gentex-def14a_2010.htm - Generated by SEC Publisher for SEC Filing

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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 CORPORATION
(Name of Registrant as Specified in Its Charter)

 

________________________________________________________________________
(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: ______________________________________

(2)

Aggregate number of securities to which transaction applies:______________________________________

(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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Total fee paid: _________________________________________________________________________

[     ] Fee paid previously with preliminary materials
[     ] 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.

 

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Amount previously paid: _________________________________________________________________

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Form, Schedule, or Registration Statement No.: _______________________________________________

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Date Filed: ____________________________________________________________________________

 

600 North Centennial Street

Zeeland, Michigan 49464

 

NOTICE OF 2010 ANNUAL MEETING OF SHAREHOLDERS

 

Dear Shareholder:

 

                The Annual Meeting of the Shareholders of Gentex Corporation (“the Company”), a Michigan corporation, will be held at The Pinnacle Center, 3330 Highland Drive, Hudsonville, Michigan, on Thursday, May 13, 2010, at 4:30 p.m. EDT, for the following purposes:

 

1.             To elect three directors as set forth in the Proxy Statement.

 

2.             To consider a shareholder proposal requesting that the Board of Directors issue a sustainability report.

 

3.             To ratify the appointment of Ernst & Young LLP as the Company’s auditors for the fiscal year ended December 31, 2010.

 

4.             To transact any other business that may properly come before the meeting, or any adjournment thereof.

 

                The Board of Directors recommends a vote FOR Items 1 and 3 and AGAINST Item 2.

 

Shareholders of record as of the close of business on March 19, 2010, are entitled to notice of, to attend, and to vote at the meeting.  We are pleased to offer multiple options for voting your shares.  As detailed in the “Solicitation of Proxies” section of the Proxy Statement, you can vote your shares via the Internet, by telephone, by mail or by written ballot at the Annual Meeting.  We encourage you to use the Internet to vote your shares as it is the most cost-effective method.  If your shares are held in "street name," (that is held for your account by a broker or other nominee), you will receive instructions from the holder of record that you must follow for your shares to be voted.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Shareholders Meeting

to be held on May 13, 2010

 

You are receiving this notice that the proxy materials for our 2010 Annual Meeting of Shareholders are available on the Internet.  The following proxy materials can be found https://www.proxyvote.com:

 

•      Company's 2010 Proxy Statement;

•      Company's Annual Report to Shareholders for the year ended December 31, 2009; and

•      Proxy Card.

 

Whether or not you expect to be present at the meeting, you are urged to promptly vote your shares using one of the methods discussed above.  If you do attend the meeting and wish to vote in person, you must withdraw your earlier-dated Proxy as set forth in the Proxy Statement, and provide proof of ownership of Gentex shares as of the record date of March 19, 2010.

 

BY ORDER OF THE BOARD OF DIRECTORS            

 

/s/ Connie Hamblin

 

Connie Hamblin

Secretary

April 1, 2010 

 

 

  

 

 

 

GENTEX CORPORATION

 

600 North Centennial Street

Zeeland, Michigan 49464

 

PROXY STATEMENT FOR ANNUAL MEETING

OF SHAREHOLDERS TO BE HELD MAY 13, 2010

 

QUESTIONS & ANSWERS

 

PROXY STATEMENT

 

Why am I receiving this Proxy Statement?

 

The Company’s Board of Directors is soliciting proxies for the 2010 Annual Meeting of Shareholders. You are receiving a Proxy Statement because you owned shares of the Company's common stock on March 19, 2010, which entitles you to notice of, to attend, and to vote at the meeting. By use of a Proxy, you can vote whether or not you plan to attend the meeting. The Proxy Statement describes the matters on which the Board would like you to vote and provides information on those matters so that you can make an informed decision.

 

The Notice of the Annual Meeting (including Notice Regarding the Availability of Proxy Materials), Proxy Statement, and Proxy Card are being mailed to shareholders on or about April 1, 2010.  These materials are available at https://www.proxyvote.com or https://materials.proxyvote.com/371901.

 

What will I be voting on?

 

•           Election of three directors (see pages 5-8).

•           Ratify the appointment of Ernst & Young LLP as the Company’s auditors for the fiscal year ending December 31, 2010 (see page 32).

 

The Board of Directors recommends a vote FOR each of the nominees to the Board of Directors and FOR ratification of the appointment of Ernst & Young LLP as the Company’s auditors for the fiscal year ending December 31, 2010.

 

•           A shareholder proposal requesting that the Board of Directors issue a sustainability report. 

 

The Board of Directors recommends a vote AGAINST the shareholder proposal.

 

How do I vote?

 

You can vote either in person at the Annual Meeting or by Proxy without attending the Annual Meeting.  We urge you to vote by Proxy even if you plan to attend the Annual Meeting so that we will know as soon as possible that enough votes will be present for us to hold the meeting. If you attend the meeting and wish to vote in person, you must withdraw your earlier-dated Proxy in accordance with this Proxy Statement, and provide proof of ownership of Gentex shares as of the record date of March 19, 2010.

 

Please note that there are separate telephone and Internet arrangements depending upon whether you are a holder of record [that is, if your shares are registered in your own name with our transfer agent and you have possession of your stock certificate(s)] or whether you hold your shares in “street name” (that is, if your shares are held for you by a broker or other nominee).

 

Shareholders of record voting by Proxy may use one of the following three options:

 

•           Voting by Internet (log on to https://www.proxyvote.com and follow the directions there). We recommend you vote this way as it is the most cost-effective method; or

•           Voting by toll-free telephone (instructions are on the Proxy Card or Voting Instruction Form); or

•           Filling out the enclosed Proxy Card, signing it, and mailing it in the enclosed postage-paid envelope.

 

 

1

If you hold your shares in “street name,” please refer to the information forwarded by your broker or other nominee to see which options are available to you.

 

The telephone and Internet voting facilities for shareholders of record will close at 11:59 p.m. EDT on May 12, 2010. If you vote over the Internet, you may incur costs, such as telephone and Internet access charges, for which you will be responsible. The telephone and Internet voting procedures are designed to authenticate shareholders by the use of control numbers and to allow you to confirm that instructions have been properly recorded.

 

Can I change my vote?

 

Yes. At any time before your Proxy is voted at the meeting, you may change your vote by:

 

•           Revoking it by written notice to the Secretary of the Company at the address on the cover of the Proxy Statement;

•           Delivering a later-dated Proxy (including a telephone or Internet vote); or

•           Voting in person at the meeting.

 

If you hold your shares in “street name,” please refer to the information forwarded by your broker or other nominee for procedures on revoking or changing your Proxy.

 

How many votes do I have?

 

You will have one vote for every share of common stock that you owned on March 19, 2010.

 

How many shares are entitled to vote?

 

There were 139,308,508 shares of the Company common stock outstanding as of March 19, 2010, and entitled to vote at the meeting.  Each share is entitled to one vote.

 

How many votes must be present to hold the meeting?

 

Under the Company’s Bylaws, a majority of all of the voting shares of the capital stock issued and outstanding as of March 19, 2009, must be present in person or by Proxy to hold the Annual Meeting.

 

What if I do not vote for some or all the matters listed on my Proxy Card?

 

If you return a Proxy Card without indicating your vote for some or all of the matters, your shares will be voted as follows for any matter you did not vote on:

 

•           For the approval of the director nominees to the Board of Directors listed on the card.

•           For ratification of Ernst & Young LLP as the Company’s auditors for the fiscal year ended December 31, 2010.

•           Against the shareholder proposal requesting that the Board of Directors issue a sustainability report.

 

How many votes are needed for the approval of items upon which the shareholders are being asked to vote?

 

•           Under Michigan law, the three nominees for director will be elected by a plurality of the votes cast.

•           The shareholder proposal requesting that the Board of Directors issue a sustainability report must be approved by a majority of the votes cast.

•           Ratification of the appointment of Ernst & Young LLP as the Company’s auditors for the fiscal year ended December 31, 2010, is by a majority of the votes cast.

 

What if I vote “abstain?”

 

A vote to “abstain” on the election of the directors or on the proposal will have no effect on the outcome.

 

2

What if I do not return my Proxy Card and do not attend the Annual Meeting?

 

If you are a holder of record and you do not vote your shares, your shares will not be voted. If you hold your shares in “street name,” and you do not give your broker or other nominee specific voting instructions for your shares, your broker or other nominee may not be permitted to exercise voting discretion with respect to certain matters to be acted upon.

 

If you do not give your record holder specific voting instructions and your record holder does not vote on the matters to be voted upon, the votes will be “broker non-votes.”  “Broker non-votes” will have no effect on the vote for the election of directors or the other matters to be voted upon.

 

Is my vote confidential?

 

Proxy instructions, ballots, and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within the Company or to third parties, except:

 

•           as necessary to meet applicable legal requirements;

•           to allow for the tabulation of votes and certification of the vote; or

•           to facilitate successful Proxy solicitation by our Board.

 

Occasionally, shareholders provide written comments on their Proxy Cards which are then forwarded to the Company’s management.

 

ANNUAL REPORT

 

Will I receive a copy of the Company’s Annual Report?

 

Unless you have previously elected to view the Company's Annual Report over the Internet, we have mailed the Annual Report for the year ended December 31, 2009, with this Proxy Statement. The Annual Report includes the Company’s audited financial statements, along with other information. We urge you to read it carefully.

 

How can I receive a copy of the Company’s Form 10-K?

