UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004, OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NO. 0-10235
GENTEX CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2030505
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 N. CENTENNIAL, ZEELAND, MICHIGAN 49464
(Address of principal executive offices) (Zip Code)
(616) 772-1800
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes (X) No ( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ( ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Class at October 20, 2004
----- -------------------
Common Stock, $0.06 Par Value 77,652,005
Exhibit Index located at page 13
Page 1 of 31
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2004 December 31, 2003
------------------ -----------------
(Unaudited) (Audited)
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $407,918,422 $322,662,971
Short-term investments 66,966,302 70,943,685
Accounts receivable, net 63,608,959 58,955,823
Inventories 28,051,346 20,938,696
Prepaid expenses and other 11,234,599 11,848,156
------------ ------------
Total current assets 577,779,628 485,349,331
PLANT AND EQUIPMENT - NET 130,634,607 126,806,882
OTHER ASSETS
Long-term investments 115,531,513 145,615,934
Patents and other assets, net 5,530,471 4,757,619
------------ ------------
Total other assets 121,061,984 150,373,553
------------ ------------
Total assets $829,476,219 $762,529,766
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 22,191,954 $ 18,259,111
Accrued liabilities 32,757,678 32,221,369
------------ ------------
Total current liabilities 54,949,632 50,480,480
DEFERRED INCOME TAXES 18,136,366 18,405,955
SHAREHOLDERS' INVESTMENT
Common stock 4,659,120 4,622,449
Additional paid-in capital 169,659,259 152,874,325
Retained earnings 576,103,320 528,358,825
Other shareholders' investment 5,968,522 7,787,732
------------ ------------
Total shareholders' investment 756,390,221 693,643,331
------------ ------------
Total liabilities and
shareholders' investment $829,476,219 $762,529,766
============ ============
See accompanying notes to condensed consolidated financial statements.
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GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------- ---------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
NET SALES $120,456,707 $112,878,954 $379,430,532 $345,104,850
COST OF GOODS SOLD 72,754,752 65,793,563 222,388,833 201,621,876
------------ ------------ ------------ ------------
Gross profit 47,701,955 47,085,391 157,041,699 143,482,974
OPERATING EXPENSES:
Engineering, research and development 7,758,575 6,944,138 22,747,948 19,462,760
Selling, general
& administrative 6,550,287 5,693,743 20,175,499 17,310,739
------------ ------------ ------------ ------------
Total operating expenses 14,308,862 12,637,881 42,923,447 36,773,499
------------ ------------ ------------ ------------
Income from operations 33,393,093 34,447,510 114,118,252 106,709,475
OTHER INCOME (EXPENSE)
Interest and dividend income 2,263,373 2,372,517 6,507,213 7,796,492
Other 1,168,367 1,225,098 3,309,635 574,035
------------ ------------ ------------ ------------
Total other income 3,431,740 3,597,615 9,816,848 8,370,527
------------ ------------ ------------ ------------
Income before provision
for income taxes 36,824,833 38,045,125 123,935,100 115,080,002
PROVISION FOR INCOME TAXES 11,600,000 12,364,000 39,910,000 37,400,000
------------ ------------ ------------ ------------
NET INCOME $ 25,224,833 $ 25,681,125 $ 84,025,100 $ 77,680,002
============ ============ ============ ============
EARNINGS PER SHARE:
Basic $ 0.33 $ 0.34 $ 1.09 $ 1.02
Diluted $ 0.32 $ 0.33 $ 1.07 $ 1.01
Cash Dividends Declared per Share $ 0.17 $ 0.15 $ 0.47 $ 0.15
See accompanying notes to condensed consolidated financial statements.
- 3 -
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
-------------------------------
2004 2003
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 84,025,100 $ 77,680,002
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 16,976,090 15,977,561
(Gain) loss on disposal of assets (863) 75,626
(Gain) loss on sale of investments (2,367,909) 872,848
Deferred income taxes 621,584 490,376
Amortization of deferred compensation 1,149,778 844,226
Tax benefit of stock plan transactions 2,693,941 5,993,320
Change in operating assets and liabilities:
Accounts receivable, net (4,653,136) (27,445,645)
Inventories (7,112,650) (2,599,478)
Prepaid expenses and other 411,208 (1,376,344)
Accounts payable 3,932,843 5,305,620
Accrued liabilities, excluding dividends declared (983,396) 1,535,126
------------- -------------
Net cash provided by
operating activities 94,692,590 77,353,238
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Plant and equipment additions (20,705,920) (15,982,008)
Proceeds from sale of plant and equipment 44,500 72,000
(Increase) decrease in investments 34,461,644 78,356,378
Increase in other assets (809,321) (552,725)
------------- -------------
Net cash provided by (used for)
investing activities 12,990,903 61,893,645
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock from
stock plan transactions 12,332,859 13,818,575
Cash dividends paid (34,760,901) 0
Repurchases of common stock 0 (10,246,810)
------------- -------------
Net cash provided by (used for)
financing activities (22,428,042) 3,571,765
------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 85,255,451 142,818,648
CASH AND CASH EQUIVALNTS,
beginning of period 322,662,971 168,834,111
------------- -------------
CASH AND CASH EQUIVALENTS,
end of period $ 407,918,422 $ 311,652,759
============= =============
See accompanying notes to condensed consolidated financial statements.
- 4 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The unaudited condensed consolidated financial statements included herein
have been prepared by the Registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to
such rules and regulations, although the Registrant believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these unaudited condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Registrant's 2003 annual report on Form 10-K.
(2) In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting of
only a normal and recurring nature, necessary to present fairly the
financial position of the Registrant as of September 30, 2004, and the
results of operations and cash flows for the interim periods presented.
(3) Inventories consisted of the following at the respective balance sheet
dates:
September 30, 2004 December 31, 2003
------------------ -----------------
Raw materials $16,315,646 $ 11,041,622
Work-in-process 2,776,280 2,401,500
Finished goods 8,959,420 7,495,574
----------- ------------
$28,051,346 $ 20,938,696
=========== ============
(4) The following table reconciles the numerators and denominators used in the
calculation of basic and diluted earnings per share (EPS):
Quarter Ended September 30, Nine Months Ended September 30,
---------------------------- -------------------------------
2004 2003 2004 2003
---- ---- ---- ----
Numerators:
Numerator for both basic and
diluted EPS, net income $25,224,833 $25,681,125 $84,025,100 $77,680,002
Denominators:
Denominator for basic EPS,
weighted-average shares
outstanding 77,243,550 76,348,527 77,059,166 76,106,950
Potentially dilutive shares
resulting from stock plans 974,411 1,220,334 1,314,345 960,198
----------- ----------- ----------- -----------
Denominator for diluted EPS 78,217,961 77,568,861 78,373,511 77,067,148
=========== =========== =========== ===========
Shares related to stock plans
not included in diluted average
common shares outstanding
because their effect would be
antidilutive 1,486,831 223,383 683,461 674,884
(5) At September 30, 2004, the Company had two stock option plans and an
employee stock purchase plan. The Company accounts for these plans under
the recognition and measurement principles of APB Opinion No. 25
(Accounting for Stock Issued to Employees) and related interpretations. No
stock-based employee compensation cost is reflected in net income, since
options granted under these plans have an exercise price equal to the
market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," to stock-based employee compensation.
