-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GI6aH9LtU58FYWTowMtaLHyqPoIFQEIdyzNIL/HEdMl7wIAIq6xsKpfFU8vbOEyU eyIJ3wKDYaI3OsNGaBwMrw== 0000950131-98-005072.txt : 19980903 0000950131-98-005072.hdr.sgml : 19980903 ACCESSION NUMBER: 0000950131-98-005072 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19980902 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KNAPE & VOGT MANUFACTURING CO CENTRAL INDEX KEY: 0000056362 STANDARD INDUSTRIAL CLASSIFICATION: PARTITIONS, SHELVING, LOCKERS & OFFICE AND STORE FIXTURES [2540] IRS NUMBER: 380722920 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: SEC FILE NUMBER: 005-32752 FILM NUMBER: 98703229 BUSINESS ADDRESS: STREET 1: 2700 OAK INDUSTRIAL DR NE CITY: GRAND RAPIDS STATE: MI ZIP: 49505 BUSINESS PHONE: 6164593311 MAIL ADDRESS: STREET 1: 2700 OAK INDUSTRIAL DRIVE, NE CITY: GRAND RAPIDS STATE: MI ZIP: 49505 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KNAPE & VOGT MANUFACTURING CO CENTRAL INDEX KEY: 0000056362 STANDARD INDUSTRIAL CLASSIFICATION: PARTITIONS, SHELVING, LOCKERS & OFFICE AND STORE FIXTURES [2540] IRS NUMBER: 380722920 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 2700 OAK INDUSTRIAL DR NE CITY: GRAND RAPIDS STATE: MI ZIP: 49505 BUSINESS PHONE: 6164593311 MAIL ADDRESS: STREET 1: 2700 OAK INDUSTRIAL DRIVE, NE CITY: GRAND RAPIDS STATE: MI ZIP: 49505 SC 13E4 1 SCHEDULE 13E-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 2, 1998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ----------------------------------- SCHEDULE 13E-4 ISSUER TENDER OFFER STATEMENT (PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) (Amendment No. ____________________) KNAPE & VOGT MANUFACTURING COMPANY (Name of Issuer) KNAPE & VOGT MANUFACTURING COMPANY (Name of Person(s) Filing Statement) COMMON STOCK, PAR VALUE $2.00 PER SHARE (Title of Class of Securities) 498782 10 1 (CUSIP Number of Class of Securities) Jack D. Poindexter Chief Financial Officer, Treasurer Knape & Vogt Manufacturing Company 2700 Oak Industrial Drive, N.E. Grand Rapids, Michigan 49505 (616) 459-3311 (Name, Address, and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) COPIES TO: Donald L. Johnson, Esq. Varnum, Riddering, Schmidt & Howlett LLP Suite 1700, 333 Bridge Street, N.W. Grand Rapids, Michigan 49504 September 2, 1998 (Date Tender Offer First Published, Sent, or Given to Security Holders) CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- Transaction Valuation* Amount of Filing - -------------------------------------------------------------------------------- $26,400,000 $5,280 - -------------------------------------------------------------------------------- *Calculated solely for the purpose of determining the filing fee, based upon the purchase of 1,200,000 shares at the maximum tender offer price per share of $22.00. [_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: N/A Filing Party: N/A Form or Registration No.: N/A Date Filed: N/A This Issuer Tender Offer Statement on Schedule 13E-4 (the "Statement") relates to the tender offer by Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company") to purchase up to 1,200,000 shares of its Common Stock, par value $2.00 per share (the "Shares") at a price, net to the seller in cash, not in excess of $22.00 nor less than $19.00 per Share, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 2, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which, together as amended or supplemented from time to time, constitute the "Offer"). Copies of such documents are filed as Exhibits (a)(1) and (a)(2), respectively, to this Statement. Item 1. Security and Issuer. (a) The issuer of the securities to which this Statement relates is Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), and the address of its principal executive office is 2700 Oak Industrial Drive, Grand Rapids, Michigan 49505. (b) The information set forth in "Introduction," "Number of Shares; Proration" in Section 1 of the Offer to Purchase, and "Interests of Directors and Officers; Transactions and Agreements Concerning the Shares" in Section 12 of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "Introduction," and the "Price Range of Shares; Dividends" in Section 8 of the Offer to Purchase is incorporated herein by reference. (d) This statement is being filed by the Issuer. Item 2. Source and Amount of Funds or Other Consideration. (a) - (b) The information set forth in "Source and Amount of Funds" in Section 11 of the Offer to Purchase is incorporated herein by reference. Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or Affiliate. (a) - (j) The information set forth in "Introduction," "Purpose of the Offer; Certain Effects of the Offer" in Section 9 of the Offer to Purchase, "Certain Information Concerning the Company" in Section 10 of the Offer to Purchase, "Source and Amount of Funds" in Section 11 of the Offer to Purchase, and "Interests of Directors and Officers; Transactions and Agreements Concerning the Shares" in Section 12 of the Offer to Purchase is incorporated herein by reference. Item 4. Interest in Securities of the Issuer. The information set forth in "Interest of Directors and Officers; Transactions and Agreements Concerning the Shares" in Section 12 of the Offer to Purchase is incorporated herein by reference. Item 5. Contracts, Arrangements, Understandings or Relationships with Respect to the Issuer's Securities. The information set forth in "Introduction," "Purpose of the Offer; Certain Effects of the Offer" in Section 9 of the Offer to Purchase, and "Interest of Directors and Officers; Transactions and Agreements Concerning the Shares" in Section 12 of the Offer to Purchase is incorporated herein by reference. Item 6. Persons Retained, Employed, or to be Compensated. The information set forth in "Introduction" and "Fees and Expenses" in Section 15 of the Offer to Purchase is incorporated herein by reference. Item 7. Financial Information. (a) - (b) The information set forth in "Certain Information Concerning the Company" in Section 10 of the Offer to Purchase is incorporated herein by reference. Item 8. Additional Information. (a) The information set forth in "Interests of Directors and Officers; Transactions and Agreements Concerning the Shares" in Section 12 of the Offer to Purchase is incorporated herein by reference. (b) None or not applicable. (c) The information set forth in "Purpose of the Offer; Certain Effects of the Offer" in Section 9 of the Offer to Purchase is incorporated herein by reference. (d) None or not applicable. (e) The information set forth in the Offer to Purchase and the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference. Item 9. Material to be Filed as Exhibits. (a) (1) Form of Offer to Purchase, dated September 2, 1998. (2) Form of Letter of Transmittal (including Certification of Taxpayer Identification Number on Form W-9). (3) Form of Notice of Guaranteed Delivery. (4) Form of Letter to Shareholders of the Company, dated September 2, 1998, from Allan E. Perry, President and Chief Executive Officer of the Company. (5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated September 2, 1998. (6) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (7) Form of Letter from Old Kent Bank ("Old Kent"), as trustee, to participants in the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan, including the form of Direction Form to Old Kent from participants in such plan. (8) Form of Summary Advertisement, dated September 2, 1998. (9) Text of Press Release issued by the Company, dated September 1, 1998. (b) Loan Agreement (revolving line of credit) extended by Old Kent to Company, dated as of November 29, 1993 (as amended on February 16, 1995, June 28, 1996), filed as Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended June 30, 1996, and as amended February 1, 1997, filed as Exhibit 10(e) to the Company=s Form 10-K for the year ended June 30, 1998, are incorporated herein by reference, and are included herein as well. (c) Letter Agreement and Restricted Stock Award Agreement, each dated July 1, 1998, each between the Company and William R. Dutmers, filed as Exhibits 10(g) and 10(h), respectively, to the Company's Annual Report on Form 10-K for the year ended June 30, 1998, are incorporated herein by reference, and are included herein as well. (d) Not applicable. (e) Not applicable. (f) Not applicable. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule 13E-4 is true, complete and correct. KNAPE & VOGT MANUFACTURING COMPANY September 2, 1998. By /s/ Jack D. Poindexter --------------------------------------------- Jack D. Poindexter Chief Financial Officer and Treasurer 101138 EXHIBIT INDEX ------------- (a) (1) Form of Offer to Purchase, dated September 2, 1998. (a) (2) Form of Letter of Transmittal (including Certification of Taxpayer Identification Number on Form W-9). (a) (3) Form of Notice of Guaranteed Delivery. (a) (4) Form of Letter to Shareholders of the Company, dated September 2, 1998, from Allan E. Perry, President and Chief Executive Officer of the Company. (a) (5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated September 2, 1998. (a) (6) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a) (7) Form of Letter from Old Kent Bank ("Old Kent"), as trustee, to participants in the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan, including the form of Direction Form to Old Kent from participants in such plan. (a) (8) Form of Summary Advertisement, dated September 2, 1998. (a) (9) Text of Press Release issued by the Company, dated September 1, 1998. (b) Loan Agreement (revolving line of credit) extended by Old Kent to Company, dated as of November 29, 1993 (as amended on February 16, 1995, June 28, 1996), and as amended February 1, 1997, filed as Exhibit 10(e) to the Company's Form 10-K for the year ended June 30, 1998, are incorporated herein by reference and are included herein as well. (c) Letter Agreement and Restricted Stock Award Agreement, each dated July 1, 1998, each between the Company and William R. Dutmers, filed as Exhibits 10(g) and 10(h), respectively, to the Company's Annual Report on Form 10-K for the year ended June 30, 1998, are incorporated herein by reference and are included herein as well. (d) Not applicable. (e) Not applicable. (f) Not applicable. EX-99.(A)1 2 FORM OF OFFER TO PURCHASE KNAPE & VOGT MANUFACTURING COMPANY OFFER TO PURCHASE FOR CASH UP TO 1,200,000 SHARES OF ITS COMMON STOCK AT A PURCHASE PRICE NOT IN EXCESS OF $22.00 NOR LESS THAN $19.00 NET PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. KNAPE & VOGT MANUFACTURING COMPANY, A MICHIGAN CORPORATION (THE "COMPANY"), HEREBY INVITES ITS SHAREHOLDERS TO TENDER SHARES OF ITS COMMON STOCK, PAR VALUE $2.00 PER SHARE ("COMMON STOCK" OR THE "SHARES"), TO THE COMPANY AT PRICES NOT IN EXCESS OF $22.00 NOR LESS THAN $19.00 PER SHARE, NET TO THE SELLER IN CASH, WITHOUT INTEREST THEREON, AS SPECIFIED BY SHAREHOLDERS TENDERING THEIR SHARES, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE AND IN THE RELATED LETTER OF TRANSMITTAL (WHICH TOGETHER, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME, CONSTITUTE THE "OFFER"). EACH SHARE OF THE COMPANY'S CLASS B COMMON STOCK, PAR VALUE $2.00 PER SHARE ("CLASS B COMMON STOCK"), IS CONVERTIBLE INTO ONE SHARE. HOLDERS OF CLASS B COMMON STOCK CAN PARTICIPATE IN THE OFFER BY TENDERING A NUMBER OF SHARES INTO WHICH THEIR CLASS B COMMON STOCK IS CONVERTIBLE PURSUANT TO THE TERMS AND CONDITIONS OF THE OFFER. SEE SECTION 3. THE COMPANY WILL, UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER, DETERMINE A SINGLE PER SHARE PRICE NOT IN EXCESS OF $22.00 NOR LESS THAN $19.00 PER SHARE, NET TO THE SELLER IN CASH, WITHOUT INTEREST THEREON (THE "PURCHASE PRICE"), THAT IT WILL PAY FOR THE SHARES PROPERLY TENDERED PURSUANT TO THE OFFER AND NOT PROPERLY WITHDRAWN, TAKING INTO ACCOUNT THE NUMBER OF SHARES SO TENDERED AND THE PRICES SPECIFIED BY THE TENDERING SHAREHOLDERS. THE COMPANY WILL SELECT THE LOWEST PURCHASE PRICE THAT WILL ALLOW IT TO PURCHASE 1,200,000 SHARES VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PURSUANT TO THE OFFER (OR SUCH LESSER NUMBER OF SHARES AS ARE VALIDLY TENDERED AT PRICES NOT IN EXCESS OF $22.00 NOR LESS THAN $19.00 NET PER SHARE). ALL SHARES PROPERLY TENDERED AT PRICES AT OR BELOW THE PURCHASE PRICE AND NOT PROPERLY WITHDRAWN WILL BE PURCHASED AT THE PURCHASE PRICE, UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER, INCLUDING THE TERMS THEREOF RELATING TO PRORATION AND CONDITIONAL TENDERS DESCRIBED HEREIN. THE COMPANY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO PURCHASE MORE THAN THE 1,200,000 SHARES PURSUANT TO THE OFFER. SHARES TENDERED AT PRICES IN EXCESS OF THE PURCHASE PRICE AND SHARES NOT PURCHASED BECAUSE OF PRORATION AND CONDITIONAL TENDERS WILL BE RETURNED. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7. THE COMMON STOCK IS PRINCIPALLY TRADED ON THE NASDAQ NATIONAL MARKET ("NASDAQ") UNDER THE TICKER SYMBOL "KNAP." ON AUGUST 31, 1998, THE LAST TRADING DATE PRIOR TO THE ANNOUNCEMENT OF THE OFFER, THE LAST REPORTED SALE PRICE PER SHARE AS REPORTED ON NASDAQ WAS $19.125. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK. THE COMPANY HAS DECLARED A REGULAR QUARTERLY DIVIDEND OF $.165 PER SHARE OF COMMON STOCK AND $.15 PER SHARE OF CLASS B COMMON STOCK PAYABLE ON SEPTEMBER 4, 1998, TO SHAREHOLDERS OF RECORD ON AUGUST 25, 1998. SHAREHOLDERS OF RECORD ON AUGUST 25, 1998 WHO TENDER SHARES PURSUANT TO THE OFFER WILL RECEIVE THIS DIVIDEND. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SUCH SHAREHOLDER'S SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SUCH SHARES SHOULD BE TENDERED. SEE SECTION 12 FOR INFORMATION REGARDING THE INTENTIONS OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO TENDERING SHARES PURSUANT TO THE OFFER. IMPORTANT Any shareholder wishing to tender all or any part of such shareholder's Shares must (a) properly complete and sign the Letter of Transmittal (or manually signed facsimile thereof) in accordance with the Instructions in the Letter of Transmittal, and mail or deliver such Letter of Transmittal together with any required signature guarantee and any other required documents to Harris Trust and Savings Bank (the "Depositary"), and mail or deliver the certificates for Shares (or equivalent securities) to the Depositary (together with any other documents required by the Letter of Transmittal), (b) tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3, or (c) request his or her broker, dealer, commercial bank, trust company, or nominee to effect the transaction for the shareholder. A shareholder whose Shares (or equivalent securities) are registered in the name of a broker, dealer, commercial bank, trust company, or nominee must contact such broker, dealer, commercial bank, trust company, or nominee if the shareholder desires to tender Shares. Any shareholder who desires to tender Shares and whose certificates for such Shares (or equivalent securities) are not immediately available or cannot be delivered to the Depositary or who cannot comply with the procedure for book-entry transfer or whose other required documents cannot be delivered to the Depositary, in any case, by the expiration of the Offer must tender such Shares pursuant to the guaranteed delivery procedure set forth in Section 3. Questions or requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal, Notice of Guaranteed Delivery, or other tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective address(es) and telephone number(s) set forth on the back cover of this Offer to Purchase. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION, IF GIVEN OR MADE, AS HAVING BEEN AUTHORIZED BY THE COMPANY. The Dealer Manager for the Offer is: Credit Suisse First Boston September 2, 1998 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Offer to Purchase contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as "believes," "anticipates," "intends," or "expects." These forward-looking statements relate to the plans and objectives of the Company for future operations, including, without limitation, statements relating to the Company's new comprehensive financial strategy and the use of the proceeds of the sale of The Hirsh Company. In light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Offer to Purchase should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. Numerous factors could cause the Company's actual results to differ materially from such forward-looking statements. The Company undertakes no obligation to release publicly the results of any future revisions it may make to forward- looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. TABLE OF CONTENTS
PAGE NO. -------- SUMMARY............................................................... i RECENT DEVELOPMENTS................................................... ii INTRODUCTION.......................................................... 1 THE OFFER............................................................. 3 1. Number of Shares; Proration....................................... 3 2. Tenders by Holders of Fewer Than 100 Shares....................... 5 3. Procedure for Tendering Shares.................................... 5 4. Withdrawal Rights................................................. 10 5. Acceptance for Payment of Shares and Payment of Purchase Price.... 10 6. Conditional Tender of Shares...................................... 11 7. Certain Conditions of the Offer................................... 12 8. Price Range of Shares; Dividends.................................. 13 9. Purpose of the Offer; Certain Effects of the Offer................ 14 10. Certain Information Concerning the Company........................ 16 11. Source and Amount of Funds........................................ 21 12. Interests of Directors and Officers; Transactions and Agreements Concerning the Shares................................................ 21 13. Certain Federal Income Tax Consequences........................... 22 14. Extension of Tender Period; Termination; Amendments............... 25 15. Fees and Expenses................................................. 25 16. Miscellaneous..................................................... 26
SUMMARY This general summary is provided for the convenience of the Company's shareholders and is qualified in its entirety by reference to the full text and more specific details of this Offer to Purchase. Number of Shares to be 1,200,000 Shares (or such lesser number of Purchased ................. Shares as are validly tendered at prices not in excess of $22.00 nor less than $19.00 net per Share). Purchase Price............. The Company will determine a single per Share net cash price, not in excess of $22.00 nor less than $19.00 net per Share, that it will pay for Shares validly tendered. All Shares acquired in the Offer will be acquired at the Purchase Price even if tendered below the Purchase Price. Each shareholder desiring to tender Shares must (i) specify in the Letter of Transmittal the minimum price (not in excess of $22.00 nor less than $19.00 net per Share) at which such shareholder is willing to have Shares purchased by the Company or (ii) elect to have such shareholder's Shares purchased at a price determined by the Dutch Auction tender process, which could result in such Shares being purchased at the minimum price of $19.00 per Share. How to Tender Shares....... See Section 3. Call the Information Agent, the Dealer Manager, or consult your broker for assistance. Brokerage Commissions...... None for registered shareholders who tender Shares directly to the Depositary. Shareholders holding Shares or Class B Common Stock through their broker or bank are urged to consult such institutions to determine whether they charge any fees or transaction costs if shareholders tender Shares through such institutions and not directly to the Depositary. Stock Transfer Tax......... None, if payment is made to the registered holder of Shares. See Section 5. Expiration and Proration Wednesday, September 30, 1998, at 12:00 Dates...................... Midnight, New York City time, unless the Offer is extended by the Company. Payment Date............... As soon as practicable after the Expiration Date. Position of the Company and its Board of Directors.................. Neither the Company nor its Board of Directors makes any recommendation to any shareholder as to whether to tender or refrain from tendering Shares. See Section 12 for information regarding the intentions of the Company's directors and executive officers with respect to tendering Shares pursuant to the Offer. Withdrawal Rights.......... Tendered Shares may be properly withdrawn at any time prior to 12:00 Midnight, New York City time, on Wednesday, September 30, 1998, unless the Offer is extended by the Company, and, unless previously purchased, after 12:00 Midnight, New York City time, on Friday, October 30, 1998. See Section 4. i Odd Lots.................... There will be no proration of Shares tendered by any shareholder who owns beneficially fewer than 100 Shares in the aggregate (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan (the "Employees' Retirement Savings Plan")), and who tenders all such Shares at or below the Purchase Price prior to the Expiration Date and who checks the "Odd Lots" box in the Letter of Transmittal. Further Developments Regarding the Offer......... Call the Information Agent, Dealer Manager, or consult your broker. Market Price................ On August 31, 1998, the last trading date prior to the announcement of the Offer, the last reported sale price as reported on NASDAQ was $19.125. