<PAGE>
--------------------------------
\ OMB APPROVAL \
\------------------------------\
\ OMB Number: 3235-0059 \
\ Expires: December 31, 1997 \
\ Estimated average burden \
\ hours per response......89 \
--------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Knape & Vogt Manufacturing Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
------------------------------------------------------------------
[LOGO OF KNAPE & VOGT
MANUFACTURING COMPANY KNAPE & VOGT MANUFACTURING COMPANY
APPEARS HERE] 2700 OAK INDUSTRIAL DRIVE, N.E.
GRAND RAPIDS, MICHIGAN 49505
------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 16, 1998
The Annual Meeting of Shareholders of Knape & Vogt Manufacturing Company will
be held at DONNELLY CONFERENCE CENTER, AQUINAS COLLEGE, 157 WOODWARD LANE,
S.E., GRAND RAPIDS, MICHIGAN, ON FRIDAY, OCTOBER 16, 1998, AT 11:30 A.M., local
time, for the following purposes:
1. To elect two persons to the Board of Directors for terms expiring in
2001.
2. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business August 28, 1998, will be
entitled to vote at the meeting or any adjournment thereof.
Dated: September 24, 1998
Grand Rapids, Michigan.
/s/ Allan E. Perry
Allan E. Perry
President and Chief Executive
Officer
<PAGE>
DATED: SEPTEMBER 24, 1998
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 16, 1998
SOLICITATION OF PROXIES FOR ANNUAL MEETING
This Proxy Statement is furnished to the shareholders of Knape & Vogt
Manufacturing Company in connection with the solicitation by the Board of
Directors of proxies to be used at the Annual Meeting of Shareholders which
will be held at DONNELLY CONFERENCE CENTER, AQUINAS COLLEGE, 157 WOODWARD
LANE, S.E., GRAND RAPIDS, MICHIGAN, ON FRIDAY, OCTOBER 16, 1998, AT 11:30
A.M., local time. The Annual Meeting is being held for the purpose of electing
two directors.
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
adjournment 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 Directors.
A proxy may be revoked prior to its exercise by delivering a written notice
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.
Attendance 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.
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
On August 28, 1998, the record date for determination of the shareholders
entitled to vote at the Annual Meeting, there were outstanding 3,523,375
shares of Common Stock of the Company, each having one vote per share and
2,427,727 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
represented by proxy.
The following table sets forth, as of July 31, 1998, information concerning
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 EACH
BENEFICIAL OWNERSHIP CLASS OF STOCK PERCENT OF
NAME AND ADDRESS ------------------------ ------------------ COMMON
OF BENEFICIAL OWNER COMMON CLASS B COMMON CLASS B EQUITY
------------------- ---------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Knape & Vogt
Manufacturing Company
Profit Sharing Plan
and Knape & Vogt
Manufacturing Company
Pension Plan
2700 Oak Industrial
Drive, N.E.
Grand Rapids, MI
49505-6083............ -- 304,425(1) -- 12.54% 5.12%
Dimensional Fund
Advisors, Inc.
1299 Ocean Avenue
Santa Monica, CA
90401................. 312,070(2) -- 8.86% -- 5.24%
First Union Corporation
One First Union Center
Charlotte, NC 28228... 228,340(3) -- 6.48% -- 3.84%
- --------
</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, William R. Dutmers, Richard S. Knape 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 207,540 shares of
Common Stock and sole dispositive power as to 312,070 shares of Common
Stock.
(3) Information provided by First Union Corporation ("Union") indicates that
Union has sole voting and dispositive power as to 228,340 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 Knape had seven
children and these individuals, their families and their descendants (the
"Knape Family") at July 31, 1998, owned approximately 2,075,605 shares (86%)
of the outstanding Class B Common Stock and 167,671 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
understanding that before taking any significant action with regard to their
Company stock, they will consult with one or more of the directors of the
Company and inform such director or directors of their proposed action and
reasons for such action. This understanding among Knape Family members,
coupled with the fact that five of the seven branches of the Knape Family are
represented 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.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of July 31, 1998, the number of shares
beneficially 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 EACH
BENEFICIAL OWNERSHIP CLASS OF STOCK PERCENT OF
NAME OF ---------------------- ------------------ COMMON
BENEFICIAL OWNER COMMON(1) CLASS B COMMON CLASS B EQUITY
- ---------------- ----------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Allan E. Perry.......... 26,315 -- * * *
Richard C. Simkins...... 33,598 877 * * *
Michael G. Van Rooy..... 15,700 -- * * *
John W. Vogus........... 3,900 -- * * *
Anthony R. Taylor....... -- -- * * *
All executive officers
and directors as a
group (11 persons)..... 152,762 442,075 4.34% 17.39% 9.66%
</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--17,550 shares; Richard C. Simkins--29,176
shares; Michael G. Van Rooy--15,700 shares; John W. Vogus--3,550 shares;
and Anthony R. Taylor--0 shares.
