SCHEDULE 14A
Information Required in Proxy Statement
Reg. /section/ 240.14a-101
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to /section/ 240.14a-11(c) or
/section/ 240.14a-12
Q.E.P. CO., INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
[ ] Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date
<PAGE>
Q.E.P. CO., INC.
1081 HOLLAND DRIVE
BOCA RATON, FLORIDA 33487
June 24, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Q.E.P. Co., Inc. (the "Company"), which will be held at Embassy Suites, 661 N.W.
53rd Street, Boca Raton, Florida 33487, on July 16, 1999, at 10:00 a.m., local
time.
The notice of the meeting and proxy statement on the following pages cover
the formal business of the meeting. Please give these proxy materials your
careful attention. It is important that your shares be represented and voted at
the Annual Meeting regardless of the size of your holdings. Accordingly, whether
or not you plan to attend the Annual Meeting, please complete, sign, and return
the accompanying proxy card in the enclosed envelope in order to make sure your
shares will be represented at the Annual Meeting. If you decide to attend the
Annual Meeting and vote in person, you will, of course, have that opportunity.
The continuing interest of the stockholders in the business of the Company
is gratefully acknowledged. We hope many will attend the meeting.
Sincerely,
/s/ LEWIS GOULD
---------------------------------------
Lewis Gould
Chairman and Chief Executive Officer
<PAGE>
Q.E.P. CO., INC.
1081 HOLLAND DRIVE
BOCA RATON, FLORIDA 33487
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 16, 1999
The Annual Meeting of Stockholders of Q.E.P. Co., Inc. will be held at
Embassy Suites, 661 N.W. 53rd Street, Boca Raton, Florida 33487, on July 16,
1999 at 10:00 a.m., local time, for the following purposes:
1. To elect five directors;
2. To ratify the appointment of Grant Thornton LLP as the Company's
independent certified public accountants for fiscal year 2000; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June 14, 1999 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting.
Stockholders are requested to vote, date, sign and promptly return the
enclosed proxy in the envelope provided for that purpose, WHETHER OR NOT THEY
INTEND TO BE PRESENT AT THE MEETING.
By Order of the Board of Directors
/s/ SUSAN J. GOULD
-------------------------------------
Susan J. Gould, Secretary
Boca Raton, Florida
June 24, 1999
<PAGE>
Q.E.P. CO., INC.
1081 HOLLAND DRIVE
BOCA RATON, FLORIDA 33487
PROXY STATEMENT
ANNUAL MEETING AND PROXY SOLICITATION INFORMATION
This proxy statement is first being sent to stockholders on or about June
24, 1999, in connection with the solicitation of proxies by the Board of
Directors of Q.E.P. Co., Inc. (the "Company"), to be voted at the Annual Meeting
of Stockholders to be held on July 16, 1999, and at any adjournment thereof (the
"Meeting"). The close of business on June 14, 1999, has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Meeting. At the close of business on the record date, the Company had
outstanding 2,664,894 shares of $0.001 par value Common Stock ("Common Stock"),
entitled to one vote per share.
Shares represented by duly executed proxies in the accompanying form
received by the Company prior to the Meeting will be voted at the Meeting. If
stockholders specify in the proxy a choice with respect to any matter to be
acted upon, the shares represented by such proxies will be voted as specified.
If a proxy card is signed and returned without specifying a vote or an
abstention on any proposal, it will be voted according to the recommendation of
the Board of Directors on that proposal. The Board of Directors recommends a
vote FOR the election of directors and FOR the ratification of the appointment
of the independent certified public accountants. The Board of Directors knows of
no other matters that may be brought before the Meeting. However, if any other
matters are properly presented for action, it is the intention of the named
proxies to vote on them according to their best judgment.
Stockholders who hold their shares through an intermediary must provide
instructions on voting as requested by their bank or broker. A stockholder who
signs and returns a proxy may revoke it at any time before it is voted by taking
one of the following three actions: (i) giving written notice of the revocation
to the Secretary of the Company; (ii) executing and delivering a proxy with a
later date; or (iii) voting in person at the Meeting.
A majority of the outstanding shares of Common Stock, represented in
person or by proxy, constitutes a quorum for the transaction of business at the
Meeting. The affirmative vote of at least a majority of the votes of the shares
of Common Stock present in person or represented by proxy at the Annual Meeting
is required to approve the matters to be voted upon at the Meeting. Votes cast
by proxy or in person at the Meeting will be tabulated by one or more inspectors
of election appointed at the Meeting, who will also determine whether a quorum
is present for the transaction of business. Abstentions and broker non-votes
will be counted as shares present in the determination of whether shares of the
Company's Common Stock represented at the Meeting constitute a quorum.
