<PAGE>
----------------------------------------------------
LOGO KNAPE & VOGT MANUFACTURING COMPANY
2700 OAK INDUSTRIAL DRIVE, N.E.
GRAND RAPIDS, MICHIGAN 49505
----- -----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 17, 1997
The Annual Meeting of Shareholders of Knape & Vogt Manufacturing Company
will be held at the office of the Company, 2700 Oak Industrial Drive, N.E.,
Grand Rapids, Michigan, on Friday, October 17, 1997, at 1:30 p.m., local time,
for the following purposes:
1. To elect two persons to the Board of Directors for terms expiring in 2000.
2. To consider and act upon a proposal to approve the Company's 1997 Stock In-
centive Plan.
3. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business August 29, 1997, will be
entitled to vote at the meeting or any adjournment thereof.
Dated: September 17, 1997
Grand Rapids, Michigan.
LOGO
Richard C. Simkins
Secretary
<PAGE>
DATED: SEPTEMBER 17, 1997
KNAPE & VOGT MANUFACTURING COMPANY
2700 Oak Industrial Drive, N.E., Grand Rapids, MI 49505
PROXY STATEMENT
For Annual Meeting of Shareholders
To Be Held October 17, 1997
SOLICITATION OF PROXIES FOR ANNUAL MEETING
This Proxy Statement is furnished to the shareholders of Knape & Vogt Man-
ufacturing Company in connection with the solicitation by the Board of Direc-
tors of proxies to be used at the Annual Meeting of Shareholders which will be
held at the office of the Company, 2700 Oak Industrial Drive, N.E., Grand Rap-
ids, Michigan, on October 17, 1997, at 1:30 p.m., local time. The Annual Meet-
ing is being held for the purpose of electing two directors and to consider
and act upon a proposal to approve the Company's 1997 Stock Incentive Plan.
If a proxy in the form distributed by the Company's Board of Directors is
properly executed and returned to the Company, the shares represented by the
proxy will be voted at the Annual Meeting of Shareholders and at any adjourn-
ment of that meeting. Where shareholders specify a choice, the proxy will be
voted as specified. If no choice is specified, the shares represented by the
proxy will be voted for the election of the nominees named by the Board of Di-
rectors and for the adoption of the proposal to approve the Company's 1997
Stock Incentive Plan.
A proxy may be revoked prior to its exercise by delivering a written no-
tice of revocation to the Secretary of the Company, executing and delivering a
proxy of a later date or attending the meeting and voting in person. Atten-
dance at the meeting does not, however, automatically serve to revoke a proxy.
Holders of the Company's Common Stock should complete an accompanying
white proxy, and holders of the Company's Class B Common Stock should complete
an accompanying blue proxy.
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<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
On August 29, 1997, the record date for determination of the shareholders
entitled to vote at the Annual Meeting, there were outstanding 3,469,399
shares of Common Stock of the Company, each having one vote per share and
2,437,180 shares of Class B Common Stock, each having ten votes per share. The
shares of Class B Common Stock are limited in their transferability but are
convertible on a share-for-share basis into Common Stock. The Common Stock is
entitled to elect, as a class, one quarter (rounded up) of the directors to be
elected at each election of directors. The Common Stock and the Class B Common
Stock vote together in the election of the remaining director nominees. Shares
cannot be voted unless the shareholder is present at the meeting or repre-
sented by proxy.
The following table sets forth, as of July 31, 1997, information concern-
ing persons known to management who may be deemed to be the beneficial owners
of more than five percent of either class of the Company's stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF PERCENT OF
NAME AND ADDRESS BENEFICIAL EACH COMMON
OF BENEFICIAL OWNER OWNERSHIP CLASS OF STOCK EQUITY
- --------------------------------------------------------------------------------
COMMON CLASS B COMMON CLASS B
------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Knape & Vogt Manufacturing -- 304,425(1) -- 12.49% 5.16%
Company Profit Sharing Plan and
Knape & Vogt Manufacturing
Company Pension Plan
2700 Oak Industrial Drive, N.E.
Grand Rapids, MI 49505-6083
Dimensional Fund Advisors, Inc. 337,070(2) -- 9.73% -- 5.71%
1299 Ocean Avenue
Santa Monica, CA 90401
- --------------------------------------------------------------------------------
</TABLE>
(1) 304,425 shares of Class B Common Stock are held by Comerica Bank, as
trustee of the Company's pension and profit sharing plans, of which Allan
E. Perry, Richard C. Simkins, William R. Dutmers and John E. Fallon, as
the members of the Profit Sharing and Pension Committee, share voting and
dispositive power.
(2) Information provided by Dimensional Fund Advisors, Inc. ("Dimensional")
indicates that Dimensional has sole voting power as to 227,540 shares of
Common Stock and sole dispositive power as to 337,070 shares of Common
Stock.
Seven of the Company's directors, Mary Rita Cuddohy, William R. Dutmers,
John E. Fallon, Herbert F. Knape, Raymond E. Knape, Richard S. Knape and
Michael J. Kregor are related. They are grandchildren or great grandchildren
of the Company's founder, John Knape (1863-1914). John
- 2 -
<PAGE>
Knape had seven children and these individuals, their families and their de-
scendants (the "Knape Family") at July 31, 1997, owned approximately 2,067,494
shares (85%) of the outstanding Class B Common Stock and 180,415 shares (5%)
of the outstanding Common Stock, for approximately 75% of the total voting
power of the Company. The Company believes Knape Family members owning at
least a majority of the Company's outstanding Class B Common Stock have an un-
derstanding that before taking any significant action with regard to their
Company stock, they will consult with one or more of the directors of the Com-
pany and inform such director or directors of their proposed action and rea-
sons for such action. This understanding among Knape Family members, coupled
with the fact that five of the seven branches of the Knape Family are repre-
sented on the Board of Directors, could result in the Knape Family members
taking a united position in response to attempts to acquire control of the
Company through tender offers or proxy contests and, accordingly, could result
in the Knape Family members effectively blocking any such attempts. However,
there is no assurance that such united action would be taken.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of July 31, 1997, the number of shares bene-
ficially owned by each of the Named Executives in the executive compensation
tables of this proxy statement and by all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF PERCENT OF PERCENT OF
NAME OF BENEFICIAL EACH COMMON
BENEFICIAL OWNER OWNERSHIP CLASS OF STOCK EQUITY
- ------------------------------------------------------------------------------
COMMON(1) CLASS B COMMON CLASS B
--------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Allan E. Perry 25,909 -- * * *
Richard C. Simkins 33,420 877 * * *
Michael G. Van Rooy 15,700 -- * * *
Anthony R. Taylor 6,650 -- * * *
John W. Vogus 3,900 -- * * *
All executive officers and direc-
tors as a group (12 persons) 126,779 442,777 3.66% 18.16% 9.64%
- ------------------------------------------------------------------------------
</TABLE>
*Denotes ownership of less than one percent.
(1) This table includes the following shares of Common Stock subject to
acquisition within sixty (60) days pursuant to the exercise of outstanding
stock options: Allan E. Perry--20,500 shares; Richard C. Simkins--32,104
shares; Michael G. Van Rooy--15,700 shares; Anthony R. Taylor--6,650
shares; and John W. Vogus--3,550 shares.
- 4 -
<PAGE>
DIRECTORS AND NOMINEES
The Company's Articles of Incorporation provide for the division of the
Board of Directors into three classes of nearly equal size with staggered
three-year terms of office. Two persons have been nominated for election to
the Board to serve three-year terms expiring at the 2000 Annual Meeting of
Shareholders. The Board of Directors has nominated the following persons for
election to the Company's Board of Directors: Allan E. Perry to be elected by
the Common Stock voting as a class, and John E. Fallon to be elected by the
Class B Common Stock and Common Stock voting together as a class.
Holders of Common Stock should complete the accompanying white proxy, and
holders of Class B Common Stock should complete the accompanying blue proxy.
Unless otherwise directed by a shareholder's proxy, it is intended that the
votes cast upon exercise of proxies in the form accompanying this statement
will be in favor of electing the nominees as directors, all of whom are pres-
ently serving as directors. The following pages of this Proxy Statement con-
tain more information about the nominees.
A plurality of the votes cast at the Annual Meeting is required to elect
the nominees as directors of the Company. As such, the individual who receives
the greatest number of votes cast by the holders of the Company's Common
Stock, voting as a class, will be elected as a director, and the individual
who receives the greatest number of votes cast by the holders of Common Stock
and Class B Common Stock, voting together, will be elected as directors.
Shares not voted at the meeting, whether by abstention, broker nonvote, or
otherwise, will not be treated as votes cast at the meeting. Votes cast at the
meeting and submitted by proxy will be tabulated by the Company.
If any nominee becomes unavailable for election due to circumstances not
now known, the accompanying proxy will be voted for such other person to be-
come a director as the Board of Directors selects. The Board of Directors rec-
ommends a vote FOR the election of all of the persons nominated by the Board.
PROPOSAL TO APPROVE THE
KNAPE & VOGT MANUFACTURING COMPANY
1997 STOCK INCENTIVE PLAN
On August 25, 1997, the Board of Directors adopted the Knape & Vogt Manu-
facturing Company 1997 Stock Incentive Plan (the "Stock Incentive Plan"), sub-
ject to approval by the Company's shareholders. The Stock Incentive Plan per-
mits the grant of stock options and restricted stock (collectively or individ-
ually referred to as "Awards") to selected key employees of the Company and
its subsidiaries. The following summary of the Stock Incentive Plan is subject
to the specific provisions contained in the complete text of the Stock Incen-
tive Plan set forth in Appendix A to this Proxy Statement. Capitalized terms
not otherwise defined herein have the meanings set forth in the Stock Incen-
tive Plan.
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<PAGE>
Purpose. The purpose of the Stock Incentive Plan is to promote the long-
term success of the Company for the benefit of its shareholders, through
stock-based compensation, by aligning the personal interests of the Company's
key employees with those of its shareholders. The Stock Incentive Plan is also
designed to allow key employees of the Company and certain of its subsidiaries
to participate in the Company's future, as well as to enable the Company to
attract, retain, and reward such employees.