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 2001 Annual Meeting of
Shareholders. The Board of Directors has nominated the following persons for
election to the Company's Board of Directors: Herbert F. Knape, to be elected
by the Class B Common Stock and Common Stock voting together as a class, and
Raymond E. Knape, to be elected by the Common Stock voting 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, both of whom are
presently serving as directors. The following pages of this Proxy Statement
contain 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 a director. 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 become a
director as the Board of Directors selects. The Board of Directors recommends
a vote FOR the election of the persons nominated by the Board.
3
<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, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------------- ------------------
YEAR
PRINCIPAL OCCUPATION FIRST PERCENT OF
(FOR MORE THAN 5 YEARS BECAME CLASS CLASS COMMON
NAME AGE UNLESS OTHERWISE NOTED) DIRECTOR COMMON (1) B COMMON B EQUITY
- ---- --- ----------------------------- -------- ------------ ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOMINEES FOR ELECTION AS
DIRECTORS FOR TERMS
EXPIRING IN 2001
NOMINEE FOR ELECTION BY
HOLDERS OF COMMON STOCK
AND CLASS B STOCK
Herbert F. Knape 75 President, Knape 1969 -- 53,739 * 2.21% *
(A)(B)(C)(D) Industries, Inc.,
Industrial Finishes
Rockford, MI
NOMINEE FOR ELECTION BY
HOLDERS OF COMMON STOCK
Raymond E. Knape(C) 66 Former Chairman and 1964 34,169(2) 94,538(2) * 3.89% 2.16%
Chief Executive Officer
of the Company(2)
DIRECTORS WHOSE TERMS
EXPIRE IN 2000
John E. Fallon 75 Private Investor 1969 -- 107,710 * 4.44% 1.81%
(B)(C)(D)(E) Spring Lake, MI
Allan E. Perry(A)(E) 58 President and Chief 1990 26,315 -- * * *
Executive Officer
of the Company
DIRECTORS WHOSE TERMS
EXPIRE IN 1999
William R. Dutmers 42 Chairman of the Board 1996 33,790 12,558 * * *
(A)(B)(E) of Directors of the
Company(3)
Richard S. Knape 72 Private Investor 1986 2,178 45,625(4) * 1.88% *
(A)(D)(E) Grand Rapids, MI(4)
Michael J. Kregor 46 Vice President, National 1996 3,112 10,619 * * *
(B)(D) Sales, Griffith Laboratories,
Alsip, IL(5)
Mary Rita Cuddohy 80 Private Investor 1985 -- 96,409 * 3.97% 1.62%
(C)(D) Franklin, MI
</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--17,550 shares.
(2) 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.
4
<PAGE>
(3) William R. Dutmers was elected to the Board of Directors on April 19,
1996, and elected Chairman of the Board on January 16, 1998. 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.
(4) 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.
(5) 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 accepted in 1996. From 1987 to 1996, Mr. Kregor held various
vice presidential positions in the marketing and sales area at Nestle.
The Board of Directors, which had five meetings in the last fiscal year, has
a standing Audit Committee, Nominating Committee and an Executive Compensation
Committee. The responsibilities of the Audit Committee, which met five times
in the last fiscal year, include making recommendations on the choice of
independent public accountants and reviewing financial matters with such
accountants, internal auditors, and management. The Nominating Committee,
which met once during the last fiscal year, selects and presents to the Board
of Directors 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 Rapids, Michigan 49505. The Executive Compensation Committee met
six times during 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 COMPENSATION AND CERTAIN TRANSACTIONS
Directors, except Mr. Dutmers, who are not employees of the Company are
compensated at the rate of $3,000 for each Board meeting attended and $1,500
for each Committee meeting 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.