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK. Dividend.................... The Company has declared a regular quarterly dividend of $.165 per share of Common Stock and $.15 per share of Class B Common Stock payable on September 4, 1998, for shareholders of record at the close of business on August 25, 1998. Shareholders of record on August 25, 1998, who tender Shares pursuant to the Offer will receive this dividend. RECENT DEVELOPMENTS On August 31, 1998, the Company signed a definitive agreement to sell substantially all of the assets of its wholly-owned subsidiary, The Hirsh Company ("Hirsh"), to Steelworks, Inc. The Company also signed a definitive agreement on August 31, 1998 to sell the stock of Hirsh following the transaction with Steelworks, Inc. Although a loss of $12,800,000 (after tax), or $2.15 per diluted Share, has been incurred on the sale of Hirsh, the sale reflects the Company's desire to enhance its corporate profit margins and remain focused on its core drawer slide, kitchen and bath storage, and wall attached shelving products. In addition, the Company's Board of Directors recently adopted a new comprehensive financial strategy which includes the Offer, the potential for additional offers, or open market or negotiated share repurchases and the intention to substitute quarterly stock dividends in place of quarterly cash dividends (along with the intention to adopt a stock dividend sale plan), as further described herein. Finally, the Company's Executive Vice President, Chief Financial Officer, Secretary, and Treasurer, Richard C. Simkins, has resigned his positions as Chief Financial Officer and Treasurer as of August 21, 1998. He will continue as a director until this year's annual meeting in October and remain as Executive Vice President of the Company until December 31, 1998. The Company has named Jack D. Poindexter, formerly the Assistant Treasurer, Director of Tax and Internal Audit, to replace Mr. Simkins as Chief Financial Officer and Treasurer. See Sections 9 and 10. ii TO THE HOLDERS OF SHARES (OR EQUIVALENT SECURITIES) OF KNAPE & VOGT MANUFACTURING COMPANY: INTRODUCTION Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), invites shareholders to tender shares of its Common Stock, par value $2.00 per share ("Common Stock" or the "Shares"), at prices not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon, specified by such tendering shareholders, upon the terms and subject to the conditions set forth herein and in the related Letter of Transmittal (which together constitute the "Offer"). Each share of the Company's Class B Common Stock, par value $2.00 per share ("Class B Common Stock"), is convertible into one Share. Holders of Class B Common Stock can participate in the Offer by tendering pursuant to the terms and conditions of the Offer a number of Shares into which their Class B Common Stock is convertible. Any Class B Common Stock delivered relating to Shares tendered but not accepted for payment pursuant to the Offer will be returned as Class B Common Stock. See Section 3. The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not in excess of $22.00 nor less than $19.00 per Share), net to the seller in cash, without interest thereon, (the "Purchase Price") that it will pay for the Shares validly tendered pursuant to the Offer and not properly withdrawn, taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the Purchase Price that will enable it to purchase 1,200,000 Shares validly tendered and not properly withdrawn (or such lesser number of Shares as is validly tendered at prices not in excess of $22.00 nor less than $19.00 net per Share) pursuant to the Offer. The Company will purchase all Shares validly tendered at prices at or below the Purchase Price and not properly withdrawn prior to the Expiration Date (as defined in Section 1), upon the terms and subject to the conditions of the Offer, including the provisions relating to proration and conditional tenders described below. The Company reserves the right, in its sole discretion, to purchase more than 1,200,000 Shares pursuant to the Offer. Shares tendered at prices in excess of the Purchase Price and Shares not purchased because of proration or conditional tenders will be returned. Class B Common Stock will be returned to shareholders as Class B Common Stock, for any Shares tendered by such shareholder which are not accepted for payment. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE OR PRICES. SEE SECTION 12 FOR INFORMATION REGARDING THE INTENTIONS OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO TENDERING SHARES PURSUANT TO THE OFFER. If before the Expiration Date, more than 1,200,000 Shares are validly tendered at or below the Purchase Price and not properly withdrawn (or such greater number of Shares as the Company may elect to purchase), the Company will, upon the terms and subject to the conditions of the Offer, purchase Shares first from Odd Lot Owners (as defined in Section 2) who validly tender all their Shares at or below the Purchase Price and then on a pro-rata basis from all other shareholders who validly tender Shares at or below the Purchase Price (and do not properly withdraw them prior to the Expiration Date), other than shareholders who tender conditionally, and for whom the condition is not satisfied. If necessary to permit the Company to purchase 1,200,000 Shares, Shares conditionally tendered, for which the condition was not satisfied, at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, may be selected by random lot. The Company will return, at its own expense, all Shares not purchased in the Offer (including Class B Common Stock not converted into Shares) and including Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration and conditional tenders. The Purchase Price will be paid net to the tendering shareholder in cash, without interest thereon, for all Shares purchased. Tendering shareholders who have Shares registered in their own name and who tender directly to the Depositary (as defined below) will not be obligated to pay brokerage commissions, solicitation fees to the Dealer Manager, Information Agent, or Depositary (each as defined below) or, subject to the Instructions to the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Company pursuant to the Offer. Shareholders holding Shares through brokers or banks are urged to consult the brokers or banks to determine whether transaction costs or fees are applicable if shareholders tender Shares through the brokers or banks and not directly to the Depositary. ANY TENDERING SHAREHOLDER OR OTHER PAYEE, HOWEVER, WHO FAILS TO COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER OF TRANSMITTAL OR A FORM W-8 OBTAINED FROM THE DEPOSITARY (AS DEFINED BELOW) MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTIONS 3 AND 13. The Company will pay all charges and expenses of Credit Suisse First Boston Corporation (the "Dealer Manager"), Harris Trust and Savings Bank (the "Depositary") and Morrow & Co., Inc. (the "Information Agent") incurred in connection with the Offer. See Section 15. The Company anticipates that substantially all of the funds necessary to consummate the Offer will be provided from cash the Company has on hand, including the proceeds of the sale of substantially all the assets of the Company's wholly-owned subsidiary, Hirsh, as described herein, and from the use of the Company's $47,500,000 Revolving Line of Credit extended by Old Kent Bank ("Old Kent") (the "Credit Facility"), as described herein. The Company's Employees' Retirement Savings Plan holds Shares in accounts for participants thereunder. Participants may instruct Old Kent, as trustee of the trust that holds Shares for the Company's Employees' Retirement Savings Plan, to tender all or part of the Shares attributable to a participant's individual account under such plan (including fractional shares, if any) by following the instructions set forth in "Procedure for Tendering Shares-- Employees' Retirement Savings Plan" in Section 3. The Company's Dividend Reinvestment Plan (the "Dividend Reinvestment Plan") holds Shares for participants thereunder. Participants may instruct Harris Trust and Savings Bank, as administrator, for the Dividend Reinvestment Plan pursuant to the Letter of Transmittal, to tender all or part of the Shares attributable to the participant's individual account by following the instructions set forth in the "Procedure for Tendering Shares--Dividend Reinvestment Plan" in Section 3. The Company has been informed that the Administrative Committee of the Company's Profit Sharing Plan and the Administrative Committee of the Company's Pension Plan may direct the trustees of such plans to tender Shares in the Offer. As of August 28, 1998, these plans collectively owned approximately 304,000 shares of Common Stock and Class B Common Stock. Each Administrative Committee has informed the Company that they do not anticipate the trustee tendering more than 15 percent of its holdings, but the right to do so is reserved. It is the Company's understanding that the decision regarding whether to tender Shares will depend on the price range provided herein and general market conditions. Each of the above named administrative committees consist of William R. Dutmers, John E. Fallon, and Richard S. Knape, each of whom is a director of the Company. The Common Stock trades on the NASDAQ National Market System ("NASDAQ") under the ticker symbol "KNAP." See Section 8. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK. As of July 31, 1998, the Company had issued and outstanding 3,523,375 shares of Common Stock, having one vote per share, and 2,427,727 shares of Class B Common Stock, having ten votes per share. Each share of Class B Common Stock is convertible into one Share. The Class B Common Stock has no established trading market, however, it can be converted into Common Stock which is traded on NASDAQ. Shares of Common Stock and Class B Common Stock are to be delivered in the same 2 manner for purposes of tendering Shares, except that Class B Common Stock cannot be delivered by book-entry delivery. See Section 3. The 1,200,000 Shares that the Company is offering to purchase represent approximately 34% of all outstanding Shares, or approximately 20% on a fully diluted basis (assuming conversion of all Class B Common Stock and the exercise of all outstanding stock options). The Company has declared a regular quarterly dividend of $.165 per share of Common Stock and $.15 per share of Class B Common Stock payable on September 4, 1998, to shareholders of record at the close of business on August 25, 1998. Shareholders of record at the close of business on August 25, 1998, who tender Shares pursuant to the Offer will receive this dividend. THE OFFER 1. NUMBER OF SHARES; PRORATION. Upon the terms and subject to the conditions of the Offer, the Company will accept for payment (and thereby purchase) up to 1,200,000 Shares that are validly tendered prior to the Expiration Date (and not properly withdrawn in accordance with Section 4) at a net cash price, without interest thereon (determined in the manner set forth below) not in excess of $22.00 nor less than $19.00 net per Share. The later of 12:00 Midnight, New York City time, on Wednesday, September 30, 1998, or the latest time and date to which the Offer is extended, is referred to herein as the "Expiration Date." See Section 14 for a description of the Company's right to extend the time during which the Offer is open and to delay, terminate or amend the Offer. Subject to Section 2 below, if the Offer is oversubscribed, only Shares tendered at or below the Purchase Price prior to the Expiration Date will be eligible for proration. The proration period also expires on the Expiration Date. The Company reserves the right, in its sole discretion, to purchase more than 1,200,000 Shares pursuant to the Offer, but does not currently plan to do so. In accordance with applicable regulations of the Securities and Exchange Commission (the "Commission"), the Company may purchase pursuant to the Offer an additional amount of Shares not to exceed 2% of the outstanding Shares without amending or extending the Offer. If (a) the Company increases or decreases the price to be paid for Shares, the Company increases or decreases the Dealer Manager's fee, the Company increases the number of Shares being sought by more than 2% of the outstanding Shares, or the Company decreases the number of Shares being sought and (b) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that the notice of such increase or decrease is first published, sent or given in the manner specified in Section 14, the Offer will be extended until the expiration of such period of ten business days. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. The Company will, upon the terms and subject to the conditions of the Offer, determine the Purchase Price taking into account the number of Shares validly tendered and the prices specified by tendering shareholders. The Company will select the lowest Purchase Price that will enable it to purchase 1,200,000 Shares validly tendered and not properly withdrawn (or such lesser number of Shares as is validly tendered and not properly withdrawn at prices not in excess of $22.00 nor less than $19.00 net per Share) pursuant to the Offer. THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7. In accordance with Instruction 5 of the Letter of Transmittal, each shareholder who wishes to tender Shares must (a) specify the price (not in excess of $22.00 nor less than $19.00 net per Share) at which such shareholder is willing to have the Company purchase such Shares or (b) elect to have such shareholder's Shares purchased at a price determined by the Dutch Auction tender process, which could result in such Shares being purchased at the minimum price of $19.00 per Share. As promptly as practical following the Expiration Date, the Company will, in its sole discretion, determine the Purchase Price (not in excess of $22.00 nor less than $19.00 net per Share) that it will pay for Shares validly tendered and not properly withdrawn pursuant to the Offer, taking into 3 account the number of Shares so tendered and the prices specified by tendering shareholders. In determining the Purchase Price, all Shares tendered at the price determined by the Dutch Auction tender process will be considered tendered at the minimum price of $19.00 per Share. The Company will pay the Purchase Price for all Shares validly tendered prior to the Expiration Date at prices at or below the Purchase Price and not properly withdrawn, upon the terms and subject to the conditions of the Offer, including the proration and conditional tender provisions. All Shares not purchased pursuant to the Offer, including Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration or conditional tenders, will be returned to the tendering shareholders at the Company's expense as promptly as practicable following the Expiration Date. Class B Common Stock will be returned to shareholders as Class B Common Stock for any Shares tendered by such shareholder which are not accepted for payment. Priority. Upon terms and subject to the conditions of the Offer, if 1,200,000 or fewer Shares have been validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, the Company will purchase all such Shares (including fractional Shares). Upon the terms and subject to the conditions of the Offer, if more than 1,200,000 Shares (or such greater number of Shares as the Company may elect to purchase pursuant to the Offer) have been validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, the Company will purchase Shares in the following order of priority: (a) all Shares validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date by any shareholder who owns beneficially or of record an aggregate of fewer than 100 Shares (excluding Shares attributable to individual accounts under the Employees' Retirement Savings Plan) (an "Odd Lot Owner"), and who validly tenders all of such Shares and completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; (b) after purchase of all of the foregoing Shares, all Shares conditionally tendered in accordance with Section 6, for which the condition was satisfied without regard to the procedure set forth in clause (c) below, and all other Shares validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date on a pro rata basis, if necessary (with appropriate adjustments to avoid purchases of fractional Shares); and (c) if necessary to permit the Company to purchase 1,200,000 Shares, Shares conditionally tendered, for which the condition was initially not satisfied, at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, selected by random lot in accordance with Section 6. Proration. If proration of tendered Shares is required, the Company will determine the final proration factor as promptly as practicable after the Expiration Date. Proration for each shareholder tendering Shares (other than Odd Lot Owners) will be based on the ratio of the number of Shares tendered by such shareholder to the total number of Shares tendered and not properly withdrawn by all shareholders (other than Odd Lot Owners) at or below the Purchase Price to determine the number of Shares (in certain cases rounded up to the nearest whole share) that will be purchased from each shareholder pursuant to the Offer. Although the Company does not expect to be able to announce the final results of such proration until approximately seven business days after the Expiration Date, preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Holders of Shares may obtain such preliminary information from the Dealer Manager or the Information Agent and may also be able to obtain such information from their brokers. As described in Section 13, the number of Shares that the Company will purchase from a shareholder may affect the U. S. federal income tax consequences to the shareholder and, therefore, may be relevant to a shareholder's decision whether to tender Shares. The Letter of Transmittal affords each tendering shareholder the opportunity to designate the order of priority in which Shares tendered are to be purchased in the event of proration. Copies of this Offer to Purchase and the related Letter of Transmittal are being mailed to record holders of Shares and Class B Common Stock as of August 27, 1998, and will be furnished to brokers, banks and similar 4 persons whose names, or the names of whose nominees, appear on the Company's shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The Company also expressly reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. See Section 14. There can be no assurance, however, that the Company will exercise its right to extend the Offer. 2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES. Upon the terms and subject to the conditions of the Offer, all Shares validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date by or on behalf of persons who each own beneficially or of record an aggregate of fewer than 100 Shares (excluding Shares attributable to individual accounts under the Company's Employees' Retirement Savings Plan) will be accepted before proration, if any, of the purchase of other tendered Shares. See Section 1. Partial tenders will not qualify for this preference, and it is not available to beneficial holders of 100 or more Shares in the aggregate (excluding Shares attributable to individual accounts under the Company's Employees' Retirement Savings Plan), even if such holders have separate stock certificates for fewer than 100 Shares. By accepting the Offer, a shareholder owning beneficially or of record fewer than 100 Shares (excluding Shares attributable to individual accounts under the Company's Employees' Retirement Savings Plan) who has Shares registered in such shareholder's own name and who tenders directly to the Depositary will avoid the payment of brokerage commissions and any applicable odd lot discount payable in a sale of such Shares. Any shareholder wishing to tender all of his Shares pursuant to this Section should complete the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery, and must properly indicate in the section entitled "Price (In Dollars) per Share at which Shares Are Being Tendered" in the Letter of Transmittal the price at which such Shares are being tendered or may elect to have such shareholder's Shares (excluding Shares attributable to individual accounts under the Company's Employees' Retirement Savings Plan) purchased at the Purchase Price determined by the Dutch Auction process. As of July 31, 1998, there were 1,887 holders of record of Shares and 217 holders of record of Class B Common Stock. Approximately 57% of these holders of record held individually fewer than 100 Shares and held in the aggregate approximately 20,479 Shares. Because of the large number of Shares held in the names of brokers and nominees, the Company is unable to estimate the exact number of beneficial owners of fewer than 100 Shares or the aggregate numbers owned. The Company also reserves the right, but will not be obligated, to purchase all Shares duly tendered by any shareholder who tendered any Shares beneficially owned at or below the Purchase Price and who, as a result of proration, would then beneficially or of record own an aggregate of fewer than 100 Shares. If the Company exercises this right, it will increase the number of Shares that it is offering to purchase in the Offer by the number of Shares purchased through the exercise of such right. 3. PROCEDURE FOR TENDERING SHARES. To tender Shares validly pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) in accordance with the Instructions of the Letter of Transmittal, together with any required signature guarantees and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either (i) certificates for shares of Common Stock or shares of Class B Common Stock must be received by the Depositary at one of such addresses or (ii) such shares of Common Stock must be delivered pursuant to the procedures for book entry transfer described below (and a confirmation of such delivery received by the Depositary, including an Agent"s Message (as defined below) if the tendering shareholder has not delivered a 5 Letter of Transmittal) or pursuant to ATOP (as defined below)), in each case prior to the Expiration Date, or (b) the holder of Shares to be tendered must comply with the guaranteed delivery procedure described below. The term "Agent's Message" means a message, transmitted by the Book Entry Transfer Facility (as defined below) to, and received by, the Depositary and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce such agreement against the participant. IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, IN ORDER TO TENDER SHARES PURSUANT TO THE OFFER, A SHAREHOLDER MUST EITHER (A) CHECK THE BOX IN THE SECTION OF THE LETTER OF TRANSMITTAL CAPTIONED "SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION" OR (B) CHECK ONE OF THE BOXES IN THE SECTION OF THE LETTER OF TRANSMITTAL CAPTIONED "SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER." A SHAREHOLDER WHO WISHES TO MAXIMIZE THE CHANCE THAT HIS OR HER SHARES WILL BE PURCHASED AT THE RELEVANT PURCHASE PRICE SHOULD CHECK THE BOX ON THE LETTER OF TRANSMITTAL MARKED, "SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION." NOTE THAT THIS ELECTION COULD RESULT IN SUCH SHAREHOLDER'S SHARES BEING PURCHASED AT THE MINIMUM PRICE OF $19.00 PER SHARE. A SHAREHOLDER WHO WISHES TO INDICATE A SPECIFIC PRICE (IN MULTIPLES OF $.125) AT WHICH HIS OR HER SHARES ARE BEING TENDERED MUST CHECK A BOX UNDER THE SECTION CAPTIONED "SHARES TENDERED AT PRICE DETERMINED BY THE SHAREHOLDER" OF THE LETTER OF TRANSMITTAL IN THE TABLE LABELED "PRICE (IN DOLLARS) AT WHICH SHARES ARE BEING TENDERED." A SHAREHOLDER WHO WISHES TO TENDER SHARES AT MORE THAN ONE PRICE MUST COMPLETE SEPARATE LETTERS OF TRANSMITTAL FOR EACH PRICE AT WHICH SUCH SHARES ARE BEING TENDERED. THE SAME SHARES CANNOT BE TENDERED AT MORE THAN ONE PRICE. A TENDER OF SHARES WILL BE PROPER IF, AND ONLY IF, ON THE APPROPRIATE LETTER OF TRANSMITTAL EITHER THE BOX IN THE SECTION CAPTIONED "SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION" OR ONE OF THE BOXES IN THE SECTION CAPTIONED "SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER" IS CHECKED. Odd Lot Owners who tender Shares must complete the Section entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery, in order to qualify for the preferential treatment available to Odd Lot Owners as set forth in Section 2. Book-Entry Delivery. