3) Includes 400,000 shares owned of record by Aspen Enterprises, Ltd., of
which Mr. Lanting is a director, officer and substantial shareholder,
and Mr. Lanting disclaims beneficial ownership of those shares.
9
(4) Includes 50,000 shares held in a trust established by Mr. La Grand's
spouse, and Mr. La Grand disclaims beneficial ownership of those
shares. Also includes 7,264 shares held in trust by Mr. La Grand's
spouse for Mr. La Grand's grandchildren, and Mr. La Grand disclaims
beneficial ownership of these shares.
(4) Includes 174 shares owned by Mr. Sotok's spouse through a partnership,
and Mr. Sotok disclaims beneficial ownership of these shares.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table contains information with respect to ownership of
the Company's common stock by persons or entities who are beneficial owners of
more than five percent of the Company's voting securities. The information
contained in this table is based on information contained in Schedule 13G
furnished to the Company.
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
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Franklin Resources 3,844,400 5.1%
One Franklin Parkway
San Mateo, CA 94403
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10
EXECUTIVE COMPENSATION
The following table contains information regarding compensation paid by
the Company for each of the last three fiscal years to its chief executive
officer and to the Company's four most highly compensated executive officers
other than the chief executive officer.
SUMMARY COMPENSATION TABLE
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LONG-TERM
COMPENSATION
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ANNUAL COMPENSATION AWARDS PAYOUTS
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YEAR SALARY BONUS OTHER RESTRICTED SECURITIES LTP ALL OTHER
($) ($) ($) STOCK UNDERLYING ($) COMPENSATION
EXECUTIVE AWARD($)(1) OPTIONS(#) ($)(2)
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Fred Bauer 2001 309,414 52,508 -- 80,000 4,572
Chairman and CEO 2000 298,510 63,441 -- 72,000 4,554
1999 287,230 62,470 -- 65,000 4,650
Kenneth La Grand 2001 185,391 31,798 -- -- 4,428
Executive Vice President 2000 190,138 75,411 -- 12,000 4,416
1999 175,186 49,546 -- 24,000 4,399
Garth Deur
Senior Vice President (3) 2001 160,928 38,041 -- 18,000 3,281
Dennis Alexejun 2001 150,800 45,587 134,850 13,850 3,641
Vice President, 2000 143,722 45,546 -- 13,200 3,687
North American
Automotive
Marketing (3)
John Carter 2001 160,847 43,273 -- 14,000 3,193
Vice President 2000 153,133 46,518 217,549 12,500 3,223
Engineering /
Mechanical (3)
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11
(1) Represents the aggregate market value at the date of grant for shares
of common stock awarded under the Company's Restricted Stock Plan.
Assuming continued employment with the Company, restrictions on shares
lapse one-third each on the 4th, 5th, and 6th anniversaries of the
grant in the case of Ken La Grand, and upon the expiration of five
years from the date of grant in all other cases. Dividends will be paid
on these shares if, and to the same extent, paid on the Company's
common stock generally. At the close of the Company's fiscal year, the
following officers held the following number of restricted shares with
the corresponding net market values: K. La Grand 12,000 shares for
$320,760, Garth Deur 9,000 shares for $240,570, Dennis Alexejun 5,000
shares for $133,650, and John Carter 22,500 shares for $601,425.
(2) These amounts represent the sum of "matching" contributions by the
Company pursuant to its 401(k) Plan and annual premiums for term life
insurance attributed to each named executive officer.
(3) The Company named Garth Deur as an executive officer in March of 2001.
In addition, Dennis Alexejun and John Carter were named executive
officers in March of 2000.