Abstentions will be treated as votes AGAINST, and broker non-votes will not be
counted for the purpose of determining whether a proposal has been approved.
The expense of preparing, printing, and mailing proxy materials to
stockholders of the Company will be borne by the Company. The Company will also
reimburse brokerage houses and other nominees for their expenses in forwarding
proxy material to beneficial owners of the Company's stock.
The executive office of the Company is located at 1081 Holland Drive, Boca
Raton, Florida 33487 and the telephone number is (561) 994-5550.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the Company's Common
Stock beneficially owned on June 1, 1999, by (i) each director and director
nominee, (ii) each executive officer named in the Summary Compensation Table,
(iii) all directors and executive officers of the Company as a group, and (iv)
any person who is known by the Company to be the beneficial owner of more than
five percent of the Common Stock outstanding. Beneficial ownership means sole or
shared voting power or investment power with respect to a security. The Company
has been informed that all shares shown are held of record with sole voting and
investment power, except as otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
NAME AND ADDRESS
OF BENEFICIAL OWNER(1) NUMBER PERCENT
- ---------------------- ------ -------
<S> <C> <C>
Lewis Gould(2) 1,348,070 50.0%
Susan J. Gould(3) 430,482 16.1%
Private Management Group
200 Corporate Drive, Suite 2100 144,052 5.4%
Irving, CA 92606
Marc P. Applebaum(4) 13,700 *
Leonard Gould(5) 12,460 *
Mervyn D. Fogel(6) 10,000 *
Apt. 6
87 Cadogan Gardens
Chelsea, London, England SW3 2RD
Christian Nast(6) 10,000 *
2917 S. Ocean Blvd., PH 1103
Highland Beach, Florida 33487
Norman R. Snesil(6) 10,000 *
2914 South Ocean Boulevard
Highland Beach, Florida 33487
Emil Vogel(6) 10,000 *
649 Hyslip Avenue
Westfield, New Jersey
All directors and executive officers as a group 1,430,560 51.5%
(8 persons)
</TABLE>
- ----------
* Less than 1%.
(1) Unless otherwise specified, the address of each person in this table is
c/o Q.E.P. Co., Inc., 1081 Holland Drive, Boca Raton, Florida 33487.
(2) Includes 414,152 shares of Common Stock owned by Susan J. Gould. Mr. Gould
has the right to vote such shares until August 2006 pursuant to the terms
of a voting trust agreement. Includes 32,600 shares which may be acquired
within 60 days through the exercise of stock options granted under the
Company's Omnibus Stock Plan of 1996.
2
<PAGE>
(3) Lewis Gould has the right to vote 414,152 of such shares until August 2006
pursuant to the terms of a voting trust agreement and has a right of first
refusal to acquire any shares of Common Stock subject to the voting trust
at a price equal to the then prevailing market price of the Common Stock.
Excludes 2,000 shares of Common Stock gifted by Lewis Gould and Susan J.
Gould to two adult children as to which Lewis Gould and Susan J. Gould
disclaim beneficial ownership. Includes 16,330 shares which may be
acquired within 60 days through the exercise of stock options granted
under the Company's Omnibus Stock Plan of 1996. In May 1998, the Board of
Directors authorized the Company to repurchase from Ms. Gould, from time
to time, up to 1,000 shares of Common Stock per month at a price per share
equal to $.50 less than the closing price of the Common Stock on the date
of repurchase. Ms. Gould is not obligated to sell any shares of Common
Stock to the Company.
(4) Includes 12,000 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Omnibus Stock Plan
of 1996.
(5) Includes 9,660 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Omnibus Stock Plan
of 1996.
(6) Includes 10,000 shares which may be acquired by each individual within 60
days through the exercise of stock options granted under the Company's
Omnibus Stock Plan of 1996.