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (referred to as the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the procedures of the Book-Entry Transfer Facility. Although delivery of Shares may be effected through book-entry transfer, a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), together with any required signature guarantees, or an Agent's Message, or in the case of a tender through the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP"), the specific acknowledgment, in each case together with any other required documents, must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed deliver procedure described below. The confirmation of a book-entry transfer of Common Stock into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF THE LETTER OF TRANSMITTAL 6 AND ANY OTHER REQUIRED DOCUMENT TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Class B Common Stock may not be delivered by means of book-entry delivery. The Participants in the Book-Entry Transfer Facility may tender Shares in accordance with ATOP, to the extent it is available to such participants for the Shares they wish to tender. A shareholder tendering through ATOP must expressly acknowledge that the shareholder has received and agreed to be bound by the Letter of Transmittal and that the Letter of Transmittal may be enforced against such shareholder. Signature Guarantees and Method of Delivery. Except as otherwise provided below, all signatures on a Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations, or brokerage houses) that is a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). Signatures on a Letter of Transmittal need not be guaranteed if (a) the Letter of Transmittal is signed by the registered holder of the Shares (which term for purposes of this section includes any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the holder of the Shares) tendered therewith and payment and delivery are to be made directly to such registered holders, or (b) such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 6 of the Letter of Transmittal. In all other cases, signatures must be guaranteed by an Eligible Institution. If a certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or Common Stock or Class B Common Stock is to be returned, to a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case signed exactly as the name of the registered holder appears on the certificate, with signature on the certificate or stock power guaranteed by an Eligible Institution. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for Common Stock or Class B Common Stock (or a timely confirmation of a book-entry transfer of such Common Stock into the Depositary's account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or facsimile thereof), or an Agent's Message in connection with a book-entry transfer, or a proper tender through ATOP, together with any other documents required by the Letter of Transmittal. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF A DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and cannot deliver certificates for Common Stock or Class B Common Stock and all other required documents to the Depositary prior to the Expiration Date or the procedure for book-entry transfer cannot be complied with in a timely manner, such Shares may nevertheless be tendered if all of the following conditions are met: (a) such tender is made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided with this Offer to Purchase (with any required signature guarantees) indicating the price at which Shares are being tendered is received by the Depositary as provided below prior to the Expiration Date; and (c) the certificates in proper form for transfer (or a confirmation of a book-entry of such Shares into the Depositary's account at the Book-Entry Transfer Facility or a proper tender through ATOP), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message or, in the case of a tender through ATOP, the specific acknowledgment) and any other documents required by the Letter of Transmittal, are received by the Depositary no later than 5:00 p.m., New York City time, on the third NASDAQ trading day after the Depositary receives the Notice of Guaranteed Delivery. 7 The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice. Backup Federal Income Tax Withholding. To avoid federal income tax backup withholding equal to 31% of the gross payments made pursuant to the Offer, each shareholder must notify the Depositary of such shareholder's correct taxpayer identification number and provide certain other information by properly completing the substitute Form W-9 included in the Letter of Transmittal. Foreign shareholders (as defined in section 13) are required to submit a properly completed Form W-8, certifying the shareholder's exempt status, in order to avoid backup withholding. In addition, foreign shareholders may be subject to 30% (or lower treaty rate) withholding on gross payments received pursuant to the Offer (as discussed in section 13). For a discussion of certain federal income tax consequences to tendering shareholders, see section 13. Each shareholder is urged to consult with his or her own tax advisor. Class B Common Stock. The Company has outstanding Class B Common Stock. Class B Common Stock is not subject to the Offer; however, each share of Class B Common Stock is convertible into one share of Common Stock. Holders of Class B Common Stock can participate in the Offer by tendering a number of Shares into which their Class B Common Stock is convertible. In order to participate in the Offer, holders of Class B Common Stock must guarantee their delivery of Shares by delivering Class B Common Stock in the same manner as Common Stock is to be delivered pursuant to the Offer, except that Class B Common Stock cannot be delivered by book-entry delivery. Class B Common Stock will be automatically converted to Common Stock upon acceptance for payment of the Shares tendered. Any Class B Common Stock delivered relating to Shares tendered but not accepted for payment pursuant to the Offer will be returned as Class B Common Stock. Stock Options. Stock options are not subject to the Offer, except to the extent provided in Rule 14e-4 under the Exchange Act. Any holder of stock options may participate in the Offer by converting their stock options into Shares which may then be tendered pursuant to the terms and subject to the conditions of the Offer. Holders of stock options are urged to consult their tax advisors since conversion to Shares can create negative tax consequences. Employees' Retirement Savings Plan. As of August 31, 1998, the Employees' Retirement Savings Plan held approximately 8,500 Shares, all of which were attributable to the individual accounts of the plan's participants. Such Shares will, subject to the limitations of the Employee Retirement Income Security Act of 1974, as amended, and the applicable regulations thereunder, be tendered (or not tendered) in accordance with the instructions of participants to Old Kent. Shares for which instructions are not received from participants will not be tendered. Old Kent will make available to participants whose Shares are attributable to individual accounts under the Employees' Retirement Savings Plan all documents furnished to shareholders generally in connection with the Offer. Each such participant will also receive a "Direction Form" (defined below) upon which the participant may instruct Old Kent regarding the Offer. Each participant may direct that some, all, or none of the Shares attributable to such participant's account under the Employees' Retirement Savings Plan (including fractional Shares, if any) be tendered. Each participant may also direct (a) the price at which such Shares are to be tendered or (b) that the price be determined by the Dutch Auction tender process. Old Kent will provide additional information in a separate letter with respect to the application of the Offer to participants in the Employees' Retirement Savings Plan. Participants in such plan may not use the Letter of Transmittal to direct the tender of Shares attributable to their individual accounts, but must use the Employees' Retirement Savings Direction Form (the "Direction Form") sent to them. Participants in the Employees' Retirement Savings Plan are urged to read the Direction Form and related materials carefully. Although the Offer is not scheduled to expire until 12:00 Midnight, New York City time, on September 30, 1998, unless extended, participants in the Employees' Retirement Savings Plan must return their Direction Forms to Harris Trust and Savings Bank, as agent for Old Kent, so it is received by Harris Trust and Savings Bank no later than 5:00 p.m., New York City time, on Friday, September 25, 1998, unless extended. Any Shares acquired by the Employees' Retirement Savings Plan after a Direction Form has been received by Harris Trust and Savings Bank will be tendered in the same proportion as the Shares you tender pursuant to the Direction Form. All proceeds received by Old Kent on account of Shares purchased from the Employees' Retirement Savings Plan will be invested initially in money market funds. Such proceeds will be reinvested as soon as administratively practical, which may not be until January 1, 1999, in accordance with the tendering participant's 8 investment election in effect on the date of reinvestment, excluding any allocation to the fund that invests in Shares. PARTICIPANTS IN THE EMPLOYEES' RETIREMENT SAVINGS PLAN ARE URGED TO READ ALL OF THE MATERIALS RELATED TO THE OFFER CAREFULLY. Dividend Reinvestment Plan. As of August 31, 1998, the Dividend Reinvestment Plan held 57,242 Shares, all of which were attributable to the individual accounts of the Dividend Reinvestment Plan participants (collectively referred to in this section as "Participants"). Such Shares will be tendered (or not tendered) by Harris Trust and Savings Bank, as administrator of the Dividend Reinvestment Plan (the "Administrator"), according to the instructions of Participants provided to the Administrator. Shares for which the Administrator has not received timely instructions from Participants will not be tendered. The Administrator will make available to the Participants in the Dividend Reinvestment Plan all documents furnished to shareholders generally in connection with the Offer. Because the Depositary for the Offer also acts as Administrator of the Dividend Reinvestment Plan, Participants in the Dividend Reinvestment Plan may use the Letter of Transmittal to instruct the Administrator regarding the Offer by completing the box entitled "Dividend Reinvestment Plan Shares" on the Letter of Transmittal. Each Participant may direct that all, some, or none of the Shares attributable to such Participant's account under the Dividend Reinvestment Plan (including fractional Shares, if any) be tendered and the price at which such Shares are to be tendered or that such Shares are to be tendered at the Purchase Price determined by the Dutch Auction tender process. Shares held by the Administrator pending allocation in the Dividend Reinvestment Plan shall be tendered by the Administrator in the same proportion as those Shares with respect to which the Administrator has received instructions from Participants are tendered. PARTICIPANTS IN THE DIVIDEND REINVESTMENT PLAN ARE URGED TO READ THE LETTER OF TRANSMITTAL AND RELATED MATERIALS CAREFULLY. Tendering Shareholder's Representations and Warranties; Company's Acceptance Constitutes an Agreement. It is a violation of Rule 14e-4 promulgated under the Exchange Act, for a person acting alone, or in concert with others, directly or indirectly, to tender Shares for his or her own account unless the person so tendering has a "net long position" equal to or greater than the amount of (a) Shares tendered or (b) other securities immediately convertible into, exercisable or exchangeable for the amount of Shares tendered and, upon acceptance of the tender, will acquire such Shares for tender by conversion, exercise, or exchange of such other securities and will cause such Shares to be delivered in accordance with the terms of the Offer. The tender of Shares pursuant to any one of the procedures described above will constitute the tendering shareholder's representation and warranty that (a) such shareholder has a "net long position" in the Shares being tendered or an equivalent security within the meaning of Rule 14e-4 promulgated under the Exchange Act, and (b) the tender of such Shares complies with Rule 14e-4. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering shareholder and the Company upon the terms and subject to the conditions of the Offer. Delivery of Class B Common Stock pursuant to the Offer will constitute an equivalent security within the meaning of Rule 14e-4. Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the Purchase Price, the form of documents, and the validity, eligibility (including time of receipt), and acceptance for payment of any tender of Shares will be determined by the Company, in its sole discretion, and its determination shall be final and binding. The Company reserves the absolute right to reject any or all tenders of Shares that it determines are not in proper form or the acceptance for payment of or payment for Shares that may, in the opinion of the Company's counsel, be unlawful. The Company reserves the absolute right to waive any defect or irregularity in any tender of Shares. None of the Company, the Dealer Manager, the Depositary, the Information Agent, or any other person will be under any duty to give notice of any defect or irregularity in tenders, nor shall any of them incur any liability for failure to give any such notice. Return of Unpurchased Shares. If any tendered Shares are not purchased, or if less than all Shares evidenced by a shareholder's certificates are tendered, certificates for unpurchased Shares will be returned (including Class B Common Stock as Class B Common Stock) as promptly as practical after the expiration or termination of the offer or in the case of Shares tendered by book-entry delivery at the Book-Entry Transfer Facility such Shares will be credited to the appropriate account maintained by the tendering shareholder at the Book-Entry Transfer Facility, in each case without expense to such shareholder. CERTIFICATES FOR COMMON STOCK OR CLASS B COMMON STOCK, TOGETHER WITH A PROPERLY COMPLETED LETTER OF TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED 9 BY THE LETTER OF TRANSMITTAL, MUST BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND WILL NOT BE DEEMED TO BE VALIDLY TENDERED. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer may be properly withdrawn at any time prior to the Expiration Date. Thereafter, such tenders and deliveries are irrevocable, except that they may be properly withdrawn after October 30, 1998, unless theretofore accepted for payment as provided in this Offer to Purchase. If the Company extends the period of time during which the Offer is open, is delayed in accepting for payment or paying for Shares, or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Company's rights under the Offer, the Depositary may, on behalf of the Company, retain all certificates delivered, and the Shares tendered may not be properly withdrawn except as otherwise provided in this Section 4, subject to Rule 13e-4(f)(5) under the Exchange Act, which provides that the issuer making the tender offer shall either pay the consideration offered, or return the tendered securities promptly after the termination or withdrawal of the tender offer. To be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person who tendered the Shares to be properly withdrawn, the number tendered, the number to be properly withdrawn, and the name of the registered holder if different from that of the person who tendered. If the certificates have been delivered to the Depositary, a signed notice of withdrawal with signatures guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution) must be submitted prior to the release of such certificates. In addition, such notice must specify the serial numbers shown on the particular certificates or, in the case of Common Stock delivered by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited with the properly withdrawn Shares. Withdrawals may not be rescinded, and Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. Properly withdrawn Shares may, however, be re-tendered or re-delivered by again following any of the procedures described in Section 3 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Company, in its sole discretion, which determination shall be final and binding. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or incur any liability for failure to give any such notification. 5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE. Upon the terms and subject to the conditions of the Offer, and as promptly as practicable after the Expiration Date, the Company will determine the single per Share Purchase Price, taking into account the number of Shares tendered and the prices specified by tendering shareholders, announce the Purchase Price, and will (subject to the proration and conditional tender provisions of the Offer) accept for payment and pay for Shares validly tendered at or below the Purchase Price and not properly withdrawn as soon as practical after the Expiration Date. If shares of Class B Common Stock have been delivered pursuant to the Offer and the Shares related thereto have been accepted for payment, the Class B Common Stock shall be automatically converted into Common Stock. For purposes of the Offer, the Company will be deemed to have accepted for payment (and therefore purchased), subject to proration and conditional tender provisions of the Offer, Shares that are validly tendered at or below the Purchase Price and not properly withdrawn when, as and if it gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made promptly (subject to possible delay in the event of proration or conditional tenders), but only after timely receipt by the Depositary of certificates (or a timely Book-Entry Confirmation of such Shares into the Depositary's account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), or, in the case of a Book-Entry Transfer, an Agent's Message, or in the case of a tender through ATOP, the specific acknowledgment, in each case together with any other required documents. 10 The Company will pay for Shares that it has purchased pursuant to the Offer by depositing the Purchase Price therefor with the Depositary. The Depositary will act as agent for tendering shareholders for the purpose of receiving payment from the Company and transmitting payment to tendering shareholders. Under no circumstances will interest be paid on amounts to be paid to tendering shareholders, regardless of any delay in making such payment. Certificates for all Common Stock not purchased and Class B Common Stock not converted into Common Stock will be returned (or, in the case of Shares tendered by book-entry transfer, the Common Stock to which they related will be credited to an account maintained with the Book-Entry Transfer Facility) as promptly as practicable without expense to the tendering or delivering shareholder. Payment for Shares may be delayed in the event of difficulty in determining the number of Shares properly tendered or if proration is required. See Section 1. In addition, if certain events occur, the Company may not be obligated to purchase Shares pursuant to the Offer. See Section 7. The Company will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any Shares to it pursuant to the Offer. If, however, payment of the Purchase Price is to be made to, or Common Stock and Class B Common Stock to be returned are to be registered in the name of, any person other than the registered holder, or if Common Stock and Class B Common Stock to be returned is registered in the name of any person other than the person signing the Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder, such other person, or otherwise) payable on account of the transfer to such person will be deducted from the Purchase Price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. See Instruction 7 to the Letter of Transmittal. ANY TENDERING OR DELIVERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF TRANSMITTAL OR A FORM W-8 OBTAINED FROM THE DEPOSITARY MAY BE SUBJECT TO REQUIRED BACK-UP U.S. FEDERAL INCOME TAX WITHHOLDING AT 31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. 