The following table contains information regarding stock options
granted to the above-named executive officers during the preceding fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
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EXECUTIVE NUMBER OF
SECURITIES, PERCENT OF OPTIONS EXERCISE GRANT DATE
UNDERLYING TO PRICE EXPIRATION PRESENT VALUE
OPTIONS(#)(1) ALL EMPLOYEES ($/SH)(2) DATE ($)(3)
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Fred Bauer 80,000 7.7% 29.01 8/17/08 1,148,128
Kenneth La Grand -- -- -- -- --
Garth Deur 18,000 1.7% 26.97 12/20/08 240,163
Dennis Alexejun 13,850 1.3% 23.59 9/24/08 161,632
John Carter 14,000 1.4% 25.46 6/27/08 176,336
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(1) These options become exercisable, so long as employment with the
Company continues, for twenty percent of the shares on each anniversary
of the grant date commencing with the first anniversary of the grant
date.
(2) The exercise price may be paid in cash, in shares of the Company's
common stock, and/or by the surrender of exercisable options valued at
the difference between the exercise price and the market value of the
underlying shares.
12
(3) Based on the Black-Scholes option valuation model, assuming volatility
of 54 percent, a risk-free rate of return equal to seven-year treasury
bonds, a dividend yield of zero, and an exercise date of seven years
after grant. This model is an alternative suggested by the Securities
and Exchange Commission, and the Company neither endorses this
particular model, nor necessarily agrees with this method for valuing
options. The ultimate value of options will depend on the Company's
success, as reflected by an increase in the price of its shares, which
will inure to the benefit of all shareholders.
The following table contains information regarding the exercise of options
during the preceding fiscal year by the above-named executives, as well as
unexercised options held by them at fiscal year-end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE YEAR-END (#) FISCAL YEAR-END ($)
EXERCISE REALIZED ------------ -------------------
EXECUTIVE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------------------------------------------------------------------------------------------------------
Fred Bauer 60,000 1,498,800 208,401 208,599 2,910,032 657,630
Kenneth La Grand 20,452 315,779 148,401 41,599 2,401,999 330,951
Garth Deur -- -- 3,400 31,600 26,493 105,971
Dennis Alexejun -- -- 13,440 35,610 106,569 146,525
John Carter -- -- 12,020 37,640 75,430 123,329
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EXECUTIVE COMPENSATION REPORT
Responsibility for the Company's executive compensation program has
been delegated by the Board of Directors to the Compensation Committee, except
for compensation of the Chief Executive Officer (C.E.O.), which is determined by
the Board based on recommendations from the Committee (without participation by
C.E.O. Bauer). This Committee is comprised of three members: two independent
outside directors and the C.E.O.
The executive compensation program is composed of three elements: base
salary, annual bonus, and stock-based incentives. These elements are utilized to
accommodate several objectives:
- Provide the means to attract, motivate, and retain executive
management personnel.
- Provide long-term success by focusing on continuing technical
development and improvement in customer satisfaction.
13
- Provide base salary compensation that is competitive in the
market for managerial talent.
- Provide annual bonus compensation reflective of both
individual achievement and overall Company performance.
- Provide stock-based incentive compensation that focuses on
long-term Company performance and aligning the interests of
management with the interests of shareholders.
Base salary compensation for executive officers is predicated primarily
on competitive circumstance for managerial talent and positions reflecting
comparable responsibility. These competitive circumstances are determined from
local, regional, and national surveys of employers comparable to the Company in
size, stage of development, and industry. Historically, base salaries for
executive officers have been relatively low, and stock-based incentives have
received more emphasis, reflecting the entrepreneurial, high growth rate stage
of the Company's development. Base salary decisions for executive officers other
than the C.E.O. are determined by C.E.O. F. Bauer. The base salary for C.E.O.
Bauer for 2001 was recommended by the Committee (without participation by C.E.O.
Bauer) and approved by the Board of Directors. The Committee's recommendation
was made after reviewing survey information from several sources, textual
materials regarding executive compensation strategies in general, the past and
expected contributions of C.E.O. Bauer to the Company's progress, the quality,
loyalty, and performance of the management team assembled and led by him, and
the relationships between his salary and the average salary levels for the
Company's hourly paid workers, salaried employees, and executive officers.