- 5 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------- -------------------------------
2004 2003 2004 2003
---- ---- ---- ----
Net income, as reported $25,224,833 $25,681,125 $ 84,025,100 $77,680,002
Deduct: Total stock-based employee
compensation expense determined
under fair value-based method of all
awards, net of tax effects (4,058,943) (2,717,304) (10,676,152) (7,731,314)
----------- ----------- ------------ -----------
Pro forma net income $21,165,890 $22,963,821 $ 73,348,948 $69,948,688
=========== =========== ============ ===========
Earnings per share:
Basic - as reported $ .33 $ .34 $ 1.09 $ 1.02
Basic - pro forma .27 .30 .95 .92
Diluted - as reported .32 .33 1.07 1.01
Diluted - pro forma .27 .30 .94 .91
(6) Comprehensive income reflects the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. For the Company, comprehensive
income represents net income adjusted for items such as unrealized gains
and losses on investments and foreign currency translation adjustments.
Comprehensive income was as follows:
September 30, 2004 September 30, 2003
------------------ -------------------
Quarter Ended $ 23,098,757 $ 27,635,064
Nine Months Ended 82,850,918 89,260,627
(7) The increase in common stock during the quarter and nine months ended
September 30, 2004, was attributable to the issuance of 198,005 and
611,189 shares, respectively, of the Company's common stock under its
stock-based compensation plans. The Company has also recorded a $0.15 per
share cash dividend in the first two quarters of 2004 and a $0.17 per
share cash dividend in the third quarter. The third quarter dividend of
approximately $13,201,000, was declared on August 18, 2004, and is payable
on October 21, 2004.
(8) The Company currently manufactures electro-optic products, including
automatic-dimming rearview mirrors for the automotive industry, and fire
protection products for the commercial building industry:
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------- -------------------------------
2004 2003 2004 2003
---- ---- ---- ----
Revenue:
Automotive Products $ 114,546,283 $107,020,164 $ 362,111,159 $ 328,091,167
Fire Protection Products 5,910,424 5,858,790 17,319,373 17,013,683
------------- ------------ ------------- -------------
Total $ 120,456,707 $112,878,954 $ 379,430,532 $ 345,104,850
============= ============ ============= =============
Operating Income:
Automotive Products $ 32,160,066 $ 33,184,710 $ 110,651,518 $ 103,318,451
Fire Protection Products 1,233,027 1,262,800 3,466,734 3,391,024
------------- ------------ ------------- -------------
Total $ 33,393,093 $ 34,447,510 $ 114,118,252 $ 106,709,475
============= ============ ============= =============
- 6 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(9) On October 13, 2004, the Financial Accounting Standards Board (FASB)
concluded that FASB Statement No. 123R, "Share-Based Payment," which would
require all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on
their fair values, would be effective for public companies for interim or
annual periods beginning after June 15, 2005. The Company does not intend
to adopt a fair-value based method of accounting for stock-based employee
compensation until a final standard is issued by the FASB that requires
this accounting. Proforma disclosures of quarterly earnings are included
in Note 5 of this quarterly statement.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." This standard clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
and addresses consolidation by business enterprises of variable interest
entities. Interpretation No. 46 requires existing unconsolidated variable
interest entities to be consolidated by their primary beneficiaries if the
entities do not effectively disperse risk among the parties involved.
Interpretation No. 46 also enhances the disclosure requirements related to
variable interest entities. This interpretation was effective for any
variable interest entered into by the Company as of the end of the first
quarter of 2004. The adoption of Interpretation No. 46 did not have any
significant effect on the Company's consolidated financial statements.
- 7 -
GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
THIRD QUARTER 2004 VERSUS THIRD QUARTER 2003
Net Sales. Net sales for the third quarter of 2004 increased by
approximately $7,578,000, or 7%, when compared with the third quarter last
year. Net sales of the Company's automotive auto-dimming mirrors increased
by approximately $7,526,000, or 7%, in the third quarter of 2004, when
compared to the third quarter last year, as auto-dimming mirror unit
shipments increased by 11% from approximately 2,475,000 in the third
quarter of 2003 to 2,756,000 in the current quarter. This increase
reflected the increased penetration of interior auto-dimming mirrors on
2004 and 2005 model year vehicles during the third quarter of 2004. Unit
shipments to customers in North America for the current quarter decreased
by 1% compared with the third quarter of the prior year, primarily due to
lower exterior mirror shipments as the result of end of the model year
inventory adjustments by certain tier one exterior mirror suppliers.
Mirror unit shipments for the current quarter to automotive customers
outside North America increased by 26% compared with the third quarter in
2003, primarily due to increased interior mirror shipments to European and
Asian-Pacific automakers as a result of increased penetration. Net sales
of the Company's fire protection products increased 1% for the current
quarter, primarily due to higher sales of certain of the Company's
signaling products.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
increased from 58.3% in the third quarter of 2003 to 60.4% in the third
quarter of 2004. This percentage increase primarily reflected annual
customer price reductions and start-up costs related to the introduction
of a number of new automated manufacturing processes during the quarter.
Each factor is estimated to have impacted cost of goods sold as a
percentage of net sales by approximately 1-2 percentage points.
Operating Expenses. Engineering, research and development expenses for the
quarter increased approximately $814,000, from 6.2% to 6.4% of net sales,
when compared with the same quarter last year, primarily reflecting
additional staffing, engineering and testing for new product development,
including mirrors with additional electronic features. Selling, general
and administrative expenses increased approximately $857,000, for the
quarter, from 5.0% to 5.4% of net sales, when compared with the third
quarter of 2003. This increased expense primarily reflected the continued
expansion of the Company's overseas sales and engineering offices.
Total Other Income. Total other income for the quarter decreased by
approximately $165,000 when compared with the third quarter of 2003,
primarily due to reduced interest income due to a higher proportion of
tax-exempt investments.
Income Taxes. The Company's effective income tax rate decreased from 32.5%
in the third quarter of 2003 to 31.5% in the third quarter of 2004,
primarily due to higher tax-exempt investment income.
NINE MONTHS ENDED SEPTEMBER 30, 2004, VERSUS NINE MONTHS ENDED SEPTEMBER
30, 2003
Net Sales. Net sales for the nine months ended September 30, 2004,
increased by approximately $34,326,000, or 10%, when compared with the
same period last year. Net sales of the Company's automotive auto-dimming
mirrors increased by approximately $34,020,000, or 10%, as auto-dimming
mirror unit shipments increased by 16% from approximately 7,544,000 in the
first nine months of 2003 to 8,739,000 in the first nine months of 2004.
This increase reflected the increased penetration on 2004 and 2005 model
year vehicles for interior and exterior auto-dimming mirrors. Unit
shipments to customers in North America increased by 5% for the first nine
months of 2004 compared with the same period last year, primarily due to
increased penetration among Asian transplants. Mirror unit shipments to
automotive customers outside North America increased by 29% for the first
nine months of 2004 compared with the first nine months in 2003, primarily
due to increased interior and exterior mirror sub-assembly shipments to
European and Asian-Pacific automakers as a result of increased
penetration. Net sales of
- 8 -
the Company's fire protection products increased 2% for the first nine
months of 2004, primarily due to higher sales of certain of the Company's
signaling products.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
increased slightly from 58.4% to 58.6% in the first nine months of 2004,
when compared to the same nine-month period in the prior year. This slight
percentage increase primarily reflected annual customer price reductions,
mostly offset by the higher sales level leveraged over the fixed overhead
costs and product mix. Each factor is estimated to have impacted cost of
goods sold as a percentage of net sales by approximately 1-2 percentage
points.