6. CONDITIONAL TENDER OF SHARES. Under certain circumstances and subject to the exceptions set forth in Section 1, the Company may prorate the number of Shares purchased pursuant to the Offer. As discussed in Section 13, the number of Shares to be purchased from a particular shareholder might affect the tax treatment of such purchase to such shareholder and such shareholder's decision whether to tender. EACH SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR. Accordingly, a shareholder may tender Shares subject to the condition that a specified minimum number of such holder's Shares tendered pursuant to a Letter of Transmittal or Notice of Guaranteed Delivery must be purchased if any such Shares so tendered are purchased, and any shareholder desiring to make such a conditional tender must so indicate in the box captioned "Conditional Tender" in such Letter of Transmittal or, if applicable, the Notice of Guaranteed Delivery. Any tendering or delivering shareholders wishing to make a conditional tender or delivery must calculate and appropriately indicate such minimum number of Shares. If the effect of accepting tenders on a pro rata basis would be to reduce the number of Shares to be purchased from any shareholder (tendered pursuant to a Letter of Transmittal or Notice of Guaranteed Delivery) below the minimum number so specified, such tender will automatically be regarded as properly withdrawn (except as provided in the next paragraph) and all Common Stock and Class B Common Stock delivered by such shareholder pursuant to such Letter of Transmittal or Notice of Guaranteed Delivery will be returned as promptly as practicable thereafter. If conditional tenders or deliveries would otherwise be so regarded as properly withdrawn and would cause the total number of Shares to be purchased to fall below 1,200,000, then, to the extent feasible, the Company 11 will select enough of such conditional tenders or deliveries that would otherwise have been so properly withdrawn to permit the Company to purchase 1,200,000 Shares. In selecting among such conditional tenders or deliveries, the Company will select by random lot and will limit its purchase in each case to the designated minimum number of Shares to be purchased. 7. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Company will not be required to accept for payment or pay for any Shares tendered, and may terminate or amend the Offer and may postpone (subject to the requirements of the Exchange Act for prompt payment for or return of Shares) the acceptance for payment of Shares tendered, if at any time after September 2, 1998, and at or before acceptance for payment of any Shares any of the following events have been determined by the Company to have occurred: (a) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental, regulatory, or administrative agency, or authority or tribunal or any other person, domestic or foreign, or before any court, authority, agency or tribunal that (i) challenges the acquisition of shares pursuant to the Offer or otherwise in any manner relates to or affects the Offer or (ii) in the sole judgment of the Company, could materially and adversely affect the business, condition (financial or other), income, operations, or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any of its subsidiaries or materially impair the Offer's contemplated benefits to the Company; (b) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced, or deemed to be applicable to the Offer or the Company or any of its subsidiaries, by any legislative body, court, authority, agency, or tribunal which, in the Company's sole judgment, would or might directly or indirectly (i) make the acceptance for payment of, or payment for, some or all of the Shares illegal or otherwise restrict or prohibit consummation of the Offer, (ii) delay or restrict the ability of the Company, or render the Company unable, to accept for payment or pay for some or all of the Shares, (iii) materially impair the contemplated benefits of the Offer to the Company or (iv) materially affect the business, condition (financial or other), income, operations, or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any of its subsidiaries; (c) it shall have been publicly disclosed or the Company shall have learned that (i) any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) has acquired or proposes to acquire beneficial ownership of more than 5% of the outstanding Shares whether through the acquisition of stock, the formation of a group, the grant of any option or right, or otherwise (other than as disclosed in a Schedule 13D or 13G on file with the Commission on September 1, 1998) or (ii) any such person or group that prior to September 1, 1998, had filed such a Schedule with the Commission thereafter shall have acquired or shall propose to acquire whether through the acquisition of stock, the formation of a group, the grant of any option or right, or otherwise, beneficial ownership of additional Shares representing 2% or more of the outstanding Shares; (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market, (ii) any significant decline in the market price of the Shares, (iii) any change in the general political, market, economic, or financial condition in the United States or abroad that could have a material adverse effect on the Company's business, condition (financial or other), income, operations, prospects, or ability to obtain financing generally or the trading in the Shares, (iv) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any limitation on, or any event which, in the Company's sole judgment, might affect, the extension of credit by lending institutions in the United States, (v) the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, or (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, in the Company's sole judgment, a material acceleration or worsening thereof; 12 (e) a tender or exchange offer with respect to some or all of the Shares (other than the Offer), or a merger, acquisition or other business combination proposal for the Company, shall have been proposed, announced or made by another person; (f) there shall have occurred any event or events that have resulted, or may in the sole judgment of the Company result, in an actual or threatened change in the business, condition (financial or other), income, operations, stock ownership or prospects of the Company and its subsidiaries, taken as a whole; or (g) there shall have occurred any decline in NASDAQ at the close of business on September 30, 1998, by an amount in excess of 10% measured from the close of business on September 1, 1998; and, in the sole judgment of the Company, such event or events make it undesirable or inadvisable to proceed with the Offer or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances (including any action or inaction by the Company) giving rise to any such condition, and any such condition may be waived by the Company, in whole or in part, at any time and from time to time in its sole discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time from time to time. Any determination by the Company concerning the events described above will be final and binding on all parties. 8. PRICE RANGE OF SHARES; DIVIDENDS. The Common Stock is traded on NASDAQ. There is no established market for Class B Common Stock, except that it can be converted into Common Stock on a one-for-one basis. The following table sets forth the high and low bid prices of the Common Stock on NASDAQ and the cash dividends for the Common Stock and Class B Common Stock for the Company's fiscal quarters indicated.
BID PRICE ------------- HIGH LOW CASH DIVIDENDS PER SHARE ------ ------ --------------------------------- COMMON STOCK COMMON STOCK CLASS B COMMON STOCK ------------- ------------ -------------------- Fiscal 1997 1st Quarter................... $16.88 $12.25 $.165 $.15 2nd Quarter................... $17.03 $14.25 $.165 $.15 3rd Quarter................... $18.50 $15.50 $.165 $.15 4th Quarter................... $17.00 $14.75 $.165 $.15 Fiscal 1998 1st Quarter................... $18.50 $15.88 $.165 $.15 2nd Quarter................... $22.75 $18.50 $.165 $.15 3rd Quarter................... $23.00 $20.00 $.165 $.15 4th Quarter................... $24.75 $21.25 $.165 $.15 Fiscal 1999 1st Quarter (through August 31, 1998).................... $22.75 $16.88 $.165 $.15
On August 31, 1998, the last full NASDAQ trading day prior to the announcement of the Offer, the last reported sale price of the Common Stock on NASDAQ was $19.125 per share. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK. The Company has declared a regular quarterly dividend of $.165 per share of Common Stock and $.15 per share of Class B Common Stock payable on September 4, 1998, to shareholders of record on August 25, 1998. Shareholders of record on August 25, 1998, who tender Shares pursuant to the Offer will receive this dividend. 13 9. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER. The Company recently announced that it is implementing a comprehensive new financial strategy. This new financial strategy makes greater use of financial leverage and changes the way the Company will distribute cash to shareholders. It is intended to provide a more balanced capital structure consistent with the Company's goal of maximizing Economic Value Added ("EVA"). Stern Stewart & Company acted as the Company's financial advisor in developing the new financial strategy and previously worked with the Company to implement EVA. EVA is a financial measure designed to encourage management to focus on the most important elements that generate cash profits and long-term value. EVA is the after-tax operating profits that remain after subtracting the cost of capital employed to generate that profit. The strategy consists of three principal elements that include (a) this Offer; (b) the intended substitution of quarterly stock dividends in place of quarterly cash dividends (along with the intention to adopt a stock dividend sale plan); and (c) additional offers, open market or negotiated repurchases. The Company believes that consummation of the Offer will have a positive impact on EVA. The Company also believes that upon consummation of the Offer, the Company will have a more efficient capital structure and the Company will still have sufficient cash flow as well as access to other sources of capital in order to fund its working capital and other needs. The Offer will afford to shareholders who are considering the sale of all or a portion of their Common Stock or Class B Common Stock the opportunity to determine the price at which they are willing to sell their Shares and, in the event they tender their Shares directly to the Depositary and the Company accepts such Shares for purchase, to dispose of Shares without the usual transaction costs associated with a market sale. The Offer will also allow qualifying shareholders owning beneficially fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Employees' Retirement Savings Plan) to avoid not only the payment of brokerage commissions but also any applicable odd lot discount payable on a sale of Shares. Correspondingly, the costs to the Company for servicing the accounts of odd lot holders will be reduced. See Section 2. Shareholders who decide not to accept the Offer will obtain a proportionate increase in their ownership interest in the Company. After consummation of the Offer, increases or decreases in net income will likely be reflected in greater increases or decreases in earnings per share on a fully diluted basis than is presently the case because of the smaller number of Shares outstanding. It is intended that quarterly cash dividends will be replaced with quarterly stock dividends, having a market value approximately equivalent to cash dividends that might otherwise have been paid. The Company also intends to adopt a stock dividend sale plan that will provide shareholders the opportunity to have their stock dividends sold through a brokerage firm and have the cash proceeds of the sale distributed to them. Unlike Shares tendered pursuant to the Offer directly to the Depositary, stock sold under the terms and conditions of the stock dividend sale plan will be subject to customary brokerage fees. More details on the intention to replace cash dividends with stock dividends and the stock dividend sale plan will be announced in the Company's second quarter of fiscal year 1999. Currently holders of Common Stock are paid a cash dividend that is 10% greater than the cash dividend paid to holders of Class B Common Stock. This dividend preference to holders of Common Stock applies only to cash dividends. Finally, the Company may, in the future, decide to purchase additional stock on the open market, in privately negotiated transactions, through one or more tender offers, or otherwise. The Board of Directors has authorized the repurchase of up to 1,350,000 shares of Common Stock or Class B Common Stock, whether in this Offer, other offers, in the open market or in negotiated transactions. Any such purchases may be on the same terms or on terms which are more or less favorable to shareholders than the terms of the Offer. Rule 13e-4 under the Exchange Act, however, prohibits the Company and its affiliates from purchasing any Shares, other than pursuant to the Offer, until at least ten business days after the Expiration Date. Any future purchases of stock by the Company would depend on many factors, including the market price of the stock, the Company's business and financial position, and general economic and market conditions. Shares that the Company acquires pursuant to the Offer will become authorized but unissued shares of Common Stock and will be available for issuance by the Company without further shareholder action (except as 14 may be required by applicable law or the rules of any securities exchanges or over-the-counter market on which the Common Stock is listed). The stock acquired by the Company in the Offer could be issued without shareholder approval for, among other things, acquisitions, the raising of additional capital for use in the Company's business, stock dividends, or in connection with employee stock, stock option and other plans, or a combination thereof. The Company has no current plans for issuance of any stock it may acquire pursuant to the Offer or any other authorized but unissued stock, except for issuance under its stock option plans and the proposed plan to pay quarterly stock dividends. As of July 31, 1998, the Company had issued and outstanding 3,523,375 shares of Common Stock and 2,427,727 shares of Class B Common Stock. The 1,200,000 Shares that the Company is offering to purchase represent approximately 20% of the Shares outstanding on a fully diluted basis after conversion of Class B Common Stock and exercise of all outstanding stock options. As of July 31, 1998, all directors and executive officers of the Company as a group owned beneficially an aggregate of 878,262 Shares or 14.76% (on a fully diluted basis after conversion of Class B Common Stock and including an aggregate of 65,976 Shares that may be acquired pursuant to the exercise of outstanding stock options exercisable within 60 days of the date thereof). The Company has been advised that no directors and/or executive officers will tender Shares pursuant to the Offer, with the possible exception of Raymond E. Knape, John E. Fallon, and Richard C. Simkins. If the Company purchases 1,200,000 Shares pursuant to the Offer and no director or executive officer of the Company tenders Shares, the percentage of outstanding Shares owned beneficially by all of the Company's directors and executive officers as a group would increase to approximately 18.49% of the Shares then outstanding on a fully diluted basis after conversion of Class B Common Stock and exercise of all outstanding stock options. That percentage will be less if Raymond E. Knape, John E. Fallon, and Richard C. Simkins tender Shares pursuant to the Offer. Mr. Knape, formerly the Chief Executive Officer of the Company, intends to tender up to approximately 55% of the Shares (or equivalent securities) he currently owns. The Company understands that Mr. Knape intends to tender up to 70,000 Shares (including Shares represented by up to 30,000 shares of Common Stock and up to 40,000 shares of Class B Common Stock). Mr. Simkins, formerly the Chief Financial Officer of the Company, has not indicated how many, if any, Shares he may tender. Mr. Simkins is the beneficial owner of approximately 34,500 Shares (including options which are currently exercisable). Mr. Fallon has indicated that he intends to tender up to 10,000 Shares (approximately 10% of the Shares or equivalent securities owned by him). Except as disclosed in this Offer to Purchase, the Company has no plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Company or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries other than as discussed in Section 10; (c) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries other than as discussed in Section 10; (d) any change in the present Board of Directors or management of the Company other than as discussed in Section 10; (e) any material change in indebtedness or capitalization of the Company other than as discussed in Sections 10 and 11; (f) any other material change in the Company's corporate structure or business; (g) any change in the Company's Articles of Incorporation or Bylaws or any actions which may impede the acquisition of control of the Company by any person; (h) a class of equity security of the Company being removed from NASDAQ; (i) a class of equity security of the Company's becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) the suspension of the Company's obligation to file reports pursuant to Section 15(d) of the Exchange Act. The Company's purchase of Shares pursuant to the Offer will reduce the number of shares of Common Stock that might otherwise trade publicly and is likely to reduce the number of shareholders. Nonetheless, the Company believes that there will still be a sufficient number of shares of Common Stock outstanding and publicly traded to ensure a reasonable trading market in the Common Stock. No assurances, however, can be given that sufficient publicly traded Common Stock will be available following the Offer to provide a reasonable trading market. Based on the published guidelines of NASDAQ, the Company does not believe that its purchases of Shares pursuant to the Offer will cause removal of the Common Stock from NASDAQ. The Common Stock is currently a "margin security" under the rules of the Federal Reserve Board. This has the effect, among other things, of allowing brokers to extend credit on the collateral of the Common Stock. 15 The Company believes that, following the purchase of Shares pursuant to the Offer, the Common Stock will continue to be "margin securities" for purposes of the Federal Reserve Board's margin regulations. In addition, shares of Common Stock are registered under the Exchange Act, which requires, among other things, that the Company furnish certain information to its shareholders and to the Commission and comply with the Commission's proxy rules in connection with meetings of the Company's shareholders. The Company believes that its purchases of Shares pursuant to the Offer will not result in the Common Stock being eligible for deregistration under the Exchange Act. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. 10. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company together with its subsidiaries is engaged primarily in the design, manufacture, and marketing of storage products, which serve the consumer, contract builder, hardware, and original equipment manufacturer markets. The Company was incorporated in Michigan in 1906, reorganized in Delaware in 1961, and reorganized in Michigan in 1985. The Company's main plant and corporate offices are located at 2700 Oak Industrial Dr., N.E., Grand Rapids, Michigan 49505, and its telephone number is (616) 459-3311. Recent Developments Hirsh. On August 31, 1998, the Company signed a definitive agreement to sell substantially all of the assets of its wholly-owned subsidiary, Hirsh, to Steelworks, Inc. In addition, the Company has entered into a definitive agreement for the sale of the stock of Hirsh. Hirsh manufactures free standing steel shelving systems, workshop items, closet storage systems, and other storage products. Hirsh has not met the Company's profitability expectations due in large part to the inability to achieve certain synergies that were expected. Total proceeds from these transactions are expected to be approximately $18,600,000 before taxes and expenses of the transactions and approximately $15,900,000 after such taxes and expenses. A loss on these transactions of $12,800,000 (after tax) or $2.15 per diluted Share has been incurred. The sale reflects the Company's desire to enhance its corporate profit margins and remain focused on its core drawer slide, kitchen and bath storage, and wall attached shelving products. Quarterly Stock Dividends. As noted earlier, the Company intends to replace its quarterly cash dividends with quarterly stock dividends and to implement a stock dividend sale plan in the Company's second quarter of fiscal year 1999. The stock dividend sale plan will provide shareholders the opportunity to sell their stock dividends through a brokerage firm, with per Share commissions being paid by the shareholders who sell under such plan. If this plan is implemented, the Dividend Reinvestment Plan will be discontinued. Additional Purchases by the Company. As noted earlier, the Company may, in the future, decide to purchase additional stock on the open market, in privately negotiated transactions, through one or more tender offers, or otherwise. The Board of Directors has currently authorized the repurchase of up to 1,350,000 Shares or shares of Class B Common Stock, including Shares that are purchased pursuant to the Offer. Chief Financial Officer and Treasurer. Richard C. Simkins, a director and the Company's Executive Vice President, Chief Financial Officer, Secretary, and Treasurer, resigned his positions as the Company's Chief Financial Officer and Treasurer on August 21, 1998. He will continue as a director until this year's annual meeting in October and remain as an Executive Vice President of the Company until December 31, 1998. Jack D. Poindexter, formerly the Assistant Treasurer, Director of Tax and Internal Audit, will replace Mr. Simkins as Chief Financial Officer and Treasurer. 16 Summary Historical and Pro Forma Financial Information The following summary historical consolidated financial information and notes to summary historical consolidated financial information as of and for the years ended June 30, 1998 and 1997 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended June 30, 1998 (the "Company's 1998 Annual Report"), which is incorporated herein by reference, and other information and data contained in the Company's 1998 Annual Report. The following summary historical financial information should be read in conjunction with, and is qualified in its entirety by reference to, the audited financial statements and related notes, and other information pertaining to the Company, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contained in the Annual Report on Form 10-K for the year ended June 30, 1998 referred to above. SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED JUNE 30, ---------------------- 1998 1997 ---------- ---------- INCOME STATEMENT INFORMATION: Net sales.............................................. $ 181,633 $ 176,630 Income (loss) from continuing operations before income taxes................................................. (4,438) 12,589 Income (loss) from continuing operations............... (8,369) 8,325 Loss from discontinued operations...................... (1,368) (472) Net income (loss)...................................... $ (9,737) $ 7,854 Basic earnings per share: Weighted average shares outstanding.................. 5,920,380 5,889,420 Income (loss) from continuing operations............. $ (1.41) $ 1.41 Loss from discontinued operations.................... (0.23) (0.08) Net income (loss).................................. $ (1.64) $ 1.33 Diluted earnings per share: Weighted average shares outstanding.................. 5,954,713 5,903,237 Income (loss) from continuing operations............. $ (1.41) $ 1.41 Loss from discontinued operations.................... (0.23) (0.08) Net income (loss).................................. $ (1.64) $ 1.33 Ratio of income from continuing operations to fixed charges............................................... - 6.28 BALANCE SHEET INFORMATION: Working capital........................................ $ 38,276 $ 39,266 Total assets........................................... 104,033 125,742 Total debt............................................. 9,700 29,000 Total liabilities...................................... 42,276 52,281 Stockholders' equity................................... 61,757 73,460 Book value per common share............................ $ 10.40 $ 12.44