Administration. The Stock Incentive Plan will be administered by the Exec-
utive Compensation Committee of the Board of Directors (the "Committee"). The
Committee is designated by the Board of Directors and must consist of not less
than three directors. Each member of the Committee is required to be a "non-
employee director" within the meaning of Rule 16b-3 of the General Rules and
Regulations under the Securities and Exchange Act of 1934, as amended, and no
member of the Committee is eligible to participate in the Stock Incentive
Plan. Subject to the Company's Articles of Incorporation, Bylaws, and the pro-
visions of the Stock Incentive Plan, the Committee has the authority, subject
to approval by the Company's Board of Directors, to select key employees to
whom Awards may be awarded; the type of Awards (or combination thereof) to be
granted; the number of shares of Common Stock to be covered by each Award; the
terms and conditions of any Award, such as conditions of forfeiture and
vesting requirements; and to determine whether, to what extent and under what
circumstances grants of Awards are to operate on a tandem basis and/or in con-
junction with or apart from other cash compensation arrangements made by the
Company other than under the terms of the Stock Incentive Plan. The Committee
has the authority to adopt, alter and repeal rules, guidelines and practices
governing the Stock Incentive Plan as necessary to interpret the Stock Incen-
tive Plan and any Awards and to supervise the administration of the Stock In-
centive Plan.
Types of Awards. The Stock Incentive Plan provides for the granting of two
types of Awards: stock options and restricted stock.
Stock Options. An "Option" is a contractual right to purchase a number of
shares at a future date at a specified price. An Option granted to an employee
may be either an Incentive Stock Option, as defined in Section 422 of the In-
ternal Revenue Code of 1986, as amended (the "Code"), or a Nonqualified Stock
Option. The calculation of the number of Options that may be granted to an el-
igible employee, and the method for determining their exercise price, is de-
scribed below.
Only employees who participate in the Company's new Economic Value Added
(EVA) Plan are eligible to receive Options under the Stock Incentive Plan. The
EVA Plan, which is referenced in the Committee Report on Executive Compensa-
tion, provides a framework within which management can make decisions that are
intended to build long-term value for the Company and its shareholders rather
than focus on short-term results. Under the EVA Plan, target bonuses are es-
tablished for participants based on improvement in EVA (after-tax operating
profit of the Company less a charge for the cost of the capital employed to
generate that profit). The number of Options that may be granted to an em-
ployee is determined by a formula contained in the Stock Incentive Plan. The
formula is designed to simulate a purchase of an Option by the employee at a
price equal to 5% of the
- 6 -
<PAGE>
current stock price of the shares covered by the Option. The employee first
elects, prior to the beginning of the fiscal year, to waive and designate a
portion of that employee's EVA target bonus for use in determining Option
grants (the "EVA Bonus Option Amount"). The Option granted may be either an
Incentive Stock Option or a Nonqualified Stock Option. At the end of the fis-
cal year, if the employee's EVA target bonus is earned, the number of shares
of Common Stock subject to any Option granted to the employee will be deter-
mined by dividing that employee's EVA Bonus Option Amount by 5% of the fair
market value of a share of Common Stock on the date of grant. The EVA Bonus
Option Amount is not paid in consideration for the Option; it is merely a fig-
ure utilized in the formula to determine the number of shares covered by an
Option granted under the Stock Incentive Plan.
The exercise price included in both Incentive Stock Options and Nonquali-
fied Stock Options is a single fixed exercise price which must equal at least
100% of the fair market value of the stock at the date of grant, increased by
a fixed percentage increase compounded annually over the term of the Option
(the "Fixed Percentage Increase") determined in the manner described below.
Fair market value, as to Incentive Stock Options, is the closing sale price
per share of the Common Stock on the relevant valuation date on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"). Fair
market value, as to Nonqualified Stock Options, is the average NASDAQ closing
sale price per share of the Common Stock during the calendar month immediately
preceding the relevant valuation date. The Fixed Percentage Increase is a per-
centage equal to the yield on five-year U.S. Treasury securities plus 2%, less
the projected dividend yield on the Company's Common Stock as determined by
the Committee and the Board of Directors.
The term of each Option is five years after the date the Option is grant-
ed. Subject to certain exceptions provided in the Stock Incentive Plan, all
Options granted under the Stock Incentive Plan vest and become exercisable
three years after the date the Option was granted. The Stock Incentive Plan
provides that all Awards will be fully vested and exercisable upon a "Change
in Control" of the Company, as defined in the Stock Incentive Plan.
The following example illustrates the calculation of the terms of a hypo-
thetical Option grant under the Stock Incentive Plan. Assume (a) an executive
of the Company has designated an EVA Bonus Option Amount of $10,000 which is
subsequently earned, (b) the fair market value of Company stock on the date of
grant is $18.00 per share, (c) the yield on 5-year U.S. Treasury securities is
6.2%, and (d) the projected, annual dividend yield is 3.65%.
Example: NUMBER OF OPTION SHARES
5% of $18.00 (the fair market value) is $0.90.
Number of shares covered by Option = 11,111 ($10,000 / $0.90)
EXERCISE PRICE
The Fixed Percentage Increase would equal 4.55% (6.2% + 2% -
3.65%). Based upon the five-year term of the Option, the exercise
price would equal $22.48 per share ($18.00 x 4.55%, compounded
over five years).
- 7 -
<PAGE>
As a result, for the Option to have economic value to the executive, the fair
market value of the Company's Common Stock must exceed $22.48 per share. If
the value of a share does not exceed that amount, the executive has lost the
$10,000 bonus amount which was waived in order to obtain the Option. Moreover,
before the executive could achieve any economic value, the Company's share-
holders would realize an annual return of 8.2% (4.55% increase in stock price
plus 3.65% dividend yield).
Restricted Stock. "Restricted Stock" are shares of Common Stock granted to
an employee subject to vesting requirements and other restrictions. Subject to
adjustments as described below, no more than 50,000 shares of Restricted Stock
may be issued under the Stock Incentive Plan. The Committee, subject to ap-
proval by the Board of Directors, determines the eligible persons to receive
Restricted Stock, the number of shares to be awarded, the price (if any) to be
paid by the employee, the vesting schedule and forfeiture provisions, and all
other terms or conditions of the Restricted Stock award. The Committee may
condition the grant of Restricted Stock upon the achievement of specific busi-
ness objectives and performance measures. The provisions of Restricted Stock
need not be the same with respect to each employee who receives Restricted
Stock. It is expected that Restricted Stock will be used in only limited and
special situations. The Board of Directors has approved guidelines for the
award of a limited number of shares of Restricted Stock as a means of making
up the loss to executives resulting from dollar maximums imposed by federal
law on the amounts which may be contributed on their behalf to the Company's
profit sharing plan. Under these guidelines, the transfer of any shares
awarded as Restricted Stock would be restricted until the executive's retire-
ment. Currently, these guidelines would affect only two executives and the
maximum number of shares that may be awarded as Restricted Stock in any year
should not exceed a total of 1,500.
Shares Subject to Stock Incentive Plan. Six hundred thousand (600,000)
shares of Common Stock, $2.00 par value, are proposed to be set aside for use
under the Stock Incentive Plan. The shares to be issued under the Stock Incen-
tive Plan will be authorized and unissued shares, including shares reacquired
by the Company which have that status. The number of shares that may be issued
under the Stock Incentive Plan, the number of shares subject to Options, and
the number of shares that are or may be issued as Restricted Stock are subject
to adjustments in the event of a merger, reorganization, consolidation, recap-
italization, dividend (other than ordinary cash dividends), stock splits, or
other change in corporate structure affecting the Common Stock. Subject to
certain restrictions, unexercised Options, lapsed shares of Restricted Stock,
and shares surrendered in payment for exercising Options may be reissued under
the Stock Incentive Plan. Subject to the above-described adjustment provi-
sions, up to, but no more than, 200,000 shares of Common Stock in the aggre-
gate may be covered by Options granted under the Stock Incentive Plan with re-
spect to any fiscal year of the Company; provided, however, that if Options
with respect to fewer than 200,000 shares are granted in any fiscal year, the
200,000 share limitation with respect to the following year shall be increased
by the difference. If the formula for determining the number of shares covered
by all Options would exceed the 200,000 share limitation, the number of shares
covered by all Options
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<PAGE>
granted with respect to that year will be proportionally reduced. As noted, no
more than a total of 50,000 shares may be awarded under the Stock Incentive
Plan as Restricted Stock.
Term of Stock Incentive Plan and Amendments. The Board may at any time
amend, discontinue, or terminate the Stock Incentive Plan or any part thereof;
provided, however, that, unless otherwise required by law, the rights of a
participant with respect to Awards granted before such amendment or termina-
tion may not be impaired without the consent of such participant. In addition,
without the approval of the Company's shareholders, no amendment may be made
which would (i) increase the aggregate number of shares of Common Stock that
may be issued under the Stock Incentive Plan, (ii) change the definition of
employees eligible to receive Awards under the Stock Incentive Plan, (iii) ex-
tend the maximum option period under the Stock Incentive Plan, (iv) decrease
the Option price of any Option to less than 100% of the fair market value on
the date of grant, or (v) cause the Stock Incentive Plan not to comply with
either Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or
Section 162(m) of the Code. The term of the Stock Incentive Plan is ten (10)
years, and no Awards may be granted under the Stock Incentive Plan after June
30, 2007, although Awards granted prior to the termination date shall remain
in effect and become exercisable pursuant to the terms of the Award and the
Stock Incentive Plan.
Eligibility. Eligibility is determined by the Committee, subject to ap-
proval by the Company's Board of Directors. Key salaried employees of the Com-
pany and certain of its subsidiaries are eligible to be granted Awards under
the Stock Incentive Plan. The Stock Incentive Plan provides that Options may
only be granted to employees who (i) participate in the Company's EVA Plan,
(ii) have designated an EVA Bonus Option Amount, and (iii) are entitled to an
EVA Bonus. A key employee of the Company or its designated subsidiaries is el-
igible to be granted Restricted Stock regardless of whether such employee is a
participant in the EVA Plan. As of the date of this Proxy Statement, no Op-
tions or Restricted Stock have been granted under the Stock Incentive Plan. On
September 10, 1997, the closing sale price of the Company's stock was $17.75.
It is not possible to predict the number or identity of future participants
or, except as set forth in the Stock Incentive Plan, to describe the restric-
tions that may be included in Award agreements. As of the date of this Proxy
Statement, the Company and its designated subsidiaries had approximately 1,007
employees. Currently, forty-four employees are participants in the EVA Plan
and, of those, forty have designated a portion for their EVA target bonus to
be allocated for the acquisition of Options. If EVA objectives are achieved,
up to a total of 200,000 shares could be optioned to these employees for the
Company's fiscal year ending June 30, 1998.