Operating Expenses. For nine months ended September 30, 2004, engineering,
research and development expenses increased approximately $3,285,000, from
5.6% to 6.0% of net sales, when compared with the same period last year,
primarily reflecting additional staffing for new product development,
including mirrors with additional electronic features. Selling, general
and administrative expenses increased approximately $2,865,000 for the
first nine months of 2004, and increased from 5.0% to 5.3% of net sales
when compared to the first nine months of 2003. This increased expense
primarily reflected the continued expansion of the Company's overseas
sales and engineering office as well as the stronger euro exchange rate.
Other Income - Net. Other income for the nine months ended September 30,
2004, increased by approximately $1,446,000 when compared with the first
nine months of 2003, primarily due to realized gains on the sale of equity
investments in the current year period, partially offset by reduced
interest income due to lower interest rates.
FINANCIAL CONDITION:
Cash flow from operating activities for the nine months ended September
30, 2004, increased $17,340,000 to $94,693,000, compared to $77,353,000,
for the same period last year, primarily due to lower growth in accounts
receivable and increased net income. During the third quarter of 2003, the
Company's largest customer extended its payment terms to its suppliers,
which resulted in a one-time increase in accounts receivable. Capital
expenditures for the nine months ended September 30, 2004, were
$20,706,000, compared to $15,982,000 for the same period last year.
The Company now expects that the construction of its fourth automotive
manufacturing facility and a new corporate facility will be completed in
early 2006. The completion date has been pushed back from the original
date due to improved manufacturing capacity utilization. The Company plans
to invest approximately $40-45 million for the new facilities during
2004-2006, which will be funded from its cash and cash equivalents on
hand.
Cash and cash equivalents as of September 30, 2004, increased
approximately $85,255,000 compared to December 31, 2003. The increase was
primarily due to cash flow from operations.
Management considers the Company's working capital and long-term
investments totaling approximately $638,362,000 as of September 30, 2004,
together with internally generated cash flow and an unsecured $5,000,000
line of credit from a bank, to be sufficient to cover anticipated cash
needs for the next year and for the foreseeable future.
On October 8, 2002, the Company announced a share repurchase plan, under
which the Company may purchase up to 4,000,000 shares based on a number of
factors, including market conditions, the market price of the Company's
common stock, anti-dilutive effect on earnings, available cash and other
factors that the Company deems appropriate. During the quarter ended March
31, 2003, the Company repurchased 415,000 shares at a cost of
approximately $10,247,000. No shares have been repurchased subsequently by
the Company.
TRENDS AND DEVELOPMENTS:
The Company is subject to market risk exposures of varying correlations
and volatilities, including foreign exchange rate risk, interest rate risk
and equity price risk. During the quarter ended September 30, 2004, there
were no significant changes in the market risks reported in the Company's
2003 Form 10-K report.
- 9 -
The Company has some assets, liabilities and operations outside the United
States, which currently are not significant. Because the Company sells its
automotive mirrors throughout the world, it could be significantly
affected by weak economic conditions in worldwide markets that could
reduce demand for its products.
The Company continues to experience pricing pressures from its automotive
customers, which have affected, and which will continue to affect, its
margins to the extent that the Company is unable to offset the price
reductions with productivity improvements, engineering and purchasing cost
reductions, and increases in unit sales volume. In addition, profit
pressures at certain automakers are resulting in increased cost reduction
efforts by them, including requests for additional price reductions,
decontenting certain features from vehicles, and warranty cost-sharing
programs, which could adversely impact the Company's sales growth and
margins. The Company also continues to experience from time to time some
pressure for select raw material cost increases.
Automakers have been experiencing increased volatility and uncertainty in
executing planned new programs which have, in some cases, resulted in
cancellations or delays of new vehicle platforms, package reconfigurations
and inaccurate volume forecasts. This increased volatility and uncertainty
has made it more difficult for the Company to forecast future sales and
effectively utilize capital, engineering, research and development, and
human resource investments.
The Company does not have any significant off-balance sheet arrangements
or commitments that have not been recorded in its consolidated financial
statements.
On October 1, 2002, Magna International acquired Donnelly Corporation, the
Company's major competitor for sales of automatic-dimming rearview mirrors
to domestic and foreign vehicle manufacturers and their mirror suppliers.
The Company sells certain automatic-dimming rearview mirror sub-assemblies
to Magna Donnelly. To date, the Company is not aware of any significant
impact of Magna's acquisition of Donnelly upon the Company; however, any
ultimate significant impact has not yet been determined.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is provided under the caption
"Trends and Developments" under Item 2 - Management's Discussion and
Analysis of Results of Operations and Financial Condition.
ITEM 4. CONTROLS AND PROCEDURES
As of September 30, 2004, an evaluation was performed under the
supervision and with the participation of the Company's management,
including the CEO and CFO, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures [(as defined
in Exchange Act Rules 13a - 15(e) and 15d - 15(e)]. Based on that
evaluation, the Company's management, including the CEO and CFO, concluded
that the Company's disclosure controls and procedures were adequate and
effective as of September 30, 2004, to ensure that material information
relating to the Company would be made known to them by others within the
Company, particularly during the period in which this Form 10-Q was being
prepared. During the period covered by this quarterly report, there have
been no changes in the Company's internal controls over financial
reporting that have materially affected or are likely to materially affect
the Company's internal controls over financial reporting.
Statements in this Quarterly Report on Form 10-Q which express "belief",
"anticipation" or "expectation" as well as other statements which are not
historical fact, are forward-looking statements and involve risks and
uncertainties described under the headings "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and "Trends and
Developments" that could cause actual results to differ materially from
those projected. All forward-looking statements in this Report are based
on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking
statements.
- 10 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 13.
- 11 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENTEX CORPORATION
Date: November 2, 2004 /s/ Fred T. Bauer
---------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: November 2, 2004 /s/ Enoch C. Jen
---------------------------
Enoch C. Jen
Vice President - Finance,
Principal Financial and
Accounting Officer
- 12 -
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
3(a) Registrant's Restated Articles of Incorporation 15
3(b) Registrant's Bylaws as amended and restated February 27, 2003, were
filed as Exhibit 3(b)(1) to Registrant's Report on Form 10-Q dated
May 5, 2003, and the same are hereby incorporated herein by
reference.
4(a) A specimen form of certificate for the Registrant's common stock,
par value $.06 per share, was filed as part of a Registration
Statement on Form S-18 (Registration No. 2-74226C) as Exhibit 3(a),
as amended by Amendment No. 3 to such Registration Statement, and
the same is hereby incorporated herein by reference.
4(b) Amended and Restated Shareholder Protection Rights Agreement, dated
as of March 29, 2001, including as Exhibit A the form of Certificate
of Adoption of Resolution Establishing Series of Shares of Junior
Participating Preferred Stock of the Company, and as Exhibit B the
form of Rights Certificate and of Election to Exercise, was filed as
Exhibit 4(b) to Registrant's Report on Form 10-Q dated April 27,
2001, and the same is hereby incorporated herein by reference.
10(a)(1) A Lease dated August 15, 1981, was filed as part of a Registration
Statement on Form S-18 (Registration Number 2-74226C) as Exhibit
9(a)(1), and the same is hereby incorporated herein by reference.
10(a)(2) A First Amendment to Lease dated June 28, 1985, was filed as Exhibit
10(m) to Registrant's Report on Form 10-K dated March 18, 1986, and
the same is hereby incorporated herein by reference.