17 NOTES TO SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION (IN ACTUAL DOLLAR AMOUNTS) (1) In 1998, the Company recognized a $12,800,000 (after tax) impairment of assets charge related to the sale of Hirsh as well as a $3,392,276 (after tax) restructuring charge related to the sale of substantially all of the assets of Knape & Vogt Canada. Due to a change in the treatment of cumulative foreign translation adjustment, the restructuring charge for the third quarter of fiscal 1998 was increased by $1,605,305 resulting in the total restructuring charge of $3,392,276, discussed above. (2) The ratios of income from continuing operations to fixed charges were computed by dividing income from continuing operations before fixed charges and income taxes by fixed charges from continuing operations. Fixed charges from continuing operations consist of interest expense and the interest portion of operating lease expense. Earnings from continuing operations were inadequate to cover fixed charges by approximately $4,439,000 for the year ended June 30, 1998. 18 Summary Unaudited Pro Forma Consolidated Financial Information The following summary unaudited pro forma consolidated financial information gives effect to the sale of Hirsh and the purchase of Shares pursuant to the Offer, based on certain assumptions described in the Notes to Summary Unaudited Pro Forma Consolidated Financial Information as if they had occurred on July 1, 1997, with respect to income statement information, and on June 30, 1998, with respect to balance sheet information. The summary unaudited pro forma consolidated financial information should be read in conjunction with the summary historical consolidated financial information and does not purport to be indicative of the results that would actually have been obtained, or results that may be obtained in the future, or the financial condition that would have resulted had the purchase of the Shares pursuant to the Offer been completed at the dates indicated. SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED JUNE 30 1998 ---------------------------------- PRO FORMA ---------------------- ASSUMED PURCHASE PRICE ---------------------- $19 $22 ACTUAL PER SHARE PER SHARE ---------- ---------- ---------- INCOME STATEMENT INFORMATION: Net sales.................................. $ 181,633 $ 145,998 $ 145,998 Income (loss) from continuing operations before income taxes....................... (4,438) 6,963 6,729 Income (loss) from continuing operations... (8,369) 4,317 4,163 Loss from discontinued operations.......... (1,368) (1,368) (1,368) Net income (loss).......................... $ (9,737) $ 2,949 $ 2,795 Basic earnings per share: Weighted average shares outstanding....... 5,920,380 4,720,380 4,720,380 Income (loss) from continuing operations.. $ (1.41) $ 0.91 $ 0.88 Loss from discontinued operations......... (0.23) (0.29) (0.29) Net income (loss)....................... $ (1.64) $ 0.62 $ 0.59 Diluted earnings per share: Weighted average shares outstanding....... 5,954,713 4,754,713 4,754,713 Income (loss) from continuing operations.. $ (1.41) $ 0.91 $ 0.88 Loss from discontinued operations......... (0.23) (0.29) (0.29) Net income (loss)....................... $ (1.64) $ 0.62 $ 0.59 Ratio of income from continuing operations to fixed charges.......................... -- 4.63 4.13 BALANCE SHEET INFORMATION: Working capital............................ $ 38,276 $ 18,376 $ 18,376 Total assets............................... 104,033 76,773 76,773 Total debt................................. 9,700 13,000 16,600 Total liabilities.......................... 42,276 38,217 41,817 Stockholders' equity....................... 61,757 38,557 34,957 Book value per common share................ $ 10.40 $ 8.14 $ 7.38
19 NOTES TO SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (IN ACTUAL DOLLAR AMOUNTS) The following assumptions were made in presenting the summary historical and pro forma financial information. (1) The pro forma consolidated financial information assumes 1,200,000 Shares are purchased at $19 per Share and $22 per Share from a portion of the proceeds received from the sale of Hirsh, which closed on September 1, 1998. The sale was assumed to have occurred at the beginning of the period presented. The remaining purchase of shares are assumed to be financed with borrowings under the existing Credit Facility. The assumed interest rate used in the pro forma on the existing Credit Facility was 6.5%. (2) In 1998, the Company recognized a $12,800,000 (after tax) impairment of assets charge related to the sale of Hirsh. The impairment of assets charge has been eliminated from income (loss) from continuing operations for 1998. The net loss from operations and the assets and liabilities of Hirsh have been eliminated from the pro forma presentation as if the sale of Hirsh had occurred as of the beginning of the period. (3) The ratios of income from continuing operations to fixed charges were computed by dividing income from continuing operations before fixed charges and income taxes by fixed charges from continuing operations. Fixed charges from continuing operations consist of interest expense and the interest portion of operating lease expense. Earnings from continuing operations were inadequate to cover fixed charges by approximately $4,439,000 for the year ended June 30, 1998. (4) Expenses directly related to the Offer were assumed to be $400,000 and were charged against additional paid-in capital. (5) The pro forma consolidated financial information gives effect to the tax expense or benefit of all applicable adjustments, as described above, at an incremental rate of 34%. 20 11. SOURCE AND AMOUNT OF FUNDS Assuming that the Company purchases 1,200,000 Shares pursuant to the Offer at a price of $22.00 net per Share, the total amount required by the Company to purchase such Shares will be $26,400,000, exclusive of fees and other expenses. The Company expects to fund the purchase of such Shares and the payment of the related fees and expenses from cash the Company has on hand, including the proceeds of the sale of Hirsh, and from its Credit Facility under which the Company has borrowed approximately $10,000,000 at August 31, 1998 leaving an additional amount of approximately $37,500,000 available to the Company. Under the Credit Facility, Old Kent provides a revolving credit line up to $47,500,000. The interest rate is the lesser of the Old Kent Index Rate, the average daily Federal Funds Rate, as quoted by the Detroit branch of the Chicago Federal Reserve District plus 85 Basis Points, or the London Interbank Offered Rate plus 78 Basis Points. The Credit Facility expires on November 1, 1999 and is unsecured. The Credit Facility contains customary affirmative covenants and negative covenants, none of which will be breached by the Offer or which breached covenants have been waived by Old Kent. The Company believes that the Credit Facility along with cash on hand, including cash generated from operations and the sale of Hirsh, will be sufficient to finance the Offer, the dividend payable on September 4, 1998, and the Company's working capital needs as well as capital expenditure needs. The Board of Directors has authorized the officers of the Company to investigate refinancing the Credit Facility under an arrangement which would provide for repayment of the Company's indebtedness under the Credit Facility over a term of several years. Some action has been taken in this regard, but no formal plans or arrangements have been made to repay the Credit Facility. The preceding summary of the Credit Facility is qualified in its entirety by reference to the text of the Credit Facility and the amendments thereto, which have been filed as exhibits to the Company's Annual Report on Form 10-K for the years ended June 30, 1996 and June 30, 1998. A copy of these exhibits may be obtained from the Commission in the manner provided in Section 16. 12. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES. Except as discussed below, based upon the Company's records and upon information provided to the Company by its directors and executive officers, neither the Company nor, to the Company's knowledge, any of its associates, subsidiaries, directors, executive officers or any associate of any such director or executive officer, or any director or executive officer of its subsidiaries, has engaged in any transactions involving the Shares during the 40 business days preceding the date hereof. Neither the Company nor, to the Company's knowledge, any of its directors or executive officers is a party to any contract, arrangement, understanding or relationship relating directly or indirectly to the Offer with any other person with respect to the Shares, except as provided herein. The Company has been advised that Raymond E. Knape, John E. Fallon, and Richard C. Simkins may tender Shares in the Offer. The Company understands that the decision of Mr. Knape, Mr. Fallon, and Mr. Simkins regarding whether to tender Shares and the number of shares tendered, if any, will depend on the price range provided herein, general market conditions, and other personal financial factors. Mr. Knape, formerly the Chief Executive Officer of the Company, intends to tender up to approximately 55% of the Shares (or equivalent securities) he currently owns. The Company understands that Mr. Knape intends to tender up to 70,000 Shares (including Shares represented by up to 30,000 shares of Common Stock and up to 40,000 shares of Class B Common Stock). Mr. Simkins, formerly the Chief Financial Officer of the Company, has not indicated how many, if any, Shares he may tender. Mr. Simkins beneficially owns approximately 34,500 shares (including options which are currently exercisable). Mr. Fallon has indicated that he intends to tender up to 10,000 Shares (approximately 10% of the Shares or equivalent securities owned by him). On July 1, 1998, the Company and William R. Dutmers entered into a letter agreement and a restricted stock award agreement concerning the compensation and services to be provided by Mr. Dutmers to the Company. Mr. Dutmers, in addition to serving as Chairman of the Board of Directors of the Company, provides 21 the Company with consulting services. Mr. Dutmers has committed at least 80% of his business time to performing services on behalf of the Company. The base compensation for services rendered is the annual award of 10,500 restricted shares of the Common Stock. The term of the letter agreement is five (5) years. The letter agreement also provides other incentives. The Shares awarded vest on the earlier of (a) one year after they are awarded; (b) the occurrence of a change in control of the Company; (c) the grantee's death; or (d) the grantee's disability. The preceding summary is qualified in its entirety by reference to the text of the letter agreement and the restricted stock award agreement which have been filed as exhibits to the Company's Annual Report on Form 10-K for the year ended June 30, 1998. A copy of this report on Form 10-K may be obtained from the Commission in the manner provided in Section 16. The Company has also been informed that the Administrative Committee of the Company's Profit Sharing Plan and the Administrative Committee of the Company's Pension Plan may tender up to 15% of their Shares (approximately 45,000 Shares) in the Offer. The decision regarding whether to tender Shares will depend on the price range provided herein and general market conditions. 13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES In General. The following summary describes certain United States federal income tax consequences to shareholders relevant to the Offer. All holders of Shares and/or Class B Common Stock are urged to consult their own tax advisors as to the tax consequences of the Offer. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code") and existing final, temporary and proposed Treasury Regulations, Revenue Rulings and judicial decisions, all of which are subject to prospective and retroactive changes. The summary deals only with Shares held as capital assets within the meaning of Section 1211 of the Code and does not address tax consequences that may be relevant to investors in special tax situations, such as certain financial institutions, tax-exempt organizations, life insurance companies, dealers in securities or currencies, or shareholders holding the Shares as part of a conversion transaction, as part of a hedge or hedging transaction, or as a position in a straddle for tax purposes. Additional or alternative tax consequences may apply with respect to Shares acquired as compensation (including Shares acquired upon exercise of options). In particular, the discussion of the tax consequences of an exchange of Shares does not apply to foreign shareholders, except as provided herein. The Company will not seek a ruling from the Internal Revenue Service (the "IRS") with regard to the United States federal income tax treatment of the Offer and, therefore, there can be no assurance that the IRS will agree with the conclusions set forth below. Accordingly, each shareholder should consult his or her own tax advisor with regard to the Offer and the application of United States federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdiction, to his or her particular situation. Characterization of the Sale. A sale of Shares by a shareholder of the Company pursuant to the Offer will be a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under applicable state, local and foreign tax laws. The United States federal income tax consequences to a shareholder may vary depending upon the shareholder's particular facts and circumstances. Under Section 302 of the Code, a sale of Shares by a shareholder to the Company pursuant to the Offer will be treated as a "sale or exchange" of such Shares for United States federal income tax purposes (rather than as a distribution by the Company with respect to the Shares held by the tendering shareholder) if the receipt of cash upon such sale (a) is "substantially disproportionate" with respect to the shareholder, (b) results in a "complete redemption" of stock of the Company owned by the shareholder, or (c) is "not essentially equivalent to a dividend" with respect to the shareholder (each as described below). If any of the above three tests is satisfied, and the sale of the Shares is therefore treated as a "sale or exchange" of such Shares for United States federal income tax purposes, the tendering shareholder will recognize gain or loss equal to the difference between the amount of cash received by the shareholder pursuant to the Offer and the shareholder's tax basis in the Shares sold pursuant to the Offer. Any such gain or loss will be capital gain or loss. Shareholders should consult their own tax advisors concerning the tax treatment of capital gains and losses. 22 If none of the above three tests is satisfied, the tendering shareholder would be treated as having received a dividend includible in gross income in an amount equal to the entire amount of cash received by the shareholder pursuant to the Offer (without reduction for the tax basis of the Shares sold pursuant to the Offer), no loss would be recognized, and the tendering shareholder's basis in the Shares sold pursuant to the Offer would be added to such shareholder's basis in its remaining stock, if any. Any such dividend would be taxable at applicable ordinary income rates. In determining whether any of the three tests under Section 302 of the Code is satisfied, shareholders must take into account not only the stock which is actually owned by the shareholder, but also stock which is constructively owned by the shareholder within the meaning of Section 318 of the Code. Under Section 318 of the Code, a shareholder may constructively own stock actually owned, and in some cases constructively owned, by certain related individuals or entities and stock which the shareholder or a related party has the right to acquire by exercise of an option or by conversion (even if such right is not exercised). Contemporaneous dispositions or acquisitions of stock by a shareholder or related individuals or entities may be deemed to be part of a single integrated transaction which will be taken into account in determining whether any of the three tests under Section 302 of the Code has been satisfied. Each shareholder should be aware that because proration may occur in the Offer, even if all the stock actually and constructively owned by a shareholder is tendered or delivered pursuant to the Offer, fewer than all of such Shares may be purchased by the Company. Thus, proration may affect whether a sale by a shareholder pursuant to the Offer will meet any of the three tests under Section 302 of the Code. See Section 6 for information regarding each shareholder's option to make a conditional tender of a minimum number of Shares. A shareholder should consult his/her own tax advisor regarding whether to make a conditional tender of a minimum number of Shares, and the appropriate calculation thereof. Section 302 Tests. The receipt of cash by a shareholder will be "substantially disproportionate" if the percentage of the outstanding stock of the Company actually and constructively owned by the shareholder immediately following the sale of Shares pursuant to the Offer (treating as not outstanding all Shares purchased pursuant to the Offer) is less than 80% of the percentage of the outstanding stock of the Company actually and constructively owned by such shareholder immediately before the sale of Shares pursuant to the Offer (treating as outstanding all Shares purchased pursuant to the Offer). Shareholders should consult their tax advisors with respect to the application of the "substantially disproportionate" test to their particular situation, including their ownership of any Class B Common Stock. The receipt of cash by a shareholder will be a "complete redemption" of all the stock owned by the shareholder if either (a) all of the stock of the Company actually and constructively owned by the shareholder is sold pursuant to the Offer, or (b) all of the stock of the Company actually owned by the shareholder is sold pursuant to the Offer, the shareholder is eligible to waive, and effectively waives, constructive ownership of all such Shares under procedures described in Section 302(c) of the Code. Even if the receipt of cash by a shareholder fails to satisfy the "substantially disproportionate" test or the "complete redemption" test, a shareholder may nevertheless satisfy the "not essentially equivalent to a dividend" test, if the shareholder's sale of Shares pursuant to the Offer results in a "meaningful reduction" in the shareholder's interest in the Company. Whether the receipt of cash by a shareholder will be "not essentially equivalent to a dividend" will depend upon the individual shareholder's facts and circumstances. The IRS has indicated in published rulings that even a small reduction in the proportionate interest of a small minority shareholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a "meaningful reduction." Shareholders expecting to rely on the "not essentially equivalent to a dividend" test should consult their own tax advisors as to its application in their particular situation. Corporate Shareholder Dividend Treatment. Under current law, if a sale of Shares by a corporate shareholder is treated as a dividend, the corporate shareholder may be entitled to claim a dividends-received deduction under Section 243 of the Code, subject to applicable limitations. It is, however, expected that any amount received by a corporate shareholder pursuant to the Offer that is treated as a dividend would constitute 23 an "extraordinary dividend" under Section 1059 of the Code. Corporate shareholders are urged to consult with their tax advisors concerning these matters. Additional Tax Considerations. The distinction between capital gains and ordinary income is relevant because certain individuals are subject to taxation at reduced rates on certain capital gains. Any capital gain or loss so recognized generally will be long-term capital gain or loss if the holding period for the holder's Shares surrendered exceeds one year. Capital gain or loss is taxed at a maximum rate of 20% under the Internal Revenue Service Restructuring and Reform Act of 1998. Class B Common Stock shareholders will generally be allowed to tack the holding period of their Class B Common Stock to the Shares they sell pursuant to the Offer. Other bills and proposed legislation have been introduced which could affect the applicable tax rates on capital gains and shareholders are urged to consult their own tax advisors in this regard and regarding any possible impact on their obligation to make estimated tax payments as a result of the recognition of any capital gain (or the receipt of any ordinary income) caused by the sale of any Shares to the Company pursuant to the Offer. Foreign Shareholders. The Company will withhold United States federal income tax at a rate of 30% from gross proceeds paid pursuant to the Offer to a foreign shareholder or his agent, unless the Company determines that a reduced rate of withholding is applicable pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with conduct of a trade or business by the foreign shareholder within the United States. For this purpose, a foreign shareholder is any shareholder that is not (a) a citizen or resident of the United States, (b) a corporation, partnership or other entity created or organized in or under the laws of the United States, or (c) any estate or trust the income of which is subject to United States federal income taxation regardless of its source. Without definite knowledge to the contrary, the Company will determine whether a shareholder is a foreign shareholder by reference to the shareholder's address. A foreign shareholder may be eligible to file for a refund of such tax or a portion of such tax if such shareholder (a) meets the "complete redemption," "substantially disproportionate" or "not essentially equivalent to a dividend" tests described above, (b) is entitled to a reduced rate of withholding pursuant to a treaty and the Company withheld at a higher rate, or (c) is otherwise able to establish that no tax or a reduced amount of tax was due. In order to claim an exemption from withholding on the ground that gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business by a foreign shareholder within the United States or that the foreign shareholder is entitled to the benefits of a tax treaty, the foreign shareholder must deliver to the Depositary (or other person who is otherwise required to withhold United States tax) a properly executed statement claiming such exemption or benefits. Such statements may be obtained from the Depositary. Foreign shareholders are urged to consult their own tax advisors regarding the application of United States federal income tax withholding, including eligibility for a withholding tax reduction or exemption and the refund procedures. Backup Withholding. See Section 3 with respect to the application of the United States federal income tax backup withholding. THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT APPLY TO SHARES ACQUIRED IN CONNECTION WITH THE EXERCISE OF STOCK OPTIONS OR PURSUANT TO OTHER COMPENSATION ARRANGEMENTS WITH THE COMPANY. THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING SHAREHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE OFFER, THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES MENTIONED ABOVE, AND THE EFFECT OF TAX LEGISLATIVE PROPOSALS. 