Participation and Assignability. Neither the Stock Incentive Plan nor any
Award agreement granted under the Stock Incentive Plan entitles any partici-
pant or other employee to any right to continued employment by the Company or
any subsidiary. Generally, no Option under the Stock Incentive Plan may, ex-
cept as otherwise specifically provided by law, be subject in any manner to
assignment, transfer, or encumbrance. However, Nonqualified Stock Options may
be transferred
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<PAGE>
without consideration to (i) an immediate family member of the optionee, (ii)
a trust for the benefit of the immediate family members of the optionee, or
(iii) a partnership or limited liability company whose only partners or mem-
bers are immediate family members of the optionee, if the option holder satis-
fies such conditions as may be required by the Committee.
Federal Tax Consequences. The following summarizes the consequences of the
grant and acquisition of Awards under the Stock Incentive Plan for federal in-
come tax purposes, based on management's understanding of existing federal in-
come tax laws. This summary is necessarily general in nature and does not pur-
port to be complete. Also, state and local income tax consequences are not
discussed, and may vary from locality to locality.
Options. Stock Incentive Plan participants will not recognize taxable in-
come at the time an Option is granted under the Stock Incentive Plan unless
the Option has a readily ascertainable market value at the time of grant. Man-
agement understands that Options to be granted under the Stock Incentive Plan
will not have a readily ascertainable market value; therefore, income will not
be recognized by participants before the time of exercise of an Option. For
Nonqualified Stock Options, the difference between the fair market value of
the shares at the time an Option is exercised and the Option exercise price
generally will be treated as ordinary income to the optionee, in which case
the Company will be entitled to a deduction equal to the amount of the
optionee's ordinary income. With respect to Incentive Stock Options, partici-
pants will not realize income for federal income tax purposes as a result of
the exercise of such Options. In addition, if Common Stock acquired as a re-
sult of the exercise of an Incentive Stock Option is disposed of more than two
years after the date the Option is granted and more than one year after the
date the Option was exercised, the entire gain, if any, realized upon disposi-
tion of such Common Stock will be treated for federal income tax purposes as
capital gain. Under these circumstances, no deduction will be allowable to the
Company in connection with either the grant or exercise of an Incentive Stock
Option. Exceptions to the general rules apply in the case of a "disqualifying
disposition." If a participant disposes of shares of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option before the expiration of
one year after the date of exercise or two years after the date of grant, the
sale of such stock will be treated as a "disqualifying disposition." As a re-
sult, such a participant would recognize ordinary income and the Company would
be entitled to a deduction in the year in which such disposition occurred.
The amount of the deduction and the ordinary income recognized upon a dis-
qualifying disposition would generally be equal to the lesser of: (a) the sale
price of the shares sold minus the Option price, or (b) the fair market value
of the shares at the time of exercise minus the Option price. If the disposi-
tion is to a related party (such as a spouse, brother, sister, lineal descen-
dant, or certain trusts for business entities in which the seller holds a di-
rect or indirect interest), the ordinary income recognized generally is equal
to the excess of the fair market value of the shares at the time of exercise
over the exercise price. Any additional gain recognized upon disposition, in
excess of the ordinary income, will be taxable as capital gain. In addition,
the exercise of Incentive Stock Options may result in an alternative minimum
tax liability.
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<PAGE>
Restricted Stock. Recipients of shares of Restricted Stock that are not
"transferable" and are subject to "substantial risk of forfeiture" at the time
of grant will not be subject to federal income taxes until the lapse or re-
lease of the restrictions on sale of the shares, unless the recipient files a
specific election under the Code to be taxed at the time of grant. The recipi-
ent's income and the Company's deduction will be equal to the excess of the
fair market value (or sale price) of the shares less any purchase price.
Required Vote for Approval. The affirmative vote of a majority of the
Company's Common Stock and Class B Common Stock voting as one class at the An-
nual Meeting, by person or by proxy, is required to approve the Stock Incen-
tive Plan. While broker nonvotes will not be treated as votes cast on the ap-
proval of the Stock Incentive Plan, shares voted as abstentions will be
counted as votes cast. Since a majority of the votes cast is required for ap-
proval, the sum of any negative votes and abstentions will necessitate offset-
ting affirmative votes to assure approval. Unless otherwise directed by mark-
ing the accompanying proxy, the proxy holders named therein will vote for the
approval of the Plan.
The Board of Directors recommends a vote FOR the approval of the proposed
Stock Incentive Plan.
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<PAGE>
INFORMATION ABOUT DIRECTORS AND DIRECTOR NOMINEES
The content of the following table is based upon information furnished to
the Company by the directors and nominees as of July 31, 1997.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
YEAR OWNERSHIP OF CLASS PERCENT
PRINCIPAL OCCUPATION FIRST ------------------- ------------ OF
(FOR MORE THAN 5 YEARS BECAME CLASS COMMON
NAME AGE UNLESS OTHERWISE NOTED) DIRECTOR COMMON(1) CLASS B COMMON B EQUITY
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOMINEES FOR ELECTION AS
DIRECTORS FOR TERMS
EXPIRING IN 2000
NOMINEE FOR ELECTION BY
HOLDERS OF COMMON
STOCK AND CLASS B STOCK
John E. 74 Private Investor 1969 -- 107,710 * 4.42% 1.82%
Fallon(B)(C) Spring Lake, MI
(D)(E)
NOMINEE FOR ELECTION BY
HOLDERS OF COMMON
STOCK
Allan E. 57 President and Chief 1990 25,909 -- * * *
Perry(A)(E) Executive Officer of the
Company
DIRECTORS WHOSE TERMS
EXPIRE IN 1999
William R. 40 Private Investor 1996 22,100 1,700 * * *
Dutmers(A) Muskegon, MI(2)
(B)(D)(E)
Richard S. 71 Private Investor 1986 2,178 45,625(3) * 1.87% *
Knape(A) Grand Rapids, MI(3)
(D)
Michael J. 45 Vice President, National 1996 2,753 10,619 * * *
Kregor(B)(D) Sales, Griffith Laboratories,
Alsip, IL(4)
Mary Rita 79 Private Investor 1985 -- 96,409 * 3.95% 1.63%
Cuddohy(C) Franklin, MI
(D)
DIRECTORS WHOSE TERMS
EXPIRE IN 1998
Raymond E. 65 Former Chairman and 1964 14,169(5) 119,623(5) * 4.91% 2.27%
Knape(C) Chief Executive Officer
of the Company(5)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
YEAR BENEFICIAL OWNERSHIP OF CLASS PERCENT
PRINCIPAL OCCUPATION FIRST ----------------------- ------------ OF
(FOR MORE THAN 5 YEARS BECAME CLASS COMMON
NAME AGE UNLESS OTHERWISE NOTED) DIRECTOR COMMON(1) CLASS B COMMON B EQUITY
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Herbert F. 74 President, Knape 1969 -- 60,214 * 2.47% 1.02%
Knape(A) Industries, Inc.,
(B)(C)(D) Industrial Finishes
Rockford, MI
Richard C. 54 Executive VP, CFO, 1993 33,420 877 * * *
Simkins(E) Secretary and Treasurer
- ----------------------------------------------------------------------------------------------
</TABLE>
*Denotes ownership of less than one percent.
(A) Member Executive Committee
(B) Member Audit Committee
(C) Member Nominating Committee
(D) Member Executive Compensation Committee
(E) Member Profit Sharing and Pension Committee
(1) This table includes the following shares of Common Stock subject to
acquisition within 60 days by the exercise of outstanding stock options:
Allan E. Perry--20,500 shares, and Richard C. Simkins--32,104 shares.
(2) William R. Dutmers was elected to the Board of Directors on April 19,
1996. Mr. Dutmers currently is a private investor. Mr. Dutmers was
President of G & L, Inc., a business consulting firm, from 1991 to 1997.
Mr. Dutmers was also president and owner of G & L Restaurants from 1986
until 1995, when he sold the company.
(3) Richard S. Knape's shares include 25,219 shares of Class B Common Stock
owned by members of the Richard S. Knape family as to which he disclaims
beneficial ownership.
(4) Michael J. Kregor was elected to the Board of Directors on April 19, 1996.
Mr. Kregor is Vice President-National Sales of Griffith Laboratories, a
position he started in 1996. From 1987 to 1996, Mr. Kregor held various
vice presidential positions in the marketing and sales area at Nestle.
(5) Raymond E. Knape retired from Knape & Vogt Manufacturing Company in fiscal
1997 after 32 years as an officer and director and had held the position
as Chairman and CEO since 1985. Mr. Knape has 4,169 shares of Common Stock
and 17,446 shares of Class B Common Stock with respect to which Mr. Knape
holds exclusive voting and dispositive power under trust and power of
attorney, but in which Mr. Knape has no financial interest. Mr. Knape has
10,000 shares of Common Stock and 46,285 shares of Class B Common Stock
held by Comerica Bank, as trustee of the Company's profit sharing plan, of
which Mr. Knape has sole voting and dispositive power. Mr. Knape directly
owns 55,892 shares of Class B Common Stock.
- 13 -
<PAGE>
The Board of Directors, which had six meetings in the last fiscal year,
has a standing Audit Committee, Nominating Committee and an Executive Compen-
sation Committee. The responsibilities of the Audit Committee, which met four
times in the last fiscal year, include making recommendations on the choice of
independent public accountants and reviewing financial matters with such ac-
countants, internal auditors, and management. The Nominating Committee, which
met once during the last fiscal year, selects and presents to the Board of Di-
rectors candidates for election to fill vacancies on the Board. The Committee
will consider nominees recommended by shareholders, provided recommendations
are submitted in writing, including a description of the proposed nominee's
qualifications and other relevant biographical data, to Mary Rita Cuddohy
(chairperson of the committee) at 2700 Oak Industrial Drive, N.E., Grand Rap-
ids, Michigan 49505. The Executive Compensation Committee met five times dur-
ing the last fiscal year. The Committee makes recommendations to the Board of
Directors relating to compensation matters and fringe benefits for officers
and participants in the supplemental executive retirement, bonus, and stock
option plans.
Directors who are not employees of the Company are compensated at the rate
of $2,500 for each Board meeting attended and $1,250 for each Committee meet-
ing held at times other than immediately preceding or subsequent to a Board
meeting. Directors are also reimbursed for out-of-pocket expenses incurred in
attending meetings.