Annual bonus compensation for executive officers is composed of two
elements: payments under the Company's Gain Sharing Bonus Plan and performance
bonuses. All employees of the Company, including executive officers, are
eligible to share in the Company's Gain Sharing Bonus Plan after the first three
months of employment. A percentage of pretax income, in excess of an established
threshold for shareholder return on equity, is distributed quarterly to eligible
employees. The amount to be distributed is allocated among all eligible
employees in proportion to the salary or wages (including overtime) paid to
those employees during the quarter. In addition, performance bonuses are paid to
various managerial employees, including executive officers, based upon
individual performance during the year and the overall performance of the
Company during the year. Regarding 2001, C.E.O. F. Bauer evaluated the
performance of each executive officer, sometimes in consultation with other
officers, and determined performance bonuses predicated approximately one-half
on the individual's achievements and contributions to Company success, and
one-half on the overall performance of the Company for the year. C.E.O. F. Bauer
participated in the Gain Sharing Plan along with all other eligible employees.
14
Stock-based incentive compensation is intended to align the interests
of shareholders and senior management by making the managers shareholders in a
significant amount, and providing them incentives to work to increase the price
of the Company's shares by granting them options to acquire additional shares.
Generally, restricted stock grants are subject to forfeiture if the executive
officer does not continue employment with the Company for the period specified
at the time of grant. Similarly, stock options become exercisable generally for
a portion of the shares after one year and for additional portions each year
thereafter, subject, however, to the requirement that the optionee must be
employed by the Company at the time of exercise. During 2001, stock options were
awarded to executive officers, other than the C.E.O., by the Committee, based
upon recommendations from C.E.O. F. Bauer, taking into consideration for each
executive the scope of responsibility, contributions to success in prior
periods, ability to influence success in the future, and demonstrated ability to
achieve agreed-upon goals. In addition, the Board approved the recommendation of
the Committee (arrived at without the participation of Mr. Bauer) to grant
C.E.O. F. Bauer an option to acquire 80,000 shares of the common stock, based
upon the Committee's evaluation of his management of the Company's other
managerial employees and his desire to receive bonus compensation in the form of
options rather than cash.
Compensation Committee Members:
Fred Bauer
Arlyn Lanting
Ted Thompson
15
STOCK PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the
Company's common stock compared to the cumulative total return on The NASDAQ
Stock Market(R) index (all U.S. companies) and the Dow Jones Index for
Automobile Parts and Equipment Companies (excluding tire and rubber makers). The
graph assumes an investment of $100 on the last trading day of 1996, and
reinvestment of dividends in all cases.
[GRAPH]
DOW JONES AUTO
THE NASDAQ PARTS & EQUIPMENT
GENTEX STOCK MARKET COMPANIES (EXCLUDING
CORPORATION (U.S. COMPANIES) TIRE AND RUBBER MARKERS)
----------- ---------------- ------------------------
12/31/96 $100 $100 $100
12/31/97 $134 $122 $128
12/31/98 $199 $173 $127
12/31/99 $276 $321 $130
12/29/00 $185 $193 $95
12/31/01 $266 $153 $124
The Company has not adopted any long-term incentive plan or any defined
benefit or actuarial plan, as those terms are defined in the applicable
regulations promulgated by the Securities and Exchange Commission. Neither does
the Company have any contracts with its executive officers assuring them of
continued employment, nor any compensatory arrangement for executives linked to
a change in control of the Company.
Directors who are employees of the Company receive no compensation for
services as directors. Directors who are not employees of the Company receive a
director's retainer in the amount of $7,000 per year plus $1,000 for each
meeting of the Board attended and $750 for each committee meeting attended. In
addition, subject to shareholder approval of the 2002 Gentex Corporation
Nonemployee Director Stock Option Plan, each nonemployee person who is a
director immediately following each annual meeting of shareholders is entitled
to receive an option to purchase 6,000 shares of the Company's common stock at a
price per share equal to the fair market value on that date. Each option has a
term of ten years and becomes exercisable in full six months after the date of
the grant.