24 14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS The Company expressly reserves the right, in its sole discretion and at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. There can be no assurance, however, that the Company will exercise its right to extend the Offer. During any such extension, all Shares will remain subject to the Offer, except to the extent that such Common Stock and Class B Common Stock may be properly withdrawn as set forth in Section 4. The Company also expressly reserves the right, in its sole discretion, (a) to terminate the Offer and not accept for payment any Shares not already accepted for payment or, subject to Rule 13-4(f)(5) under the Exchange Act, which requires the Company either to pay the consideration offered or to return the Common Stock or Class B Common Stock promptly after the termination or withdrawal of the Offer, or to postpone payment for Shares upon the occurrence of any of the conditions specified in Section 7 hereof by giving oral or written notice of such termination to the Depositary and making a public announcement thereof and (b) at any time or from time to time amend the Offer in any respect. Amendments to the Offer may be effected by public announcement. Without limiting the manner in which the Company may choose to make public announcement of any termination or amendment, the Company shall have no obligation (except as otherwise required by applicable law) to publish, advertise, or otherwise communicate any such public announcement, other than by making a press release, except in the case of an announcement of an extension of the Offer, in which case the Company shall have no obligation to publish, advertise, or otherwise communicate such announcement other than by issuing a notice of such extension by press release or other public announcement, which notice shall be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Material changes to information previously provided to holders of Common Stock and Class B Common Stock in this Offer or in documents furnished subsequent thereto will be disseminated to such holders in compliance with Rule 13e-4(e)(2) promulgated by the Commission under the Exchange Act. If the Company materially changes the terms of the Offer or the information concerning the Offer, the Company will extend the Offer to the extent required by Rules 13e-4(d)(2), 13e-4(e)(2) and 13e-4(f) under the Exchange Act. Those rules require that the minimum period during which an offer must remain open following material changes in the terms of the Offer or information concerning the Offer (other than a change in price, change in dealer's soliciting fee, or change in percentage of securities sought) will depend on the facts and circumstances, including the relative materiality of such terms or information. In a published release, the Commission has stated that in its view, an offer should remain open for a minimum of ten business days from the date that notice of such a material change is first published, sent or given. The Offer will continue or be extended for at least ten business days from the time the Company publishes, sends or gives to holders of Common Stock and Class B Common Stock a notice that it will (a) increase or decrease the price it will pay for Shares or the amount of the Dealer Manager's fee or (b) increase (except for an increase not exceeding 2% of the outstanding Shares) or decrease the number of Shares it seeks. 15. FEES AND EXPENSES Credit Suisse First Boston Corporation will act as Dealer Manager for the Company in connection with the Offer. The Company has agreed to pay the Dealer Manager, upon acceptance for payment of Shares pursuant to the Offer, a fee of $.12 per Share purchased by the Company pursuant to the Offer. The Dealer Manager will also be reimbursed by the Company for its reasonable out-of- pocket expenses and will be indemnified against certain liabilities and expenses, including liabilities under the federal securities laws, in connection with the Offer. The Company has retained Harris Trust and Savings Bank as Depositary and Morrow & Co., Inc. as Information Agent in connection with the Offer. The Dealer Manager and the Information Agent may contact shareholders by mail, telephone, telex, facsimile, telegraph, and personal interviews, and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners. The Depositary and the Information Agent will receive reasonable and customary compensation for their services and will also be reimbursed for certain out-of-pocket expenses. The Company has agreed to indemnify the Depositary 25 and the Information Agent against certain liabilities, including liabilities under the federal securities laws, in connection with the Offer. Neither the Information Agent nor the Depositary has been retained to make solicitations or recommendations in connection with the Offer. The Company will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the fee of the Dealer Manager). The Company will, upon request, reimburse brokers, dealers, commercial banks, and trust companies for reasonable and customary handling and mailing expenses incurred by them in forwarding materials relating to the Offer to their customers. 16. MISCELLANEOUS The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Certain information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities, and any material interest of such persons in transactions with the Company is filed with the Commission. The Company has also filed an Issuer Tender Offer Statement on Schedule 13E-4 with the Commission, which includes certain additional information relating to the Offer. Such reports, as well as such other material, may be inspected and copies may be obtained at the Commission's public reference facilities at 450 Fifth Street, N.W., Washington, D.C. The Commission maintains a Worldwide Web site on the Internet at http://www.sec.gov that contains reports, proxy, and other information related to registrants that file electronically with the Commission. Copies of such material may be obtained by mail, upon payment of the Commission's customary fees, from the Commission's Public Reference Section at 450 Fifth Street, N.W., Washington D.C. 20549 and should also be available for inspection and copying at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400 Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. The Offer is being made to all holders of Shares (or equivalent securities). The Company is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to state statute. If the Company becomes aware of any valid state statute prohibiting the making of the Offer, the Company will make a good faith effort to comply with such statute. If, after such good faith effort, the Company cannot comply with such statute, the Offer will not be made to, nor will tenders be accepted from or on behalf of, holders of Shares in such state. In those jurisdictions whose securities, blue sky, or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdictions. Knape & Vogt Manufacturing Company September 2, 1998 26 Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates for Shares and any other required documents should be sent or delivered by each shareholder or such shareholder's broker, dealer, commercial bank, trust company, or nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: HARRIS TRUST AND SAVINGS BANK By Hand or Overnight By Mail: Delivery: c/o Harris Trust Company of New c/o Harris Trust Company of New York York 88 Pine Street, 19th Floor Wall Street Station, P.O. Box New York, NY 10005 1010 New York, NY 10268-1010 Facsimile Transmission: (212) 701-7636 Confirm Receipt of Facsimile by Telephone: (212) 701-7624 ---------------- Any questions or requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal, or the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at the telephone numbers and addresses set forth below. Shareholders may also contact their broker, dealer, commercial bank, trust company, or nominee for assistance concerning the Offer. To confirm delivery of Shares, shareholders are directed to contact the Depositary. The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue, 5th Floor New York, NY 10022 (800) 566-9061 (Toll Free) or Banks and Brokerage Firms, please call: (800) 662-5200 (Toll Free) The Dealer Manager for the Offer is: CREDIT SUISSE FIRST BOSTON CORPORATION Eleven Madison Avenue New York, NY 10010-3629 (800) 881-8320 (Toll Free) 27 EX-99.(A)2 3 FORM OF LETTER OF TRANSMITTAL
LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF KNAPE & VOGT MANUFACTURING COMPANY PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 2, 1998 THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: HARRIS TRUST AND SAVINGS BANK By Registered or Certified Mail: By Hand or Overnight Delivery: Harris Trust and Savings Bank Harris Trust and Savings Bank c/o Harris Trust Company of New York c/o Harris Trust Company of New York P.O. Box 1010 88 Pine Street, 19th Floor Wall Street Station New York, NY 10005 New York, NY 10268-1010 By Facsimile Transmission: (212) 701-7636 Confirm Receipt of Facsimile by Telephone: (212) 701-7624 For Information Call: (800) 245-7630 --------------- THIS LETTER OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS, SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (Please fill in, if blank, exactly as name(s) appear(s) on Share certificate(s)) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED (See Instructions 3 and 4) - ---------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES EVIDENCED BY SHARE SHARE CERTIFICATE NUMBER(S)* CERTIFICATE(S) NUMBER OF SHARES TENDERED** - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- Total Shares...................................... - ------------------------------------------------------------------------------- Indicate in this box the order (by certificate number) in which Shares are to be purchased in event of proration.*** Attach additional signed list if necessary. See Instruction 10. 1st: ____ 2nd: ____ 3rd: ____ - -------------------------------------------------------------------------------
* DOES NOT need to be completed if Shares are tendered by book-entry transfer. ** If you desire to tender fewer than all Shares evidenced by any certificates listed above, please indicate in this column the number of Shares you wish to tender. Otherwise, all Shares evidenced by such certificates will be deemed to have been tendered. See Instruction 4. *** If you do not designate an order, in the event less than all Shares tendered are purchased due to proration, Shares will be selected for purchase by the Depositary. [_CHECK]HERE IF YOUR CERTIFICATES HAVE BEEN LOST OR DESTROYED. UPON RECEIPT OF THIS LETTER OF TRANSMITTAL, THE DEPOSITARY WILL CONTACT YOU DIRECTLY WITH REPLACEMENT INSTRUCTIONS, OR TO EXPEDITE THE PROCESS PLEASE CALL THE HARRIS TRUST AND SAVINGS BANK AT (312) 360-5341. DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT CONSTITUTE VALID DELIVERY. DELIVERIES TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE VALID DELIVERY TO THE DEPOSITARY. This Letter of Transmittal is to be completed only if (a) certificates are to be forwarded herewith, or (b) a tender of Shares (as defined below) is to be made concurrently by book-entry transfer to the account maintained by Harris Trust and Savings Bank (the "Depositary") at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to Section 3 of the Offer to Purchase (as defined below). Shareholders who wish to tender Shares pursuant to the Offer (as defined below) and who cannot deliver the certificates to the Depositary prior to the Expiration Date (as defined in the Offer to Purchase (as defined below)), or who cannot complete the procedure for book-entry transfer on a timely basis, or who cannot deliver a Letter of Transmittal and all other required documents to the Depositary prior to the Expiration Date must, in each case, tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. [_CHECK]HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ____________________________________________ Account Number: ___________________________________________________________ Transaction Code Number: __________________________________________________ [_CHECK]HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s): ___________________________________________ Date of Execution of Notice of Guaranteed Delivery: _______________________ Name of Institution that Guaranteed Delivery: _____________________________ Account Number (if any): __________________________________________________ Transaction Code Number (if any): _________________________________________ 2 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), shares of the Company's Common Stock, par value $2.00 per share (the "Common Stock" or "Shares"), represented by the above-described certificates for Common Stock or Class B Common Stock, par value $2.00 per share ("Class B Common Stock"), at the price per Share indicated in this Letter of Transmittal, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Company's Offer to Purchase, dated September 2, 1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"). Each share of Class B Common Stock is convertible into one Share. In order to participate in the Offer, holders of Class B Common Stock must guarantee their delivery of Shares by delivering Class B Common Stock in the same manner as Common Stock is to be delivered, except that Class B Common Stock cannot be delivered by book-entry delivery. Class B Common Stock will be automatically converted to Common Stock upon acceptance for payment of the Shares tendered. Subject to, and effective upon, acceptance for payment of the Shares tendered hereby in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company, all right, title and interest in and to all the Shares that are being tendered hereby, and orders the registration of such Shares if done by book-entry transfer and hereby irrevocably constitutes and appoints the Depositary as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Depositary also acts as the agent of the Company) with respect to such Shares with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to: (a) deliver certificate(s) for such Shares or transfer ownership of such Shares on the account books maintained by the Book-Entry Transfer Facility, together in either such case with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company upon receipt by the Depositary, as the undersigned's agent, of the aggregate Purchase Price (as defined below) with respect to such Shares; (b) convert Class B Common Stock to Common Stock upon acceptance for payment of the Shares tendered which are related thereto; (c) present certificates for such Shares for cancellation and transfer on the Company's books; and (d) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, subject to the next paragraph, all in accordance with the terms of the Offer. The undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and further represents and warrants to the Company that: (a) the undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer, including the undersigned's representation and warranty that: (i) the undersigned has a "net long position" in Common Stock or equivalent securities at least equal to the Shares tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, and (ii) such tender of Shares complies with Rule 14e-4; (b) when and to the extent the Company accepts such Shares for purchase, the Company will acquire good, marketable, and unencumbered title to them, free and clear of all restrictions, security interests, liens, charges, encumbrances, conditional sales agreements, or other obligations relating to their sale or transfer, and not subject to any adverse claim; (c) on request, the undersigned will execute and deliver any additional documents the Depositary or the Company deems necessary or desirable to complete the assignment, transfer and purchase of the Shares tendered hereby; and 3 (d) the undersigned has read and agrees to all of the terms of the Offer. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the undersigned and the Company upon terms and subject to the conditions of the Offer. All authorities conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy, and legal representatives of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The name(s) and address(es) of the registered holder(s) should be printed above, if they are not already printed above, exactly as they appear on the certificates related to the Shares tendered hereby. The certificate numbers, the number of Shares represented by such certificates, and the number of Shares that the undersigned wishes to tender, should be set forth in the appropriate boxes above. The price at which such Shares are being tendered should be indicated in the box below. The undersigned understands that the Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not in excess of $22.00 nor less than $19.00 per Share) net to the seller in cash, without interest thereon (the "Purchase Price"), that it will pay for Shares properly tendered and not properly withdrawn prior to the Expiration Date pursuant to the Offer, taking into account the number of Shares so tendered and the prices (in multiples of $.125) specified by tendering shareholders. The undersigned understands that the Company will select the lowest Purchase Price that will allow it to buy 1,200,000 Shares (or such lesser number of Shares as are properly tendered at prices not in excess of $22.00 nor less than $19.00 net per Share) pursuant to the Offer. The undersigned understands that all Shares properly tendered at prices at or below the Purchase Price and not properly withdrawn prior to the Expiration Date will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including its proration and conditional tender provisions, and that the Company will return all certificates related to Shares not purchased (including Class B Common Stock returned as Class B Common Stock) pursuant to the Offer, including certificates related to Shares tendered at prices greater than the Purchase Price and not properly withdrawn prior to the Expiration Date and Shares not purchased because of proration or conditional tender. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, the Company may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, Shares tendered or may accept for payment fewer than all of the Shares tendered hereby. In any such event, the undersigned understands that any certificate(s) delivered herewith but not tendered or not purchased will be returned to the undersigned at the address indicated above, unless otherwise indicated under the "Special Payment Instructions" or "Special Delivery Instructions" below. Class B Common Stock delivered but not converted to Common Stock, will be returned as Class B Common Stock. The undersigned recognizes that the Company has no obligation, pursuant to the Special Payment Instructions, to transfer any certificate for Shares (or equivalent securities) from the name of its registered holder, or to order the registration or transfer of Shares tendered by book-entry transfer, if the Company purchases none of the Shares represented by such certificate or tendered by such book-entry transfer. The check for the aggregate Purchase Price for such of the Shares tendered hereby as are purchased will be issued to the order of the undersigned and mailed to the address indicated above, unless otherwise indicated under the Special Payment Instructions or the Special Delivery Instructions below. 4 PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED (SEE INSTRUCTION 5) CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO PROPER TENDER OF SHARES (Shareholders who desire to tender Shares at more than one price must complete a separate Letter of Transmittal for each price at which Shares are tendered.) SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION: [_The]undersigned wants to maximize the chance of having the Company purchase all Shares the undersigned is tendering (subject to the possibility of proration). Accordingly, by checking this BOX INSTEAD OF ONE OF THE PRICES BELOW, the undersigned hereby tenders Shares and is willing to accept the Purchase Price resulting from the Dutch auction tender process. This action will result in receiving a price per Share as low as $19.00 or as high as $22.00. OR SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER: By checking ONE of the boxes below INSTEAD OF THE BOX ABOVE, the undersigned hereby tenders Shares at the price checked. This action could result in none of the Shares being purchased if the Purchase Price for the Shares is less than the price checked. A shareholder who desires to tender Shares at more than one price must complete a separate Letter of Transmittal for each price at which Shares are tendered. The same Shares cannot be tendered at more than one price. PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