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Meeting five directors are to be elected to hold office until the
2000 Annual Meeting of Stockholders and until their successors have been elected
and qualified. The five nominees for election as directors are Mervyn D. Fogel,
Lewis Gould, Christian Nast, Emil Vogel and Leonard Gould. Each nominee is
currently a member of the Board. Information concerning each of the nominees is
set forth below. The persons named in the enclosed proxy card have advised that,
unless otherwise directed on the proxy card, they intend to vote FOR the
election of the nominees, and that should any nominee become unable or unwilling
to accept nomination or election for any reason, votes will be cast for a
substitute nominee designated by the Board of Directors. The Board of Directors
has no reason to believe the nominees named will be unable or unwilling to serve
if elected.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
POSITION, PRINCIPAL OCCUPATION,
NOMINEE AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS DIRECTOR SINCE
- ------- --- ------------------------------------- --------------
<S> <C> <C> <C>
Lewis Gould 56 Chairman of the Board and Chief Executive 1979
Officer of the Company since 1979
(inception).
Mervyn D. Fogel 57 Managing Director The Home Place, Ltd., 1996
London, England since 1997, Vice President
of Business Development from 1992 to 1997
of Pentland USA, a division of Pentland TLC.
Emil Vogel 56 President, Tarnow International, an 1997
executive search firm since 1982.
Christian Nast 67 Vice Chairman, Rexall Sundown, Inc. 1998
("Rexall") (NASD: RXSD) since February 1999.
Mr. Nast served as Chief Executive Officer
of Rexall from 1997-1999 and President from
1990 and has been a Director since 1993.
From 1989 to 1995, he was Executive Vice
President, North America at Colgate
Palmolive Company.
Leonard Gould 30 Vice President, Home Center Sales of the
Company, since 1998. Management positions
in the Company since 1995.
</TABLE>
3
<PAGE>
OTHER EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
EXECUTIVE OFFICER AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS
- ----------------- --- ---------------------------------------------------------------------
<S> <C> <C>
Susan J. Gould 53 Vice President and Corporate Secretary of the Company since 1979
(inception), responsible for billing, collection, customer service
and related functions.
Marc P. Applebaum 43 Senior Vice President, Chief Financial Officer and Treasurer of
the Company since March 1997. Senior Vice President of Finance
and Control and Assistant Treasurer from December 1993 to March
1997 of Pueblo-Xtra International, Inc., a food retailer based
in Florida and Puerto Rico. Audit partner with the international
accounting firm of Coopers & Lybrand, from 1991 to 1993.
Norman R. Snesil 55 President, Chief Operating Officer of the Company August 1, 1998
through April 19, 1999.
</TABLE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended February 28, 1999, the Company's Board of
Directors held three meetings. Except as otherwise stated below, each of the
Company's directors attended at least 75% of the total number of Board meetings
and meetings of committees of which he is a member that were held during fiscal
year 1999. Mervyn Fogel attended only two of the three Board meetings held
during fiscal 1999. Leonard Gould was not a Director of the Company at any time
during fiscal 1999 and as such attended no meetings during fiscal 1999. During
the period of fiscal 1999 that Mr. Nast served as a director of the Company, the
Board of Directors held one meeting.
The Compensation Committee consisted of William Killian and Emil Vogel.
The purpose of the Compensation Committee is to recommend to the Board both base
salary levels and bonuses for the Chief Executive Officer and the other officers
of the Company. The Compensation Committee also reviews and makes
recommendations with respect to the Company's existing and proposed compensation
plans, and serves as the committee responsible for administering the Company's
Omnibus Stock Plan of 1996. During fiscal 1999, the Compensation Committee met
once but it did not participate in the determination of the salaries and bonuses
paid to the Company's executive officers other than the Company's Chief
Executive Officer. Mr. Killian resigned as a director of the Company and from
the Compensation Committee on June 14, 1999. See "Board Compensation Committee
Report on Executive Compensation."
The Audit Committee consists of Christian Nast and Emil Vogel. The duties
of the Audit Committee are to recommend to the Board of Directors the selection
of independent certified public accountants, to meet with the Company's
independent certified public accountants to review the scope of audit procedures
employed by the Company's independent auditors, to review and approve the audit
reports rendered by the Company's independent auditors and to approve the audit
fee charged by the independent auditors. During fiscal 1999, the Audit Committee
met twice.
COMPENSATION OF DIRECTORS
During fiscal 1999, the fee paid to all non-employee Directors was
increased to $2,000 for each meeting of the Board of Directors and $500 for each
committee meeting attended. They are also granted 2,000 options at fair market
value. These amounts were paid to the Directors for two meetings during fiscal
1999. Prior to the increase, all non-employee Directors were paid $500. The
Directors also received reimbursement for reasonable travel or other
out-of-pocket expenses incurred in connection with attending such meetings. No
employee of the Company received any additional compensation for his service as
a Director.