16
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Fred Bauer, Chairman and C.E.O., was a member of the Company's
Compensation Committee during the fiscal year ended December 31, 2001. That
Committee was responsible for supervising the Company's executive compensation
arrangements, including the making of decisions with respect to the award of
stock-based incentives for executive officers during that year.
Arlyn Lanting, a director and member of the Company's Compensation
Committee, was an officer of the Company more than fifteen years ago.
TRANSACTIONS WITH MANAGEMENT
Since 1978, prior to the time the Company became a publicly held
corporation, the Company has leased a building that previously housed its main
office, manufacturing and warehouses facilities, and currently houses production
operations for the Company's fire protection products. The lessor for that
building is G & C Associates, a general partnership, and nearly all of the
partnership interests in G & C Associates are held by persons related to Fred
Bauer. The lease is a "net" lease, obligating the Company to pay all expenses
for maintenance, taxes, and insurance, in addition to rent. During 2001, the
rent paid to this partnership was $52,153, and the rent for the current fiscal
year is the same. The Board of Directors believes that the terms of this lease
are at least as favorable to the Company as could have been obtained from
unrelated parties.
Arlyn Lanting and Kenneth La Grand are both substantial shareholders in
MTA Travel, Inc., a local travel agency used by the Company to book airline
travel for its employees. During 2001, the Company paid $377,899 for airline
travel booked through this agency and the travel agency receives a small
percentage (usually less than five percent) of this amount as a commission from
the airlines. This arrangement has been reviewed by the Company's Board of
Directors and approved on the basis that the prices and services provided afford
the best value available to the Company.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP to serve as the
Company's independent auditors for the fiscal year ending December 31, 2002. The
following fees were billed by Ernst & Young LLP, the Company's independent
auditors, for the services provided to the Company during the fiscal year ended
December 31, 2001: Audit Fees of $113,905; Financial Information Systems Design
and Implementation Fees of $0; and all other fees of $96,219 for tax consulting
services, tax compliance services and employee benefit plan audits.
Representatives of Ernst & Young are expected to be present at the
annual meeting to respond to appropriate questions and will have an opportunity
to make a statement if they desire.
17
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of Forms 3, 4, and 5 furnished to the Company
during or with respect to the preceding fiscal year and written representations
from certain reporting persons, the Company is not aware of any failure by any
reporting person to make timely filings of those Forms as required by Section
16(a) of the Securities Exchange Act of 1934, except that Arlyn Lanting was late
in reporting a sale of 50 shares through a partnership in December 2000 and Ken
La Grand was eight days late in reporting an option exercise and hold of 20,452
shares in September 2001.
SHAREHOLDER PROPOSALS
Any proposal of a shareholder intended to be presented at the next
annual meeting of the Company must be received by the Company at its
headquarters, at 600 N. Centennial Street, Zeeland, Michigan 49464, no later
than December 3, 2002, if the shareholder wishes the proposal to be included in
the Company's proxy statement relating to that meeting. In addition, the
Company's Bylaws contain certain notice and procedural requirements applicable
to shareholder proposals, irrespective of whether the proposal is to be included
in the Company's proxy materials. A copy of the Company's Bylaws is filed with
the Securities and Exchange Commission and can be obtained from the Public
Reference Section of the Commission or the Company.
MISCELLANEOUS
The Company's Annual Report to Shareholders, including financial
statements, is being mailed to shareholders with this Proxy Statement.
Management is not aware of any matters to be presented for action at
the Annual Meeting other than as set forth in this Proxy Statement. If other
business should come before the meeting, it is the intention of the persons
named as proxy holders in the accompanying Proxy to vote the shares in
accordance with their judgment. Discretionary authority to do so is included in
the Proxy.
The cost of the solicitation of Proxies will be borne by the Company.