*10(b)(1) Gentex Corporation Qualified Stock Option Plan (as amended and
restated, effective February 26, 2004) was included in Registrant's
Proxy Statement dated April 6, 2004, filed with the Commission on
April 6, 2004, which is hereby incorporated herein by reference.
*10(b)(2) Specimen form of Grant Agreement for the Gentex Corporation
Qualified Stock Option Plan (as amended and restated, effective
February 26, 2004). 20
*10(b)(3) Gentex Corporation Second Restricted Stock Plan was filed as Exhibit
10(b)(2) to Registrant's Report on Form 10-Q dated April 27, 2001,
and the same is hereby incorporated herein by reference.
*10(b)(4) Specimen form of Grant Agreement for the Gentex Corporation
Restricted Stock Plan. 23
- 13 -
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
*10(b)(5) Gentex Corporation 2002 Non-Employee Director Stock Option Plan
(adopted March 6, 2002), was filed as Exhibit 10(b)(4) to
Registrant's Report on Form 10-Q dated April 30, 2002, and the same
is incorporated herein by reference.
*10(b)(6) Specimen form of Grant Agreement for the Gentex Corporation 2002
Non-Employee Director Stock Option Plan. 26
10(e) The form of Indemnity Agreement between Registrant and each of the
Registrant's directors and certain officers was filed as Exhibit 10
(e) to Registrant's Report on Form 10-Q dated October 31, 2002, and
the same is incorporated herein by reference.
31.1 Certificate of the Chief Executive Officer of Gentex Corporation
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350). 29
31.2 Certificate of the Chief Financial Officer of Gentex Corporation
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350). 30
32 Certificate of the Chief Executive Officer and Chief Financial
Officer of Gentex Corporation pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) 31
*Indicates a compensatory plan or arrangement.
- 14 -
EXHIBIT 3(A)
RESTATED ARTICLES OF INCORPORATION
OF
GENTEX CORPORATION
The following Restated Articles of Incorporation are executed by the
undersigned corporation pursuant to the provisions of Act 284, Public Acts of
1972:
1. The present name of the corporation is: Gentex Corporation.
2. The corporation identification number assigned by the Bureau is:
085536.
3. All former names of the corporation are: None.
4. The date of filing the original Articles of Incorporation was:
January 11, 1974.
The following Restated Articles of Incorporation supersede the original
Articles of Incorporation as amended and shall be the Articles of Incorporation
for the corporation:
ARTICLE I
The name of the corporation is Gentex Corporation.
ARTICLE II
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Business Corporation Act of Michigan.
ARTICLE III
The total number of shares of all classes of stock which the corporation
shall have the authority to issue is 205,000,000 shares, consisting of
200,000,000 shares of Common Stock, par value $.06 per share, and 5,000,000
shares of Preferred Stock, no par value.
The authorized shares of Common Stock of the par value of $.06 per share
are all of one class with equal voting power, and each such share shall be equal
to every other such share.
The shares of Preferred Stock may be divided into and issued in one or
more series. The Board of Directors is hereby authorized to cause the Preferred
Stock to be issued from time to time in one or more series with such
designations and such relative voting, dividend, liquidation, and other rights,
preferences, and limitations as shall be stated and expressed in the resolution
providing for the issue of such Preferred Stock adopted by the Board of
Directors. The Board of Directors by vote of a majority of the whole Board, is
expressly authorized to adopt such resolution or resolutions and issue such
stock from time to time as it may deem desirable.
ARTICLE IV
The address of the registered office, which is the same as the mailing
address, is 600 N. Centennial Street, Zeeland, Michigan 49464. The name of the
resident agent at the registered office is Fred T. Bauer.
ARTICLE V
The corporation shall, to the full extent permitted by the Michigan
Business Corporation Act, as amended from time to time, indemnify all persons
whom it may indemnify pursuant thereto.
- 15 -
ARTICLE VI
AUTHORITY OF BOARD
A. The business and affairs of the corporation shall be managed by a Board
of Directors which shall exercise all of the powers and authority of the
corporation (subject to the delegation to committees of the Board of Directors
as permitted by law and not inconsistent with these Articles of Incorporation)
except for such matters as are reserved to shareholders of the corporation by
law or by these Articles of Incorporation.
SIZE OF BOARD
B. The Board of Directors shall consist of at least six (6), but not more
than nine (9) members, and the specific number of directors to be elected or
appointed within such limits shall be as determined by the Board of Directors
from time to time.
CLASSIFICATION OF BOARD
C. Directors shall be divided into three classes and each class shall be
as nearly equal in number as possible to the other classes. At the first
election of directors subsequent to the adoption of this Article, the directors
shall be elected by class to serve for terms which expire at the first, second,
and third subsequent annual meetings of shareholders, respectively. At each
annual meeting of shareholders thereafter, directors shall be elected to serve
for a term which expires at the third annual meeting of shareholders following a
meeting at which the director is elected.
VACANCIES IN BOARD
D. Vacancies occurring in the Board of Directors by reason of death,
resignation, or removal of a director may be filled by the affirmative vote of a
majority of the remaining directors, though less than a quorum of the Board, and
vacancies occurring by reason of an increase of the number of directors may be
filled by majority vote of the Board of Directors at any meeting duly called and
convened. Directors appointed by the Board of Directors to fill any vacancies
shall hold office only until the next annual meeting of shareholders.
NOMINATION FOR BOARD
E. Nomination for directors who are proposed as replacements for directors
appointed by the Board of Directors to fill vacancies, if any, shall be
designated in ballots and/or proxies submitted to shareholders to serve such
terms of years as will make the classes of directors as nearly equal to each
other in number as possible. Nominations by shareholders for any directorship
must be submitted to the Board of Directors by written notice not later than
thirty (30) days prior to the date of the annual meeting of shareholders at
which the election is to be held (or within seven (7) days after the date the
corporation mails, or otherwise gives notice of the date of such meeting, if
such notice is given less than forty (40) days prior to the meeting date), which
notice shall state the name of the nominee, the address of the nominee's
business or residence, the nominee's principal occupation, and the name and
address of the nominee's employer or business if self-employed.
REMOVAL FROM BOARD
F. A director may be removed from office as a director, with or without
cause, only by the affirmative vote of the holders of two-thirds (2/3) of the
then issued and outstanding shares of the corporation's stock entitled to vote
thereon at a meeting duly called and convened for that purpose; provided,
however, that the term of office of any director who is first elected to the
Board of Directors after May 13, 1987, and who is then or thereafter becomes an
employee of the corporation, or any of its subsidiaries, shall automatically
terminate simultaneously with the termination of that director's employment by
the corporation or subsidiary, with or without cause.
AMENDMENT
G. This Article may not be amended or repealed, in whole or in part,
except by affirmative vote of the holders or at least two-thirds (2/3) of the
issued and outstanding shares of the corporation's capital stock entitled to
vote in the election of directors; provided, however, that such amendment or
repeal may be made by majority vote of such shareholders at any meeting of
shareholders duly called and convened where such amendment has been recommended
for approval by two-thirds (2/3) of all directors then holding office.