4
<PAGE>
TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
During fiscal 1999, the Company engaged Mr. Vogel and his executive search
firm, Tarnow International, to conduct an executive search for an executive
position within the Company. Mr. Vogel's fee which was determined based on a
percentage customary within the industry of the executive's salary was $96,263.
In addition, the Company engaged Mervyn Fogel to provide international sales and
marketing consulting in connection with the Company's European activities. He
received $6,600 during fiscal 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than ten
percent of the Common Stock of the Company to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission.
Directors, executive officers and ten percent stockholders are required to
furnish the Company with copies of all Section 16(a) reports they file. Based on
its review of the copies of such reports received by it, the Company believes
that during fiscal 1999, its directors, executive officers and ten percent
beneficial owners complied with all applicable filing requirements.
EXECUTIVE COMPENSATION
The following table presents certain information concerning the
compensation received or accrued for services rendered during the fiscal years
ended February 28, 1999, February 28, 1998 and February 28, 1997 for the
Company's Chief Executive Officer and each other executive officer of the
Company whose total annual salary and bonus exceeded $100,000 in fiscal year
1999 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ----------------------
NUMBER OF
NAME AND PRINCIPAL FISCAL OTHER ANNUAL SECURITIES
POSITION YEAR SALARY BONUS COMPENSATION UNDERLYING OPTIONS
-------- ---- ------ ----- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Lewis Gould 1999 $333,462 $206,000 $17,267(1) 20,000
Chairman and Chief 1998 334,138 45,000 23,747(1) 16,000
Executive Officer 1997 275,724 20,000 28,582(1) 10,000
Susan J. Gould 1999 $120,765 $7,500 $ 2,500(1) 1,000
Vice President and 1998 118,045 12,500 7,549(1) -0-
Secretary 1997 115,611 13,000 13,754(1) 16,000
Marc P. Applebaum 1999 $172,529 $30,637 $ 1,737(1) 3,000
Chief Financial Officer 1998 144,229 20,000 11,000
and Treasurer 1997 N/A N/A
Norman R. Snesil 1999 $153,365 $80,208 7,000(2) 50,000
President, Chief
Operating Officer
</TABLE>
- ----------
(1) Represents contributions made by the Company under its 401(K) and profit
sharing plans, and in the case of Mr. Gould, an automobile allowance in
the amount of $14,764, $8,728 and $7,848 in 1999, 1998 and 1997,
respectively.
(2) Represents an automobile allowance for Mr. Snesil of $7,000. Mr. Snesil
resigned as a director of the Company and from all of his officer
positions with the Company as of April 19, 1999.
5
<PAGE>
OPTION GRANTS IN FISCAL 1999
The following table sets forth certain information relating to option
grants pursuant to the Company's Omnibus Stock Plan of 1996 in the fiscal year
ended February 28, 1999 to the individuals named in the Summary Compensation
Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES OF % OF TOTAL OPTIONS POTENTIAL REALIZABLE VALUES AT
COMMON STOCK GRANTED TO EXERCISE ASSUMED ANNUAL RATES OF STOCK
UNDERLYING OPTIONS EMPLOYEES IN PRICE PER EXPIRATION PRICE APPRECIATION FOR
GRANTED FISCAL YEAR SHARE DATE OPTION TERM (1)
------------------- ------------------ --------- ---------- ------------------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Lewis Gould 20,000 18.4% $9.00 7/17/08 66,386 212,320
Norman Snesil 50,000 46.6% $9.00 7/17/08 165,966 530,550
Marc P. Applebaum 3,000 2.8% $9.00 7/17/08 9,957 31,851
Susan Gould 1,000 1.0% $9.00 7/17/08 3,319 10,617
</TABLE>
- --------------
(1) Potential realizable value is based on the assumed growth rates for the
option term. The actual value, if any, an executive may realize will depend
on the excess of the stock price over the exercise price on the date the
option is exercised, therefore, there is no assurance the value realized by
an executive will be at or near the amounts reflected in this table.
OPTION VALUES AS OF FEBRUARY 28, 1999
The following table sets forth certain information with respect to the
unexercised options to purchase Common Stock granted under the Omnibus Stock
Plan of 1996 to the individuals named in the Summary Compensation Table above.
None of the individuals named in the Summary Compensation Table exercised any
options to purchase Common Stock during the fiscal year ended February 28, 1999.