Mr. Dutmers became the Chairman of the Board on January 16, 1998. For the 12
month period ending June 30, 1999, Mr. Dutmers has agreed to devote at least
80 percent of his business time to the Company's business. Mr. Dutmers has
received 10,500 restricted shares of the Company's common stock and will
participate in the Management Incentive Compensation Plan (the Economic Value
Added Incentive Plan). In addition, he will receive coverage under the
Company's medical insurance plan and the Company will provide an automobile
and reimburse him for expenses related to the Company's business. During the
year ended June 30, 1998, Mr. Dutmers provided consulting services to the
Company concerning mergers, acquisitions, asset dispositions and other special
projects assigned to him by the Board of Directors or management of the
Company. Amounts paid to Mr. Dutmers under these arrangements through June 30,
1998 totaled $131,700.
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Company's Executive Compensation Committee (the "Committee"), which is
comprised of five non-employee directors of the Company, is responsible for
considering and approving compensation arrangements for senior management of
the Company, including the Company's executive officers. The goals of the
Committee in establishing annual compensation for senior management are as
follows: (i) to attract and retain key executives who will assure real growth
of the Company and its operating subsidiaries; and (ii) to provide strong
financial incentives, at a reasonable cost to the Company's shareholders, for
senior management to enhance long-term value of the shareholders' investment
in the Company.
5
<PAGE>
Executive compensation consists of the following components:
. Base salary compensation;
. Short-term incentive compensation (the Economic Value Added Incentive
Plan); and
. Long-term incentive compensation (the 1997 Stock Incentive Plan).
The committee also reviews management benefit plans and makes recommendations
regarding such plans to the Board of Directors.
BASE SALARY
The Company is committed to providing a competitive base pay to help attract
and retain the best people in the industry. To insure 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
salaries of the Company's executives compare favorably with executives with
similar 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 responsibilities 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 strategic and
business plan goals, operating profit, performance relative to competitors, and
timely new product introductions. Individual performance is evaluated according
to organizational and management development and the fostering of teamwork and
Company values.
THE ECONOMIC VALUE ADDED INCENTIVE PLAN
The Economic Value Added (EVA) Plan is an incentive compensation program,
first effective at the beginning of the 1998 fiscal year, which provides for
annual bonuses for all executive officers of the Company and certain other
officers and key employees of the Company and its subsidiaries, if their
performance adds value for Company shareholders. EVA is the after-tax operating
profits that remain after subtracting the cost of capital employed to generate
that profit. EVA was implemented to improve the Company's performance under
this financial measure. The EVA program replaced the Company's short-term
incentive bonus program which was based on sales growth and return on equity.
Under the EVA Plan, bonuses are awarded to each Plan participant based on the
improvement in EVA for the Company's consolidated results. To measure the
improvement (or deterioration) in EVA, an EVA target is set yearly based on the
average of the prior fiscal year's target and actual EVA plus the expected
improvement in EVA for the current fiscal year. If the annual improvement in
EVA is in excess of the targeted improvement, the bonus calculation will
produce an amount in excess of the participant's target bonus. If the annual
improvement in EVA is less than the targeted improvement, the bonus calculation
will produce an amount less than the individual's target bonus. Bonuses payable
under the EVA Plan are not subject to any minimum or maximum. In fiscal 1998,
the Company exceeded its EVA target resulting in Plan compensation of 104.6% of
target.
For fiscal 1998, participants were divided into classifications which had
target bonus levels ranging from 15% to 65% of base salary. It is intended that
the assignment of a particular classification correspond with a position's
relative effect on the Company's performance.