- 16 -
ARTICLE VII
SPECIAL REQUIREMENTS REGARDING CERTAIN TRANSACTIONS
WITH INTERESTED PARTIES
A, Unless the conditions set forth in subparagraphs 1 through 4 of this
Paragraph A are satisfied or the approval specified in subparagraph 1 of
Paragraph B of this Article has been made, the affirmative vote of the holders
of that fraction of the outstanding shares of the capital stock of the
corporation entitled to vote in the election of directors, but in no event less
than two-thirds (2/3), determined by using as the numerator a number equal to
the sum of (i) the outstanding shares of such stock beneficially owned by all
Interested Parties, plus (ii) two-thirds (2/3) of the remaining number of such
outstanding shares, and using as the denominator a number equal to the total
number of the outstanding shares entitled to vote in the election of directors,
shall be required for the adoption or authorization of a Combination or
Reorganization (as hereinafter defined) with any Interested Party (as
hereinafter defined) if, as of the record date for the determination of
shareholders entitled to vote thereon, the Interested Party is (or has been at
any time within the preceding twelve (12) months) the beneficial owner, directly
or indirectly, of five percent (5%) or more of the issued and outstanding shares
of the Corporation's capital stock entitled to vote in the election of
directors. The two-thirds (2/3) vote requirement specified in the preceding
sentence shall not be applicable if:
1. The cash and fair market value of any other consideration to be
received per share by holders of the common stock of the corporation
(including shareholders who do not vote in favor of the transactions) in
exchange or substitution for their shares in the Combination or
Reorganization is at least equal in amount to: (a) the highest per share
amount paid by the Interested Party in acquiring any of its holdings of
the common stock of the corporation; plus (b) the amount, if any, by which
six percent (6%) per annum of that per share price exceeds the aggregate
of per share amounts paid as cash dividends; in each case computed from
the date the Interested Party became an Interested Party;
2. Subsequent to becoming an Interested Party: (a) the Interested
Party shall have taken steps to ensure that the corporation's Board of
Directors included at all times representation by Continuing Directors (as
hereinafter defined) proportionate to the shareholdings of the
shareholders not affiliated with the Interested Party (with a Continuing
Director to occupy any resulting fractional Board position); (b) the
Interested Party shall not have acquired any newly issued securities of
the corporation, including securities convertible into common stock, from
the corporation, directly or indirectly, except with respect to pro rata
stock dividends or stock splits; (c) the Interested Party shall not have
acquired any additional shares of the outstanding common stock of the
corporation or securities convertible into common stock, except as a part
of the transaction which resulted in the Interested Party becoming an
Interested Party; and (d) the Interested Party shall not have received a
benefit, directly or indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges, tax credits, or other
financial assistance provided by the corporation;
3. Subsequent to the date the Interested Party became an Interested
Party there shall have been no major change in the corporation's business
or equity capital structure without, in each case, approval by at least
two-thirds (2/3) of the Continuing Directors, as well as a majority of all
Directors; and
4. A proxy statement conforming to the requirements of the
Securities Exchange Act of 1934 shall have been mailed to the shareholders
of the corporation for the purpose of soliciting shareholder approval of
the Combination or Reorganization containing at the front thereof, in a
prominent place, any recommendations as to the advisability (or
inadvisability) of the Combination or Reorganization that the Continuing
Directors, or any of them, may choose to state and, if deemed advisable by
majority of the Continuing Directors, an opinion of a reputable investment
banking firm as to the fairness (or lack thereof) of the terms of the
Combination or Reorganization from the point of view of the remaining
public shareholders of the corporation, which investment banking firm
shall be selected by a majority of the Continuing Directors and shall be
paid a reasonable fee for its services by the corporation upon receipt of
the opinion.
EXCEPTIONS
B. The provisions of Paragraph A of this Article shall not apply, and the
otherwise applicable provisions of Michigan law shall apply to:
1. Any Combination or Reorganization as to which a memorandum of
understanding with the Interested Party setting forth the principal terms
of the transaction has been approved by two-thirds (2/3) of the Continuing
Directors and a majority of all directors (provided the transaction is
consummated in substantial conformity therewith); or
2. Any Combination or Reorganization with an Interested Party where
this corporation then holds more than fifty percent (50%) of the issued
and outstanding shares of the capital stock in such Interested Party which
are entitled to vote in elections of directors.
- 17 -
DEFINITIONS
C. As used in this Article, the following words and phrases shall have the
following meanings:
1. "Interested Party" means every person or entity which first
becomes the beneficial owner of five percent (5%) or more of the
corporation's issued and outstanding shares of capital stock entitled to
vote in the election of directors after the date this Article becomes
effective. In addition, an Interested Party includes (and an Interested
Party shall be deemed to be the beneficial owner of all of the shares held
directly or indirectly by) all "Affiliates" and "Associates" (as
hereinafter defined) of such person or entity and any person or entity
with which the Interested Party, or the Affiliates or Associates thereof,
has any agreement, arrangement, or understanding with respect to the
acquisition, holding, disposition, or voting of shares of the capital
stock of this corporation, together with the successors and assigns of
such persons or entities in any transaction or series of transactions not
involving a public offering of the corporation's shares within the meaning
of the Securities Act of 1933.
2. "Combination or Reorganization" means any merger involving this
corporation (or a subsidiary of this corporation) and an Interested Party
(irrespective of the identity of the surviving corporation), any
consolidation involving this corporation (or a subsidiary of this
corporation), and an Interested Party, any sale, exchange, lease,
mortgage, transfer, or other disposition by this corporation (or a
subsidiary of this corporation) of all, or substantially all, of its
assets or business, directly or indirectly, to an Interested Party, and
any transaction whereby voting securities of this corporation (or any
subsidiary) in exchange or payment for the securities or assets of an
Interested Party.
3. "Continuing Director" means a director of the corporation holding
office as of the time this Article becomes effective, a director elected
by shareholders subsequent to the time this Article becomes effective, but
prior to the time an Interested Party acquired the status of Interested
Party, and any director who succeeded a Continuing Director pursuant to an
affirmative recommendation by a majority of Continuing Directors.
4. "Affiliate" means with respect to any person or entity that such
person or entity directly, or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with, such person or entity.
5. "Associate" means with respect to any person or entity: (1) any
corporation or organization of which such person or entity is an officer,
director, or partner, or is directly or indirectly the beneficial owner of
ten percent (10%) or more of any class of equity securities; (2) any trust
or other estate in which such person or entity has a substantial
beneficial interest or as to which such person or entity serves as trustee
or any similar capacity; and (3) any relative or spouse of such person, or
any relative of such spouse, who has the same home as such person.
INTERPRETATIONS
D. A majority of the Continuing Directors shall have the authority to
determine for purposes of this Article, on the basis of information know to
them:
1. Whether any person or entity owns beneficially five percent (5%)
or more of the issued and outstanding shares of the common stock of the
corporation.
2. Whether a person or entity is an Affiliate or Associate of
another; and
3. Whether a person or entity has an agreement, arrangement, or
understanding with another.
Any determination pursuant to this subparagraph made in good faith by the
Continuing Directors shall be conclusive and binding for the purposes specified
in this Article.
AMENDMENT
E. This Article may not be amended or repealed, in whole or in part,
except by affirmative vote of that fraction of the outstanding shares of the
capital stock of the corporation entitled to vote in the election of directors,
but in no event less than two-thirds (2/3) determined by using as the numerator
a number equal to the sum of (i) the outstanding shares of such stock
beneficially owned by all Interested Parties, plus (ii) two-thirds (2/3) of the
remaining number of such outstanding shares, and using as the denominator a
number equal to the total number of the outstanding shares of stock of the
corporation entitled to vote in the election of directors.
- 18 -
ARTICLE VIII
EVALUATION OF CERTAIN OFFERS
The Board of Directors of the corporation shall not approve, adopt, or
recommend any offer of any person or entity, other than the corporation, to make
a tender or exchange offer for any capital stock of the corporation, to merge or
consolidate the corporation with any other entity or to purchase or otherwise
acquire all or substantially all of the assets or business of the corporation
unless and until the Board of Directors shall have first evaluated the offer and
determined that the offer would be in compliance with all applicable laws and
that the offer is in the best interests of the corporation and its shareholders.