 

You can obtain, free of charge, a copy of our Form 10-K for the year ended December 31, 2009, which we recently filed with the Securities and Exchange Commission, by writing to:

 

            Corporate Secretary

            Gentex Corporation

            600 North Centennial Street

            Zeeland, Michigan 49464

 

You can also obtain a copy of the Company’s Form 10-K and other periodic filings with the Securities and Exchange Commission (SEC) on the Company’s Internet web site under the heading “SEC Filings” at:

 

http://www.easyir.com/easyir/cogo.do?easyirid=74B343E1F282071F

 

The Company’s Form 10-K and other SEC filings mentioned above are also available from the SEC’s EDGAR database at www.sec.gov.

 

 

ELECTRONIC DELIVERY AND AVAILABILITY OF PROXY STATEMENT AND ANNUAL REPORT

 

Can I access the Company’s proxy materials and Annual Report electronically?

 

This Proxy Statement and the 2009 Annual Report are available at:

 

https://materials.proxyvote.com/371901.

 

They are also available on the Company’s Internet web site under the heading “Annual Reports and Proxies” at:

 

http://www.easyir.com/easyir/cogo.do?easyirid=74B343E1F282071F

 

3

 

Most shareholders can elect to view future Proxy Statements and Annual Reports over the Internet instead of receiving paper copies in the mail.

 

If you are a holder of record, you can choose this option and save the Company the cost of producing and mailing these documents by:

 

•           Following the instructions provided when you vote over the Internet, or

•           Going to https://www.icsdelivery.com/gntx and following the instructions provided.

 

If you are a holder of record and you choose to view future Proxy Statements and Annual Reports over the Internet, you will receive an e-mail message next year containing the Internet address to access the Company’s Proxy Statement and Annual Report.   The e-mail also will include instructions for voting over the Internet. Your choice will remain in effect until you tell us otherwise. You do not have to elect Internet access each year.

 

If you hold your shares in “street name,” and choose to view future Proxy Statements and Annual Reports over the Internet and your broker or other nominee participates in this service, you will receive an e-mail message next year containing the Internet address to use to access the Company’s Proxy Statement and Annual Report.

 

HOUSEHOLDING INFORMATION

 

What is “householding?”

 

The Company has adopted a procedure called “householding,” which has been approved by the Securities and Exchange Commission. “Householding” is intended to reduce printing costs, mailing costs and fees by eliminating the mailing of duplicate copies of the Annual Report and Proxy Statement to any household at which two or more shareholders reside if they appear to be members of the same family.  Under this procedure, a single copy of the Annual Report and Proxy Statement will be sent to such households if the shareholders at such household consent, unless one of the shareholders at the address notifies us that they wish to receive additional copies.  Consent given will remain effective until revoked by a shareholder.

 

Shareholders who participate in householding will continue to receive separate Proxy Cards. If a single copy of the Annual Report and Proxy Statement was delivered to an address that you share with another shareholder, at your request to the Corporate Secretary (at 600 North Centennial Street, Zeeland, Michigan 49464, 1-616-772-1800), we will promptly deliver a separate copy.

 

How do I withhold my consent to the householding program?

 

If you are a holder of record and share an address and last name with one or more holders of record, and you wish to continue to receive separate Annual Reports, Proxy Statements and other disclosure documents, you should withhold your consent by checking the appropriate box on the enclosed Proxy Card and returning it by mail in the enclosed envelope. Even if you vote by telephone or Internet, the enclosed Proxy Card should be returned and marked appropriately to withhold your consent to householding.

 

If you do not return the Proxy Card to withhold your consent to the householding program, you may revoke your consent at any future date.  Please contact Broadridge, either by calling toll-free at 1-800-542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.  You will be removed from the householding program within 30 days of the receipt of the revocation of your consent, following which you will receive an individual copy of our disclosure documents.

 

If you are receiving multiple copies of the Annual Report and Proxy Statement at an address shared with another shareholder, you may also contact Broadridge to participate in the householding program.

 

A number of brokerage firms have instituted householding. If you hold shares in “street name,” please contact your broker or other nominee to request information about householding.

4

SOLICITATION OF PROXIES

 

            This Proxy Statement is being furnished on or about April 1, 2010, to the shareholders of Gentex Corporation as of the record date, 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 13, 2010, at 4:30 p.m. EDT, at The Pinnacle Center, 3330 Highland Drive, Hudsonville, Michigan.

 

            Each shareholder as of the record date, 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.

 

            There are four ways to vote your shares:

 

 

1)

By Internet at https://www.proxyvote.com.  We encourage you to vote this way.

 

2)

By toll-free telephone (refer to your Proxy Card or Voting Instruction Form for the correct number).

 

3)

By completing and mailing your Proxy Card or Voting Instruction Form.

 

4)

By written ballot at the Annual Meeting.

 

If the form of Proxy accompanying this Proxy Statement is properly executed using any of the methods described above, 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; to ratify Ernst & Young LLP as the Company’s auditors for the fiscal year ending December 31, 2010; and AGAINST the shareholder proposal requesting that the Board of Directors issue a sustainability report.  These proposals are 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) delivery of a later-dated Proxy including a telephone or Internet vote, or (3) attending the meeting and voting in person (must provide proof of share ownership as of the record date).

 

VOTING SECURITIES AND RECORD DATE

 

            March 19, 2010, 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, 139,308,508 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. Abstentions and broker non-votes are counted for the purposes of determining the presence or absence of a quorum for the transaction of business. Abstentions and broker non-votes are not, however, counted in tabulations of votes cast on matters presented to shareholders.

 

ELECTION OF DIRECTORS

 

            The Company’s Restated 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 currently set the number of directors at nine. The Restated 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 majority of the members of the Company’s Board of Directors qualify as “independent directors” as determined in accordance with the current listing standards of The NASDAQ Global Select Market (“NASDAQ”).  Based on the current NASDAQ listing standards, the Company’s Board has identified and affirmatively determined the following individuals have no material relationships with the Company other than as a director and are independent: Gary Goode, Ken La Grand, Arlyn Lanting, John Mulder, Rande Somma, Wallace Tsuha, and James Wallace.  In making its independence determinations, the Board considered: the former employment of Mr. Mulder and his consulting arrangement with the Company as described herein; the former employment of Mr. La Grand; and the former employment of Mr. Lanting.  The Board determined that these circumstances do not interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

5

 

            Each of the current Board of Directors members (including the nominees for election as directors at the Annual Meeting) meet the required experience and qualifications set forth in the Company's Position Profile:  Member of the Board of Directors, including, but not limited to, high levels of personal and professional integrity, distinguished management careers, and the demonstrated ability to work efficiently as Board members.  Combined with the other desirable characteristics and experience of such individuals, these individuals have the experience, qualifications, attributes, and/or skills which led the Nominating Committee to recommend such individuals to the Board for nomination for election to the Board and led the Board to conclude such individuals should be nominated for election to the Board.

 

            The terms of current Board of Directors members John Mulder, Frederick Sotok, and Wallace Tsuha expire upon the election of the directors to be elected at the 2010 Annual Meeting.  The Board has (upon the recommendation of the Company's Nominating Committee) nominated John Mulder, Frederick Sotok, and Wallace Tsuha for election as directors at the Annual Meeting, each to serve a three-year term expiring in 2013. 

 

--Mr. Mulder has served as a director of the Company since 1992 and was most recently elected as a director by the Company's shareholders in 2007.  In addition to Mr. Mulder's overall understanding of the Company's primary industry and familiarity with the Company's core business principles, Mr. Mulder also possesses intimate knowledge of selling to automotive original equipment manufacturers ("OEMs") and has over many years enjoyed close relationships with relevant decision makers at the Company's customers.

--Mr. Sotok has served as a director of the Company since 2000 and was most recently elected as a director by the Company's shareholders in 2007.  By virtue of his former executive position at a large automotive interior parts supplier, Mr. Sotok has a thorough understanding of the global automotive industry and what it takes for automotive suppliers to be successful, especially the operational and administrative aspects of automotive suppliers.  Mr. Sotok’s 17 years of experience in manufacturing management at General Electric also provide the Board with additional manufacturing experience to draw upon.

--Mr. Tsuha has served as a director of the Company since 2003 and was previously elected as a director by the Company’s shareholders in 2007.  As the founder and CEO of a global supplier of automotive electronics, electrical wiring, and electromechanical products to OEMs, Mr. Tsuha has experience in an entrepreneurial environment in the Company's key industry as well as an understanding of electronics technology.  Mr. Tsuha also offers race diversity.

 

Unless otherwise specifically directed by a shareholder’s marking on the Proxy Card, or in directions given either via the Internet or telephone, the persons named as Proxy voters in the accompanying Proxy will vote for the nominees described above and below. If any of these nominees becomes unavailable, which is not now anticipated, the Board may designate a substitute nominee, under the recommendation of the Nominating Committee, 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 votes will be elected, regardless of the number of votes received.  Broker non-votes and votes withheld 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, as of March 1, 2010.

6

 

Name (Age) and Position

Business Experience Past Five Years

Nominees Whose Terms to Expire in 2013

John Mulder (73)

  Director since 1992

Mr. Mulder was the Vice President-Customer Relations of the Company from February 2000 to June 2002.  Previously, he was Senior Vice President-Automotive Marketing of the Company from September 1998 to February 2000. Prior to September 1998, he was Vice President- Automotive Marketing of the Company for more than five years.  Mr. Mulder has affirmatively been identified as an independent director by the Board of Directors.  See above for more information regarding his experience, qualifications, attributes and skills.

Frederick Sotok (75)

  Director since 2000

Mr. Sotok was Executive Vice President and Chief Operating Officer of Prince Corporation (manufacturer of automotive interior parts that was acquired by Johnson Controls in 1996) from October 1977 to October 1996.  See above for more information for more information regarding his experience, qualifications, attributes and skills.  Mr. Sotok was a director of Clarion Technologies, Inc. during 2005, 2006 and 2007.