All directors attended at least three-fourths of the aggregate number of
meetings of the Board and Board committees which they were eligible to attend.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board's Executive Compensation Committee is made up of six nonemployee
members of the Board of Directors. Its function is to investigate and recom-
mend to the Board the base pay, short-term incentive bonuses, and long-term
(stock option) incentives payable by the Company based on Company and execu-
tive performances for the last completed fiscal year. The Committee also rec-
ommends the annual rate of Company contribution to the Profit Sharing Retire-
ment Plan Trust and the nomination of new employees to participate in the Sup-
plemental Executive Retirement Plan.
The goals of the compensation plan are to apply a consistent policy of
compensation to all employees, to pay competitive base pay to attract and re-
tain executive officers who contribute to the long-term success of the Compa-
ny, and to design and implement both short and long-term incentive programs to
reward individual contributions to Company performance and success.
A substantial portion of the annual compensation of each officer must re-
late to, and be contingent on, the performance of the Company. Outstanding
performance, measured in terms of profit growth and total shareholder return,
should generate rewards for senior executives and key employees.
- 14 -
<PAGE>
COMPETITIVE BASE RATES
The Company is committed to providing a competitive base pay to help at-
tract and retain the best people in the industry. To ensure that base salaries
are competitive, local and national association annual reports, as well as
special individual position data and total compensation reports by management
consultants, are utilized annually. The goal is to ensure that the base sala-
ries of the Company's executives compare favorably with executives with simi-
lar responsibilities in like companies in comparable industries.
Formal job descriptions outlining the duties, primary functions and basic
and peripheral responsibilities of each executive position are utilized in
placing each in the salary ranges, and the individuals' relative responsibili-
ties and annual performances are used to adjust specific base salary.
Senior executives' salary recommendations include a review and discussion
of the executives' individual performance, and the relationship to the
Company's performance for the last fiscal year. These include meeting strate-
gic and business plan goals, operating profit, performance relative to compet-
itors, and timely new product introductions. Individual performance is evalu-
ated according to organizational and management development and the fostering
of teamwork and Company values.
The same evaluation system is applied to the Company's CEO. Consistent
with the Company's existing policies and practices, the Executive Compensation
Committee reviewed available compensation data from the Company's peers and
evaluated Mr. Perry's contributions to the Company as well as his experience
and expertise. The Executive Compensation Committee also took into considera-
tion the performance of the Company, including strategic and business plan
goals, operating profit, performance relative to competitors and timely new
product introduction. It is expected that Mr. Perry's total compensation in
future years will be determined in part by the Economic Value Added program
discussed below.
The Executive Compensation Committee met six times during the 1997 fiscal
year. These meetings dealt with base salary adjustments to changes in officer
responsibilities, competitive compensation rates, the establishment and imple-
mentation of the Economic Value Added (EVA) program, setting up of EVA based
incentive formulas for officers starting with the 1998 fiscal year, a Change
in Control Management Continuity Agreement for officers, and establishing the
SERP Benefit formula for the retiring Chairman and CEO, Raymond E. Knape. Ad-
ditional meetings were held with consultants, Stern Stewart & Co., regarding
the EVA program and its implementation. For the 1997 fiscal year, the
Company's Short and Long-Term Incentive Programs were in effect. The Board of
Directors has adopted the EVA program for the 1998 fiscal year, and the EVA-
based Incentive Program will replace the former incentive programs.
- 15 -
<PAGE>
PERFORMANCE-BASED INCENTIVES
Since 1987, the Company has rewarded its officers and managers, as well as
those of its subsidiaries, with an annual short-term incentive bonus based on
the attainment of sales and profit objectives and also with long-term incen-
tives. The short-term incentive bonus is calculated by a formula which rewards
executives according to the degree that the Company achieves target goals of
return on shareholders' equity and on sales growth percentage. The formula is
designed to recognize each executive's position of responsibility for and con-
tribution to meeting or exceeding the targets. The incentive bonus is calcu-
lated monthly and calculations are reviewed by executives and the Executive
Compensation Committee. The short-term incentive bonus is paid at the comple-
tion of the fiscal year based on year-end results. The Committee reviews the
formula targets and percentages yearly for appropriateness and individual ex-
ecutives in the plan. Similar plans, administered by management, cover
nonsenior executives and general employees under a Cash Profit Sharing Bonus
Plan.
SHORT-TERM INCENTIVE
The Company's Mission Statement has set goals of 10% annual growth in
sales and a 15% return on equity. The formula for computing an executive's
short-term incentive bonus is based on both of these objectives, whereby per-
formance based on return on equity and sales growth is allocated a weight of
75% and 25%, respectively. Once a minimum of 10% return on equity is achieved,
executives can earn up to 130% of target for a return on equity of 18% or
more. Similarly, once a minimum of 5% sales growth is achieved, executives can
earn up to 45% of target for sales growth of 13% or more.
For fiscal years 1995, 1996 and 1997 the target incentives were set at 45%
of base salary for the CEO and President; 35% for other officers of the Compa-
ny; 15% for middle managers of the Company and 20% for officers of subsidiar-
ies.
LONG-TERM INCENTIVE
The Company also provides long-term incentives in the form of stock op-
tions. A stock option list is recommended by the Committee to the Board annu-
ally. This year the list included ten senior executives and 59 other key em-
ployees. These options are meant to recognize their individual contribution to
the long-term profit objectives of the Company.
Based on Company performance in 1996, the Committee recommended and the
Board approved the issuance of stock options on October 18, 1996, of 8,000
shares each for Mr. Perry, Mr. Simkins, and Mr. Van Rooy, and of 2,000 shares
each for Mr. Vogus and Mr. Taylor. Other subsidiary
- 16 -
<PAGE>
officers, middle management and other key employees were awarded options of
1,000, 500, or 250 shares for a total option award of 50,000.
In addition, the Company has for many years made a yearly contribution to
the Profit Sharing Retirement Plan for all executives. The percentage of
profit allocated and the percentage of each executive's compensation to be
contributed to that plan is recommended to the Board by the Committee. For
fiscal 1997, the Company contributed an amount equal to 9% of executives' base
salaries (limited to a maximum of $150,000) to the Profit Sharing Retirement
Plan.
The Company also maintains a Supplemental Executive Retirement Plan (SERP)
originally designed to assure new executive hirees the security of an ongoing
retirement plan in their first years of employment with the Company. The Com-
mittee recommends eligibility of new members in this plan to the Board and
oversees its application.
EVA PROGRAM
Economic Value Added (EVA) is a financial measure that closely ties man-
agement's operating decisions to shareholders' interests. EVA is the after-tax
operating profits that remain after subtracting the cost of capital employed
to generate that profit. EVA was implemented in fiscal 1998 to improve the
Company's performance under this financial measure. As mentioned previously,
the Board of Directors has adopted the EVA incentive compensation program for
fiscal 1998. This program replaces the Company's short-term incentive bonus
program which was based on sales growth and return on equity. If the 1997
Stock Incentive Plan is approved by the shareholders, it will replace the for-
mer long-term incentive stock option program. The new plan utilizes leveraged
stock options which are intended to more closely link incentive awards to the
creation of shareholder wealth.
Submitted by the Executive Compensation Committee
Herbert F. Knape Mary Rita Cuddohy
John E. Fallon Richard S. Knape
William R. Dutmers Michael J. Kregor
- 17 -
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Company's
CEO and the other four most highly compensated executive officers of the Com-
pany (the "Named Executives") for each of the three fiscal years ended June
30, 1997, 1996, and 1995.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------ ------------
SECURITIES
UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OPTIONS (#) COMPENSATION(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allan E. Perry 1997 $256,000 $69,939 8,000 $15,862
President and Chief 1996 210,000 -0- 4,000 12,862
Executive Officer 1995 195,500 39,315 3,000 12,862
Richard C. Simkins 1997 $187,200 $39,780 8,000 $15,937
Executive VP, CFO, 1996 156,000 -0- 4,000 12,937
Secretary and Treasurer 1995 149,000 22,469 3,000 12,867
Michael G. Van Rooy 1997 $150,000 $31,875 8,000 $15,155
Vice President-Manufactur- 1996 128,000 -0- 4,000 10,615
ing 1995 106,333 17,417 1,500 9,740
Anthony R. Taylor 1997 $117,476 $14,262 2,000 $ 1,755
President-KV Canada 1996 108,119 7,024 1,500 1,767
1995 92,954 19,325 1,500 1,744
John W. Vogus 1997 $114,290 $13,875 2,000 $10,286
Vice President-Sales and 1996 101,269 11,595 500 7,089
Marketing 1995 89,520 8,452 500 6,336
- --------------------------------------------------------------------------------
</TABLE>
(1) Includes amounts deferred by employees pursuant to Section 401(k) of the
Internal Revenue Code.
(2) Represents amounts earned under the Company's short-term incentive bonus
plan.
(3) The amounts disclosed in this column include: (a) amounts contributed by
the Company to the Company's profit sharing plan for fiscal 1997, pursuant
to which substantially all salaried employees of the Company participate,
in the following amounts: Mr. Perry $13,500; Mr. Simkins $13,500; Mr. Van
Rooy $13,500; and Mr. Vogus $10,286; and (b) payments by the Company in
fiscal 1997 of premiums for term life insurance for the benefit of the
Named Executives, in the following amounts: Mr. Perry $2,362; Mr. Simkins
$2,437; Mr. Van Rooy $1,655; and Mr. Taylor $1,755.
- 18 -
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on options granted to the Named
Executives during the year ended June 30, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO EXERCISE OR OPTION TERM (4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED (1) FISCAL YEAR (2) (PER SHARE) (3) DATE 5% 10%
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allan E. Perry 8,000 16.0% $15.50 10/18/06 $ 77,983 $ 187,249
Richard C. Simkins 8,000 16.0% $15.50 10/18/06 $ 77,983 $ 187,249
Michael G. Van Rooy 8,000 16.0% $15.50 10/18/06 $ 77,983 $ 187,249
Anthony R. Taylor 2,000 4.0% $15.50 10/18/06 $ 19,496 $ 46,812
John W. Vogus 2,000 4.0% $15.50 10/18/06 $ 19,496 $ 46,812
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Indicates number of shares that may be purchased pursuant to options
granted under the Company's 1987 Stock Option Plan.
(2) The Company granted options covering 50,000 shares to eligible employees
of the Company and its subsidiaries.
(3) The exercise price equals the prevailing market price of the Company's
Common Stock on the date of grant. The exercise price may be paid in cash,
by the delivery of previously owned shares, or a combination thereof.