In addition to the use of the mail, Proxies may be solicited personally or by
telephone or facsimile by a few regular employees of the Company without
additional compensation. The Company does not intend to pay any compensation for
the solicitation of Proxies, except that brokers, nominees, custodians, and
other fiduciaries will be reimbursed by the Company for their expenses in
connection with sending proxy materials to beneficial owners and obtaining their
Proxies.
18
A COPY OF THE COMPANY'S REPORT ON FORM 10-K FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS AVAILABLE, WITHOUT CHARGE, UPON WRITTEN REQUEST FROM
THE SECRETARY OF THE COMPANY, 600 N. CENTENNIAL STREET, ZEELAND, MICHIGAN 49464.
Shareholders are urged to promptly date, sign, and return the
accompanying Proxy in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Connie Hamblin
---------------------------------
Connie Hamblin
Secretary
April 2, 2002
19
APPENDIX A
GENTEX CORPORATION
2002 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
(ADOPTED MARCH 6, 2002)
PART I: PLAN ADMINISTRATION AND ELIGIBILITY
1.1 Purpose. The purpose of this 2002 Nonemployee Director Stock
Option Plan (the "Plan") of Gentex Corporation (the "Company") is to make
service on the Board of Directors of the Company (the "Board") more attractive
to present and prospective outside directors of the Company, as the continued
services of qualified outside directors are considered essential to the
Company's sustained progress, and to provide additional incentive for such
directors to direct the Company effectively by offering them a greater interest
in the continued success of the Company through stock ownership. The Plan is
also intended to encourage stock ownership by outside directors of the Company.
1.2 Administration. The Plan shall be administered by the Board.
Grants of stock options under the Plan ("Options") and the amount and nature of
the Options to be granted shall be automatic as described in Sections 1.3 and
2.2. The Board shall have the power to determine all questions arising under the
Plan and to adopt and amend such rules and regulations for the administration of
the Plan as it may deem desirable.
1.3 Stock Subject to the Plan.
(A) Class. The stock which is to be made the subject of
Options granted under the Plan shall be the Company's authorized common stock,
par value $.06 per share ("Common Stock"). Shares shall be supplied to satisfy
the requirements of Options granted under the Plan out of authorized but
unissued shares.
(B) Aggregate Amount.
(1) The total number of shares issuable under the
Plan shall not exceed 500,000 shares (subject to adjustment as provided in
Section 3.4).
(2) If any outstanding Option under the Plan expires
or is terminated for any reason, then the Common Stock allocable to the
unexercised or surrendered portion of such Option shall not be charged against
the limitation of Section 1.3(B)(1) above, and may again become the subject of a
Option granted under the Plan.
1.4 Eligibility; Grant of Options. Only directors who are not
common law or contractual employees of the Company or any of its subsidiaries (a
"Nonemployee Director") shall be eligible to receive Options under this Plan.
Effective as of the date of each annual meeting of the shareholders of the
Company, each Nonemployee Director who is newly elected or continues in office
as a director subsequent to that meeting, shall be granted an Option to acquire
six thousand (6,000) shares. Any Nonemployee Director who is elected as a
director by the Board shall be granted an Option to acquire that number of
shares that is equal to six thousand (6,000) shares multiplied by a fraction
that is equal to three hundred sixty-five (365),
20
minus the number of days that have elapsed since the last annual meeting of
shareholders, and dividing that difference by three hundred sixty-five (365);
the result shall be rounded to the nearest whole share. Any Nonemployee Director
who receives Options pursuant to this Plan may be referred to herein as
"Optionee."
PART II: OPTIONS AND RIGHTS
2.1 Nonstatutory Stock Options. All Options granted under the
Plan shall be nonstatutory options, not entitled to special tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended.