Wallace Tsuha (66)

  Director since 2003

Mr. Tsuha is Chairman and Chief Executive Officer of Saturn Electronics & Engineering, Inc. in Rochester Hills, Michigan, which is a global supplier of automotive electronics, electrical wiring, and electro-mechanical products to OEMs and their first tier suppliers.  Mr. Tsuha has held this position for more than five years.  Mr. Tsuha serves on the Company's Audit and Compensation Committees.  Mr. Tsuha has affirmatively been identified as an independent director by the Board of Directors.  See above for more information regarding his experience, qualifications, attributes and skills.

Directors Whose Terms Expire in 2012

Fred Bauer (67)

  Director since 1981

Mr. Bauer is the Chairman and Chief Executive Officer of Gentex Corporation, and he has held that position for more than five years.  Mr. Bauer serves on the Company's Executive Committee.  As a founder of the Company, Mr. Bauer offers the Board of Directors a vast wealth of knowledge and experience which comes with over 35 years of dedicated service to the Company.  Mr. Bauer not only understands the industries in which the Company operates, but also has been integrally involved in the operational, engineering, administrative, and financial aspects of the Company for his entire tenure.  Mr. Bauer is the named inventor on a number of the Company’s patents as well.

Gary Goode (65)

  Director since 2003

Mr. Goode is the Chairman of Titan Distribution LLC, an Elkhart, Indiana, company that offers consulting and distribution services related to structural adhesives, and has held that position since 2004.  He was previously employed at Arthur Andersen LLP (“Andersen”) for 29 years, including 11 years as the managing partner of its West Michigan practice, until his retirement in March 2001.  Mr. Goode is the Audit Committee Chairman at, and a director of, Universal Forest Products, Inc.  He is the Chairman of the Company's Audit and Compensation Committees, and serves on the Company's Nominating Committee.  Mr. Goode has affirmatively been identified as an independent director by the Board of Directors and as an audit committee financial expert.  Mr. Goode's career in public accounting has provided him the opportunity to work with a great variety of small and large companies, both publicly held and privately held, in a broad array of industries (including automotive and technology companies).  Mr. Goode's experience brings the Board of Directors a well-developed financial perspective and familiarity with publicly held companies.

James Wallace (67)

  Director since 2007

 

Mr. Wallace is Chairman of the Board of Cranel, Inc., a Columbus, Ohio, company that provides storage, imaging, and information technology services; data storage solutions; document imaging, storage, publishing, and duplication services; and support, to the storage and imaging industry.  Previously, he served as President and Chief Executive Officer of Cranel, Inc. for more than five years.  Mr. Wallace is the Chairman of the Company’s Nominating Committee and serves on the Company's Compensation Committee.  Mr. Wallace has affirmatively been identified as an independent director by the Board of Directors.  Mr. Wallace brings to the Board experience working with an entrepreneurial company, an understanding of various technologies, and manufacturing expertise. 

Directors Whose Terms Expire in 2011

Arlyn Lanting (69)

  Director since 1981

Until its dissolution in 2007, Mr. Lanting served as the Vice President-Finance of Aspen Enterprises, Ltd., a Grand Rapids, Michigan, investment company.  He held that position for more than five years.  Mr. Lanting serves on the Company's Executive Committee.  Mr. Lanting has affirmatively been identified as an independent director by the Board of Directors.  Mr Lanting has experience with start-up companies and larger companies, understands various aspects of being a publicly held company, and provides the Board of Directors with expertise related to financing and investing issues. 

Kenneth La Grand (69)

  Director since 1987

Mr. La Grand was the Executive Vice President of the Company from September 1987 to January 2003.  Mr. La Grand serves on the Company's Executive Committee.  Mr. La Grand has affirmatively been identified as an independent director by the Board of Directors.  Mr. La Grand understands core principles of the Company and its entrepreneurial nature, as well as the disclosure environment faced by publicly held companies.  Mr. La Grand also has significant automotive industry experience. 

Rande Somma (58)

  Director since 2005

Mr. Somma is an independent consultant for Rande Somma & Associates, LLC, in Bloomfield Hills, Michigan.  Previously, he was the President of Automotive Operations - Worldwide, at Johnson Controls from 2002-2003, and was President of Automotive Operations – North America from 2000-2002.  Prior to that date and since 1988, Mr. Somma held several different managerial positions in the Automotive Systems Group at Johnson Controls.  Johnson Controls is a global market leader in automotive systems and facility management and control.  In the automotive market, it is a major supplier of integrated seating and interior systems and batteries.  Mr. Somma serves on the Company's Audit Committee.  Mr. Somma has affirmatively been identified as an independent director by the Board of Directors.  Mr. Somma's careers as an automotive industry executive and now as independent consultant have provided him perspective on operational, sales, and manufacturing aspects of an automotive supplier, from which the Board of Directors benefits.

7

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. 

 

COMMON STOCK 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 such executive officers as a group.  The content of this table is based upon information supplied by the Company’s named executive officers, directors and nominees for election as directors, and represents the Company’s understanding of circumstances in existence as of March 1, 2010.

 

 

Amount and Nature of Ownership

 

Name of Beneficial Owner

Shares Beneficially

Owned (1)

Exercisable Options (2)

Percent

 of Class

Dennis Alexejun

65,512

 

32,522

*

Fred Bauer

5,035,496

 

569,000

3.6%

Steve Dykman

41,106

 

21,620

*

Gary Goode

65,176

 

58,176

*

Enoch Jen

204,642

 

130,572

*

Arlyn Lanting

439,250

 

86,000

*

Kenneth La Grand

476,281

(3)

54,000

*

John Mulder

156,520

(4)

53,212

*

Mark Newton

36,157

 

14,957

*

Rande Somma

36,013

 

30,000

*

Frederick Sotok

43,668

(5)

30,000

*

Wallace Tsuha

52,852

 

47,852

*

James Wallace

25,500

 

18,000

*

All directors and executive officers as a group (13 persons)

6,678,173

 

1,145,911

4.8%

 

*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 50,500 shares held in a trust established by Mr. La Grand’s spouse, and Mr. La Grand disclaims beneficial ownership of these shares. Also includes 43,596 shares held in trust by Mr. La Grand’s spouse for the benefit of Mr. La Grand’s grandchildren, and Mr. La Grand disclaims beneficial ownership of these shares.

 

(4)

Includes 30,000 shares held in a trust established by Mr. Mulder's spouse, and Mr. Mulder disclaims beneficial ownership of these shares.

 

(5)

Includes 174 shares owned by Mr. Sotok’s spouse through a partnership, and Mr. Sotok disclaims beneficial ownership of these shares.

 

8

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

The following table contains information with respect to ownership of the Company’s common stock by persons or entities that are beneficial owners of more than five percent of the Company’s voting securities as of December 31, 2009.  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

 

 

 

Wells Fargo & Company

14,192,062

10.3%

420 Montgomery Street

 

 

San Francisco, CA   94104

 

 

 

 

 

Blackrock, Inc.

7,098,589

 5.2%

4 East 52nd Street

 

 

New York,   NY 10022

 

 

 

__________________________________________________________________

 

 

SHAREHOLDER PROPOSAL BY WALDEN ASSET MANAGEMENT

 

            A shareholder, Walden Asset Management, a division of Boston Trust & Investment Mortgage Company ("Walden"), One Beacon Street, Boston, Massachusetts 02108, has informed the Company that it intends to present the proposal set forth below at the Company's Annual Meeting of Shareholders on May 13, 2010.  The Board of Pensions of the Evangelical Lutheran Church in America, The Needmor Fund, and The Christopher Reynolds Foundation have co-filed as additional proponents on Walden’s proposal with the Company.  The total number of voting securities held collectively by the proponents is approximately 140,406 shares.  The address and exact number of voting securities held by each of the foregoing will be provided to shareholders upon the Company receiving an oral or written request. 

 

SUSTAINABILITY REPORT PROPOSAL  

 

WHEREAS, sustainable business includes “encouraging long lasting social well being in communities where [companies] operate, interacting with different stakeholders (e.g. clients, suppliers, employees, government, local communities, and non-governmental organizations), and responding to their specific and evolving needs, thereby securing a long-term ‘license to operate,’ superior customer and employee loyalty, and ultimately superior financial returns.” (Dow Jones Sustainability Group)

 

We believe reporting on environmental, social and governance (ESG) business practices makes a company more responsive to the global business environment, one with finite natural resources, shifting legislation, and changing public expectations of corporate behavior. Reporting also helps companies better integrate and gain strategic value from existing corporate social responsibility efforts, identify gaps and opportunities, develop company-wide communications, publicize innovative practices, and receive feedback.

 

The Carbon Disclosure Project (CDP), representing 475 institutional investors globally with $55 trillion in assets, has for years requested greater disclosure from companies on their climate change management programs. The 2009 response rate to the CDP for S&P and the Global 500 was 66 and 82%, respectively. 

 

Furthermore, according to a 2008 KPMG report on sustainability reporting, of the 250 Global Fortune companies, 79% produce reports compared to 52% in 2005. Of the 100 top U.S. companies by revenue, 73% produce reports compared to 32% in 2005. Increasingly, small and medium cap companies are following this trend, identifying ESG factors relevant to their business and addressing them strategically through sustainability programs and reports.

9

In contrast, Gentex Corporation (Gentex) does not report in any detail on its sustainability efforts and does not outline greenhouse gas emissions (GHG) data or reduction plans. Climate change disclosure is particularly crucial as it is one of the most financially significant environmental issues currently facing investors.