(4) These potential realizable values are based on assumed rates of
appreciation in the market value of the Company's Common Stock over the
entire option period and without any discount to present value. There can
be no assurances that the amounts reflected in this table will be
achieved.
- 19 -
<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1997
AND YEAR END OPTION VALUES
The following table provides information on the number and value of unex-
ercised options at June 30, 1997. No options were exercised by the Named Exec-
utives during fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE
OPTIONS AT JUNE 30, 1997 MONEY OPTIONS AT JUNE 30, 1997(1)
------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allan E. Perry 20,500 -0- $ 10,750 -0-
Richard C. Sim-
kins 32,104 -0- $ 63,051 -0-
Michael G. Van
Rooy 15,700 -0- $ 8,550 -0-
Anthony R. Tay-
lor 6,650 -0- $ 2,500 -0-
John W. Vogus 3,550 -0- $ 1,500 -0-
- ------------------------------------------------------------------------------
</TABLE>
(1) Values are based on the difference between the closing price of the
Company's Common Stock on June 30, 1997, ($16.00) and the exercise prices
of the options.
CHANGE IN CONTROL MANAGEMENT CONTINUITY AGREEMENT
On July 1, 1997, the Company, by its Board of Directors and on recommenda-
tion of its Executive Compensation Committee, entered into individual Manage-
ment Continuity Agreements with Messrs. Perry, Simkins, Van Rooy and Vogus.
These agreements provide severance benefits if the executive's employment is
terminated within 36 months after a change in control or within 6 months be-
fore a change in control if the Company terminates his employment in contem-
plation of a change in control and to avoid the agreement. For the purposes of
these agreements, a "change in control" is any acquisition of 51% or more of
the voting power of the Company's securities, an extraordinary change in the
composition of the Board of Directors, or certain other specified events. Sev-
erance benefits will not be payable if the Company terminates the employment
for cause, if employment terminates due to the executive's death or disabili-
ty, or if the executive resigns without good reason. An executive may resign
with "good reason" after a change in control and retain benefits if the Com-
pany reduces the executive's salary or bonus, assigns duties materially dif-
ferent from or inconsistent with the executive's prior position, or shifts the
executives job location more than 40 miles. The agreements are for an initial
term of 3 years, which may be extended for 3 additional years if the Board of
Directors specifically approves such an extension. Each agreement is automati-
cally extended for a 3-year term from the date of a change of control. These
agreements provide a severance benefit of a lump-sum payment equal to 2 1/2
times yearly salary and incentives and continuation of certain health, insur-
ance and other benefits for three years. The obligations of these agreements
would be assumed by any successor corporation on change in control.
- 20 -
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph shows the cumulative total shareholder return on an
investment in the Company's Common Stock compared to the cumulative total re-
turn of the NASDAQ market for U.S. companies and a peer group of NASDAQ traded
companies with the same Standard Industrial Classification (SIC) code as that
of the Company's. The comparison assumes a $100 dollar investment on June 30,
1992, and the reinvestment of dividends.
- 21 -
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
PERFORMANCE GRAPH FOR
KNAPE & VOGT MANUFACTURING COMPANY
LOGO
The dollar values for total shareholder return plotted in the graph above
are shown in the table below.
<TABLE>
<CAPTION>
6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Knape & Vogt Manufacturing Com-
pany 100.0 96.0 121.6 108.0 118.5 125.5
NASDAQ Stock Market (US Compa-
nies) 100.0 125.8 127.0 169.5 217.6 264.6
NASDAQ Stocks (SIC Code 3400-
3499) 100.0 114.1 127.2 148.5 184.2 253.0
</TABLE>
Index figures prepared by the Center for Research in Security Prices at The
University of Chicago.
- 22 -
<PAGE>
RELATIONS WITH INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company have been examined by
BDO Seidman, LLP, Certified Public Accountants. A representative of BDO Seid-
man, LLP is expected to be present at the Annual Meeting with the opportunity
to make a statement, if desired, and will be available to respond to appropri-
ate questions. During October of 1996, the Company's Audit Committee selected
the Company's auditors for the current fiscal year. It is expected that the
same practice will be followed this year. The Company has no reason to believe
that BDO Seidman, LLP will not be selected as the Company's principal auditors
for the current fiscal year. They have audited the records of the Company for
over ten years.
SHAREHOLDER PROPOSALS--1998 ANNUAL MEETING
Any proposal of a shareholder intended to be presented for action at the
next Annual Meeting of the Company must be received by the Company at 2700 Oak
Industrial Drive, N.E., Grand Rapids, Michigan 49505, not later than May 15,
1998, if the shareholder wishes the proposal to be included in the Company's
proxy materials for that meeting.
AVAILABILITY OF 10-K ANNUAL REPORT
The annual report on Form 10-K, filed with the Securities and Exchange
Commission, will be provided free to shareholders upon written request. Write
Richard C. Simkins, Secretary, Knape & Vogt Manufacturing Company, 2700 Oak
Industrial Drive, N.E., Grand Rapids, Michigan 49505.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10 percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than 10 percent shareholders are
required to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on the review of written communications and copies of such
forms received by the Company, the Company believes that all required forms
have been filed accurately and timely with the Securities and Exchange
Commission.
- 23 -
<PAGE>
MISCELLANEOUS
Management of the Company is not aware of any other matter to be presented
for action at the meeting. However, if any such other matter is properly pre-
sented for action, it is the intention of the persons named in the accompanying
form of proxy to vote thereon in accordance with their best judgment.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to solicitation by mail, proxies may be solicited in
person, or by telephone or telegraph, by some regular employees of the Company,
and by Morrow & Co. which the Company has retained to assist in the solicita-
tion. The Company will pay Morrow & Co. $4,000 for its services. The above No-
tice and Proxy Statement are sent by order of the Board of Directors.
September 17, 1997
LOGO
Richard C. Simkins
Secretary
- 24 -
<PAGE>
APPENDIX A
KNAPE & VOGT MANUFACTURING COMPANY
1997 STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 1
ESTABLISHMENT AND PURPOSE OF THE PLAN..................................... A-1
1.1 Establishment of the Plan......................................... A-1
1.2 Purpose of the Plan............................................... A-1
1.3 Term of Plan...................................................... A-1
ARTICLE 2
DEFINITIONS............................................................... A-1
ARTICLE 3
ADMINISTRATION............................................................ A-4
3.1 The Committee..................................................... A-4
3.2 Committee Authority............................................... A-4
ARTICLE 4
COMMON STOCK SUBJECT TO THE PLAN.......................................... A-5
ARTICLE 5
ELIGIBILITY............................................................... A-6
ARTICLE 6
STOCK OPTIONS............................................................. A-6
6.1 Options........................................................... A-6
6.2 Grants............................................................ A-6
6.3 Incentive Stock Options........................................... A-6
6.4 Terms of Options.................................................. A-7
ARTICLE 7
RESTRICTED STOCK.......................................................... A-10
7.1 Awards of Restricted Stock........................................ A-10
7.2 Awards and Certificates........................................... A-10
7.3 Restrictions and Conditions....................................... A-11
ARTICLE 8
TERMINATION OR AMENDMENT OF THE PLAN...................................... A-11
ARTICLE 9
UNFUNDED PLAN............................................................. A-12
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 10
ADJUSTMENT PROVISIONS..................................................... A-12
10.1 Antidilution..................................................... A-12
10.2 Change in Control................................................ A-12
10.3 Adjustments by Committee......................................... A-13
ARTICLE 11
GENERAL PROVISIONS........................................................ A-13
11.1 Legend........................................................... A-13
11.2 No Right to Employment........................................... A-14
11.3 Withholding of Taxes............................................. A-14
11.4 No Assignment of Benefits........................................ A-14
11.5 Governing Law.................................................... A-14
11.6 Application of Funds............................................. A-14
11.7 Rights as a Shareholder.......................................... A-15
ARTICLE 12
SHAREHOLDER APPROVAL...................................................... A-15
</TABLE>
- ii -
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY
1997 STOCK INCENTIVE PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE OF THE PLAN
1.1 Establishment of the Plan. Knape & Vogt Manufacturing Company, a Mich-
igan corporation (the "Company"), hereby establishes a stock incentive plan to
be known as the "Knape & Vogt Manufacturing Company 1997 Stock Incentive Plan"
(the "Plan"), as set forth in this document. The Plan permits the granting of
stock options and restricted stock to key employees of the Company and its
subsidiaries.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the long-
term success of the Company for the benefit of the Company's shareholders,
through stock-based compensation, by aligning the personal interests of the
Company's key employees with those of its shareholders. The Plan is also de-
signed to allow key employees to participate in the Company's future, as well
as to enable the Company to attract, retain and reward such employees. Compen-
sation related to Awards under the Plan is generally intended to qualify as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code of 1986, as amended ("Code").
1.3 Term of Plan. No Awards shall be granted pursuant to the Plan on or
after the tenth anniversary of the Effective Date ("Termination Date"), pro-
vided that Awards granted prior to the Termination Date may extend beyond that
date.
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings set
forth below:
2.1 AWARD means any award under this Plan of any Options or Restricted
Stock.
2.2 AWARD AGREEMENT means an agreement evidencing the grant of an Award
under this Plan. Awards under the Plan shall be evidenced by Award Agreements
that set forth the details, conditions and limitations for each Award, as es-
tablished by the Committee and shall be subject to the terms and conditions of
the Plan.
2.3 AWARD DATE means the date that an Award is made, as specified in an
Award Agreement.
2.4 BOARD means the Board of Directors of the Company.
A-1
<PAGE>
2.5 CAUSE means Termination of Employment as a result of action by the
Company or a Subsidiary because of (i) the Participant's conviction for, or
plea of nolo contendere to, a felony or a crime involving moral turpitude,
(ii) the Participant's commission of an act involving personal dishonesty or
fraud involving personal profit in connection with the Participant's employ-
ment, (iii) the Participant's commission of an act involving willful miscon-
duct or gross negligence in the conduct of the Participant's employment du-
ties, (iv) habitual absenteeism, chronic alcoholism or any other form of ad-
diction on the part of the Participant, or (v) the Participant's breach of any
material provision of any of the Company's or a Subsidiaries employment poli-
cies.
2.6 CHANGE IN CONTROL is defined in Article 10.
2.7 CODE means the Internal Revenue Code of 1986, as amended.
2.8 COMMITTEE means the Committee, as specified in Article 3, appointed by
the Board to administer the Plan, no members of which shall be eligible to re-
ceive an Award pursuant to the Plan.
