STOCK-BASED COMPENSATION PLANS

Employee Stock Option Plan

In 2004, a new Employee Stock Option Plan was approved by shareholders, replacing the prior plan. The Company may grant options for up to 18,000,000 shares under its new Employee Stock Option Plan. The Company has granted options on 15,723,739 shares (net of shares from canceled/expired options) under the new plan through December 31, 2013. Under the plans, the option exercise price equals the stock’s market price on date of grant. The options vest after one to five years, and expire after three to seven years.

The fair value of each option grant in the Employee Stock Option Plan was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the indicated periods:



	2013			2012			2011
Dividend yield⁽¹⁾	2.6		%	2.7		%	2.7		%
Expected volatility ⁽²⁾	44.7		%	45.5		%	41.6		%
Risk-free interest rate ⁽³⁾	1.3		%	0.8		%	1.4		%
Expected term of options (in years) ⁽⁴⁾	4.0			4.1			4.2
Weighted-average grant-date fair value	$	7		$	6		$	8

(1) Represents the Company's estimated cash dividend yield over the expected term of option grant.


(2)	Amount is determined based on analysis of historical price volatility of the Company's common stock. The expected volatility is based on the daily percentage change in the price of the stock over a period equal to the expected term of the option grant.

(3) Represents the U.S. Treasury yield over the expected term of the option grant.


(4)	Represents the period of time that options granted are expected to be outstanding. Based on analysis of historical option exercise activity, the Company has determined that all employee groups exhibit similar exercise and post-vesting termination behavior.

As of December 31, 2013, there was $24,527,192 of unrecognized compensation cost related to share-based payments which is expected to be recognized over the remaining vesting periods, with a weighted-average period of 2.2 years.

A summary of the status of the Company’s employee stock option plan at December 31, 2013, 2012 and 2011, and changes during the same periods are presented in the tables and narrative below:



	2013
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	8,861		$	21
Granted	2,731		25
Exercised	(2,225	)	16			$	20,884
Forfeited	(367	)	23
Outstanding at End of Year	9,000		23		3.4 Yrs	$	85,633
Exercisable at End of Year	2,745		$	23	2.3 Yrs	$	28,302



	2012
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	7,555		$	21
Granted	2,641		20
Exercised	(689	)	15			$	3,810
Forfeited	(646	)	21
Outstanding at End of Year	8,861		21		3.4 Yrs	$	11,730
Exercisable at End of Year	3,003		$	19	2.2 Yrs	$	7,617



	2011
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	6,805		$	17
Granted	2,462		29
Exercised	(1,497	)	16			$	20,659
Forfeited	(215	)	19
Outstanding at End of Year	7,555		21		3.5 Yrs	$	66,295
Exercisable at End of Year	2,024		$	17	2.3 Yrs	$	26,218

A summary of the status of the Company’s non-vested employee stock option activity for the years ended December 31, 2013, 2012, and 2011, are presented in the table and narrative below:



	2013				2012				2011
	Shares (000)		Wtd. Avg Grant Date Fair Value		Shares (000)		Wtd. Avg Grant Date Fair Value		Shares (000)		Wtd. Avg Grant Date Fair Value
Nonvested Stock Options at Beginning of Year	5,858		$	6	5,530		$	6	5,038		$	5
Granted	2,731		7		2,641		6		2,462		8
Vested	(2,022	)	6		(1,936	)	5		(1,766	)	5
Forfeited	(313	)	7		(377	)	6		(204	)	5
Nonvested Stock Options at End of Year	6,254		$	7	5,858		$	6	5,530		$	6

Non-employee Director Stock Option Plan

In 2012, an Amended and Restated Non-employee Director Stock Option Plan, covering a total of 500,000 shares of common stock, was approved by shareholders replacing a prior plan. The Company has granted options on 84,000 shares (net of shares from canceled options) under the new director plan and 549,240 shares (net of shares from canceled options) under a prior plan through December 31, 2013. Under the shareholder approved plans, the option exercise price equals the stock's market price on date of grant. The options vest after six months, and expire after ten years.

The fair value of each option grant in the Non-employee Director Stock Option Plans was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the indicated periods:



	2013			2012			2011
Dividend yield ⁽¹⁾	2.7		%	2.6		%	2.7		%
Expected volatility⁽²⁾	45.9		%	44.5		%	40.5		%
Risk-free interest rate ⁽³⁾	1.9		%	1.7		%	3.2		%
Expected term of options (in years) ⁽⁴⁾	7.0			6.8			6.5
Weighted-average grant-date fair value	$	9		$	8		$	11

(1) Represents the Company's estimated cash dividend yield over the expected term of option grant.