FEBRUARY 28, 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NAME OPTIONS AT IN-THE-MONEY OPTIONS
FEBRUARY 28, 1999 AT FEBRUARY 28, 1999 (1)
--------------------------- ---------------------------
EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Lewis Gould 26,000 20,000 $ 23,801 -0-
Susan Gould 16,000 1,000 $8,800 -0-
Marc P. Applebaum 11,000 3,000 $ 20,050 -0-
</TABLE>
- -----------
(1) Based on the public trading price of the Common Stock of $8.50 on February
28, 1999.
401(K) PLAN
Effective March 1, 1995, the Company merged, amended and restated its prior
defined contribution profit sharing plan and its prior 401(k) plan into a
revised plan (the "401(k) Plan") to provide retirement income to employees of
the Company. The prior plans were, and the 401(k) Plan is intended to remain,
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended.
The 401(k) Plan covers all employees who are at least age 21 and have completed
one year of service. It is funded each year by the following contributions: (i)
voluntary pre-tax ("salary reduction") contributions from employees up to a
maximum dollar limit set by law (and increased for cost of living changes), (ii)
discretionary matching contributions by the Company equal to a percentage of the
amount of the employee's salary reduction contribution, which percentage is to
be determined each year by the Company (and may be zero), and (iii) a profit
sharing contribution, the amount of which, if any, is determined by the Company
in its sole discretion. Upon leaving the Company, each participant is 100%
vested with respect to the participant's contributions and is vested based on
years of service with respect to the Company's matching contributions.
Contributions are invested as directed by the participant in investment funds
available under the 401(k) Plan. Full retirement benefits are payable to each
participant in a single cash payment upon the participant's retirement,
termination of employment, death or disability.
6
<PAGE>
EMPLOYMENT AGREEMENT
Effective June 1996, the Company entered into an employment agreement with
Lewis Gould. The agreement provides that Mr. Gould shall devote his full
business time to the Company, may be terminated by the Company for "cause" (as
defined in the agreement) and will receive an annual base salary of $275,000,
subject to adjustment for cost of living increases. The agreement provides that
Mr. Gould may receive an annual bonus at the discretion of the Board of
Directors and will receive lump sum compensation equal to 2.9 times his annual
salary and bonus in the event of a non-negotiated change in control of the
Company. The Company also provides Mr. Gould with an automobile allowance. The
employment agreement extends for a three-year term and is subject to successive
one-year renewals thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, the members of the Compensation Committee were William
Killian and Emil Vogel, each of whom are non-employee directors of the Company.
Lewis Gould, the Company's Chairman and Chief Executive Officer, participated in
deliberations concerning executive compensation (other than the compensation of
the Chief Executive Officer) during the Company's fiscal year ended February 28,
1999. As previously stated, Mr. Killian resigned as a director of the Company in
June 1999. See "Board Compensation Committee Report on Executive Compensation."
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934 THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT,
IN WHOLE OR IN PART, THE FOLLOWING BOARD COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION AND THE PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
All executive officer compensation for fiscal 1999 (other than the
compensation of the Chief Executive Officer) was established by Lewis Gould, the
Company's Chairman of the Board and Chief Executive Officer. In determining
executive officer compensation, Mr. Gould took into consideration all factors he
deemed relevant, including business conditions in general and in the Company's
line of business, the Company's performance, and the performance of the specific
executive officer under consideration. While the Board of Directors was advised
of Mr. Gould's determinations and Mr. Gould acted after receiving the advice and
recommendations of other executive officers, his decisions were not brought to
the Board of Directors or the Compensation Committee for formal action. In
addition to salaries and retirement plan contributions, the compensation program
for executive officers in fiscal 1999 also included awards of stock options
under the Company's Omnibus Stock Plan of 1996 and bonuses. The awards granted
to executive officers during fiscal 1999 under this plan and bonuses were
approved by the Compensation Committee and the Board of Directors. The Board of
Directors believes that stock options provide additional incentive to executive
officers to continue in the service of the Company and align the interests of
executive officers with those of the Company's stockholders.
The compensation for Mr. Gould is governed by the terms of an employment
agreement entered into in June 1996. In July of 1998, Mr. Gould received an
increase in an annual base salary from $300,000 to $360,000. The agreement
provides that Mr. Gould may receive, as discretionary, an annual bonus. During
fiscal 1999, the Compensation Committee awarded Mr. Gould a bonus of $206,000.