2.2 Terms, Conditions, and Form of Options. Each Option granted
under this Plan shall be evidenced by a written agreement in such form and
containing such terms as the Board shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:
(A) Transferability of Options. Options may not be sold,
pledged, assigned, or transferred in any manner otherwise than by will or the
laws of descent and distribution to the extent provided in Section 2.2(D),
except that the Board may authorize the grant or amendment of Options so as to
permit transfer to the Optionee's spouse and/or the Optionee's descendants or to
a trust created primarily for the benefit of the Optionee, the Optionee's spouse
and/or the Optionee's descendants ("Authorized Transferee"), provided the
Optionee satisfies such conditions to the transfer as may be required by the
Board. The agreement pursuant to which a transferable Option is granted shall
expressly set forth the transfer rights and limitations, prohibit payment of any
consideration by the Authorized Transferee to the original Optionee, prohibit
any further transfer of the Option and provide that the Authorized Transferee
shall succeed to all rights and benefits (except any right to further transfer
of the Option) and be subject to all obligations, conditions, and limitations
applicable to the original Optionee. However, such rights and benefits (except
any right to further transfer of the Option) and obligations, conditions, and
limitations shall be determined as if the original Optionee continued to hold
the Option, whereby provisions of this Plan dealing with death of an Optionee
will continue to refer to the original Optionee regardless of whether the Option
has been transferred to an Authorized Transferee. Options may be exercised
during the lifetime of the original Optionee only by the original Optionee or an
Authorized Transferee. After the Optionee's death, the Option shall be
exercisable only to the extent provided in Section 2.2(D).
(B) Period of Option. Options shall terminate upon the
expiration of ten (10) years from the date upon which such Options were granted,
or at such earlier date as may be established in the option agreement (subject
to prior termination as hereinafter provided).
(C) Exercise of Option. Options may be exercised, in full or
in part, only by giving written notice to the Company, stating the number of
shares of Common Stock with respect to which the Option is being exercised,
accompanied by payment in full for such shares, which payment may be in whole or
in part in shares of the Common Stock of the Company valued at fair market value
as computed under Section 2.3 below; provided, however, that (i) there shall be
no such exercise at any one time as to fewer than three thousand (3,000) shares,
unless fewer than three thousand shares (3,000) remain to be purchased under the
Option being exercised; (ii) Options may not be exercised for a period of six
(6) months after the date of grant,
21
(iii) Options may be exercised only during periods beginning on the second (2nd)
business day following the date on which the Company releases for publication
its annual or quarterly financial reports and ending on the twelfth (12th)
business day following that date, and (iv) all or any portion of Options granted
that remain unexercised at the time the Optionee's status as a director of the
Company terminates for any reason other than death, shall automatically expire
ninety (90) days after the date of such termination and be of no further force
or effect.
(D) Death of Optionee and Transfer of Options. In the event of
an Optionee's death, Options may be exercised, to the same extent exercisable by
the Optionee at the date of death, at any time prior to the earlier of the
specified expiration date or the first anniversary of the Optionee's death, by
any of the following persons: (i) personal representatives of the estate of the
Optionee; (ii) any person or persons who shall have acquired the Option directly
from the Optionee by bequest or inheritance; (iii) any person designated to
exercise the Option by means of a specific written designation executed by the
Optionee and filed with the Company prior to the Optionee's death; or (iv) an
Authorized Transferee. No Options, unless granted pursuant to an agreement
specifically permitting transfer as described in Section 2.2(A), shall be
transferable by an Optionee otherwise than by will or by the laws of descent and
distribution of the state of the Optionee's domicile; provided, however, than an
Optionee may execute and file a notice of designation as provided for in (iii)
above.
2.3 Option Price. The Option exercise price for an Option granted
under the Plan shall be the fair market value of the shares of Common Stock
covered by the Option at the time the Option is granted. For purposes of this
Plan, the fair market value of a share of Common Stock shall be equal to the
last reported sale price per share of Common Stock on the date of grant or, if
that date is not a trading date, then the trading date immediately preceding the
date of the grant, or if there is no reported sale, the mean between the highest
closing bid and closing asked price, as quoted on the Nasdaq Stock Market.