In connection with its evaluation as to compliance with laws, the connection
with its evaluation as to compliance with laws, the Board of Directors may seek
and rely upon an opinion of legal counsel independent from the offeror and it
may test such compliance with laws in any state or federal court or before any
state or federal administrative agency which may have appropriate jurisdiction.
In connection with its evaluation as to the best interests of the corporation
and its shareholders, the board of Directors shall consider all factors which it
deems relevant, including, without limitation: (1) the adequacy and fairness of
the consideration to be received by the corporation and/or its shareholders
under the offer considering historical trading prices for the corporation's
stock, the price that might be achieved in a negotiated sale of the corporation
as a whole, premiums over trading prices which have been proposed or offered
with respect to the securities of other companies in the past in connection with
similar offers, and the future prospects for the corporation and its business;
(2) the potential social and economic impact of the offer and its consummation
on the corporation, its employees, customers, and vendors; and (3) the potential
social and economic impact of the offer and its consummation on the communities
in which the corporation and any subsidiaries operate or are located.
AMENDMENT
This Article may not be amended or repealed, in whole or in part, except
by affirmative vote of the holders of at least two-thirds (2/3) of the issued
and outstanding shares of the corporation's capital stock entitled to vote in
the election of directors; provided, however, that such amendment or repeal may
be made by a majority vote of shareholders at any meeting of shareholders duly
called and convened where such amendment or repeal has been recommended for
approval by two-thirds (2/3) of all directors then holding office.
ARTICLE IX
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for a breach of fiduciary
duty as a director, except for liability: (a) for any breach of the director's
duty of loyalty to the corporation or its shareholders; (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) resulting from a violation of section 551(1) of the
Michigan Business Corporation Act; (d) for any transaction from which the
director derived an improper personal benefit; or (e) for any act or omission
occurring prior to March 1, 1987.
These Restated Articles of Incorporation were duly adopted on August 12,
2004, in accordance with the provisions of Section 642 of the Michigan Business
Corporation Act. The necessary number of shares as required by statute were
voted in favor of these Restated Articles of Incorporation.
Signed this 20th day of August, 2004.
/s/ Enoch C. Jen
----------------------------
Enoch C. Jen
Its Vice President-Finance
990048
- 19 -
EXHIBIT 10(b)(2)
GENTEX CORPORATION GRANT AGREEMENT
Date: _____________________
NAME: ________________________
ADDRESS: ________________________
________________________
Dear _____________________:
Pursuant to the terms and conditions of the Company's Qualified Stock Option
Plan (the "Plan"), you have been granted an Incentive Stock Option to purchase
___________ shares (the "Option") of stock as outlined below.
Granted to: _________________________
SS # _________________________
Grant Date: _______________
Options Granted: _______________
Option Price Per Share: $______________ Total Cost to Exercise: $________
Expiration Date:
Vesting Schedule: 5 Year Vesting
______ on _________
______ on _________
By my signature below, I hereby acknowledge receipt of this Option granted on
the date shown above, which has been issued to me under the terms and conditions
of the Plan. I further acknowledge receipt of the copy of the Plan and agreed to
conform to all of the terms and conditions of the Option and the Plan.
Please return one signed copy of this agreement to Victoria Morris.
Signature: _______________________________ Date: ______________________
(Name)
NOTE: If there are any discrepancies in the name or address shown above, please
make the appropriate corrections this form.
-20-
1. OPTION PLAN. All of the defined terms contained in this Agreement shall
have the same meaning as is set forth in the Gentex Corporation Qualified Stock
Option Plan (as amended and restated effective February 26, 2004), and this
Option Agreement is subject to the terms and provisions of that Plan, as amended
from time to time. If any inconsistency exists between the provisions of this
Agreement and the Plan, the Plan shall govern.
2. OPTION GRANT. Effective as of the Grant Date, the Optionee has been
granted an option to purchase that Number of Shares of the Company's common
stock at the Exercise Price for a period ending on the Expiration Date, all as
shown on the cover page hereof. Qualified options are intended to carry the
favorable income tax consequences for incentive stock options as defined by
Section 422 of the Internal Revenue Code, and non-qualified portions, if any,
shown on the cover page are recognized not to be eligible for such favorable tax
treatment.
3. EXERCISE. Options may not be exercised for fewer than the Minimum
Shares per transaction specified on the cover page, and options shall become
exercisable only in accordance with the Vesting Schedule specified on the cover
page. No vesting shall occur after the date of termination of employment with
the Company. Options shall be exercised by written notice to the Company stating
the number of shares to be purchased, signed by the person exercising the
option, and accompanied by payment of the full purchase price of the shares in
cash, in shares of the Company's common stock, by the surrender of option rights
granted under the Plan, or by any combination of cash, stock, or options rights
as provided in the Plan. Promptly after exercise, the Company shall issue a
stock certificate representing that number of shares to which the option was
exercised.
4. OPTIONEE'S AGREEMENT. In consideration of the grating of the option,
the Optionee agrees to continue to serve as an employee of the Company for a
period of not less than twelve (12) months from the Grant Date; provided,
however, that noting contained in this Agreement shall be interpreted so as to
impose on the Company any obligation to retain the Optionee in its employ for
any period.
5. NON-TRANSFERABILITY. This Agreement and the option it represents shall
not be transferable by the Optionee other than by will or the laws of descent
and distribution, and may be exercised during the lifetime of the Optionee only
by the Optionee or his or her guardian or legal representative. Without limiting
the generality of the foregoing, except as expressly provided above, this option
shall not be transferred, assigned, pledged, or hypothecated in any way, shall
not be assignable by operation of law, and shall not be subject to execution,
levy, attachment, or similar process. Any attempted transfer, assignment,
pledge, hypothecation, or other disposition of this option contrary to the terms
hereof, and any execution, levy attachment or similar process upon the option,
shall be null and void and without effect.
6. TERMINATION OF SERVICE AS EMPLOYEE. In the event the Optionee shall
cease to be employed by the Company for any reason other than on account of his
or her death or disability, this option shall terminate ninety (90) days after
termination of employment in the case of retirement with the consent of the
Company and as of the date of such cessation of employment in all other cases.
7. DEATH OR DISABILITY OF OPTIONEE. In the event of the Optionee's death
or disability while in the employ of the Company, the Optionee, or the
Optionee's personal representative or legatee, as the case may be, may exercise
the vested portion (as of the date of termination of employment) of this option
for a period of twelve (12) months after the death or the date of disability.
For purposes of this Agreement, the date of disability shall be the date of the
injury which caused the disability. In no event, however, shall this option be
exercised after the Expiration Date.
8. ADJUSTMENTS. In the event of any change in the number of outstanding
shares of the Company's common stock by reason of a stock dividend, stock split,
recapitalization, merger, consolidation, split-up, combination, or exchange of
shares, without the receipt of consideration by the Company, then the number of
shares subject to this option, and the option price shall be appropriately
adjusted as provided in the Plan.