 

Environmental impact, occupational safety and health, and community relations are areas that can pose significant regulatory, legal, reputational and financial risks to business. Increasingly, companies like Wal-Mart and the auto industry are encouraging suppliers to be more transparent. We believe that Gentex has a positive story to tell and benefits from understanding the risks and opportunities of various sustainability issues. 

 

RESOLVED, Shareholders request that the Board of Directors issue a sustainability report describing the company’s ESG performance and goals, along with specific information on greenhouse gas emissions and management plans for their reduction. The report will be prepared at reasonable cost, omitting proprietary information to be available to investors, by November 1, 2010. 

SUPPORTING STATEMENT

 

We encourage Gentex to use the Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines (G3) to prepare the report and to use the Carbon Disclosure Project (CDP) as a means to specifically report on its GHG reduction efforts. The GRI (www.globalreporting.org) is an international organization developed with representatives from the business, environmental, human rights and labor communities. The G3 provide guidance on report content, addressing, among other issues, direct economic impacts, environmental performance, international labor standards and practices, human rights policies and product responsibility. The Guidelines provide a flexible reporting system that allows companies to report incrementally over time.

 

 

STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL

 

The Board of Directors unanimously recommends a vote AGAINST the foregoing shareholder proposal.

 

The Board believes that approval of the proposed resolution is not in the best interests of the Company or our shareholders.  The Company already recognizes the importance, as both an ethical and a business responsibility, of addressing the environmental and social impacts of our business.  Our Code of Business Conduct and Ethics, posted on our website, reflects our commitment to conduct business in accordance with the letter and spirit of all applicable laws, rules, and regulations, and to avoid even the appearance of impropriety.  In addition, the Company has in place an environmental management system which demonstrates the high priority the Company places on conducting business in a sustainable manner, while protecting the health and safety of team members, partners, and the communities in which we operate.

 

In fact, the Company has achieved ISO 14001 certification, which requires a structured management system to achieve and demonstrate sound environmental performance by controlling the impact that activities, products, and services have on the environment.  Pursuant thereto, a third-party audit is conducted on site annually with Company management to ensure continued compliance.  Furthermore, the Company consistently strives for continual improvement and periodically establishes and reviews objectives and targets to minimize the creation of waste, pollution, and adverse impacts on the environment.  Management and team members of all levels are expected to support our environmental management system and carry out their responsibilities consistent with the foregoing. 

 

The Company also meets or exceeds all automotive industry standards, such as the End of Life Vehicles Directives, and uses industry resources, such as the International Material Data System (a web-based system that provides automotive suppliers a common format to report substances of concern within manufactured parts).  Overall, the Company's environmental management system encompasses energy

10

efficiency, recycling, air quality, water quality, and waste disposal, among other issues.  To capture the foregoing, the Company offered to produce a periodic Environmental Report addressing the above (with proprietary information redacted), and provide a link to that document on the Company’s website in response to the proposed resolution.  That offer, however, was not satisfactory to the proponent.

            The Company already demonstrates (and will continue to demonstrate) genuine concern about the relevant issues that would be covered in the sustainability report requested by the proponent (and has communicated and attempted to work with the proponent concerning transparency with respect to these issues as noted above).  Quite simply, the industries in which the Company operates require us to do so, as those familiar with ISO 14001 and automotive industry requirements already understand.  The amount of time, effort, and other resources (monetary, etc.), however, required to produce and maintain a sustainability report in the form recommended by the proponent would divert significant resources that the Board believes should be focused on managing and growing the Company with new technology, product development and sales in the very tumultuous automotive industry.  Importantly, such a report would not change existing compliance practices, as the Company's existing practices are already sound.  Also, some of this information that would purport to be included in a report in the form recommended by the proponent is confidential and would even be competitively harmful for the Company to make available publicly.  Many of the materials are, on their own, considered to be trade secrets at the Company.  The Board of Directors strongly feels that preparing such a sustainability report would be an unnecessary and imprudent use of the Company's assets.

 

The unwillingness to accept disclosure of a periodic Environmental Report as discussed above and recommending that the Company use the Global Reporting Initiative's Sustainability Reporting Guidelines (the "Guidelines") and the “Carbon Disclosure Project (CDP) as a means to specifically report on its greenhouse gas emissions” implies that the content of the proponent's requested report will be far more comprehensive and reach beyond the proponent's stated sustainability considerations.  The Guidelines (identified by the proponent as the “gold standard of reporting”) address not only environmental performance and product responsibility, but also topics such as international labor standards and practices, human rights, climate change, carbon emissions, and workplace diversity.  The proposal explicitly requests that the Company provide “specific information on greenhouse gas emissions and management plans for their reduction.”  Again, these issues appear to go well beyond sustainability concerns for the Company given the nature of our business. 

 

A review of the Global Reporting Initiative's website (www.globalreporting.org) demonstrates that the Guidelines are over 40 pages in length and appear to be much more appropriate for global companies with multi-billions of dollars in annual revenues and significant global environmental footprints (as opposed to the Company).  The Company believes that the recommended use of the Guidelines, in addition to our interactions with the proponent, demonstrate a certain lack of familiarity with the Company in terms of our size, footprint and staffing.  It is unclear to the Company how the Company can construct and prepare a sustainability report that would be satisfactory to the proponent and beneficial to our shareholders, especially considering what the Company has already offered the proponent in terms of disclosure.  In the Company's interactions with the investment community (including the Company's largest shareholders), environmental matters, sustainability, and the other topics covered in the Guidelines are virtually never a topic of discussion, implying that our shareholders are satisfied with the Company's performance in these areas.  Nevertheless, the proponent (a self-described socially responsive investor who, together with the proponent's supporters, own approximately 0.1% of the Company's stock) believes the Company should follow guidelines which are obviously intended for organizations with footprints that are vastly larger than the Company.

 

The proponent's resolution, if implemented, will require an excessive amount of Company time, effort, and money, compared with any incremental benefit.  The Company has a long history of dedication to good corporate citizenship.  Preparing the requested report would deplete human and financial resources without providing any meaningful or demonstrable benefit to our shareholders, our employees,

11

or the communities in which we operate.  Again, we do not believe it is in the best interest of our shareholders for the Company to add staff and spend additional time and money to develop a report that lacks an immediate and tangible return for our shareholders.  The Board believes that it is far more important to the majority of the Company’s shareholders that management continues to focus on improving areas of the Company that can provide tangible results to our shareholders. 

 

Again, and for all of the above reasons, the Board of Directors unanimously recommends that you vote AGAINST this shareholder proposal.

 

The shareholder proposal requesting that the Board of Directors issue a sustainability report must be approved by a majority of the votes cast by holders of the shares entitled to vote at the Annual Meeting of Shareholders.

 

CORPORATE GOVERNANCE

 

            The Company operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professionalism and personal conduct, and assuring compliance with such responsibilities and standards. The Company regularly monitors developments in the area of corporate governance.

 

The Board of Directors has an Audit Committee, a Compensation Committee, a Nominating Committee, and an Executive Committee, and may also, in accordance with the Company's Bylaws, appoint other committees from time to time.  Other than the Executive Committee, each committee has a written charter.  All such charters, as well as any documents marked with an asterisk (*) in this Proxy Statement, are available under the heading “Corporate Governance” on the Company’s internet web site at http://www.easyir.com/easyir/cogo.do?easyirid=74B343E1F282071F.   Any of these documents will be provided in print to any shareholder who submits a request in writing to the Corporate Secretary, Gentex Corporation, 600 North Centennial Street, Zeeland, MI 49464. 

 

Each member of the Board of Directors is expected to make a reasonable effort to attend all meetings of the Board of Directors, all applicable committee meetings, and each annual meeting of shareholders. While no formal policy with respect to attendance has been adopted, attendance at these meetings is encouraged and expected. All members of the Board of Directors attended the 2009 Annual Meeting of Shareholders.  Each of the current members of the Board of Directors are expected to attend the 2010 Annual Meeting of Shareholders. During 2009, the Board of Directors met on five occasions. All incumbent directors attended at least 75 percent of the aggregate number of meetings of the Board and Board committees on which they served.

 

Independent Directors

 

 

 

12

 

Board of Directors Leadership Structure

 

 

Audit Committee

 

 

13

Compensation Committee

 

 

Nominating Committee

 

14

 

Executive Committee

 

 

Codes

 

 

Shareholder Communication with Members of the Board of Directors

 

15

Personal Loans to Executive Officers and Directors

 

 

Director and Executive Officer Stock Transactions

 

 

Risk Oversight

 

16

Report of the Audit Committee

 

            The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities for management’s conduct of the Company’s accounting and financial reporting processes and the Company’s system of internal controls regarding finance, accounting, legal compliance and ethics. The Audit Committee’s function is more fully described in its Charter, which the Board has adopted and is available on the Company's website. The Audit Committee reviews this Charter on an annual basis.  The Board annually reviews the NASDAQ listing standards’ definition of independence for audit committee members and has determined that each member of the Audit Committee meets that standard.

 

            Management is responsible for the preparation, presentation, and integrity of the Company’s financial statements, and financial reporting principles, internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. The Company’s independent auditors, Ernst & Young LLP, are responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles.

 

            Pursuant to a meeting of the Audit Committee on February 17, 2010, the Audit Committee reports that it has:  (i) reviewed and discussed the Company's audited financial statements with management; (ii) discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and (iii) received the written disclosures and the letter from the independent accountants required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant'' independence.  Based on the review and discussions referred to in Items (i)-(iii) above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's annual report on Form 10-K for the year ended December 31, 2009, for filing with the Securities and Exchange Commission.