(2)	Amount is determined based on analysis of historical price volatility of the Company's common stock. The expected volatility is based on the daily percentage change in the price of the stock over a period equal to the expected term of the option grant.

(3) Represents the U.S. Treasury yield over the expected term of the option grant.


(4)	Represents the period of time that options granted are expected to be outstanding. Based on analysis of historical option exercise activity, the Company has determined that non-employee directors exhibit similar exercise and post-vesting termination behavior.

As of December 31, 2013, there was no unrecognized compensation cost related to share-based payments under this plan.

A summary of the status of the Company’s Non-employee Director Stock Option Plan at December 31, 2013, 2012, and 2011, and changes during the same periods are presented in the tables and narrative below:



	2013
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	234		$	21
Granted	42		25
Exercised	(45	)	20			$	300
Forfeited	—		—
Outstanding at End of Year	231		22		6.4 Yrs	$	2,491
Exercisable at End of Year	231		$	22	6.4 Yrs	$	2,491



	2012
	Shares (000)	Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	192	$	21
Granted	42	22
Exercised	—	—
Forfeited	—	—
Outstanding at End of Year	234	21		6.4 Yrs	$	225
Exercisable at End of Year	234	$	21	6.4 Yrs	$	225



	2011
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	244		$	18
Granted	42		32
Exercised	(94	)	17			$	1,362
Forfeited	—		—
Outstanding at End of Year	192		21		6.8 Yrs	$	1,740
Exercisable at End of Year	192		$	21	6.8 Yrs	$	1,740

A summary of the status of the Company’s non-vested Non-employee Director Stock Option Plan activity for the years ended December 31, 2013, 2012, and 2010, are presented in the table and narrative below:



	2013				2012				2011
	Shares (000)		Wtd. Avg Grant Date Fair Value		Shares (000)		Wtd. Avg Grant Date Fair Value		Shares (000)		Wtd. Avg Grant Date Fair Value
Nonvested stock options at Beginning of Year	—		$	—	—		$	—	—		$	—
Granted	42		9		42		8		42		11
Vested	(42	)	9		(42	)	8		(42	)	11
Forfeited					—		—		—		—
Nonvested stock options at End of Year	—		$	—	—		$	—	—		$	—

Employee Stock Purchase Plan

In May 2013, the 2013 Gentex Corporation Employee Stock Purchase Plan covering 1,000,000 shares of common stock was approved by the shareholders, replacing a prior plan. Under such plan, the Company sells shares at 85% of the stock’s market price at date of purchase. Under ASC 718, the 15% discounted value is recognized as compensation expense. The following table summarizes shares sold to employees under the 2013 Plan and the prior plan in the years ended December 31, 2013, 2012 and 2011.



Plan	2013	2012	2011	Cumulative Shares Issued in 2013	Weighted Average Fair Value 2013
2013 Employee Stock Purchase Plan	51,462	—	—	51,462	$	22.64
2003 Employee Stock Purchase Plan	26,170	102,498	68,630	1,200,000	$	17.01
Total shares sold to employees	77,632	102,498	68,630

Restricted Stock Plan

In 2008, an amendment to the Company’s Second Restricted Stock Plan was approved by shareholders. The Plan amendment increased the maximum number of shares that may be subject to awards to 2,000,000 shares and to extend the Plan’s termination date to February 21, 2018. The purpose of this plan is to permit grants of shares, subject to restrictions, to key employees of the Company as a means of retaining and rewarding them for long-term performance and to increase their ownership in the Company. Shares awarded under the plan entitle the shareholder to all rights of common stock ownership except that the shares may not be sold, transferred, pledged, exchanged or otherwise disposed of during the restriction period. The restriction period is determined by a committee, appointed by the Board of Directors, but may not exceed ten years. The Company has 768,200 shares outstanding under the plan as of December 31, 2013. During 2013, 2012, and 2011, 187,090, 225,730 and 140,900 shares, respectively, were granted with a restriction period of five years at market prices ranging from $20.23 to $32.83 in 2013, $17.27 to $24.45 in 2012, and $24.96 to $30.25 in 2011, and has unearned stock-based compensation of $9,762,379 associated with these restricted stock grants. The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable restriction periods. Amortization expense of restricted stock for years ended December 31, 2013, 2012 and 2011 was $2,760,446, $2,108,583. and 2,039,377 respectively.