STOCK-BASED COMPENSATION PLANS

At December 31, 2015, the Company had four equity incentive plans which include two stock option plans, a restricted stock plan and an employee stock purchase plan. All of the plans and any material amendments thereto have previously been approved by shareholders.

Employee Stock Option Plan

In May 2014, the Employee Stock Option Plan was approved by shareholders, amending and restating a prior plan. The Company may grant up to 24,000,000 shares of common stock under the plan. The purpose of the plan is to provide an opportunity to use stock options as a means of recruiting new managerial and technical personnel and as a means for retaining certain employees of the Company and allow them to purchase shares of common stock of the Corporation and thereby have an additional incentive to contribute to the prosperity of the Company.

The Company has granted options on 7,472,734 shares (net of shares from canceled/expired options) under the new plan through December 31, 2015. 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 five 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:



	2015			2014			2013
Dividend yield⁽¹⁾	2.1		%	2.3		%	2.6		%
Expected volatility ⁽²⁾	35.8		%	38.5		%	44.7		%
Risk-free interest rate ⁽³⁾	1.5		%	1.7		%	1.3		%
Expected term of options (in years) ⁽⁴⁾	4.3			4.2			4.0
Weighted-average grant-date fair value	$	4		$	4		$	4

(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, 2015, there was $20,728,349 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 2.0 years.

A summary of the status of the Company’s employee stock option plan at December 31, 2015, 2014 and 2013, and changes during the same periods are presented in the tables and narrative below and have been adjusted to reflect the two-for-one common stock split effected in the form of a 100% stock dividend on December 31, 2014.



	2015
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	17,829		$	13
Granted	2,966		17
Exercised	(2,344	)	12			$	11,596
Forfeited	(759	)	14
Outstanding at End of Year	17,692		14		3 Yrs	$	45,842
Exercisable at End of Year	6,858		$	13	2.1 Yrs	$	23,917



	2014
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	18,000		$	12
Granted	5,757		15
Exercised	(5,224	)	11			$	26,618
Forfeited	(704	)	13
Outstanding at End of Year	17,829		13		3.5 Yrs	$	90,759
Exercisable at End of Year	4,564		$	12	2.3 Yrs	$	28,342



	2013
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	17,722		$	11
Granted	5,462		13
Exercised	(4,450	)	8			$	20,884
Forfeited	(734	)	12
Outstanding at End of Year	18,000		12		3.4 Yrs	$	85,633
Exercisable at End of Year	5,490		$	12	2.3 Yrs	$	28,302

A summary of the status of the Company’s non-vested employee stock option activity for the years ended December 31, 2015, 2014, and 2013, are presented in the table and narrative below:



	2015				2014				2013
	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	13,265		$	4	12,508		$	4	11,716		$	3
Granted	2,966		4		5,757		4		5,462		4
Vested	(4,678	)	4		(4,346	)	3		(4,044	)	3
Forfeited	(718	)	4		(654	)	4		(626	)	4
Nonvested Stock Options at End of Year	10,835		$	4	13,265		$	4	12,508		$	4

Non-employee Director Stock Option Plan

In 2012, an Amended and Restated Non-employee Director Stock Option Plan, covering a total of 1,000,000 shares of common stock, was approved by shareholders replacing a prior plan. The Company has granted options on 315,000 shares (net of shares from canceled options) under the new director plan and 1,086,480 shares (net of shares from exercised/canceled options) under a prior plan through December 31, 2015. 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:



	2015			2014			2013
Dividend yield ⁽¹⁾	2.1		%	2.2		%	2.7		%
Expected volatility⁽²⁾	36.3		%	39.6		%	45.9		%
Risk-free interest rate ⁽³⁾	2.2		%	2.5		%	1.9		%
Expected term of options (in years) ⁽⁴⁾	6.0			6.4			7.0
Weighted-average grant-date fair value	$	5		$	5		$	5

(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, 2015, there were no unrecognized compensation costs 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, 2015, 2014, and 2013, and changes during the same periods are presented in the tables and narrative below:



	2015
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	381		$	12
Granted	49		17
Exercised	(57	)	11
Forfeited	—		—
Outstanding at End of Year	373		13		6.4 Yrs	$	1,069
Exercisable at End of Year	373		$	13	6.4 Yrs	$	1,069



	2014
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	462		$	11
Granted	98		14
Exercised	(167	)	10			$	893
Forfeited	(12	)	16
Outstanding at End of Year	381		12		6.7 Yrs	$	2,137
Exercisable at End of Year	381		$	12	6.7 Yrs	$	2,137



	2013
	Shares (000)		Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contract Life	Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year	468		$	11
Granted	84		12
Exercised	(90	)	10			$	300
Forfeited	—		—
Outstanding at End of Year	462		11		6.4 Yrs	$	2,491
Exercisable at End of Year	462		$	11	6.4 Yrs	$	2,491

A summary of the status of the Company’s nonvested Non-employee Director Stock Option Plan activity for the years ended December 31, 2015, 2014, and 2013, are presented in the table and narrative below:



	2015				2014				2013
	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	49		5		98		5		84		5
Vested	(49	)	5		(98	)	5		(84	)	5
Forfeited	—		—		—		—		—		—
Nonvested stock options at End of Year	—		$	—	—		$	—	—		$	—

Employee Stock Purchase Plan

In 2013, the Gentex Corporation Employee Stock Purchase Plan covering 2,000,000 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, 2015, 2014 and 2013.



Plan	2015	2014	2013	Cumulative Shares Issued in 2015	Weighted Average Fair Value 2013
2013 Employee Stock Purchase Plan	201,785	137,028	102,924	441,737	$	14.11
2003 Employee Stock Purchase Plan	—	—	52,340	2,400,000	$	8.51
Total shares sold to employees	201,785	137,028	155,264

Restricted Stock Plan

In 2015, 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 9,000,000 shares and to extend the Plan’s termination date to February 19, 2025. 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 1,530,380 shares outstanding under the plan as of December 31, 2015. During 2015, 2014, and 2013, 229,660, 431,880 and 374,180 shares, respectively, were granted with a restriction period of five years, and cliff vest after the restriction period with no additional restrictions, at market prices ranging from $15.50 to $18.30 in 2015, $13.39 to $18.31 in 2014, and $10.12 to $16.42 in 2013, and has unearned stock-based compensation of $11,536,022 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, 2015, 2014 and 2013 was $3,486,242, $3,095,136. and $2,760,446 respectively.