 

            The Audit Committee has selected Ernst & Young LLP as the Company’s independent auditors for the year ending December 31, 2010, and has submitted the same to the shareholders for ratification at the Annual Meeting. 

 

            This report of the Audit Committee does not constitute "soliciting material" and should not be deemed "filed" or incorporated by reference into any of the other Company filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically requests that the information be treated as soliciting material or specifically incorporates this report by reference therein.

 

 

Audit Committee: 

Gary Goode, Chairman

 

 

Rande Somma

 

 

Wallace Tsuha

 

 

 

February 17, 2010

17

Compensation Committee Report

 

The primary purpose of the Compensation Committee of the Board of Directors of the Company is to assist the Board in discharging its responsibilities related to compensation of the Company's executives.  The Compensation Committee's function is more fully described in its Charter, which the Board has adopted and is available on the Company's website.  The Compensation Committee reviews its Charter on an annual basis, recommending changes to the Board when and as appropriate.  The Compensation Committee is comprised of three members, each of whom the Board has determined meets the appropriate independence tests for compensation committee members under the NASDAQ listing standards.

 

            Pursuant to a meeting of the Compensation Committee held on February 17, 2010, the Compensation Committee reports that it has reviewed and discussed the Company's Compensation Discussion and Analysis with management.  Based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's annual report on Form 10-K for the year ended December 31, 2009, and this Proxy Statement, for filing with the Securities and Exchange Commission.

 

            This report of the Compensation Committee does not constitute "soliciting material" and should not be deemed "filed" or incorporated by reference into any of the other Company filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically requests that the information be treated as soliciting material or specifically incorporates this report by reference therein.

 

 

Compensation Committee:

Gary Goode, Chairman

 

 

Wallace Tsuha

 

 

James Wallace

 

 

 

February 17, 2010

18

COMPENSATION DISCUSSION AND ANALYSIS

 

Introduction

 

            Overview of Our Compensation System

 

            The Primary Objectives Are:

 

                        •create and maintain an entrepreneurial culture

                        •motivate employees to:

                                    -continue technical developments

                                    -improve customer satisfaction

                        •create and maintain teamwork (all salaried employees subject to same system)

 

            The Elements Comprise:

 

                        •base salary

                        •bonuses

                        •stock-based incentives

 

            We Emphasize Stock-Based Incentives:

 

•current pay (salary and bonus) predicated on competitive circumstances, but historically has been low in favor of stock-based compensation

•stock-based compensation intended to align executive and employee interests with the interests of our shareholders (appropriately structured so as to not encourage inappropriate risk taking)

 

            Responsibilities

 

            Compensation Committee.  The Compensation Committee of our Board of Directors is appointed to assist our Board in discharging its responsibilities relating to the compensation of our executives.  The Compensation Committee:

 

•is comprised of three directors, each of whom has been determined by our Board to be independent under applicable standards;

•operates under and in accordance with its written Charter; and

•has a chair that sets meeting agendas and the calendar for meetings.

           

The Chief Executive Officer and other members of management attend meetings of the Compensation Committee at the request of this Committee.  The Compensation Committee does meet in executive session as necessary.  The Compensation Committee has the authority to engage outside consultants to advise the Committee with respect to compensation of executives, in its discretion, but has not done so in the last five years. 

 

            Board of Directors.  The Board of Directors has responsibility to annually assess our director compensation program.  Members of management attend meetings of the Board at the Board's request, but the Board meets in executive session when necessary.

 

19

Role of Executives in Establishing Compensation

 

            While the Compensation Committee is responsible for recommending CEO and other executive officer compensation to the Board of Directors for approval in accordance with its Charter, the CEO in particular provides input and makes recommendations to the Compensation Committee with respect to compensation decisions for other executive officers.  In fact, the CEO (along with management) is primarily responsible for making compensation decisions for our other employees within established guidelines.  The Compensation Committee does, however, review and approve all stock-based awards.  Since the Compensation Committee and the entire Board recognize that the CEO and other executive officers have the greatest opportunity to influence our performance, our Compensation Committee concentrates its efforts on establishing proper rewards and incentives for executive officers.  This structure provides our CEO and executive officers the freedom to influence and motivate our employees to positively impact our Company performance within the guidelines established by the Compensation Committee.

 

Compensation Committee Activity

 

            During fiscal year 2009, the Compensation Committee met six times and also met in February of 2010 to approve the Compensation Committee Report included in the Proxy Statement.  Included in the activities of the Compensation Committee was a review of each element of compensation payable to named executive officers, as well as the total compensation payable to them, by use of an Executive Officer Compensation Tally Sheet and Stock Appreciation Tally Sheet.  These Tally Sheets total aggregate compensation for the current year and for a certain number of previous years so that compensation decisions of the Compensation Committee and the Board can be placed in the appropriate context.

 

Objectives of Compensation Program

 

            Compensation Philosophy.  Our compensation program is comprised of three fundamental elements:

 

•base salary;

•bonuses; and

•stock-based incentives.

 

These elements are intended to reflect our cultural emphasis on all team members sharing in the financial opportunities and sacrifices at our Company, just as our shareholders do and are intended to avoid encouraging excessive and unnecessary risk taking.  The compensation program is designed in light of our desire to maintain an entrepreneurial culture and to incentivize desired growth.  The elements of compensation are utilized to accomplish several objectives, including:

 

•attract, motivate, and retain management personnel;

•encourage continued technical development and improve customer satisfaction;

•stay competitive for talent;

•encourage and reward individual achievement as well as overall Company performance; and

•focus on long-term performance (to align the interests of our team with the interests of our shareholders).

 

            The compensation program is available to all of our salaried employees generally and in operation provides for the same method of allocation of benefits between executive and non-executive participants.  Our compensation program is reviewed periodically.  Ingenuity of our employees, employee turnover, employee morale, and individual and Company performance are important factors in determining whether our compensation program is consistent with our philosophy and is meeting its objectives.  No changes to our compensation system were made this past year based on the determination that our compensation system is appropriate under the foregoing factors. 

20

Compensation Elements in General

 

As noted above, the compensation program is comprised of three fundamental elements:  (1) base salary; (2) bonus; and (3) stock-based incentives.

 

            Base Pay.  Base compensation for executive officers is predicated primarily on:

 

•competitive circumstances for managerial talent; and

•positions reflecting comparable responsibility.

 

Historically, base salaries for our employees have been relatively low, and stock-based compensation has received more emphasis to encourage our entrepreneurial culture.  A variety of factors are considered concerning executive officer compensation which are discussed in more detail below.

 

            Bonuses.  Bonus compensation is comprised of two elements: 

 

•payments under our Profit Sharing Bonus Plan; and

•discretionary performance bonuses.

 

All of our full-time employees, including the CEO and other executive officers, are eligible to share in our Profit Sharing Bonus Plan after they have completed one full calendar quarter in our employ.  A percentage of pre-tax income, in excess of an established threshold for shareholder return on equity is distributed quarterly to eligible employees under this plan.  During 2009, this Profit Sharing Bonus Plan paid approximately $8,814,247 to approximately 2,207 employees.  In addition, discretionary performance bonuses may be awarded to various managerial and technical employees, including named executive officers, based on individual performance and our overall performance.

 

Stock-Based Compensation.  Stock-based compensation is intended to align the interests of shareholders and executives by making our executives shareholders in a significant amount.  We attempt to foster and maintain an entrepreneurial culture that seems to work best when our employees are owners and, therefore, win when our shareholders win.  History and the current climate have confirmed for us that stock-based compensation provides appropriate incentives to improve long-term performance and is also a good retention tool.  Stock-based compensation includes:

 

•stock options; and

•restricted stock

 

Stock options are granted under our Employee Stock Option Plan and restricted stock is granted under our Second Restricted Stock Plan, each of which has been approved by our shareholders.  Our stock-based incentives vest over time to encourage our employees to take a long-term perspective.

 

Details of Compensation Program Design

 

            The fundamental elements of our compensation program allow compensation to be impacted by our overall performance and by individual performance as well.

 

21

            Impact of Performance on Compensation

 

Each year, the Compensation Committee undertakes a CEO performance review which involves a multi-step process.  First, the entire Board of Directors evaluates CEO performance on a variety of factors including:

 

•leadership;

•financial results;

•recruitment, training, retention, and morale of personnel;

•strategic planning;

•succession planning;

•communications with the Board, management, employees, and shareholders;

•contributions to our communities and industries in furthering business goals; and

•Board relations.

 

The Compensation Committee gathers the results of this evaluation.  The Compensation Committee then considers these evaluations and discusses the same with the CEO.  Based on the foregoing, the Compensation Committee then makes compensation recommendations to the entire Board of Directors.  Pursuant to this process, the CEO's base salary, discretionary performance bonus, and stock-based awards are determined and approved by the Board.  Evaluations are also undertaken for non-CEO executive officers.  Through these evaluation processes, the Compensation Committee and the Board can exercise positive or negative discretion concerning compensation decisions.  Specific performance targets are not used as we have found that emphasizing stock-based compensation has not required them.  Evaluations of all our employees take place on or about the employee's anniversary date of employment. 

 

            Instead, the Compensation Committee considers the foregoing factors in varying degrees.  In its 2009 review of CEO performance, leadership in difficult economic times, plans for the Fire Protection Products Group, ongoing strategic and succession plans, staffing, cost containment and stock performance were considered by the Compensation Committee and the Board of Directors in determining CEO compensation. 