PART III. GENERAL PROVISIONS
3.1 Assignability. The rights and benefits under this Plan shall
not be assignable or transferable by an Optionee, and during the lifetime of the
Optionee Options granted under the Plan shall be exercisable only by him or her,
except as otherwise expressly provided in Section 2.2 of this Plan.
3.2 Time for Granting Options. No Options may be granted under
this Plan after the day prior to the tenth (10th) annual meeting following the
date the Plan was approved by the shareholders of the Company (i.e., May 9,
2012).
3.3 Limitation of Rights.
(A) No Right to Continue as a Director. Neither the Plan, nor
the granting of an Option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain a director for any period of time, or at any
particular rate of compensation.
(B) No Shareholders' Rights for Options. An Optionee shall
have no rights as a shareholder with respect to the shares covered by Option(s)
until the date of the issuance to him
22
or her of a stock certificate therefor, and no adjustment will be made for
dividends or other rights for which the record date is prior to the date such
certificate is issued.
3.4 Adjustments to Stock. In the event any change is made to the
Common Stock subject to the Plan or subject to any outstanding Option(s) granted
under the Plan (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, change in corporate structure, or otherwise), then appropriate
adjustments shall be made to the maximum number of shares subject to the Plan
and the number of shares and price per share of stock subject to outstanding
Option(s). The Board's determination of any such adjustments shall be final,
binding, and conclusive with respect to all Optionees.
3.5 Effective Date of the Plan. This Plan shall take effect on the
date of approval by the shareholders of the Company, and shall be applicable to
all incumbent directors as of that date. The approval of the Plan by the
shareholders of the Company shall terminate the Gentex Corporation Nonemployee
Director Stock Option Plan (As Amended And Restated Effective March 7, 1997)
effective as of the day before approval of the Plan and no further options will
be issuable under that plan.
3.6 Amendment of the Plan. The Board of the Company may suspend or
discontinue the Plan or revise or amend it in any respect whatsoever; provided,
however, that without approval of the shareholders no revision or amendment
shall change the number of shares subject to the Plan (except as provided in
Section 3.4), change the designation of the class of directors eligible to
receive Options, materially increase the benefits accruing to participants under
the Plan or alter or impair any rights or obligations of any Option previously
granted with out the consent of the Optionee holding such Option.
3.7 Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by and interpreted and construed
in accordance with the laws and in the courts of the state of Michigan, without
regard to its conflicts of laws principles.
3.8 Expenses of the Plan. All costs and expenses of the adoption
and administration of the Plan shall be borne by the Company.
CERTIFICATION
The foregoing Plan was adopted by the Board of the Company on March 6,
2002.
/s/ Connie Hamblin
---------------------------
Connie Hamblin, Secretary
23
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The shareholder(s) signing on the reverse side hereby appoint(s) Connie Hamblin
and Enoch Jen as Proxies, each with the power to appoint a substitute, and
hereby authorizes them to represent and to vote, as designated herein, all of
the shares of common stock of Gentex Corporation held of record by such
shareholder(s) on March 15, 2002, at the Annual Meeting of Shareholders to be
held on May 9, 2002, or any adjournment thereof.
1. Election of Directors (except where marked to the
contrary) for a three-year term. |_| FOR |_| WITHHELD
NOMINEES: Arlyn Lanting, Kenneth La Grand, and Ted Thompson
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME LISTED ABOVE.)
2. To act upon a proposal to approve the 2002 Nonemployee Director Stock Option
Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
|_| I plan to attend the meeting. |_| I do not plan to attend the meeting.
(To be Signed on Reverse Side)
When properly executed, this proxy will be voted in the manner directed by the
shareholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED FOR A THREE-YEAR TERM AND FOR THE APPROVAL OF
THE 2002 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN.
NOTE: Please sign as your name appears
hereon. When shares are held jointly,
each holder should sign. When signing
for an estate, trust, or corporation,
the title and capacity should be stated.
Persons signing as attorney-in-fact
should submit powers of attorney.
Signature _______________Date: ____________ Signature______________Date:________