[_]$19.000 [_]$19.625 [_]$20.250 [_]$20.875 [_]$21.500 [_]$19.125 [_]$19.750 [_]$20.375 [_]$21.000 [_]$21.625 [_]$19.250 [_]$19.875 [_]$20.500 [_]$21.125 [_]$21.750 [_]$19.375 [_]$20.000 [_]$20.625 [_]$21.250 [_]$21.875 [_]$19.500 [_]$20.125 [_]$20.750 [_]$21.375 [_]$22.000
CONDITIONAL TENDER (SEE INSTRUCTION 9) A tendering Shareholder may condition the tender of Shares upon the purchase by the Company of a specified minimum number of Shares tendered hereby, all as described in the Offer to Purchase, particularly Section 6 thereof. Except as set forth in Section 6 of the Offer to Purchase, unless at least a minimum number of Shares is purchased by the Company pursuant to the terms of the Offer, none of the Shares tendered hereby will be purchased. It is the tendering Shareholder's responsibility to calculate and appropriately indicate a minimum number of Shares, and each Shareholder is urged to consult a tax advisor. Unless this box is completed and a minimum number specified, the tender will be deemed unconditional. [_CHECK]HERE IF TENDER OF SHARES IS CONDITIONAL ON THE COMPANY PURCHASING ALL OR A MINIMUM NUMBER OF THE TENDERED SHARES AND COMPLETE THE FOLLOWING: Minimum number of Shares to be sold: 5 ODD LOTS (SEE INSTRUCTION 8) To be completed ONLY if the Shares are being tendered by or on behalf of a person owning beneficially or of record an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan). The undersigned either (check one box): [_]is the beneficial or record owner of an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan), all of which are being tendered; or [_]is a broker dealer, commercial bank, trust company, or other nominee that (a) is tendering for the beneficial owner(s) thereof, Shares with respect to which it is the record holder and (b) believes, based upon representations made to it by such beneficial owner(s), that each such person is the beneficial owner of an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan) and is tendering all of such Shares. ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 6, 7 AND 11) (SEE INSTRUCTIONS 1, 4, 6, 7 AND 11) To be completed ONLY if To be completed ONLY if certificates for Shares not certificates for Shares not tendered or not purchased and/or tendered or not purchased and/or any check for the aggregate any check for the Purchase Price of Purchase Price of Shares purchased Shares purchased are to be mailed are to be issued in the name of and to someone other than the sent to someone other than the undersigned or to the undersigned undersigned. at an address other than that shown above. Issue: [_] Check to: [_] Certificates to: Mail: [_] Check to: [_] Certificates to: Name(s) ____________________________ (Please Print) Name(s) ____________________________ (Please Print) Address ____________________________ (Include Zip Code) Address ____________________________ (Include Zip Code) ------------------------------------ (Taxpayer Identification or Social ------------------------------------ Security Number) (Taxpayer Identification or Social Security Number) KNAPE & VOGT MANUFACTURING COMPANY DIVIDEND REINVESTMENT PLAN (SEE INSTRUCTION 16) This section is completed ONLY if Shares held in the Knape & Vogt Manufacturing Company Dividend Reinvestment Plan are to be tendered. [_]By checking this box, the undersigned represents that the undersigned is a participant in the Dividend Reinvestment Plan and hereby instructs the Depositary to tender on behalf of the undersigned the following number of Shares (including fractional Shares, if any) credited to Dividend Reinvestment Plan account of the undersigned at the Purchase Price per Share indicated above under this item "Price (in Dollars) per Share at which Shares are Being Tendered" Shares (1). -------------------------------------------- (1) The undersigned understands and agrees that all Shares held in the Dividend Reinvestment Plan Account(s) of the undersigned will be tendered if the above box is checked and the space above is left blank. 6 PLEASE SIGN HERE (TO BE COMPLETED BY ALL SHAREHOLDERS) (PLEASE COMPLETE AND RETURN THE ENCLOSED FORM W-9) (Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted with this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 6.) ------------------------------------------------------------------------------ (Signature(s) of Owner(s)) Dated: , 1998 Name(s): _____________________________________________________________________ (Please Print) Capacity (full title): _______________________________________________________ Address: _____________________________________________________________________ (Include Zip Code) Area Code(s) and Telephone Number(s): ________________________________________ Taxpayer Identification or Social Security Number: ___________________________ (see substitute Form W-9) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 6) Name of Firm: ________________________________________________________________ Authorized Signature: ________________________________________________________ Name: ________________________________________________________________________ (Please Print) Title: _______________________________________________________________________ Address: _____________________________________________________________________ (Include Zip Code) Area Code and Telephone Number: ______________________________________________ Dated: , 1998 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. All signatures on this Letter of Transmittal must be guaranteed by a financial institution (including commercial banks, savings and loan associations, and brokerage houses) that is a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Agreement") (an "Eligible Institution") unless: (a) this Letter of Transmittal is signed by the registered holder of the Shares tendered (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of such Shares) exactly as the name of the registered holder appears on the certificate tendered with this Letter of Transmittal and payment and delivery are to be made directly to such owner unless such owner has completed either the box entitled "Special Payment Instructions" or "Special Delivery Instructions" above; or (b) such Shares are tendered for the account of an Eligible Institution. See Instruction 6. 2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. This Letter of Transmittal is to be used only if certificates are delivered with it to the Depositary (or such certificate will be delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary) or if a tender for Shares is being made concurrently pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. The Depositary must receive (a) properly completed and duly executed Letter of Transmittal or a facsimile thereof in accordance with the instructions of the Letter of Transmittal, including any required signature guarantees, certificates, and any other documents required by the Letter of Transmittal, on or prior to the Expiration Date at one of its addresses set forth on the back cover of the Offer to Purchase, (b) such Shares delivered pursuant to the procedures for book-entry transfer described in Section 3 of the Offer to Purchase (and a confirmation of such delivery is received by the Depositary, including an Agent's Message, if the tendering shareholder has not delivered a Letter of Transmittal) or (c) such Shares validly tendered through the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP"), prior to the Expiration Date. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by the Depositary and forming a part of the Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase), which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce such agreement against the participant. If certificates are to be forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Participants in the Book-Entry Transfer Facility may tender their Shares in accordance with ATOP, to the extent it is available to such participants for the Shares they wish to tender. A shareholder tendering through ATOP must expressly acknowledge that the shareholder has reviewed and agreed to be bound by the Letter of Transmittal and that the Letter of Transmittal may be enforced against such shareholder. Shareholders whose certificates are not immediately available or who cannot deliver certificates and all other required documents to the Depositary before the Expiration Date, or whose Shares cannot be delivered on a timely basis pursuant to the procedure for book-entry transfer, must, in any such case, tender their Shares by or through any Eligible Institution by properly completing and duly executing and delivering a Notice of Guaranteed Delivery (or facsimile of it) and by otherwise complying with the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company (with any required signature guarantees) must be received by the Depositary prior to the Expiration Date, and (c) certificates for all physically delivered Shares or Class B Common Stock in proper form for transfer by delivery, or in the case of Shares by confirmation of a book-entry transfer, into Depositary's account at the Book- Entry Transfer Facility of all Shares delivered electronically, in each case together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantees (or, in 8 the case of book-entry transfer an Agent's Message or, in the case of a tender through ATOP, the specified acknowledgment), and all other documents required by this Letter of Transmittal, must be received by the Depositary within three NASDAQ trading days after receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a signature guarantee by an Eligible Institution in the form set forth in such Notice. For Shares to be tendered validly pursuant to the guaranteed delivery procedure, the Depositary must receive the Notice of Guaranteed Delivery on or before the Expiration Date. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. The Company will not accept any alternative, conditional or contingent tenders, nor will it purchase any fractional Shares, except as expressly provided in the Offer to Purchase. All tendering shareholders, by execution of this Letter of Transmittal (or a facsimile of it), waive any right to receive any notice of the acceptance of their tender. DELIVERY OF DOCUMENTS TO THE BOOK ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. 3. Inadequate Space. If the space provided in the box captioned "Description of Shares Tendered" is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule and attached to this Letter of Transmittal. 4. Partial Tenders and Unpurchased Shares. (Not applicable to shareholders who tender by book-entry transfer.) If fewer than all of the Shares evidenced by or to be converted from any certificate are to be tendered, fill in the number of Shares that are to be tendered in the column entitled "Number of Shares Tendered," in the box captioned "Description of Shares Tendered." In such case, if any tendered Shares are purchased, a new certificate for the remainder of the Shares including any Shares not purchased or equivalent securities not converted evidenced by the old certificate(s) will be issued and sent to the registered holder(s), unless otherwise specified in either the "Special Payment Instructions" or "Special Delivery Instructions" box on this Letter of Transmittal, as soon as practicable after the expiration or termination of the Offer. Unless otherwise indicated, all Shares represented by the certificate(s) listed and delivered to the Depositary will be deemed to have been tendered. 5. Indication of Price at which Shares are Being Tendered. For Shares to be properly tendered, the shareholder MUST check either the box under "Shares Tendered at Price Determined by Dutch Auction" or one of the boxes under "Shares Tendered at Price Determined by Shareholder," indicating the price per Share at which he or she is tendering Shares all under "Price (In Dollars) Per Share at Which Shares Are Being Tendered" on this Letter of Transmittal. ONLY ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO PROPER TENDER OF SHARES. A shareholder wishing to tender portions of his or her Share holdings at different prices must complete a separate Letter of Transmittal for each price at which he or she wishes to tender each such portion of his or her Shares. The same Shares cannot be tendered (unless previously properly withdrawn as provided in Section 4 of the Offer to Purchase) at more than one price. 6. Signatures on Letter of Transmittal, Stock Powers and Endorsements. (a) If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby or delivered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without any change whatsoever. (b) If the Shares are registered in the names of two or more joint holders, each such holder must sign this Letter of Transmittal. 9 (c) If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles of it) as there are different registrations of certificates. (d) When this Letter of Transmittal is signed by the registered holder(s) of the Shares (or equivalent securities) listed and transmitted hereby, no endorsement(s) of certificate(s) representing such Shares or separate stock power(s) are required unless payment is to be made or the certificate(s) not tendered or not purchased are to be issued to a person other than the registered holder(s). SIGNATURE(S) ON SUCH CERTIFICATE(S) MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed, or if payment is to be made or the certificate(s) not tendered or not purchased are to be issued to a person other than the registered holder(s), the certificate(s) must be endorsed or accompanied by appropriate stock power(s), in either case signed exactly as the name(s) of the registered holder(s) appears on the certificate(s), and the signature(s) on such certificate(s) or stock power(s) must be guaranteed by an Eligible Institution. See Instruction 1. (e) If this Letter of Transmittal or any certificate(s) or stock power(s) are signed by trustees, executors, administrators, guardians, attorneys-in- fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Company of their authority so to act. 7. Stock Transfer Taxes. Except as provided in this Instruction 7, no stock transfer tax stamps or funds to cover such stamps need accompany this Letter of Transmittal. The Company will pay or cause to be paid any stock transfer taxes payable on the transfer to it of Shares purchased pursuant to the Offer. If, however: (a) payment of the aggregate Purchase Price for Shares tendered hereby and accepted for purchase is to be made to any person other than the registered holder(s); (b) certificates not tendered or not accepted for purchase are to be registered in the name(s) of any person(s) other than the registered holder(s); or (c) tendered certificates are registered in the name(s) of any person(s) other than the person(s) signing this Letter of Transmittal; then the Depositary will deduct from such aggregate Purchase Price the amount of any stock transfer taxes (whether imposed on the registered holder, such other person or otherwise) payable on account of the transfer to such person, unless satisfactory evidence of the payment of such taxes or any exemption from them is submitted. See Section 5 of the Offer to Purchase. 8. Odd Lots. As described in Section 1 of the Offer to Purchase, if the Company is to purchase fewer than all Shares tendered before the Expiration Date and not properly withdrawn, the Shares purchased first will consist of all Shares tendered by any shareholders who own of record or own beneficially an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employee's Retirement Savings Plan), and who tender all of their Shares at or below the Purchase Price ("Odd Lot Owner"). Partial tenders will not qualify for this preference and this preference will not be available unless the box captioned "Odd Lots" in this Letter of Transmittal and the Notice of Guaranteed Delivery, if any, is completed. 9. Conditional Tenders. As described in Sections 1 and 6 of the Offer to Purchase, shareholders may condition their tenders on all or a minimum number of their tendered Shares being purchased ("Conditional Tenders"). If the Company is to purchase less than all Shares tendered before the Expiration Date and not properly withdrawn, the Depositary will perform a preliminary proration, and any Shares tendered at or below the Purchase Price pursuant to a Conditional Tender for which the condition was not satisfied shall be deemed withdrawn, subject to reinstatement if such conditionally tendered Shares are subsequently selected by random lot for purchase subject to Sections 1 and 6 of the Offer to Purchase. Conditional tenders will be selected by lot only from shareholders who tender all of their Shares. 10 All tendered shares shall be deemed unconditionally tendered unless the "Conditional Tender" box is completed. The Conditional tender alternative is made available so that a shareholder may assure that the purchase of Shares from the shareholder pursuant to the Offer will be treated as a sale of such Shares by the shareholder, rather than the payment of a dividend to the shareholder, for federal income tax purposes. Odd Lot Shares, which will not be subject to proration, cannot be conditionally tendered. It is the tendering shareholder's responsibility to calculate the minimum number of Shares that must be purchased from the shareholder in order for the shareholder to qualify for sale (rather than dividend) treatment, and each shareholder is urged to consult his or her own tax advisor. 10. Order of Purchase in Event of Proration. As described in Section 1 of the Offer to Purchase, shareholders may designate the order in which their Shares are to be purchased in the event of proration. The order of purchase may have an effect on the federal income tax treatment of the Purchase Price for the Shares purchased. See Sections 1 and 13 of the Offer to Purchase. 11. Special Payment and Delivery Instructions. If a check for the Purchase Price of any Shares tendered hereby is to be issued in the name of, and/or any certificates not tendered or not accepted for purchase are to be returned to, a person other than the signer of the Letter of Transmittal or if such certificates and/or checks are to be mailed to someone other than the person signing the Letter of Transmittal or to the signer at a different address, the boxes captioned "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal should be completed as applicable and signatures must be guaranteed as described in Instruction 1. Shareholders tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such shareholder at the Book-Entry Transfer Facility. 12. Irregularities. All questions as to the number of Shares to be accepted, the price to be paid therefor and the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company in its sole discretion, which determinations shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders of Shares it determines not to be in proper form or the acceptance of which or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Shares, and the Company's interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of Shares will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Company shall determine. None of the Company, the Dealer Manager (as defined in the Offer to Purchase), the Depositary, the Information Agent (as defined in the Offer to Purchase) or any other person is or will be obligated to give notice of any defects or irregularities in tenders and none of them will incur any liability for failure to give any such notice. 13. Dividend Reinvestment Plan. If a shareholder desires to tender Shares (including fractional shares, if any) credited to the shareholder's account under the Company's Dividend Reinvestment Plan, the box captioned "Knape & Vogt Manufacturing Company Dividend Reinvestment Plan" should be completed. A participant in the Dividend Reinvestment Plan may complete such box on only one Letter of Transmittal submitted by such participant. If a participant submits more than one Letter of Transmittal and completes such box on more than one Letter of Transmittal, the participant will be deemed to have elected to tender all Shares (including fractional shares, if any) credited to the shareholder's account under the Dividend Reinvestment Plan at the lowest price specified in such Letters of Transmittal. If a shareholder tenders Shares held in the Dividend Reinvestment Plan, all such Shares credited to such shareholder's account(s), including fractional Shares, will be tendered, unless otherwise specified above under the box "Knape & Vogt Manufacturing Company Dividend Reinvestment Plan." In the event that box is not completed, no Shares held in the tendering shareholder's account will be tendered. 14. Questions and Requests for Assistance and Additional Copies. Questions and requests for assistance may be directed to, or additional copies of the Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of Transmittal may be obtained from, the Information Agent or the Dealer Manager at their addresses and telephone numbers set forth at the end of this Letter of Transmittal or from your broker, dealer, commercial bank or trust company. 