 

Specifics on Elements of Compensation for 2009

 

            Tables.  The “Summary Compensation Table for 2009” shows the base salary, bonuses, stock awards, stock option awards and other compensation for each of our named executive officers.  Total compensation for each named executive officer is also reflected in that Table.  The “Grants of Plan-Based Awards for 2009” Table demonstrates our emphasis on stock-based compensation.  The “Outstanding Equity Awards at Fiscal Year-End December 31, 2009,” Table and the “Option Exercises and Stock Vested for 2009” Table further demonstrate the aligning of our executive officers' interests with those of our shareholders.  We continue to believe these compensation elements and the mix of these elements are appropriate for the Company given its culture, performance, industry, and current challenges.

 

            Base Salary.     The base salaries for our named executive officers are set forth in the “Summary Compensation Table for 2009.”  The Company approved guidelines for 2009 that salaried employees, including executive officers, were eligible for an increase in base salary of up to 3% per year for performance alone and up to 10% per year total if increased responsibilities are undertaken (or, potentially more in the case of a promotion).  These guidelines have been revised to an increase in base salary of up to 3.5% for 2010 in the case where no additional responsibilities have been undertaken. 

 

•For 2009, our CEO received a 3.0% increase in base pay, while our other executive officers received increases in base pay ranging from 0% to 3% (although Mr. Newton received a larger increase in base pay due to a promotion and increase in responsibilities).

22

•Increases, if any,  were predicated largely on leadership in what may have been the most difficult year in the Company’s history.  The qualitative factors cited above in the review of CEO performance also impacted other executive officer compensation determinations.

•Base salaries for executives still remain relatively low as stock-based compensation is emphasized.

 

            Bonuses.  Profit Sharing Bonuses, in accordance with the above-described formula, and discretionary performance bonuses for named executive officers are also set forth in the “Summary Compensation Table for 2009.”  The Company has approved a guideline such that employees, including executive officers, are eligible for discretionary performance bonuses of up to 20% of base salary (or, potentially more, in the case of a promotion or exemplary performance), based on individual and Company performance as determined in the evaluation process. 

 

•CEO 2009 discretionary bonus - $0.

•Other Executive Officer 2009 discretionary bonuses - 0% to 14%.

 

Discretionary bonuses reflect our Compensation Committee's positive and negative discretion.  In addition, the Compensation Committee and the Board of Directors generally prefer to emphasize stock-based compensation for the CEO, as evidenced by the CEO not receiving a discretionary bonus in 2009 or 2008.

 

            Stock-Based Compensation.  Our named executive officers are also eligible to receive grants of stock options under our Employee Stock Option Plan and grants of restricted stock under our Second Restricted Stock Plan.  The Company has approved guidelines so that stock option awards up to an established percentage may be made under our Employee Stock Option Plan and restricted stock awards of up to an established percentage may be made under our Second Restricted Stock Plan, which guidelines in operation provide for the same method of allocation of benefits between executive and non-executive participants.  During 2009:

 

•CEO - 114,000 stock option shares granted

•Other Executive Officers - 0 to 28,950 stock option shares granted

•Restricted Stock Awards of 6,000 shares (to Mr. Dykman) and 10,200 shares (to Mr. Newton)

           

            These awards are predicated on both individual and company performance, while creating incentives to help achieve our long-term goals.  In particular, in the case of our CEO, the Compensation Committee prefers stock option grants to the CEO rather than increasing base pay and discretionary bonuses to a level that would be more commensurate with the market for chief executive talent.  In light of the fact that our CEO's base pay is relatively low, and the fact that he received no discretionary bonus or restricted stock award, our CEO was granted the foregoing stock option award in 2009, which will only benefit him if our shareholders benefit as well.  While the variability of these compensation decisions among our executive officers demonstrates discretion with respect thereto, it also demonstrates how important it is to our culture for all our salaried employees to be compensated within the same parameters.

 

23

Our Employee Stock Option Plan makes stock options generally available to all of our salaried employees.  All options, including those granted to named executive officers, are granted to employees around the end of the quarter in which their anniversary date of employment occurs at scheduled meetings of the Compensation Committee.  Stock options are only granted at their fair market value on the date of Compensation Committee meetings with all such grants being reviewed and approved by the Compensation Committee.  Generally, stock option awards to officers have a seven-year term and become exercisable (as long as employment continues), for 20% of the shares on each anniversary of the grant date commencing on the first anniversary of the grant date, although a five-year term might be used in order to incentivize certain behavior.  Stock options for other employees generally carry a five- to seven-year term and similarly vest over time.  Restricted stock awards are granted at the discretion of the Compensation Committee at scheduled meetings of the Compensation Committee.  Generally, grants of restricted stock to eligible employees, including executive officers, are considered once every three years for each eligible employee.  Usually, these share grants are restricted for five years from the date of grant, and as such are viewed as an important retention tool.  Dividends are paid on such shares if, and to the extent, we pay dividends on our common stock.  The vesting schedules associated with stock option and restricted stock awards, in part, discourages excessive and unnecessary risk-taking (especially when considered in connection with the stock ownership guidelines for executive officers).

 

Other Compensation.  All other compensation for named executive officers set forth in the Summary Compensation Table for 2009 includes "matching" contributions by the Company pursuant to our 401(k) plan, restricted stock dividends, and the personal use of automobiles by certain executive officers as detailed in the notes to the Summary Compensation Table.  Finally, membership fees at local country clubs are paid for certain executive officers as detailed in the notes to the Summary Compensation Table.  We also make available to our executives Company aircraft for personal use provided it does not conflict with any business purpose for the aircraft.  All executives are required to reimburse us for the incremental costs for such use.  The incremental cost to the Company of personal use of Company aircraft is calculated using our average variable operating costs.  Those average variable operating costs include fuel, maintenance, use tax and other miscellaneous variable costs.

 

We do not generally utilize any employment agreements (and no employee currently has a written employment agreement) as it has been our practice that all employees, including the CEO and other executive officers, serve the Company on an at-will basis.  Similarly, we do not have any "golden parachute" agreements or contracts with current employees that guaranty severance payments.

 

Director Compensation

 

            Our Board of Directors has responsibility for periodically assessing our director compensation program.

 

            During 2009, our directors who are not employees of the Company received:

 

•$10,000 annual directors' retainer fee;

•$1,500 for each Board meeting attended;

•$1,000 for each Committee meeting attended; and

•options to purchase 6,000 shares of our common stock.

 

The Chairmen of our Compensation and Audit Committees also received an additional retainer fee in the amount of $3,000.  The non-employee directors annual option to purchase 6,000 shares of our common stock is at a price per share equal to the closing price of our stock on the NASDAQ on the date of each annual meeting of shareholders in accordance with our shareholder approved Nonemployee Director Stock Option Plan.  See the Director Compensation Table for 2009.  Like executives, Board members may make personal use of Company aircraft if such use does not conflict with any business purpose for the aircraft and provided the director reimburses us for the incremental cost of such use.  We believe this director compensation to be reasonable and appropriate.

 

 

24

Stock Ownership

 

            The Company has adopted Stock Ownership Guidelines (*) providing that executive officers should own three times their annual salaries in Company common stock and directors should own two times their annual director fees in Company common stock.  As noted above, such guidelines help discourage excessive and unnecessary risk-taking in the context of the Company’s emphasis on stock-based compensation.

 

Impact of Regulatory Requirements

 

            In making compensation design and award decisions, we have considered the ability to deduct compensation in accordance with Internal Revenue Code Section 162(m).  We have also considered the impact of Section 16 of the Securities and Exchange Act of 1934 and rules promulgated thereunder.  Since we do not have a deferred compensation plan, it has not been necessary for us to consider the impact of Internal Revenue Code Section 409A in compensation design and award decisions.  We have also undertaken certain actions disclosed in our SEC filings with respect to the impact of expensing stock-based awards (including stock options) under FASB ASC Topic 718.  The executive compensation disclosure rules applicable to annual reports and proxy statements after December 15, 2006, and new rules effective February 28, 2010, with respect to the disclosure of compensation-related risks for all employees, certain matters related to communication consultants, and reporting of equity awards in the Summary Compensation table have had no material impact on our decisions regarding compensation. 

 

Conclusion

 

            We have reached the conclusion that each individual element of compensation, as well as the total compensation, delivered to our named executive officers and to our directors during 2009 are reasonable, appropriate, and in the best interests of our Company and our shareholders.  That determination is based on a continuation of our compensation philosophy and practices which we believe align both the short-term and long-term interests of our employees with those of our shareholders.  It remains the case that each element of our compensation program is important to accomplishing the Company's goals of creating an entrepreneurial environment so that our employees are motivated to remain with us, individually perform to the best of their abilities, and focus on our long-term success.

 

25

EXECUTIVE COMPENSATION

 

Summary Compensation

 

            The following table sets forth the compensation earned by the principal executive officer, principal financial officer, and other executive officers for services rendered to the Company for the fiscal year ended December 31, 2009.