2.9 COMMON STOCK means the Common Stock, $2.00 par value per share, of the
Company.
2.10 DISABILITY means permanent and total disability as determined under
the rules and guidelines established by the Committee for purposes of the
Plan.
2.11 EFFECTIVE DATE means July 1, 1997.
2.12 EMPLOYEE means a salaried employee (including officers and directors
who are also employees) of the Company or a Subsidiary.
2.13 EVA BONUS means a bonus payable to a Participant under the EVA Plan.
2.14 EVA BONUS OPTION AMOUNT means the portion of a Participant's EVA Bo-
nus which the Participant has elected to waive and designated for use in de-
termining Option grants.
2.15 EVA PLAN means the Economic Value Added Incentive Remuneration Plan
approved by the Board.
2.16 EXERCISE PRICE means the price at which a share of Common Stock may
be purchased by a Participant pursuant to an Option, as determined by the Com-
mittee.
2.17 FAIR MARKET VALUE means, as to Incentive Stock Options, the closing
sale price per share of the Common Stock on the relevant valuation date on the
National Association of Securities Dealers Automated Quotation System or any
successor system then in use ("NASDAQ"). If no sale of shares of Common Stock
is reflected on the NASDAQ on a date, "Fair Market Value" shall be determined
on the next preceding day on which there was a sale of shares of Common Stock
re-
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flected on NASDAQ. Fair Market Value means, as to Nonqualified Stock Options,
the average NASDAQ closing sale prices per share of the Common Stock during
the calendar month immediately preceding the relevant valuation date.
2.18 FIXED PERCENTAGE INCREASE means a percentage equal to the Index Rate
plus two percent (2%) less the Projected Dividend Yield. The Fixed Percentage
Increase will be established by the Committee, subject to Board approval, as
of the Award Date and will remain in effect for the term of the Option or Op-
tions to which it applies.
2.19 INCENTIVE STOCK OPTION or ISO means an option to purchase shares of
Common Stock granted under Article 6, which is designated as an Incentive
Stock Option and is intended to meet the requirements of Section 422 of the
Code.
2.20 INDEX RATE means the weekly average yield on U.S. Treasury securities
adjusted to a constant maturity of five (5) years, as most recently made
available by the Federal Reserve Board prior to an Award Date.
2.21 NON-EMPLOYEE DIRECTOR has the meaning set forth in Rule 16b-
3(b)(3)(i) or any successor definition adopted by the Securities and Exchange
Commission.
2.22 NONQUALIFIED STOCK OPTION or NQSO means an option to purchase shares
of Common Stock, granted under Article 6, which is not an Incentive Stock Op-
tion.
2.23 OPTION means an Incentive Stock Option or a Nonqualified Stock Op-
tion.
2.24 PARTICIPANT means an Employee of the Company or a Subsidiary who
holds an outstanding Award granted under the Plan.
2.25 PERMITTED TRANSFEREE means (i) a spouse, a child, or a grandchild of
a Participant (each an "Immediate Family Member"), (ii) a trust for the exclu-
sive benefit of a Participant and/or one or more Immediate Family Members, or
(iii) a partnership or limited liability company whose only partners or mem-
bers are the Participant and/or one or more Immediate Family Members.
2.26 PROJECTED DIVIDEND YIELD means a percentage determined by dividing
the average projected annual dividends per share of Common Stock into the av-
erage projected market price per share of Common Stock over the term of the
Option or Options as to which a Fixed Percentage Increase is being determined,
with such projections as to annual dividends and market prices to be made in
the discretion of the Committee, subject to Board approval.
2.27 RETIREMENT (including normal, early and disability retirement) means
the termination of a Participant's employment with the Company or a Subsidiary
with eligibility for normal, early or
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disability retirement benefits under the terms of the Company's profit sharing
plan, as amended and in effect at the time of such termination of employment.
2.28 RESTRICTED STOCK means an Award granted to a Participant under Arti-
cle 7 of this Plan.
2.29 RULE 16B-3 means Rule 16b-3 promulgated by the Securities and Ex-
change Commission under the Securities Exchange Act of 1934 (the "Act"), as
amended from time to time or any successor rule.
2.30 SUBSIDIARY means any corporation in which the Company owns directly,
or indirectly through subsidiaries, at least fifty percent (50%) of the total
combined voting power of all classes of stock, or any other entity (including,
but not limited to, partnerships and joint ventures) in which the Company owns
at least fifty percent (50%) of the combined equity thereof.
2.31 TERMINATION DATE means June 30, 2007.
2.32 TERMINATION OF EMPLOYMENT means the termination of a Participant's
employment with the Company or a Subsidiary. A Participant employed by a Sub-
sidiary shall also be deemed to incur a Termination of Employment if the Sub-
sidiary ceases to be a Subsidiary and the Participant does not immediately
thereafter become an Employee of the Company or another Subsidiary.
ARTICLE 3
ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Executive Compen-
sation Committee designated by the Board consisting of not less than three (3)
directors who shall be appointed from time to time by the Board, each of whom
shall qualify as a Non-Employee Director.
3.2 Committee Authority. Subject to the Company's Articles of Incorpora-
tion, Bylaws and the provisions of this Plan, the Committee shall have full
authority to grant Awards to key Employees of the Company or a Subsidiary,
however, no Award shall be granted without Board approval. Awards may be
granted singly, in combination, or in tandem. The authority of the Committee
shall include the following:
(a) To select the key Employees of the Company or a Subsidiary to whom
Awards may be granted under the Plan;
(b) To determine whether and to what extent Options and Restricted
Stock Awards, or any combination thereof are to be granted under the Plan;
(c) To determine the number of shares of Common Stock to be covered by
each Award;
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(d) To determine the terms and conditions of any Award Agreement,
including, but not limited to, the Option Price, any vesting restriction or
limitation, any vesting schedule or acceleration thereof, or any forfeiture
restrictions or waiver thereof, regarding any Award and the shares Common
Stock relating thereto, based on such factors as the Committee shall
determine in its sole discretion;
(e) To determine whether, to what extent and under what circumstances
grants of Awards are to operate on a tandem basis and/or in conjunction
with or apart from other cash compensation arrangements made by Company
other than under the terms of this Plan;
(f) To determine under what circumstances an Award may be settled in
cash, Common Stock, or a combination thereof; and
(g) To determine to what extent and under what circumstances shares of
Common Stock and other amounts payable with respect to an Award shall be
deferred.
The Committee shall have the authority to adopt, alter and repeal such ad-
ministrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of
the Plan and any Award issued under the Plan (including any Award Agreement)
and to otherwise supervise the administration of the Plan. However, the Com-
mittee shall take no action which will impair any Award previously granted un-
der the Plan or cause the Plan or the Award not to meet the requirements of
Rule 16b-3. A majority of the Committee shall constitute a quorum, and the
acts of a majority of a quorum at any meeting, or acts reduced to or approved
in writing by a majority of the members of the Committee, shall be the valid
acts of the Committee. The interpretation and construction by the Committee of
any provisions of the Plan or any Award granted under the Plan shall be final
and binding upon the Company, the Board and Participants, including their re-
spective heirs, executors and assigns. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with re-
spect to the Plan or an Award granted hereunder.
ARTICLE 4
COMMON STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 10.1, the maximum aggregate
number of shares of Common Stock which may be issued under this Plan shall not
exceed 600,000 shares, which may be either authorized and unissued Common
Stock or issued Common Stock reacquired by the Company ("Plan Shares"). Deter-
minations as to the number of Plan Shares that remain available for issuance
under the Plan shall be made in accordance with such rules and procedures as
the Committee shall determine from time to time, which shall be consistent
with the requirements of Rule 16b-3 and regulatory and judicial interpreta-
tions thereof. If an Award expires unexercised or is forfeit-
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ed, canceled, terminated or settled in cash in lieu of Common Stock, the
shares of Common Stock that were theretofore subject (or potentially subject)
to such Award may again be made subject to an Award Agreement; provided, how-
ever, that any such shares subject to a forfeited or canceled Award shall not
again be made subject to an Award Agreement to any Participant who received,
directly or indirectly, any of the benefits of ownership of the securities un-
derlying such Award, excluding the right to vote such shares.
ARTICLE 5
ELIGIBILITY
The persons who shall be eligible to receive Awards under the Plan shall
be such key Employees as the Committee shall select from time to time. In mak-
ing such selections, the Committee shall consider such factors as the Commit-
tee in its discretion shall deem relevant. Participants may hold more than one
Award, but only on the terms and subject to the restrictions set forth in the
Plan and their respective Award Agreements.
ARTICLE 6
STOCK OPTIONS
6.1 Options. Options may be granted alone or in addition to other Awards
granted under this Plan. Each Option granted under this Plan shall be either
an Incentive Stock Option ("ISO") or a Nonqualified Stock Option ("NQSO").
6.2 Grants. The Committee shall have the authority to grant to any Partic-
ipant one or more Incentive Stock Options, Nonqualified Stock Options, or both
types of Options, provided that the Participant (i) is also a participant in
the EVA Plan, (ii) has designated an EVA Bonus Option Amount, and (iii) is en-
titled to an EVA Bonus. The Participant's EVA Bonus Option Amount will be used
to determine the number of shares subject to Options that will be granted to a
Participant as further provided in Section 6.4(a). To the extent that any Op-
tion does not qualify as an Incentive Stock Option (whether because of its
provisions or the time or manner of its exercise or otherwise), such Option or
the portion thereof which does not qualify shall constitute a separate Non-
qualified Stock Option.
6.3 Incentive Stock Options. Anything in the Plan to the contrary notwith-
standing, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of the Participants affected, to disqual-
ify any Incentive Stock Option under such Section 422. An Incentive Stock Op-
tion shall not be granted to an
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individual who, on the date of grant, owns stock possessing more than ten per-
cent (10%) of the total combined voting power of all classes of stock of the
Company. The aggregate Fair Market Value, determined on the Award Date of the
shares of Common Stock with respect to which one or more Incentive Stock Op-
tions (or other incentive stock options within the meaning of Section 422 of
the Code, under all other option plans of the Company) granted on or after
January 1, 1987, that are exercisable for the first time by a Participant dur-
ing any calendar year shall not exceed the $100,000 limitation imposed by Sec-
tion 422(d) of the Code.
