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.

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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 th at 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 th e 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 periodi cally 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

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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, ef fort, 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 b e 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,

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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 submit s 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

• In accordance with the NASDAQ Stock Market Rules, in order for a director to qualify as “independent,” the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence.  The Board of Directors has affirmatively determined a majority of its members are independent, and they include Messrs. Goode, La Grand, Lanting, Mulder, Somma, Tsuha, and Wallace.  As such, a majority of the Board is comprised of independent directors as defined in the NASDAQ Stock Market Rules.
• A meeting of the independent directors, separate from management, is an agenda item at each Board of Directors meeting.  During 2009, the independent directors met on five occasions.

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Board of Directors Leadership Structure

• Fred Bauer has served as Chairman of the Board of Directors and Chief Executive Officer (CEO) of the Company for 35 years.  The Company’s market capitalization has increased from approximately $17 million at the initial public offering in 1981 to approximately $2.8 billion in 2010.
• The Board does not have a lead independent director, though the independent members of the Board meet in connection with each Board meeting and regularly suggest agenda items for Board meetings.  The Company acknowledges that independent board leadership is important, but believes that it is already getting such leadership from its independent directors without the need to split the Chairman and CEO roles or to have a lead director.
• The Board has determined that the Company is fortunate to have Mr. Bauer, a founder of the Company, serve as Chairman of the Board and Chief Executive Officer of the Company, as his 35 years of experience in these roles makes him the best choice for each of these roles.
• The Board has also determined that Mr. Bauer serving in each of these roles has allowed the Company to speak with one voice, avoid the dilution of leadership, and empowered Mr. Bauer to act with determination, all of which have benefited the Company and its shareholders.
• The Board is not aware of any credible evidence suggesting that separating the positions of Chairman and CEO improves corporate performance.  In this particular instance, after past and continuing distinguished service, such separation does not make sense and is simply not in the best interest of the Company or its shareholders.

Audit Committee

• The Company’s Audit Committee currently includes Messrs. Goode (Chairman), Somma, and Tsuha.
• The Audit Committee met four times during the fiscal year ended December 31, 2009.  Information regarding the functions performed by the Committee is set forth in the following “Report of the Audit Committee.”
• The Board of Directors has affirmatively determined that all members of the Audit Committee meet the appropriate tests for independence, including those set forth in the NASDAQ Stock Market Rules.
• All Audit Committee members possess the required level of financial literacy and the Board of Directors has determined that at least one member of the Audit Committee, Mr. Goode, meets the current standard of audit committee financial expert as required by the Sarbanes-Oxley Act.
• The Audit Committee operates pursuant to the Gentex Corporation Audit Committee Charter (*).
• The Company’s independent auditors report directly to the Audit Committee.

• The Audit Committee, consistent with the Sarbanes-Oxley Act and the rules adopted thereunder, meets with management and the auditors prior to the filing of officer certifications with the SEC to receive information concerning, among other things, any significant deficiencies in the design or operation of internal controls.
• The Audit Committee’s policy regarding the pre-approval of audit and non-audit services provided by the Company’s independent auditors is outlined in a document called “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.
• The Audit Committee has adopted a policy titled “Complaint Procedures for Accounting and Auditing Matters” (*) to enable confidential and anonymous reporting to the Audit Committee.
• The Audit Committee reviews and approves all related party transactions in accordance with its Charter.  This review and approval covers all manners of related party transactions, which are viewed in light of applicable disclosure requirements, independence standards for directors, and applicable Company codes and policies.

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Compensation Committee

• The Company’s Compensation Committee currently includes Messrs. Goode (Chairman), Tsuha, and Wallace. 
• The Compensation Committee met six times during the fiscal year ended December 31, 2009.  The Compensation Committee is responsible for administering the Company’s stock-based incentive plans and supervising other compensation arrangements for executive officers of the Company.  Information regarding functions performed by the Committee is set forth in the following "Compensation Committee Report."
• The Board of Directors has affirmatively determined that all members of the Compensation Committee meet the appropriate tests for independence, including those set forth in the NASDAQ Stock Market Rules.
• The Compensation Committee operates pursuant to the Gentex Corporation Compensation Committee Charter (*).
• More information regarding the scope of authority of the Compensation Committee, any delegation of its authority, and the role of executive officers is set forth in the following “Compensation Discussion and Analysis.”
• Although the Compensation Committee has authority under the Compensation Committee Charter to hire consultants, it has not done so in over five years and, as such, compensation consultants have played no role in determining or recommending the amounts or form of executive officer and director compensation.
• The Compensation Committee does not believe that the Company's compensation policies and practices are reasonably likely to have a material adverse effect on the Company.

Nominating Committee

• The Company’s Nominating Committee currently includes Messrs. Wallace (Chairman) and Goode. 
• The Nominating Committee met one time during the fiscal year ended December 31, 2009 (holding other informal discussions at regularly scheduled Board meetings).  The Nominating Committee is responsible for identifying and recommending qualified individuals to serve as members of the Company’s Board of Directors.
• The Board of Directors has affirmatively determined that all members of the Nominating Committee meet the appropriate tests for independence, including those set forth in the NASDAQ Stock Market Rules.
• The Nominating Committee operates pursuant to the Gentex Corporation Nominating Committee Charter (*).