In order to encourage a long-term commitment by executive officers and other
key employees to the Company and its shareholders, the EVA Plan requires that
two-thirds of any bonus earned in a given year in
6
<PAGE>
excess of the target bonus be deferred in a "bonus bank" for possible future
pay out by the Company. Thirty-three percent of a positive bonus bank balance
is paid out each year. Consequently, the total bonus payable in any given
period consists of the individual's target bonus, plus (or minus) the
participant's fixed share of EVA improvement and plus (or minus) a portion of
the bonus bank balance. A bonus bank account is considered "at risk" in the
sense that in any year EVA performance results in a bonus amount which is
negative, the negative bonus amount is subtracted from the outstanding bonus
bank balance. In the event that the outstanding bonus bank balance at the
beginning of the year is negative, the bonus paid for that year is limited to
the aggregate of thirty-three percent of the positive bonus earned up to the
target bonus and thirty-three percent of any positive bonus bank balance after
applying the remaining portion of the bonus earned for the year against the
negative balance in the bonus bank. The executive is not expected to repay
negative balances in the bonus bank. In the event that an executive voluntarily
terminates employment with the Company, the bonus bank balance is subject to
forfeiture.
THE 1997 STOCK INCENTIVE PLAN
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.
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
number of Options that may be granted to an employee 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 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 fiscal 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 determined 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 figure utilized in the
formula to determine the number of shares covered by an Option grant under the
Stock Incentive Plan.
The exercise price included in both Incentive Stock Options and Nonqualified
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
percentage 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 granted.
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.
7
<PAGE>
The following example illustrates the calculation of the Option grant under
the Stock Incentive Plan. Assume (a) an executive of the Company has designated
an EVA Bonus Option Amount of $40,000 which is subsequently earned, (b) the
fair market value of Company stock on the date of grant is $22.00 per share,
(c) the yield on 5-year U.S. Treasury securities is 5.5%, and (d) the
projected, annual dividend yield is 3.0%.
EXAMPLE: NUMBER OF OPTION SHARES
5% of $22.00 (the fair market value) is $1.10.
Number of shares covered by Option = 36,364 ($40,000 / $1.10)
EXERCISE PRICE
The Fixed Percentage Increase would equal 4.5% (5.5% + 2% -
3.0%). Based upon the five-year term of the Option, the
exercise price would equal $27.42 per share ($22.00 x 4.5%,
compounded over five years).
Thus, the fair market value of the Company's common stock must exceed $27.42
per share between 3 and 5 years from the date of the Option grant to give the
Option value to the Senior Executive, based on this example.
Options to purchase up to a maximum of 200,000 shares may be granted each
year. A maximum of 600,000 shares may be issued pursuant to awards made under
the 1997 Stock Incentive Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The factors that are used to determine the annual base salary and incentive
compensation of Mr. Allan E. Perry, the Company's President and Chief Executive
Officer, are the same as those described above for all executive officers.
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
consideration the performance of the Company, including strategic and business
plan goals, operating profit, performance relative to competitors and timely
new product introduction.
In fiscal 1998, Mr. Perry received a base salary of $281,600. Mr. Perry's EVA
target bonus level for fiscal 1998 was 65% of base salary. As a result of the
Company achieving EVA Plan results equaling 104.6% of target, Mr.Perry earned
incentive compensation of $191,460. From his earned incentive computation, Mr.
Perry purchased 78,897 leveraged stock options at $1.16 per share, totaling
$91,521, was paid incentive compensation of $94,323 and $5,616 was added to his
bonus bank.
OTHER COMPENSATION ISSUES
In addition to the foregoing components of executive compensation, the
Compensation Committee reviews, on an on-going basis, other components of
compensation, such as benefits and prerequisites. In all cases, the objective
of the Compensation Committee is to assist senior management in attracting,
motivating and retaining qualified executive personnel.