 

Summary Compensation Table for 2009

 

 

Name and Principal Position

Year

Salary

($)

Bonus

($)

(1)

Stock Awards

($)

(2)

Option Awards

($)

Non-Equity Incentive Plan Compen-sation

Change in Pension Value and Nonquali-fied Deferred Compensation Earnings

($)

(3)

All Other Compen-sation ($)

Total ($)

Fred Bauer, Chairman and CEO

2009

2008

2007

428,979

406,619

388,984

39,727

47,899

73,316

0

0

0

563,456

523,260

703,068

-

-

 

-

-

 

30,192

30,730

30,855

1,062,354

1,008,508

1,196,223

Enoch Jen,

Senior Vice President

2009

2008

2007

242,896

231,395

220,330

57,389

63,443

71,523

0

0

175,500

74,668

109,627

109,778

-

-

 

-

-

 

25,326

27,146

27,402

400,279

431,611

604,533

Mark Newton,

Senior Vice President – Electronics, Purchasing and North American Sales (5)

2009

2008

193,183

164,416

38,331

68,882

145,350

0

55,539

40,583

-

-

8,865

6,930

441,268

280,811

Dennis Alexejun, Vice President - Sales – General Motors (4)

2009

2008

2007

222,335

211,822

202,228

20,472

27,957

48,126

0

0

129,294

0

69,364

95,543

-

-

 

-

-

 

16,395

24,236

21,542

259,202

333,379

496,733

Steve Dykman,

Vice President – Finance

2009

2008

2007

163,586

153,043

144,808

38,530

40,572

43,157

108,180

0

0

71,766

27,337

56,766

-

-

-

-

7,253

8,751

8,300

389,315

229,703

253,031

 

(1)

For each outstanding restricted stock award, the value shown is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (as opposed to what is included in the Company's financial statements).  See the Company’s Annual Report (Footnote 6) for the years ended December 31, 2009, 2008 and 2007, for the assumptions made in the valuation of restricted stock.  The actual number of restricted shares granted is shown in the "Grants of Plan-based Awards for 2009" table included in this Proxy Statement.  Assuming continued employment with the Company, restrictions on shares lapse upon expiration of five years from date of grant.  Dividends are and will be paid on the shares if, and to the same extent, paid on the Company's common stock.  Executive officers are eligible to receive restricted stock awards every three years.

 

 

(2)

For each outstanding stock option award, the value shown is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (as opposed to what is included in the Company's financial statements).  See the Company’s Annual Report (Footnote 6) for the years ended December 31, 2009, 2008 and 2007, for the assumptions made in the valuation of stock options.  The actual number of stock options granted is shown in the "Grants of Plan-based Awards for 2009" table included in this Proxy Statement. 

 

 

(3)

Other compensation represents the sum of restricted stock dividends and "matching" contributions by the Company pursuant to its 401(k) Plan.  In addition, other compensation includes the use of Company automobiles for Messrs. Bauer, Jen and Alexejun, pursuant to the Company's policy for use of such vehicles and membership fees at a local country club for Mr. Bauer.  These amounts exclude personal use of Company aircraft, which the Company makes available to its executives when personal use does not conflict with any business purpose for the aircraft.  Reimbursement of the Company's incremental cost is required for personal use of Company aircraft, which is calculated using average variable operating cost (including fuel, maintenance, use tax and other miscellaneous variable costs).

26

 

(4)

As disclosed in a previously filed Form 8-K, effective August 2009, Dennis Alexejun is no longer an executive officer of the Company and his title was changed to Vice President, Sales – General Motors.

 

 

(5)

As disclosed in previously filed Forms 8-K, Mr. Newton became an executive officer of the Company effective January 1, 2008, and his title is now Senior Vice President of Electronics, Purchasing and North American Sales.

 

Grant of Plan-Based Awards

 

The following table discloses the actual number of restricted stock awards and stock options granted and the grant date of those awards.  It also captures potential future payouts under the Company's nonequity and equity incentive plans.

 

Grants of Plan-Based Awards for 2009

 

Name

 

(1)

Grant Date

 

Estimated Future Payouts Under Non-Equity Incentive Plan Awards

Estimated Future Payouts Under Equity Incentive Plan Awards

All Other Stock Awards: Number of Shares of Stock or Units

(#)

(2)

All Other Option Awards: Number of Securities Underlying Options

(#)

(3)

Exercise or Base Price of Option Awards ($/Sh)

 

(4)

Grant Date Fair Value

of Stock and Option Awards

($)

 

Thres-hold

($)

 

Target

($)

 

Maxi-mum ($)

Thres-hold

(#)

Target (#)

Maxi-mum

(#)

 

 

Fred Bauer

8/13/09

-

-

-

-

-

-

0

114,000

14.50

563,456

 

Enoch Jen

3/31/09

-

-

-

-

-

-

0

28,950

9.96

74,668

 

Mark Newton

9/28/09

-

-

-

-

-

-

10,200

13,920

14.25

200,889

 

Dennis Alexejun

-

-

-

-

-

-

-

0

0

0

0

 

Steve Dykman

12/29/09

-

-

-

-

-

-

6,000

13,860

18.03

179,946

 

(1)

The Grant Date is the date the Compensation Committee met to approve the grants.

 

 

(2)

These options are seven-year options that become exercisable, as long as the 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, except the options granted to Mr. Jen which are five-year options that become exercisable, as long as the employment with the Company continues, for 25 percent of the shares on each anniversary of the grant date commencing with the first anniversary of the grant date.

 

 

(3)

The exercise price was the closing price of the stock on the date the Compensation Committee met to approve the option grants.  The exercise price may be paid in cash, in shares of the Company's common stock, and/or by the surrender of the exercisable options valued at the difference between the exercise price and the market value of the underlying shares.

 

 

(4)

Stock option grant date fair values are based on the Black-Scholes option valuation model in accordance with FASB ASC Topic 718.  Restricted stock awards represent the aggregate value at the date of grant for shares of common stock awarded under the Company’s Second Restricted Stock Plan.  See the Company’s Annual Report (Footnote 6) for the year ended December 31, 2009, for the assumptions made in the valuation of stock options.

 

Outstanding Equity Awards at Fiscal Year End

 

            The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 31, 2009, for the named executive officers.  It also shows restricted stock awards not yet vested as of December 31, 2009.

27

Outstanding Equity Awards at Fiscal Year-End at December 31, 2009

 

 

Option Awards

Stock Awards

Name

(1)

Number

of

Securities Underlying Unexercised Options

(#)

Exercisable

(1)

Number of Securities Underlying Unexercised Options

(#)

Unexercis-able

Equity Incentive Plan Awards: Number of Securities Underlying Unexer-cised Unearned Options

(#)

(2)

Option Exercise Price

($)

Option Expiration Date

(3)

Number of Shares or Units of Stock That Have Not Vested

(#)

(4)

Market Value of Shares or Units of Stock That Have Not Vested

($)

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested

(#)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

($)

Fred Bauer

180,000

189,000

78,400

58,800

41,200

21,600

0

0

0

19,600

39,200

61,800

86,400

114,000

-

-

-

-

-

-

-

16.71

17.25

18.03

13.52

21.17

16.10

14.50

8/12/10

8/12/11

8/11/12

8/10/13

8/9/14

8/14/15

8/13/16

0

0

-

-

 

569,000

321,000

-

 

 

0

0

- 

-

Enoch  Jen

 

7,320

38,400

32,320

15,000

10,500

6,892

0

0

0

8,080

10,000

15,750

20,678

28,950

-

-

-

-

-

-

-

12.82

21.10

15.93

14.00

16.25

17.00

9.96

3/28/10

3/26/11

3/30/12

6/30/13

3/30/14

3/28/13

3/31/14

10,800

192,780

-

-

 

110,432

83,458

-

 

 

10,800

192,780

-

-

Mark Newton

4,013

4,800

3,840

2,304

0

0

3,200

5,760

9,216

13,920

-

-

-

-

-

17.13

14.36

19.59

14.30

14.25

9/29/10

9/20/13

9/25/14

9/30/15

9/28/16

5,000

10,200

 

89,250

182,070

 

-

-

 

14,957

32,096

-

 

 

15,200

271,320

-

-

Dennis Alexejun

  10,200

10,812

7,572

3,938

3,400

7,208

11,358

15,752

-

-

-

-

17.13

14.36

19.59

14.30

9/29/12

9/20/13

9/25/14

9/30/15

6,600

 

117,810

 

-

-

 

32,522

37,718

-

 

 

6,600

117,810

-

-

Steve Dykman

9,380

7,200

5,040

2,640

0

0

4,800

7,560

10,560

13,860

-

-

-

-

-

19.50

15.85

18.12

8.30

18.03

12/27/10

12/27/13

12/27/14

12/24/15

12/29/16

5,000

6,000

89,250

107,100

-

-

 

24,260

36,780

-

 

 

11,000

196,350

-

-

 

(1)

These options become exercisable, as 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.  Mr. Jen has 56,520, Mr. Newton has 4,013, and Mr. Dykman has 9,380 five-year options, that become exercisable, as long as employment with the Company continues, for twenty-five percent of the shares each anniversary of the grant date commencing on the first anniversary of the grant date.  The options were granted to Messrs. Dykman and Newton before they became executive officers of the Company on January 2, 2007, and January 1, 2008, respectively.  Five-year options were granted to Mr. Jen to encourage him to remain with the Company.  On March 30, 2005, in response to the required implementation of FASB ASC Topic 718 (formerly SFAS No. 123(R)), the Company accelerated the vesting of current "under water" stock options.  As a result of the vesting acceleration, stock option grants with an expiration date of 8/12/10, 9/24/10, 3/26/11, 6/30/11, 8/12/11 and 9/29/11 became immediately exercisable.

 

 

28

(2)

The exercise price was the closing price of the stock on the date the Compensation Committee met to approve the option grants.  The exercise price may be paid in cash, in shares of the Company's common stock, and/or by the surrender of the exercisable options valued at the difference between the exercise price and the market value of the underlying shares.

 

 

(3)

Assuming continued employment with the Company, restrictions on shares lapse upon the expiration of five years from the date of grant.  Dividends are and will be paid on these shares if, and to the same extent, paid on the Company's common stock.

 

 

(4)

Represents the aggregate market value as of 12/31/09 for shares of common stock awarded under the Company's Second Restricted Stock Plan.