6.4 Terms of Options. Options granted under the Plan shall be evidenced by
Award Agreements in such form as the Committee shall from time to time ap-
prove, and which Agreements shall comply with and be subject to the following
terms and conditions:
(a) Number of Shares Subject to Option. The number of shares of Common
Stock subject to an Option granted to a Participant under this Plan will be
determined by dividing the EVA Bonus Option Amount by five percent (5%) of
the Fair Market Value of one share of Common Stock. However, no more than
200,000 shares of Common Stock in the aggregate may be covered by Options
granted under this Plan with respect to any fiscal year of the Company. If
the formula for determining the number of shares covered by all Options
would exceed the 200,000 share limitation, the number of shares covered by
all Options granted with respect to that year shall be proportionally
reduced. Conversely, if the formula for determining the number of shares
covered by all Options would be less than the 200,000 share limitation, the
200,000 share limitation with respect to the following year shall be
increased by the difference. The Board is authorized, in its discretion, to
reduce the maximum aggregate number of shares that may be covered by
Options with respect to any particular fiscal year of the Company. The EVA
Bonus Option Amount is not paid in consideration for the Option; it is
merely a figure utilized in the formula to determine the number of shares
covered by an Option granted under the Plan.
(b) Exercise Price. The Exercise Price per share of Common Stock
purchasable under an Option shall be a single fixed exercise price equal to
one hundred percent (100%) of the Fair Market Value of the Common Stock at
the Award Date increased by the Fixed Percentage Increase compounded
annually over the term of the Option.
(c) Option Term. The term of each Option shall be five (5) years after
the date the Option is granted.
(d) Vesting. Except as otherwise provided herein, all Options granted
under the Plan shall vest three (3) years after the date the Option was
granted, subject to acceleration as provided in Sections 6.4(i), 6.4(j) and
10.2.
(e) Exercisability. Except as otherwise provided in this Plan, no
Option shall be exercisable either in whole or in part prior to the third
anniversary of the Award Date. Thereafter,
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an Option shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee and set forth
in the Award Agreement. If the Committee provides that any Option is
exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such factors
as the Committee may determine.
(f) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (e) above, Options may be
exercised in whole or in part at any time after they become exercisable
during the term of the Option, by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall
be accompanied by payment in full of the purchase price in such form as the
Committee may accept. Notwithstanding the foregoing, an Option shall not be
exercisable with respect to less than 100 shares of Common Stock unless the
remaining shares covered by an Option are fewer than 100 shares. If and to
the extent determined by the Committee in its sole discretion at or after
grant, payment in full or in part may also be made in the form of Common
Stock owned for at least six months by the Participant (and for which the
Participant has good title free and clear of any liens and encumbrances) or
Restricted Stock, or by reduction in the number of shares issuable upon
such exercise based, in each case, on the Fair Market Value of the Common
Stock on the last trading date preceding payment as determined by the
Committee (without regard to any forfeiture restrictions applicable to
Restricted Stock). No shares of stock shall be issued until payment has
been made. A Participant shall generally have the rights to dividends or
other rights of a shareholder with respect to shares subject to the Option
when the optionee has given written notice of exercise, has paid for such
shares as provided herein, and, if requested, has given the representation
described in Section 11.1 of the Plan. Notwithstanding the foregoing, if
payment in full or in part has been made in the form of Restricted Stock,
an equivalent number of shares of Common Stock issued on exercise of the
Option shall be subject to the same restrictions and conditions, and during
the remainder of the Restriction Period [as defined in Section 7.3(a)],
applicable to the shares of Restricted Stock surrendered therefor.
(g) Nontransferability of Options. No Option may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution, provided, however, a
Nonqualified Stock Option may be transferred, without consideration, to a
Permitted Transferee if the Participant satisfies such conditions to the
transfer as may be required by the Committee. A Permitted Transferee shall
succeed to all rights and benefits (except any right to further transfer of
the Option) and be subject to all obligations and limitations applicable to
the original Participant. However, such rights and benefits (except any
right to further transfer of the Option), and obligations and limitations
shall be determined as if the original Participant continued to hold the
Option, whereby provisions of this Plan dealing with termination of
employment, retirement, disability or death of a Participant will continue
to refer to the original Participant regardless of whether a Nonqualified
Stock Option has been transferred to a Permitted Transferee. The Company
shall have no obligation to notify a Permitted
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Transferee of the termination of employment, retirement, disability, or
death of a Participant. Further, all Options shall be exercisable, during
the Participant's lifetime, only by such Participant, or, in the case of a
Nonqualified Stock Option, by a Participant or a Permitted Transferee, as
the case may be. The designation of a person entitled to exercise an Option
after a person's death will not be deemed a transfer.
(h) Termination of Employment for Cause or Voluntary Resignation. Upon
Termination of Employment for Cause or as a result of a Participant's
voluntary resignation, each Option held by the Participant shall, to the
extent vested at the date of such Termination of Employment and not fully
exercised, be exercisable, in whole or in part, at any time within the
remaining term of the Option following Termination of Employment, subject,
however, to any limitations on the exercise of such Options in effect at
the date of exercise under the terms of this Plan or under the terms of the
Award Agreement. If the Participant dies after such Termination of
Employment, the Option, to the extent vested at the date of Termination of
Employment and not fully exercised, shall be exercisable, in whole or in
part, by the personal representative of the Participant's estate or by any
other person or persons who shall have acquired the Option directly from
the Participant by bequest or inheritance or by a Permitted Transferee.
(i) Termination of Employment Without Cause, for Retirement or
Disability. Upon Termination of Employment without Cause or by reason of
Retirement or Disability, each Option held by such Participant shall be
fully vested and, to the extent that an Option shall not have been fully
exercised, remain exercisable in whole or in part, for the remaining term
of the Option following such Termination of Employment, subject, however,
to any limitations imposed by the Plan. If the Participant dies after such
Termination of Employment, the Option, to the extent not fully exercised,
shall be exercisable, in whole or in part, by the personal representative
of the Participant's estate or by any other person or persons who shall
have acquired the Option directly from the Participant by bequest or
inheritance or by a Permitted Transferee.
(j) Termination of Employment for Death. Upon Termination of Employment
due to death, each Option held by such Participant shall be fully vested
and, to the extent that an Option shall not have been fully exercised, be
exercisable, in whole or in part, by the personal representative of the
Participant's estate or by any person or persons who shall have acquired
the Option directly from the Participant by bequest or inheritance or by a
Permitted Transferee, subject, however, to any limitation on the exercise
of such Option in effect at the date of exercise.
(k) Termination of Options. Any Option that is not exercised within
whichever of the exercise periods specified in Sections 6.4(h), (i) or (j)
is applicable shall terminate upon expiration of such exercise period.
(l) Purchase and Settlement Provisions. The Committee may at any time
offer to purchase an Option previously granted, based on such terms and
conditions as the Committee shall establish and communicate to the
Participant at the time that such offer is made.
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ARTICLE 7
RESTRICTED STOCK
7.1 Awards of Restricted Stock. Subject to adjustment, as provided in Sec-
tion 10.1, of the maximum number of shares of Common Stock which may be issued
under this Article, no more than 50,000 Plan Shares may be issued as Re-
stricted Stock awards pursuant to this Article 7. Shares of Restricted Stock
may be issued either alone or in addition to other Awards granted under the
Plan. The Committee shall, subject to Board approval, determine the eligible
persons to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the price (if any) to be
paid by the Participant, the time or times within which such Awards may be
subject to forfeiture, the vesting schedule and rights to acceleration there-
of, and all other terms and conditions of the Awards. The Committee may condi-
tion the grant of Restricted Stock upon the achievement of specific business
objectives, measurements of individual or business unit or Company perfor-
mances, or such other factors as the Committee may determine. The provisions
of Restricted Stock awards need not be the same with respect to each Partici-
pant, and such Awards to individual Participants need not be the same in sub-
sequent years.
7.2 Awards and Certificates. A prospective Participant selected to receive
Restricted Stock shall not have any rights with respect to such Award, unless
and until such Participant has executed an Award Agreement evidencing the
Award and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such Award.
Further, such Award shall be subject to the following conditions:
(a) Acceptance. Awards of Restricted Stock must be accepted within a
period of 20 days (or such shorter period as the Committee may specify at
grant) after the Award Date, by executing an Award Agreement and by paying
whatever price (if any) the Committee has designated for such shares of
Restricted Stock.
(b) Legend. Each Participant receiving a Restricted Stock Award shall
be issued a stock certificate in respect of such shares of Restricted
Stock. Such certificate shall be registered in the name of such
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Knape & Vogt Manufacturing Company 1997 Stock
Incentive Plan and related Award Agreement entered into between the
registered owner and the Company, dated . Copies of
such Plan and Agreement are on file in the offices of the Company, 2700
Oak Industrial Drive, N.E., Grand Rapids, MI 49505."
(c) Custody. The Committee may require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and
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that, as a condition of any award of Restricted Stock, the Participant
shall have delivered a duly signed stock power, endorsed in blank, relating
to the Common Stock covered by such Award.
7.3 Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Plan shall be subject to the following restrictions and con-
ditions:
(a) Restriction Period. Subject to the provisions of this Plan and the
Award Agreement, during a period set by the Committee (the "Restriction
Period"), the Participant shall not be permitted to sell, transfer, pledge,
or assign shares of Restricted Stock awarded under this Plan. Subject to
these limits, the Committee, in its sole discretion, may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions in whole or in part, based on service, performance and/or such
other factors or criteria as the Committee may determine.
(b) Rights as Shareholder. Except as provided in this subsection (b)
and subsection (a) above, the Participant shall have, with respect to the
shares of Restricted Stock, all of the rights of a holder of shares of
Common Stock of the Company including the right to receive any dividends.
The Committee, in its sole discretion, as determined at the time of Award,
may permit or require the payment of dividends to be deferred. If any
dividends or other distributions are paid in shares of Common Stock, such
shares shall be subject to the same restrictions on transferability and
forfeitability as the shares of Restricted Stock with respect to which they
were paid.
(c) Termination of Employment. Subject to the applicable provisions of
the Award Agreement and this Article 7, upon Termination of Employment for
any reason during the Restriction Period, all Restricted Shares still
subject to restriction will vest or be forfeited in accordance with the
terms and conditions established by the Committee as specified in the Award
Agreement.
(d) Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock, the certificates for
such shares shall be delivered to the Participant.