Submitted by the Executive Compensation Committee:
Michael J. Kregor, Chairman Mary Rita Cuddohy
John E. Fallon Richard S. Knape
Herbert F. Knape
8
<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 Company
(the "Named Executives") for each of the three fiscal years ended June 30,
1998, 1997, and 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL 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.......... 1998 $ 281,600 $ 94,323 -0- $16,762
President and Chief 1997 256,000 69,939 8,000 15,862
Executive Officer 1996 210,000 -0- 4,000 12,862
Richard C. Simkins...... 1998 $ 205,920 $ 107,696 -0- $16,705
Executive Vice President 1997 187,200 39,780 8,000 15,937
1996 156,000 -0- 4,000 12,937
Michael G. Van Rooy..... 1998 $ 160,000 $ 36,661 -0- $16,055
Senior Vice President-- 1997 150,000 31,875 8,000 15,155
Manufacturing 1996 128,000 -0- 4,000 10,615
John W. Vogus........... 1998 $ 142,742 $ 32,707 -0- $13,807
Vice President-- 1997 114,290 13,875 2,000 10,286
Sales and Marketing 1996 101,269 11,595 500 7,089
Anthony R. Taylor....... 1998 $ 107,438 $ 39,383 -0- $ -0-
President--KV Canada 1997 117,476 14,262 2,000 1,755
(Retired 4/9/98) 1996 108,119 7,024 1,500 1,767
</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 1998, pursuant
to which substantially all salaried employees of the Company participate,
in the following amounts: Mr. Perry $14,400; Mr. Simkins $14,400; Mr. Van
Rooy $14,400; and Mr. Vogus $12,847; and (b) payments by the Company in
fiscal 1998 of premiums for term life insurance for the benefit of the
Named Executives, in the following amounts: Mr. Perry $2,362; Mr. Simkins
$2,305; Mr. Van Rooy $1,655; and Mr. Vogus $960.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted to employees during the year ended June 30,
1998.
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1998
AND YEAR END OPTION VALUES
The following table provides information on the number and value of
unexercised options at June 30, 1998. No options were exercised by the Named
Executives during fiscal 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT VALUE OF UNEXERCISED
TO UNEXERCISED OPTIONS AT IN THE MONEY OPTIONS AT
JUNE 30, 1998 JUNE 30, 1998(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Allan E. Perry.............. 17,550 0 $103,248 0
Richard C. Simkins.......... 29,176 0 $225,195 0
Michael G. Van Rooy......... 15,700 0 $100,624 0
John W. Vogus............... 3,550 0 $ 21,250 0
Anthony R. Taylor........... 0 0 0 0
</TABLE>
- --------
(1) Values are based on the difference between the closing price of the
Company's Common Stock on June 30, 1998, ($22.50) and the exercise prices
of the options.
9
<PAGE>
CHANGE IN CONTROL MANAGEMENT CONTINUITY AGREEMENT
On July 1, 1997, the Company, by its Board of Directors and on
recommendation of its Executive Compensation Committee, entered into
individual Management 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 before a change in control if the Company terminates his employment
in contemplation 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. Severance benefits will not be payable if the Company
terminates the employment for cause, if employment terminates due to the
executive's death or disability, 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 Company reduces the executive's salary or bonus,
assigns duties materially different from or inconsistent with the executive's
prior position, or shifts the executive's 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 automatically 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, insurance and other benefits for three years.
The obligations of these agreements would be assumed by any successor
corporation on change in control.
10
<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
return 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, 1993, and the reinvestment of dividends.
LOGO
11
<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
Seidman, 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 appropriate questions. During October of 1997, 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--1999 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 23,
1999, 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
Corporate 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.
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
presented 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
solicitation. The Company will pay Morrow & Co. $4,000 for its services. The
above Notice and Proxy Statement are sent by order of the Board of Directors.
September 24, 1998
LOGO
Allan E. Perry
President and Chief Executive
Officer
12
<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 16, 1998
Common Stock
The undersigned hereby appoints William R. Dutmers, Allen E. Perry and
Michael J. Kregor, 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 Donnelly Conference Center, Aquinas College, 157 Woodward
Lane, S.E., Grand Rapids, Michigan, on Friday, October 16, 1998, at 11:30 a.m.,
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. [X]
FOR WITHHOLD
1. Election of director to be elected by holders of
Common Stock Voting as a class -- [_] [_]
Nominee: Raymond E. Knape
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: Herbert F. Knape
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 nominees
names in Items (1) and (2).
Dated: , 1998
----------------------
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 16, 1998
Class B Common Stock
The undersigned hereby appoints William R. Dutmers, Allen E. Perry and
Michael J. Kregor, 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 Donnelly Conference Center, Aquinas College,
157 Woodward Lane, S.E., Grand Rapids, Michigan, on Friday, October 16, 1998, at
11:30 a.m., and at 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>
KNAPE & VOGT MANUFACTURING COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
FOR WITHHOLD
1. Election of director to be elected by holders of
Class B Common Stock voting together as a class [_] [_]
with Common Stock --
Nominee: Herbert F. Knape
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 Items (1).
Dated: , 1998
----------------------
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.