___ INITIALS
-21-
9. HOSTILE TAKEOVER. In the event of a hostile change in control of the
Company, the option provided for in this Agreement shall become immediately
exercisable in full, provided the Optionee is employed by the Company at such
time. As used herein, "hostile change of control" shall mean: (i) the
acquisition or accumulation of twenty percent (20%) or more of the Company's
outstanding shares of common stock by any person, entity, or group pursuant to a
published offer to the Company's shareholders, or any merger or consolidation
with any other corporation, where the transaction in question was not either
initiated by the Company, or certified as "friendly" in a resolution by the
Company's Board of Directors passed by the affirmative vote of at least eighty
percent (80%) of all directors; or (ii) the election of a director or directors
not endorsed by the Company's Board of Directors.
The grant of this option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or
assets.
10. RIGHTS AS A SHAREHOLDER. Neither the Optionee nor a transferee of this
option shall have any rights as a shareholder with respect to any shares covered
hereby until the date he or she shall have become the holder of record of such
shares. No adjustment shall be made for dividends, distributions, or other
rights for which the record date is prior to the date on which he or she shall
have become the holder of record thereof, except as provided in paragraph 8
above.
11. MODIFICATIONS, EXTENSION, AND RENEWAL. Subject to the terms and
conditions and within the limitations of the Plan, the Committee may modify or
renew this option, or accept its surrender and authorize the granting of a new
option in substitution; provided, however, that no modification shall alter or
impair any rights or obligations hereunder without the consent of the Optionee.
12. POSTPONEMENT OF DELIVERY OF SHARES AND REPRESENTATIONS. The Company,
in its discretion, may postpone the issuance and/or delivery of shares upon any
exercise of an option until completion of such stock exchange listing, or
registration, or other qualification of such shares under any state and/or
federal law, rule, or regulation as the Company may consider appropriate, and
may require any person exercising an option to make such representations,
including a representation that it is the Optionee's intention to acquire shares
for investment and not with a view to distribution thereof, and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of the shares in compliance with applicable laws, rules, and
regulations. In such event no shares shall be issued to such holder unless and
until the Company is satisfied with the accuracy of any such representations.
13. POST-EMPLOYMENT COMPETITION. In the event Optionee engages in any
activity competitive to any business of the Company that is being actively
conducted or planned at the time of termination of Optionee's employment with
the Company, prior to the expiration of four (4) years after such termination of
employment, either directly or indirectly, as a proprietor, partner, employee,
officer, director, consultant, or holder of any equity interest in any
competitive corporation or limited liability company (excluding less than five
percent (5%) interest in any publicly traded entity), then Optionee shall
forfeit all economic benefits derived by the Optionee with respect to all stock
options granted to Optionee that were either outstanding and unexercised as of,
or granted after a date that is four (4) years prior to the date the competitive
activity commenced. Forfeiture of economic benefits shall mean the cancellation
of all unexercised options and the payment to the Company of an amount equal to
the difference between the exercise price and the market value on the date of
exercise for all exercised options. The provisions of this Section 13 shall have
no further force or effect in the event of a hostile change in control as
specified in Section 9 above. By accepting this option grant, Optionee agrees
that the provisions of this Section 13 shall apply to all options granted to
Optionee prior to the date hereof under any option plan sponsored by the
Company, including the Company's Employee Stock Purchase Plan.
___ INITIALS
-22-
EXHIBIT 10(b)(4)
GENTEX CORPORATION GRANT AGREEMENT
DATE: ___________________
Name: _______________________
Address: _______________________
_______________________
Dear _____________________:
Pursuant to the terms and conditions of the company's Second Restricted Stock
Plan (the "Plan"), you have been granted a Restricted Stock Award for
____________ shares (the "Option") of stock as outlined below.
Granted to: _______________________
SS # _______________________
Grant Date: ______________________
Options Granted: ____________________
Option Price Per Share: $______________
Vesting Schedule: Restricted Stock Vesting - 5 Yr.
On _______________
By my signature below, I hereby acknowledge receipt of this Option granted on
the date shown above, which has been issued to me under the terms and conditions
of the Plan. I further acknowledge receipt of the copy of the Plan and agreed to
conform to all of the terms and conditions of the Option and the Plan.
Please return one signed copy of this agreement to Victoria Morris.
Signature: ________________________________ Date: ________________
NOTE: If there are any discrepancies in the name or address shown above, please
make the appropriate corrections on this form.
-23-
1. SECOND RESTRICTED STOCK PLAN. All of the defined terms contained in
this Agreement shall have the same meaning as is set forth in the Gentex
Corporation Second Restricted Stock Plan, and this Agreement is subject to the
terms and provisions of that Plan, as amended from time to time. If any
inconsistency exists between the provisions of this Agreement and the Plan, the
Plan shall govern.
2. STOCK GRANT. Effective as of the Grant Date, the Grantee has been
awarded a restricted stock grant for that number of Shares of the Company's
common stock shown on the cover page hereof.
3. RESTRICTION. Between the date hereof and the release date shown on the
cover page hereof, the Shares Awarded shall be subject to the restriction
contained in the following legend, which legend shall be conspicuously placed on
the face of the certificate issued to the Grantee representing the Shares:
The Shares represented by this certificate are subject to restrictions
on transfer as provided in a Second Restricted Stock Plan adopted by
Gentex Corporation and contained in a certain Restricted Stock Agreement
between Gentex Corporation and the record holder of this certificate,
and such Shares are subject to forfeiture and return to Gentex
Corporation upon the happening of certain events specified in the Plan
and the Agreement.
4. FORFEITURE. In the event the employment relationship between the
Company and Grantee terminates during the Restriction Period due to the
Grantee's retirement, death, or disability, the restrictions shall be deemed to
have lapsed with respect to that portion of the Shares which is proportional to
the amount of the Restriction Period which has expired, and if the employment
relationship terminates for any other reason, the Committee administering the
Plan shall determine the extent to which the restrictions shall have lapsed, if
any. In the event of a dissolution or liquidation of the Company, or a merger or
consolidation involving the Company where the Company is not the surviving
corporation, the restrictions shall be deemed to have lapsed with respect to all
Shares. The Grantee's rights with respect to those Shares which are not covered
by lapsed restrictions provided above in this Section 4, shall be forfeited.
5. ADJUSTMENTS. In the event of any recapitalization of the Company, then
the number of Shares shall be appropriately adjusted as provided in the Plan.
6. PROCEDURE ON FORFEITURE. In the event of any forfeiture under this
Agreement, the certificate representing the forfeited Shares should be returned
to the Company immediately on demand. In the event of a failure to comply with
any such demand, the Plan authorizes the Company to bring suit to enforce the
obligation to return forfeited Shares, and to recover any related costs and
expenses, including attorneys' fees.
___ INITIALS
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7. POST-EMPLOYMENT COMPETITION. In the event the Grantee engages in any
activity competitive to any business of the Company that is being actively
conducted or planned at the time of termination of Grantee's employment with the
Company, prior to the expiration of four (4) years after such termination of
employment, either directly or indirectly, as a proprietor, partner, employee,
officer, director, consultant, or holder of any equity interest in any
competitive corporation or limited liability company (excluding less than five
percent (5%) interest in any publicly traded entity), then Grantee shall forfeit
all economic benefits derived by the Grantee with respect to all restricted
stock grants granted to the Grantee that were outstanding and not vested as of,
or granted after a date, that is four (4) years prior to the date the
competitive activity commenced. Forfeiture of economic benefits shall mean
payment to the Company of an amount equal to the difference between the price
paid by the Grantee for such shares, if any, and the market price for those
shares as of the date the restrictions lapsed with respect to those shares. By
accepting this restricted stock grant, the Grantee agrees that the provisions of
this section shall apply to all restricted stock grants granted to the Grantee
prior to the date hereof under any restricted stock plan sponsored by the
Company.