 

Option Exercises and Stock Vested

 

The following table contains information regarding the exercise of stock options during the fiscal year ended December 31, 2009, by the following executive officers:

 

Option Exercises and Stock Vested for 2009

 

 

Option Awards

Stock Awards

Name

 

Number of

Shares

Acquired

on Exercise

(#)

Value Realized

on Exercise

($)

 

Number of

Shares

Acquired

on Vesting

(#)

Value Realized

on Vesting

($)

 

 

Fred Bauer

 

0

 

0

 

0

 

0

 

Enoch Jen

 

0

 

0

 

18,000

 

181,800

 

Mark Newton

 

0

 

0

 

3,000

 

42,750

 

Dennis Alexejun

 

0

 

0

 

11,000

 

156,750

 

Steve Dykman

 

17,860

 

9,734

 

0

 

0

 

 

The Company has not adopted any long-term incentive plan, defined benefit or actuarial plan, or nonqualified deferred compensation plan, as those terms are defined in applicable laws, rules, and regulation promulgated by the Securities and Exchange Commission.  The Company does not have any contracts with its named executive officers linked to a change in control of the Company other than with respect to vesting certain restricted stock or stock option awards which provisions are applicable to all employees receiving such awards.

 

29

DIRECTOR COMPENSATION

 

The following table discloses the cash, stock option awards, and other compensation earned, paid, or awarded to each of the Company's directors during the fiscal year 2009.

 

Director Compensation for 2009

 

Name

(1)

Fees Earned or

Paid in

Cash

($)

Stock

Awards

($)

(2)

Option

Awards

($)

Non-Equity

Incentive Plan

Compen-sation

($)

Change in Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

(3)

All Other

Compensation

($)

Total

($)

 

Gary Goode

 

39,500

 

-

 

23,080

 

-

 

-

 

 0

 

62,580

 

Arlyn Lanting

 

17,500

 

-

 

23,080

 

-

 

-

 

 0

 

40,580

 

Kenneth La Grand

 

17,500

 

-

 

23,080

 

-

 

-

 

 0

 

40,580

 

John Mulder

 

17,500

 

-

 

23,080

 

-

 

-

 

    2,000 (4)

 

42,580

 

Rande Somma

 

21,500

 

-

 

23,080

 

-

 

-

 

0

 

44,580

 

Fred Sotok

 

17,500

 

-

 

23,080

 

-

 

-

 

0

 

40,580

 

Wallace Tsuha

 

26,500

 

-

 

23,080

 

-

 

-

 

0

 

49,580

 

Jim Wallace

 

25,500

 

-

 

23,080

 

-

 

-

 

0

 

48,580

 

(1)

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 $10,000 per year plus $1,500 for each meeting of the Board attended and $1,000 for each committee meeting attended.  Directors who are chairman of the Compensation and Audit Committees receive an additional retainer fee in the amount of $3,000 per year.

 

 

(2)

Nonemployee directors who are directors immediately following each Annual Meeting of Shareholders are entitled to receive an option to purchase 6,000 shares of the Company's common stock at a price per share equal to the closing price of the Company's stock on NASDAQ on that date.  Each option has a term of ten years and becomes exercisable in full six months after the date of grant.   For each outstanding stock option award, the value shown is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (as opposed to what is included in the Company's financial statements).  See the Company’s Annual Report (Footnote 6) for the years ended December 31, 2009, 2008 and 2007 for the assumptions made in the valuation of stock options.

 

 

(3)

The Company also makes Company aircraft available to directors for personal use if such use does not conflict with any business purpose for the aircraft.  Reimbursement of the Company's incremental cost is required for personal use of Company aircraft, which is calculated using average variable operating cost (including fuel, maintenance, use tax and other miscellaneous variable costs).

 

 

(4)

The Company has entered into a consulting agreement with John Mulder subsequent to his retirement in June 2002.  During 2009, the Company paid Mr. Mulder $2,000 in consulting fees, plus reimbursement of business expenses.

30

The following table summarizes securities issued and to be issued under the Company’s equity compensation plans as of December 31, 2009:

 

Executive Compensation Plan Summary

 

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)

Equity compensation Plans approved by Shareholders

9,440,589

$14.741

12,755,898

 

Equity Compensation Plans not approved by Shareholders

 --

--

--

Total

9,440,589

$14.741

12,755,898

 

Compensation Committee Interlocks and

Insider Participation

 

            The Compensation Committee is currently comprised solely of members of the Company’s Board of Directors who are independent under the applicable NASDAQ listing standards. The Compensation Committee is 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.

 

CERTAIN TRANSACTIONS

 

            The Audit Committee of the Company reviews and approves all related party transactions in accordance with its Charter.  The Code of Business Conduct and Ethics requires directors, officers, and employees to report these types of matters.  In addition, the Company uses questionnaires for its directors and officers annually in part to discover any unreported related-party transactions.  The approval of the Audit Committee is required for related-party transactions.

 

            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 warehouse 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 2009, 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.

 

            Philip A. Sotok, the son of director Frederick Sotok, is a majority owner of an entity that has an indirect interest in a vendor of the Company.  For a period of time, ending in July of 2012,  the Company has agreed to utilize this vendor, a certified minority supplier, as a distributor for certain electronic components.  This vendor expects to realize net distribution fees of approximately $2.4 million between 2010 and 2012.  By virtue of the above-described indirect interest, Philip A. Sotok could realize approximately $10,000 for such period of time. 

 

31

 

            Jeremy Fogg, Vice President, Mechanical Engineering and Program Management, is the son-in-law of Fred Bauer, the Company's Chairman of the Board and Chief Executive Officer. In 2009, Jeremy Fogg earned $168,449, including profit-sharing and performance-based bonuses.  Jeremy Fogg also received an option to purchase 9,070 shares of Gentex common stock at an exercise price of $14.25.  All of Mr. Fogg's compensation is determined under and in accordance with the Company's existing compensation plans and policies applicable to all salaried employees.

 

            The Company is highly selective, and hires new employees based upon merit. Employees may also be eligible for certain other benefits which are similarly available on no less favorable terms to other employees of the Company at the same level and pay rate.  Family members of any employee are not discouraged from seeking employment.

 

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS – PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The Audit Committee and Board of Directors has selected, and submits to shareholders for ratification, Ernst & Young LLP to serve as the Company’s independent auditors for the fiscal year ending December 31, 2010.  The following fees were billed by Ernst & Young LLP, the Company’s independent auditors, for the services provided to the Company during the fiscal years ended December 31:

 

 

2009

2008

Audit Fees

$192,700

$193,900

Audit-Related

--

--

Tax Fees

--

--

All Other

--

--

Total

 

$192,700

$193,900

 

 

Audit fees include the annual audit of the Company’s consolidated financial statements, the audit of internal control over financial reporting, timely quarterly reviews, foreign statutory audits and consultations concerning accounting matters associated with the annual audit.  Tax services primarily include amounts billed for assistance with the calculation of the extra-territorial exclusion.  All non-audit services were pre-approved by the Audit Committee pursuant to the Revised Audit Committee Procedures for Approval of Audit and Non-audit Services by Independent Auditors, which is attached as Appendix A to this Proxy Statement. 

 

Although ratification of the independent auditors by the Company’s shareholders is not legally required, our Audit Committee and Board of Directors believes that submission of this matter to the shareholders follows sound business practice and is in the best interest of shareholders in the current environment.  If the shareholders do not approve the selection of Ernst & Young LLP, the selection of such firm as our independent auditors will be reconsidered by the Audit Committee.

 

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. 

 

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 Fred Bauer was late in reporting an option grant of 114,000 shares in August of 2009.

32

SHAREHOLDER PROPOSALS

 

            Any proposal of a shareholder intended to be presented at the 2011 Annual Meeting of the Company must be received by the Company at its headquarters, c/o Corporate Secretary’s Office, 600 North Centennial Street, Zeeland, Michigan 49464, no later than December 1, 2010, 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.  To be timely, such a shareholder's notice must be delivered, or mailed and received at, the Company's headquarters by April 10, 2010.  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 delivered 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 and e-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 registered and beneficial owners and obtaining their Proxies.

 

Shareholders are urged to promptly vote your shares either on the Internet (preferred method), via telephone, or by dating, signing, and returning the accompanying Proxy in the enclosed envelope.

 

 

BY ORDER OF THE BOARD OF DIRECTORS

 

 

 

/s/ Connie Hamblin

 

 

 

Connie Hamblin

 

Secretary

 

 

April 1, 2010

33

 

APPENDIX A

 

 

 

 

 

 

 

Revised Audit Committee

Procedures for Approval of Audit and Non-Audit

Services by Independent Auditors

 

 

 

The following procedure is adopted by the Audit Committee relating to the approval of audit and non-audit services provided by the Company’s independent auditors.

 

1.                 The Committee has reviewed and approved work to be performed by the independent auditors in the areas of tax, audit and advisory services and subcategories within each category as designated on the attached schedule.

 

2.                 Any additional audit and non-audit work performed by the independent auditors that is not included on the attached schedule must be specifically pre-approved as follows:

 

a.      If the proposed independent auditors’ engagement is equal to or less than $25,000, the Chairman of the Audit Committee must pre-approve the work and will communicate his approval to the full Audit Committee at the next regularly scheduled meeting of the Audit Committee.

 

b.     If the proposed independent auditors’ engagement is greater than $25,000, the full Audit Committee must pre-approve the work.

 

3.                  The independent auditors may not conduct any work that is prohibited by applicable SEC rules or regulations.

 

 

 

Effective October 30, 2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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