• The Nominating Committee has adopted certain procedures contained in a document called “Selection Process for New Board Candidates” (*) to consider candidates for director nominations.  Generally, for each election of directors the Chair of the Nominating Committee initiates the search with support of the other committee member(s), other board members, and management, as needed.  An initial slate that meets the established criteria are identified and presented to the entire Nominating Committee.  The Nominating Committee will then conduct interviews and reviews, as appropriate and necessary.  The Nominating Committee then meets to consider and approve the most qualified candidates so it can make its recommendation to the full Board of Directors.
• The Nominating Committee has established the minimum qualifications for candidates, which are contained in a document called “Position Profile: Member of the Board of Directors” (*).  Those required qualifications include:  working with an entrepreneurial company; high level of personal and professional integrity; successful and distinguished business management career (using the Company's core principles); understanding of the Company's markets; and ability to work effectively with current Board members.  The Position Profile also sets forth other desirable experience and qualifications, including gender and/or race diversity.  While gender and race diversity are important enough to include as other desirable experiences and qualifications in the Position Profile, the Nominating Committee and the Board continue to believe that finding the v ery best candidate is most important.
• The Nominating Committee has not yet paid any third party a fee to assist in identifying and evaluating nominees, but has the authority to do so.
• The Nominating Committee has not, to date, received any potential director candidates for nomination from any shareholder that beneficially owns more than five percent of the Company's common stock.
• The Nominating Committee considers suggestions from many sources, including shareholders, regarding possible candidates for the Board of Directors. If you want to recommend a director candidate, you may do so in accordance with the Company’s procedures or the Company’s Restated Articles of Incorporation. If a shareholder desires to recommend a candidate for consideration by the Nominating Committee for inclusion in the Company’s 2011 Proxy Statement as a Board nominee, that recommendation should be submitted in writing, together with appropriate biographical information, to the Chairman of the Nominating Committee, c/o Corporate Secretary’s Office, Gentex Corporation, 600 North Centennial Street, Zeeland, Michigan 49464.  Any such nominations must be received by the Chairman of the Nominating Committee by no later than December 1, 2010, to allow adequate time for consideration of the nominee. Other nominations by shareholders for any directorship may be submitted to the Board of Directors by written notice within the time periods set forth in the Company’s Restated Articles of Incorporation, which must include certain biographical information. In general, a written notice must be timely received and contain all information required to be disclosed in a solicitation of proxies for elections of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, in addition to other information.
• In accordance with the above-referenced Selection Process for New Board Candidates and the Position Profile, the independent directors approved the slate of nominees standing for election at the 2010 Annual Meeting of Shareholders, and recommended the same to the entire Board of Directors.

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Executive Committee

• The Company has an Executive Committee comprised of Messrs. Bauer, Lanting and La Grand.  The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board or independent director review and approval.  In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling make it difficult or impracticable to assemble the full Board.  All actions taken by the Executive Committee must be reported at the next Board meeting.  This Committee did not meet during the fiscal year ended December 31, 2009.
• The Executive Committee does not take any action which must be approved by the independent directors or a committee made up of only independent directors under applicable laws, rules and regulations.

Codes

• The Board of Directors has adopted a “Code of Ethics for Certain Senior Officers” (*) that applies to the Company’s chief executive officer, principal financial officer and principal accounting officer. Information concerning any alleged violations is to be reported to the Audit Committee.
• The Company has also adopted a “Code of Business Conduct and Ethics” (*). This Code applies to all directors, officers and employees of the Company.
• No waivers of either of the foregoing codes has occurred to date.

Shareholder Communication with Members of the Board of Directors

• You may contact any of our directors by writing them: Board of Directors, c/o Corporate Secretary’s Office, Gentex Corporation, 600 North Centennial, Zeeland, Michigan 49464.  Employees and others who wish to contact the Board or any member of the Audit Committee may do so anonymously, if they wish, by using this address. Such correspondence will not be screened and will be forwarded in its entirety.

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Personal Loans to Executive Officers and Directors

• The Company complies with and will operate in a manner consistent with an act of legislation outlawing extensions of credit in the form of personal loans to or for its directors and executive officers.

Director and Executive Officer Stock Transactions

• Under the regulations of the Securities and Exchange Commission (SEC), directors and executive officers are required to file notice with the SEC within two (2) business days of any purchase or sale of the Company’s stock.  Information on filings made by any of our directors or executive officers can be found on the Company’s web site under “SEC Filings” at http://www.easyir.com/easyir/cogo.do?easyirid=74B343E1F282071F.

Risk Oversight

• On behalf of the Board of Directors, the Audit Committee periodically discusses with management the Company's risk assessment and risk management and steps taken by management to control and mitigate risk exposure in accordance with the Audit Committee Charter (other than risks arising from the Company’s compensation policies and practices, which are reviewed by the Compensation Committee).  This oversight does not necessarily have any effect on the Company's leadership structure.

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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.

February 17, 2010

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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.

February 17, 2010

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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.

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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 Compensatio n 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. 

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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.

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            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 pla ce 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 off icers' 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 i ncrease 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).

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•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.& nbsp; 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 demons trates how important it is to our culture for all our salaried employees to be compensated within the same parameters.

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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.  St ock 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.&n bsp; 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.

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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 eff ective 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.

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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

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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

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.

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

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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

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.

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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

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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

Compensation Committee Interlocks and

Insider Participation

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 b elieves 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. 

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            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:

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.

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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 t he 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.

April 1, 2010

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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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©2010, Gentex Corporation, 600 North Centennial Street, Zeeland, MI 49464