8. Miscellaneous. This Agreement contains the entire agreement of the
parties with respect to its subject matter, and there are no other terms and
conditions except as expressly set forth in this Agreement and in the Plan. This
Agreement may be amended or modified only by means of a written instrument
signed by an authorized representative of the Company and the Grantee. Grantee's
rights pursuant to this Agreement may not be assigned, in whole or in part,
directly or indirectly, without the prior written consent of an authorized
officer of the Company. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, personal representatives,
successors, and permitted assigns.
544925
___ INITIALS
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EXHIBIT 10(b)(6)
GENTEX CORPORATION GRANT AGREEMENT
DATE: ____________________
Name: ___________________________
Address: ___________________________
___________________________
Dear _____________:
Pursuant to the terms and conditions of the company's 2002 Non-Employee Director
Plan (the "Plan"), you have been granted a Non-Qualified Stock Option to
purchase ________ shares (the "Option") of stock as outlined below.
Granted To: _________________________
SS # _________________________
Grant Date: _____________
Option Price Per Share: $___________ Total Cost to Exercise: $______
Expiration Date: ______________
Vesting Schedule: Non-Employee Director Vesting
_____________________________
By my signature below, I hereby acknowledge receipt of this Option granted on
the date shown above, which has been issued to me under the terms and conditions
of the Plan. I further acknowledge receipt of the copy of the Plan and agreed to
conform to all of the terms and conditions of the Option and the Plan.
Please return one signed copy of this agreement to Steve Dykman.
Signature: ________________________ Date: _________________
(Name)
NOTE: If there are any discrepancies in the name or address shown above, please
make the appropriate corrections on this form.
-26-
1.OPTION PLAN. All of the defined terms contained in this Agreement shall
have the same meaning as is set forth in the Gentex Corporation 2002
Non-employee Director Stock Option Plan (the "Plan"), and this Option Agreement
(the "Agreement") is subject to the terms and provisions of that Plan, as
amended from time to time. If any inconsistency exists between the provisions of
this Agreement and the Plan, the Plan shall govern.
2. OPTION GRANT. Effective as of the Grant Date, the Optionee has been
granted an option to purchase that Number of Shares of the Company's common
stock at the Exercise Price for a period ending on the Expiration Date, all as
shown on the cover page hereof.
3. EXERCISE. Options may not be exercised for fewer than the Minimum
Shares per transaction specified on the cover page, and options shall become
exercisable only in accordance with the Vesting Schedule specified on the cover
page. Options shall be exercised by written notice to the Company stating the
number of shares to be purchased, signed by the person exercising the option,
and accompanied by payment of the full purchase price of the shares in cash or
in shares of the Company's common stock, or by any combination of cash and
stock. Options may be exercised only during periods beginning on the second
business day following the date on which the Company releases for publication
its annual or quarterly financial reports, and ending on the twelfth business
day following that date. Promptly after exercise, the Company shall issue a
stock certificate representing that number of shares to which the option was
exercised.
4. OPTIONEE'S AGREEMENT. In consideration of the granting of the
option, the Optionee agrees to continue to serve as a director of the Company
during the term for which he or she was elected.
5. TRANSFERS. This Agreement and the option it represents shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution, and may be exercised during the lifetime of the Optionee only by
the Optionee or his or her guardian or legal representative, except as
hereinafter provided. Notwithstanding the previous sentence, this option may be
transferred, in whole or in part, to the Optionee's spouse, and/or the
Optionee's descendants and/or to a trust created primarily for the benefit of
the Optionee, the Optionee's spouse and/or the Optionee's descendants
("Authorized Transfer"); provided, however, that no payment of anything of value
shall be made to the Optionee in consideration of any such transfer, and no
Authorized Transferee shall be entitled to make any further assignment or other
transfer of the option. Any transferred option may be exercised during the
Optionee's lifetime by the Authorized Transferee. Except as expressly provided
above, this option shall not be transferred, assigned, pledged, or hypothecated
in any way, shall not be assignable by operation of law, and shall not be
subject to execution, levy, attachment, or similar process. Any attempted
transfer, assignment, pledge, hypothecation, or other disposition of this option
contrary to the terms hereof, and any execution, levy attachment or similar
process upon the option, shall render this option null and void and without
effect.
6. DEATH OF OPTIONEE. In the event of the Optionee's death, the
Optionee, the Optionee's personal representative or legatee, or an Authorized
Transferee, as the case may be, may exercise this option for a period of twelve
(12) months after the date of death or disability, to the extent then
exercisable. In no event, however, shall this option be exercised after the
Expiration Date.
____ INITIALS
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7. ADJUSTMENTS. In the event of any change in the number of outstanding
shares or the Company's common stock by reason of a stock dividend, stock split,
recapitalization, merger, consolidation, split-up, combination, or exchange of
shares, without the receipt of consideration by the Company, then the number of
shares subject to this option, and the option price shall be appropriately
adjusted as provided in the Plan.
8. RIGHTS AS A SHAREHOLDER. Neither the Optionee nor a transferee of
this option shall have any rights as a shareholder with respect to any shares
covered hereby until the date he or she shall have become the holder of record
of such shares. No adjustment shall be made for dividends, distributions, or
other rights for which the record date is prior to the date on which he or she
shall have become the holder of record thereof, except as provided in paragraph
7 above.
9. TERMINATION. All or any portion of the option that is the subject to
this Agreement, and all or any portion of any other option previously granted to
the Optionee with respect to the Company's common stock, that remains
unexercised at the time the Optionee's status as a director of the Company
terminates for any reason other than death, shall automatically expire ninety
(90) days after the date of such termination and be of no further force or
effect.
__ INITIALS
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EXHIBIT 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER OF GENTEX COPORATION
I, Fred T. Bauer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gentex
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods, presented
in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures [as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] for the
registrant and have:
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this quarterly
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the period covered
by this quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's
internal control over financial reporting; and;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting;
Date: November 2, 2004
/s/ Fred T. Bauer
--------------------------------
Fred T. Bauer
Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER OF GENTEX COPORATION
I, Enoch C. Jen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gentex
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods, presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures [as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this quarterly report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the period covered by this
quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting; and;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting;
Date: November 2, 2004
/s/ Enoch C. Jen
-----------------------
Enoch C. Jen
Vice President, Finance
-30-
EXHIBIT 32
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002 (18-U.S.C. SECTION 1350)
Each, Fred T. Bauer, Chief Executive Officer of Gentex Corporation, and Enoch C.
Jen, Chief Financial Officer of Gentex Corporation, certify, to the best of
their knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18-U.S.C. Section 1350), that:
(1) The quarterly report on Form 10-Q for the quarterly period ended
September 30, 2004, which this statement accompanies, fully complies
with the requirements of Section 13 (a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in this quarterly report on Form 10-Q of the
quarterly period ended September 30, 2004, fairly presents, in all
material respects, the financial condition and results of operations of
Gentex Corporation.
Dated: November 2, 2004 GENTEX CORPORATION
By /s/ Fred T. Bauer
--------------------------
Fred T. Bauer
Its Chief Executive Officer
By /s/ Enoch C. Jen
--------------------------
Enoch C. Jen
Its Vice President-Finance/Chief
Financial Officer
A signed original of this written statement has been provided to Gentex
Corporation and will be retained by Gentex Corporation and furnished to the
Securities and Exchange Commission or its staff upon request
-31-