In determining the bonus and the adjustment in base salary to be paid to Mr.
Gould, the Compensation Committee took into consideration a number of factors,
including the 82.5% growth in the Company's net sales in fiscal 1999, the
acquisitions completed during fiscal 1998, the expansion of the Company's
customer base and overall performance of the Company, much of which was
attributable to Mr. Gould's efforts. In addition, during fiscal 1999, the
Compensation Committee awarded Mr. Gould options to purchase 20,000 shares of
Common Stock under the Omnibus Stock Plan of 1996.
As described in this report, Lewis Gould, individually, and the other
members of the Compensation Committee determined portions of executive officer
compensation for fiscal 1999, respectively. Accordingly, this report is provided
by each member of the Compensation Committee who participated in determining
1999 executive officer compensation, and who currently serves as a member of the
Company's Board of Directors.
Lewis Gould
Emil Vogel
7
<PAGE>
PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total returns for the
Company's Common Stock as compared with the cumulative total return for the
NASDAQ Stock Market (U.S.) Index and the Russell 2000 Index. The Securities and
Exchange Commission rules provide that the Company may compare its returns to
those of issuers with similar market capitalization if the Company does not use
a published industry or line-of-business index as a comparison and does not
believe it can reasonably identify a peer group. After reasonable inquiry, the
Company determined that no existing published industry or line-of-business
indexes were applicable to the Company's business. In addition, the Company was
unable to identify a peer group of publicly traded companies to which it
believed a reasonable and meaningful comparison could be made. Therefore, the
Company determined to compare its returns to those of the Russell 2000 Index, an
index which the Company believes includes companies with market capitalizations
similar to its own. The graph assumes that $100 was invested in the Company's
Common Stock on September 18, 1996 (the date the Company's Common Stock
commenced trading on the NASDAQ National Market System) and in each of the
indexes on August 31, 1996, and that all dividends were reinvested.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
=====================================================================================================
8-31-96 9-18-96 2-28-97 2-28-98 2-28-99
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Q.E.P. Co., Inc. $100 $ 94 $ 99 $100
- -----------------------------------------------------------------------------------------------------
NASDAQ Stock Market (U.S.) $100 $114 $148 $192
- -----------------------------------------------------------------------------------------------------
Russell 2000 $100 $109 $137 $120
=====================================================================================================
</TABLE>
The Company cautions that the stock price performance shown in the graph
above should not be considered indicative of potential future stock price
performance.
8
<PAGE>
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's Board of Directors has appointed Grant Thornton LLP, Fort
Lauderdale, Florida, as independent accountants to audit the consolidated
financial statements of the Company for the year ending February 29, 2000.
Representatives of Grant Thornton LLP are expected to be present at the Annual
Meeting of Stockholders with the opportunity to make a statement if they desire
to do so and to respond to appropriate questions posed by stockholders. The
Company has not had any changes in or disagreements with its independent
accountants on accounting or financial disclosure issues. If the stockholders do
not ratify the appointment of Grant Thornton LLP, the Company will select other
independent accountants. The Board of Directors recommends a vote FOR the
ratification of the appointment of Grant Thornton LLP as the Company's
independent certified public accountants for the year ending February 29, 2000.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended for presentation at the 2000 Annual
Meeting of Stockholders must be received by the Company on or before February
25, 2000 in order to be included in the Company's proxy statement and form of
proxy for that meeting.
OTHER MATTERS
The Board of Directors is not aware of any other matters to come before the
Meeting. However, if any other matters properly come before the Meeting, it is
the intention of the persons named in the enclosed form of proxy to vote said
proxy in accordance with their judgment in such matters.
9
<PAGE>
Q.E.P. CO., INC.
1081 Holland Drive
Boca Raton, Florida 33487
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lewis Gould and Marc P. Applebaum, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them or their substitutes to represent and to vote, as
designated below, all the shares of stock of Q.E.P. Co., Inc. held of record by
the undersigned on June 14, 1999, at the annual meeting of stockholders to be
held on July 16, 1999 or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
MERVYN D. FOGEL LEWIS GOULD LEONARD GOULD CHRISTIAN NAST EMIL VOGEL
2. PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR 2000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(CONTINUED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2
DATED: , 1999
----------------------
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Signature
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Signature if held jointly
Please sign exactly as name appears on
this proxy. When shares are held by joint
tenants, both should sign. When signing
as attorney, as executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by
President or other authorized officer. If
a partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