ARTICLE 8
TERMINATION OR AMENDMENT OF THE PLAN
The Board may at any time amend, discontinue or terminate this Plan or any
part thereof (including any amendment deemed necessary to ensure that the Com-
pany may comply with any applicable regulatory requirement); provided, howev-
er, that, unless otherwise required by law, the rights of a Participant with
respect to Awards granted prior to such amendment, discontinuance or termina-
tion, may not be impaired without the consent of such Participant and, pro-
vided further, with-
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out the approval of the Company's shareholders, no amendment may be made which
would (i) increase the aggregate number of shares of Common Stock that may be
issued under this Plan (except by operation of Section 10.1); (ii) change the
definition of Employees eligible to receive Awards under this Plan; (iii) de-
crease the option price of any Option to less than one hundred percent (100%)
of the Fair Market Value on the date of grant for an Option; (iv) extend the
maximum option period under Section 6.4(c) of the Plan; or (v) cause the Plan
not to comply with either Rule 16b-3, or any successor rule under the Act, or
Section 162(m) of the Code. The Committee may amend the terms of any Award
theretofore granted, prospectively or retroactively, but, subject to Section
10.2, no such amendment or other action by the Committee shall impair the
rights of any Participant without the Participant's consent. Awards may not be
granted under the Plan after the Termination Date, but Awards granted prior to
such date shall remain in effect or become exercisable pursuant to their re-
spective terms and the terms of this Plan.
ARTICLE 9
UNFUNDED PLAN
This Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payment not yet made to a Partici-
pant by the Company, nothing contained herein shall give any such Participant
any rights that are greater than those of a general creditor of the Company.
ARTICLE 10
ADJUSTMENT PROVISIONS
10.1 Antidilution. Subject to the provisions of this Article 10, if the
outstanding shares of Common Stock are increased, decreased, or exchanged for
a different number or kind of shares or other securities, or if additional
shares or new or different shares or other securities are distributed with re-
spect to such shares of Common Stock or other securities, through merger, con-
solidation, sale of all or substantially all of the assets of the Company, re-
organization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Com-
mon Stock or other securities, an appropriate and proportionate adjustment may
be made in (i) the maximum number and kind of shares provided in Articles 4, 6
and 7 of the Plan, (ii) the number and kind of shares or other securities sub-
ject to the then outstanding Awards, and (iii) the price for each share or
other unit of any other securities subject to the then outstanding Awards.
10.2 Change in Control. Notwithstanding Section 10.1, upon the occurrence
of a Change in Control, all Awards then outstanding under the Plan will be
fully vested and exercisable and all restrictions will immediately cease. As
used in this Plan, a "Change in Control" of the Company shall be deemed to
have occurred only if:
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(i) Any "person" [as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act")] is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing fifty-one
percent (51%) or more of the combined voting power of the Company's then
outstanding securities; or
(ii) At any time a majority of the Board is comprised of other than
Continuing Directors (for purposes of this and the following paragraphs,
the term "Continuing Director" means a director who was either (A) first
elected or appointed as a director prior to the date of this Plan; or (B)
subsequently elected or appointed as a director if such director was
nominated or appointed by at least a majority of the then Continuing
Directors); or
(iii) Any of the following occur:
(A) Any merger or consolidation of the Company, other than a merger
or consolidation in which the voting securities of the Company
immediately prior to the merger or consolidation continue to represent
(either by remaining outstanding or being converted into securities of
the surviving entity) fifty-one percent (51%) or more of the combined
voting power of the Company or surviving entity immediately after the
merger or consolidation with another entity;
(B) Any sale, exchange, lease, mortgage, pledge, transfer, or other
disposition (in a single transaction or a series of related
transactions) of all or substantially all of the assets of the Company,
which shall not include any asset sales approved by the Continuing
Directors for the specific purpose of downsizing of the Company's
continuing business operations;
(C) Any liquidation or dissolution of the Company; or
(D) Any transaction or series of related transactions having,
directly or indirectly, the same effect as any of the foregoing; or any
agreement, contract, or other arrangement providing for any of the
foregoing.
10.3 Adjustments by Committee. Any adjustments pursuant to this Article 10
will be made by the Committee, whose determination as to what adjustments will
be made and the extent thereof will be final, binding, and conclusive. No
fractional interest will be issued under the Plan on account of any such ad-
justments. Only cash payments will be made in lieu of fractional shares.
ARTICLE 11
GENERAL PROVISIONS
11.1 Legend. The Committee may require each person purchasing shares pur-
suant to an Award under the Plan to represent to and agree with the Company in
writing that the Participant is acquiring the shares without a view to distri-
bution thereof. In addition to any legend required by this
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Plan, the certificates for such shares may include any legend which the Com-
mittee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions as the Commit-
tee may deem advisable under the rules, regulations and other requirements of
the Securities and Exchange Commission, any stock exchange upon which the
Stock is then listed, any applicable Federal or state securities law, and any
applicable corporate law, and the Committee may cause a legend or legends to
be put on any such certificates to make appropriate reference to such restric-
tions.
11.2 No Right to Employment. Neither this Plan nor the grant of any Award
hereunder shall give any Participant or other Employee any right with respect
to continuance of employment by the Company or any Subsidiary, nor shall there
be a limitation in any way on the right of the Company or any Subsidiary by
which an Employee is employed to terminate his or her employment at any time.
11.3 Withholding of Taxes. The Company shall have the right to deduct from
any payment to be made pursuant to this Plan, or to otherwise require, prior
to the issuance or delivery of any shares of Common Stock or the payment of
any cash hereunder, payment by the Participant of, any federal, state or local
taxes required by law to be withheld. Unless otherwise prohibited by the Com-
mittee, each Participant may satisfy any such withholding tax obligation by
any of the following means or by a combination of such means: (a) tendering a
cash payment; (b) authorizing the Company to withhold from the shares other-
wise issuable to the Participant a number of shares having a Fair Market Value
as of the "Tax Date", less than or equal to the amount of the withholding tax
obligation; or (c) delivering to the Company unencumbered shares owned by the
Participant having a Fair Market Value, as of the Tax Date, less than or equal
to the amount of the withholding tax obligation. The "Tax Date" shall be the
date that the amount of tax to be withheld is determined.
11.4 No Assignment of Benefits. No Option, Award or other benefit payable
under this Plan shall, except as otherwise specifically transfer, provided by
law, be subject in any manner to anticipation, alienation, attachment, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempt to antic-
ipate, alienate, attach, sell, transfer, assign, pledge, encumber or charge,
any such benefits shall be void, and any such benefit shall not in any manner
be liable for or subject to the debts, contracts, liabilities, engagements or
torts of any person who shall be entitled to such benefit, nor shall it be
subject to attachment or legal process for or against such person.
11.5 Governing Law. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws and in the courts
of the state of Michigan.
11.6 Application of Funds. The proceeds received by the Company from the
sale of shares of Common Stock pursuant to Awards granted under this Plan will
be used for general corporate purposes.
A-14
<PAGE>
11.7 Rights as a Shareholder. Except as otherwise provided in an Award
Agreement, a Participant shall have no rights as a shareholder of the Company
until he or she becomes the holder of record of Common Stock.
ARTICLE 12
SHAREHOLDER APPROVAL
The Plan shall be effective on the Effective Date and shall be submitted
for approval by the shareholders of the Company at the Annual Meeting of Share-
holders in 1997. If the shareholders do not approve the Plan, it, and any ac-
tion taken under the Plan, shall be void and of no effect.
A-15
<PAGE>
PROXY KNAPE & VOGT MANUFACTURING COMPANY PROXY
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting of Shareholders to be Held on October 17, 1997
Common Stock
The undersigned hereby appoints Herbert F. Knape, Richard S. Knape and
Richard C. Simkins, and each of them, Proxies with power of substitution to vote
all of the shares of Common Stock of Knape & Vogt Manufacturing Company which
the undersigned is entitled to vote at the Annual Meeting of Shareholders of
the Company to be held at 2700 Oak Industrial Drive, N.E., Grand Rapids,
Michigan, and at all adjournments thereof as stated below.
If you also hold Class B Common Stock, please fill out the blue Class B Proxy.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [_]
1. Election of director to be elected by holders of FOR WITHHOLD
Common Stock voting as a class-- [_] [_]
Nominee: Allan E. Perry
2. Election of director to be elected by holders of FOR WITHHOLD
Common Stock voting together as a class with [_] [_]
Class B Common Stock--
Nominee: John E. Fallon
3. To consider and act upon a proposal to FOR AGAINST ABSTAIN
approve the Company's 1997 Stock [_] [_] [_]
Incentive Plan.
This proxy when executed will be voted in the manner directed by the
undersigned. If no direction is given, this proxy will be voted "FOR" the
selection of the nominees named in Items (1) and (2) and "FOR" the approval of
the Company's 1997 Stock Incentive Plan.
Dated: , 1997
-------------------
Signature(s)
-----------------------------------------
------------------------------------------------------
Please sign your name as it appears on this proxy. If
signing for estates, trusts or corporations, title or
capacity should be stated. If shares are held jointly,
each holder should sign. Attorneys should submit power
of attorney forms.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE>
PROXY KNAPE & VOGT MANUFACTURING COMPANY PROXY
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting of Shareholders to be Held on October 17, 1997
Class B Common Stock
The undersigned hereby appoints Herbert F. Knape, Richard S. Knape and
Richard C. Simkins, and each of them, Proxies with power of substitution to vote
all of the shares of Class B Common Stock of Knape & Vogt Manufacturing Company
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
of the Company to be held at 2700 Oak Industrial Drive, N.E., Grand Rapids,
Michigan, and to all adjournments thereof as stated below.
If you also hold Common Stock, please fill out the white Common Stock Proxy.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
1. Election of director to be elected by holders of FOR WITHHOLD
Class B Common Stock voting together as a class
with Common Stock-- [_] [_]
Nominee: John E. Fallon
FOR AGAINST ABSTAIN
2. To consider and act upon a proposal to approve
the Company's 1997 Stock Incentive Plan. [_] [_] [_]
This proxy when executed will be voted in the manner directed by the
undersigned. If no direction is given, this proxy will be voted "FOR" the
election of the nominee named in Item (1) and "FOR" the approval of the
Company's 1997 Stock Incentive Plan.
Dated: , 1997
------------------------------
Signature(s)
---------------------------------------------
---------------------------------------------------------
Please sign your name as it appears on this proxy. If
signing for estates, trusts or corporations, title or
capacity should be stated. If shares are held jointly,
Each holder should sign. Attorneys should submit power of
attorney forms.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