11 15. Form W-9 and Form W-8. Under the federal income tax backup withholding rules, unless an exemption applies under the applicable law and regulations, 31% of the gross proceeds payable to a shareholder or other payee pursuant to the Offer must be withheld and remitted to the United States Treasury, unless the shareholder or other payee provides his or her taxpayer identification number (employer identification number or social security number) to the Depositary and certifies that such number is correct. Therefore, each tendering shareholder should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding, unless such shareholder otherwise establishes to the satisfaction of the Depositary that it is not subject to backup withholding. Certain shareholders (including, among others, all corporations and certain foreign individuals are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that individual must submit an IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Depositary. 16. Withholding on Foreign Shareholders. Even if a foreign shareholder has provided the required certification to avoid backup withholding, the Depositary will withhold federal income taxes equal to 30% of the gross payments payable to a foreign shareholder or his agent unless the Depositary determines that an exemption from or a reduced rate of withholding is available pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business in the United States. For this purpose, a foreign shareholder is a shareholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof or (iii) any estate or trust the income of which is subject to United States federal income taxation regardless of the source of such income. In order to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign shareholder must deliver to the Depositary a properly completed Form 1001. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign shareholder must deliver to the Depositary a properly completed Form 4224. The Depositary will determine a shareholder's status as a foreign shareholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (e.g., Form 1001 or Form 4224) unless facts and circumstances indicate that such reliance is not warranted. A foreign shareholder may be eligible to obtain a refund of all or a portion of any tax withheld if such shareholder meets the "complete redemption," "substantially disproportionate" or "not essentially equivalent to a dividend" test described in Section 13 of the Offer to Purchase or is otherwise able to establish that no tax or a reduced amount of tax is due. Backup withholding generally will not apply to amounts subject to the 30% or treaty-reduced rate of withholding. Foreign shareholders are urged to consult their tax advisors regarding the application of federal income tax withholding, including eligibility for a withholding tax reduction or exemption and refund procedures. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE THEREOF) TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER, OR, IN THE CASE OF TRANSFER THROUGH ATOP, A SPECIFIC ACKNOWLEDGMENT, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE. 12 PAYER'S NAME: HARRIS TRUST AND SAVINGS BANK - ------------------------------------------------------------------------------- PART 1--Taxpayer Identification Number--for all accounts, enter taxpayer identification number in the box at right and certify by signing and dating below. SUBSTITUTE TIN: ___________ FORM W-9 Social Security Number or Employer Identification Number (If awaiting TIN, write "Applied For") Department of the Treasury, Internal Revenue Service Note: If the account is in more than one name, see the chart in the enclosed Guidelines to determine which number to give the payer. PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") ------------------------------------------------------------- PART 2--For payees exempt from backup withholding, please write "EXEMPT" here (see the enclosed Guidelines): ---------------- - ------------------------------------------------------------------------------- PART 3--Certification--UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this form is my correct TIN (or I am waiting for a TIN to be issued to me), and (2) I am not subject to backup withholding because (a) I am exempt from withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. (Also see instructions in the enclosed Guidelines.) - ------------------------------------------------------------------------------- SIGNATURE: __________________________________ DATE: ____________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a TIN has not been issued to me, and either (1) I have mailed or delivered an application to receive a TIN to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a TIN by the time of payment, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. SIGNATURE: __________________________________ DATE: ____________________ NAME: __________________________________________________________________ (Please Print) ADDRESS: _______________________________________________________________ (Include Zip Code) 13 The Information Agent for the Offer is: Morrow & Co., Inc. 445 Park Avenue, 5th Floor New York, NY 10022 (800) 566-9061 (Toll Free) Banks and Brokerage Firms, please call: (800) 662-5200 The Dealer Manager for the Offer is: Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 (800) 881-8320 (Toll Free) 14 EX-99.(A)3 4 FORM OF NOTICE OF GUARANTEED DELIVERY KNAPE & VOGT MANUFACTURING COMPANY NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) if: (a) certificates for shares of Common Stock, par value $2.00 per share ("Common Stock" or the "Shares"), and/or Class B Common Stock, par value $2.00 per share ("Class B Common Stock"), of Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), cannot be delivered to the Depositary (as defined below) prior to the Expiration Date (as defined in Section 1 of the Company's Offer to Purchase dated September 2, 1998 (the "Offer to Purchase")); or (b) the procedure for book-entry transfer (set forth in Section 3 of the Offer to Purchase and the related Letter of Transmittal, which, as amended or supplemented from time to time, together constitute the "Offer") cannot be completed on a timely basis; or (c) the Letter of Transmittal (or a facsimile thereof) and all other required documents cannot be timely delivered to the Depositary prior to the Expiration Date. This Notice of Guaranteed Delivery, properly completed and duly executed, may be delivered by hand, mail or facsimile transmission to the Depositary. See Section 3 of the Offer to Purchase. The Depositary for the Offer is: HARRIS TRUST AND SAVINGS BANK By Hand or Overnight Delivery: By Mail: c/o Harris Trust Company of New York c/o Harris Trust Company of New York 88 Pine Street, 19th Floor P.O. Box 1010 New York, NY 10005 Wall Street Station New York, NY 10268-1010 Facsimile Transmission: (212) 701-7636 Confirm Receipt of Facsimile by Telephone: (212) 701-7624 ---------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND, THEREFORE, WILL NOT CONSTITUTE VALID DELIVERY. DELIVERIES TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE VALID DELIVERY TO THE DEPOSITARY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" (as defined in the Offer to Purchase) under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to the Company at the price per Share indicated in this Notice of Guaranteed Delivery, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal, receipt of both of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. ODD LOTS (See Instruction 8 of Letter of Transmittal) To be completed ONLY if the Shares are being tendered by or on behalf of a person owning beneficially or of record an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan). The undersigned either (check one box): [_]owns beneficially or of record an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan), all of which are being tendered; or [_]is a broker, dealer, commercial bank, trust company, or other nominee that (a) is tendering, for the beneficial owner(s) thereof, Shares with respect to which it is the record holder, and (b) believes, based upon representations made to it by such beneficial owner(s), that each such person is the beneficial owner of an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan), and is tendering all of such Shares. ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED CONDITIONAL TENDER (See Instruction 9 of Letter of Transmittal) A tendering shareholder may condition the tender of Shares upon the purchase by the Company of a specified minimum number of Shares tendered hereby, all as described in the Offer to Purchase, particularly in section 6 thereof. Except as set forth in Section 6 of the Offer to Purchase, unless at least such minimum number of shares is purchased by the Company pursuant to the terms of the Offer, none of the Shares tendered hereby will be purchased. It is the tendering shareholder's responsibility to calculate and appropriately indicate such minimum number of Shares, and each shareholder is urged to consult a tax advisor. Unless this box has been completed and a minimum number specified, the tender will be deemed unconditional. [_]CHECK HERE IF TENDER OF SHARES IS CONDITIONAL ON THE COMPANY PURCHASING ALL OR A MINIMUM NUMBER OF THE TENDERED SHARES AND COMPLETE THE FOLLOWING: Minimum number of Shares to be sold:_______________________________________ 2 PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO PROPER TENDER OF SHARES (Shareholders who desire to tender Shares at more than one price must complete a separate Notice of Guaranteed Delivery for each price at which Shares are tendered.) [_]SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION: The undersigned wants to maximize the chance of having the Company purchase all Shares the undersigned is tendering (subject to the possibility of proration). Accordingly, by checking this BOX INSTEAD OF ONE OF THE PRICES BELOW, the undersigned hereby tenders Shares and is willing to accept the Purchase Price resulting from the Dutch Auction tender process. This action will result in receiving a price per Share as low as $19.00 or as high as $22.00. OR SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER: By checking ONE of the boxes below INSTEAD OF THE BOX ABOVE, the undersigned hereby tenders Shares at the price checked. This action could result in none of the Shares being purchased if the Purchase Price for the Shares is less than the price checked. A shareholder who desires to tender Shares at more than one price must complete a separate Notice of Guaranteed Delivery for each price at which Shares are tendered. The same Shares cannot be tendered at more than one price. PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
[_]$19.000 [_]$19.625 [_]$20.250 [_]$20.875 [_]$21.500 [_]$19.125 [_]$19.750 [_]$20.375 [_]$21.000 [_]$21.625 [_]$19.250 [_]$19.875 [_]$20.500 [_]$21.125 [_]$21.750 [_]$19.375 [_]$20.000 [_]$20.625 [_]$21.250 [_]$21.875 [_]$19.500 [_]$20.125 [_]$20.750 [_]$21.375 [_]$22.000
3 (Please type or print) Number of Shares: _________________ Certificate Nos. (if available): __ ----------------------------------- Name(s) ----------------------------------- Address(es) ----------------------------------- ----------------------------------- Area Code(s) and Telephone Number(s) ----------------------------------- Sign Here ----------------------------------- Signature(s) , 1998 ----------------------------------- Dated If Shares will be tendered by book-entry transfer, provide the following information: Account Number: ___________________ Date: _____________________________ THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDERS. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. 4 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) THE UNDERSIGNED IS A MEMBER FIRM OF A REGISTERED NATIONAL SECURITIES EXCHANGE, A MEMBER OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., OR A FINANCIAL INSTITUTION THAT IS A MEMBER OF A RECOGNIZED SIGNATURE GUARANTEE MEDALLION PROGRAM WITHIN THE MEANING OF RULE 17AD-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND HEREBY GUARANTEES: (A) THE ABOVE-NAMED PERSON(S) HAS A NET LONG POSITION IN THE SHARES TENDERED HEREBY WITHIN THE MEANING OF RULE 14E-4 PROMULGATED UNDER THE EXCHANGE ACT, AND (B) SUCH TENDER OF SHARES COMPLIES WITH SUCH RULE 14E-4, AND (C) DELIVERY TO THE DEPOSITARY, AT ONE OR MORE OF ITS ADDRESSES SET FORTH ABOVE, OF (I) CERTIFICATE(S) DELIVERED HEREBY IN PROPER FORM FOR TRANSFER, OR (II) CONFIRMATION THAT THE SHARES (BUT NOT THE CLASS B COMMON STOCK) TENDERED HEREBY HAVE BEEN DELIVERED PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER (SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE) INTO THE DEPOSITARY'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY, IN EACH CASE, TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER(S) OF TRANSMITTAL (OR FACSIMILE THEREOF) WITH ANY REQUIRED SIGNATURE GUARANTEE(S), OR AN AGENT'S MESSAGE (AS DEFINED IN THE OFFER TO PURCHASE) OR THROUGH ATOP (AS DEFINED IN THE OFFER TO PURCHASE), AND ANY OTHER REQUIRED DOCUMENTS, ALL WITHIN THREE NASDAQ NATIONAL MARKET TRADING DAYS AFTER THE RECEIPT BY THE DEPOSITARY. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares (or equivalent securities) to the Depositary within the time shown herein. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm: _____________________ Address: __________________________ ----------------------------------- Zip Code Area Code and Telephone No.: ____________________ ----------------------------------- Authorized Signature Name: _____________________________ Please Print Title: ____________________________ Date: _____________________________ DO NOT SEND CERTIFICATES WITH THIS FORM. YOUR SHARE CERTIFICATES MUST BE SENT WITH LETTER OF TRANSMITTAL. 5 EX-99.(A)4 5 FORM OF LETTER TO SHAREHOLDERS KNAPE & VOGT MANUFACTURING COMPANY 2700 OAK INDUSTRIAL DRIVE, N.E. GRAND RAPIDS, MI 49505 LOGO September 2, 1998 To Our Shareholders: Knape & Vogt Manufacturing Company (the "Company") is offering (the "Offer") to purchase up to 1,200,000 shares of its Common Stock ("Common Stock" or the "Shares"), or approximately 20% of the currently outstanding capital stock of the Company, from existing shareholders. The price will not be in excess of $22.00 nor less than $19.00 net per Share. On August 31, 1998, the last trading day prior to the announcement of the Offer, the last reported sale price per Share on the NASDAQ National Market was $19.125. Any shareholder whose Shares are tendered directly in the Offer and not through a broker will receive the total purchase price in cash and will not incur the usual transaction costs associated with open market sales. Holders of the Company's Class B Common Stock, ("Class B Common Stock") can participate in the Offer by tendering a number of Shares up to the number of shares of Class B Common Stock held by the shareholder. Class B Common Stock will be automatically converted to Common Stock on a one-for-one basis upon acceptance for payment of the Shares tendered. The Company is conducting the Offer through a procedure known as a "Dutch Auction." This procedure allows you to select a price or prices within the specified range at which you are willing to sell Shares to the Company. The actual purchase price will be determined by the Company in accordance with the terms of the Offer. All shares purchased will be at the one price determined by the Company. The Offer is explained in detail in the enclosed Offer to Purchase and Letter of Transmittal. We encourage you to read these materials carefully before making any decision with respect to the Offer. If you desire to tender Shares, the instructions on how to tender Shares are also explained in detail in the accompanying materials. The Offer to Purchase also describes the definitive agreement the Company has entered into for the sale of substantially all of the assets of its wholly-owned subsidiary, The Hirsh Company, to Steelworks, Inc. While a loss will be incurred, the sale will generate cash for the Company and also allow us to remain focused on our core drawer slide, kitchen and bath storage, and wall-attached shelving products. The sale fits our strategy of targeting growing, profitable markets. While the Board of Directors of the Company has approved the Offer, neither the Company nor its Board of Directors makes any recommendation to any shareholder as to whether to tender or refrain from tendering Shares. Each shareholder must make the decision whether to tender Shares and, if so, how many Shares and at what price or prices Shares should be tendered. For information concerning the intentions of the Company's directors and executive officers with respect to tendering Shares pursuant to the Offer, please refer to the Offer to Purchase. The Offer is the first step of the implementation of a comprehensive new financial strategy for the Company which is intended to make greater use of financial leverage and will change the way the Company distributes cash to its shareholders. This new financial strategy provides a more balanced capital structure consistent with the Company's goal of maximizing Economic Value Added ("EVA") and enhancing long-term shareholder value. The Company implemented EVA during fiscal 1997. EVA is founded on the principle that the only way to increase the value of a business is to produce profits over and above the minimum required rate of return on the capital entrusted to it by lenders and shareholders. As another part of the new financial strategy, the Company is in the process of implementing a plan under which shareholders would receive quarterly stock dividends having a market value approximately equivalent to cash dividends that might otherwise have been paid. This plan includes a stock dividend sale plan which would provide shareholders a convenient way to sell their quarterly stock dividends, if so desired, through one brokerage firm and have the cash proceeds distributed to them. Our goal is to allow those shareholders who wish to receive a predictable income stream to receive cash on a more tax efficient basis. More details on the stock dividend sale plan will be announced in the second quarter of fiscal year 1999. Finally, as part of the new financial strategy, the Company may repurchase additional Common Stock on the open market or Class B Common Stock following the Dutch Auction in accordance with SEC rules. Please note the Offer will expire at 12 midnight, New York City time, on Wednesday, September 30, 1998, unless extended by the Company. If you have any questions regarding the Offer or need assistance in tendering your Shares, please contact Morrow & Co., Inc., the Information Agent for the Offer, at (800) 566-9061 or Credit Suisse First Boston Corporation, the Dealer Manager for the Offer, at (800) 881-8320. Sincerely, /s/ Allan E. Perry Allan E. Perry President and Chief Executive Officer EX-99.(A)5 6 FORM OF LETTER TO BROKER DEALER LETTER Credit Suisse First Boston Credit Suisse First Boston Corporation Eleven Madison Avenue Telephone (212) 325-2000 New York, NY 10010-3629 LOGO KNAPE & VOGT MANUFACTURING COMPANY OFFER TO PURCHASE FOR CASH UP TO 1,200,000 SHARES OF ITS COMMON STOCK AT A PURCHASE PRICE NOT IN EXCESS OF $22.00 NOR LESS THAN $19.00 NET PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. September 2, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), has engaged us to act as Dealer Manager in connection with its offer to purchase for cash 1,200,000 shares (or such lesser number of shares as are properly tendered) of its Common Stock, par value $2.00 per share ("Common Stock" or the "Shares"), at prices not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon, as specified by shareholders tendering their Shares upon the terms and subject to the conditions set forth in its Offer to Purchase, dated September 2, 1998, and in the related Letter of Transmittal (which together, as amended or supplemented from time to time, constitute the "Offer"). Each share of the Company's Class B Common Stock, par value $2.00 per share ("Class B Common Stock"), is convertible into one Share. Holders of Class B Common Stock can participate in the Offer by tendering pursuant to the terms and conditions of the Offer a number of Shares into which their Class B Common Stock is convertible. Class B Common Stock will automatically be converted to Common Stock upon acceptance for payment of the Shares tendered. Any Class B Common Stock delivered relating to Shares tendered but not accepted for payment pursuant to the Offer will be returned as Class B Common Stock. The Company will, upon the terms and subject to the conditions of the Offer, determine the single per Share price, not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon (the "Purchase Price"), that it will pay for Shares properly tendered pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the lowest Purchase Price that will allow it to buy 1,200,000 Shares (or such lesser number of Shares as are properly tendered at prices not in excess of $22.00 nor less than $19.00 net per Share). All Shares acquired in the Offer will be acquired at the Purchase Price. All Shares properly tendered at prices at or below the Purchase Price and not properly withdrawn will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration and conditional tender provisions. Shares tendered at prices in excess of the Purchase Price and Shares not purchased because of proration will be returned. Class B Common Stock delivered pursuant to the terms and conditions of the Offer will be returned as Class B Common Stock if the Shares they represent are not accepted for payment. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7 OF THE OFFER TO PURCHASE. We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee) or who hold Shares registered in their own names. Please bring the Offer to their attention as promptly as possible. For your information and for forwarding to your clients for whom you hold Shares or Class B Common Stock registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase, dated September 2, 1998; 2. Printed form letter which may be sent to your clients for whose accounts you hold Shares or Class B Common Stock registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 3. Letter to Shareholders, dated September 2, 1998, from Allan E. Perry, President and Chief Executive Officer of the Company, to shareholders of the Company; 4. Letter of Transmittal for your use and for the information of your clients (together with accompanying Form W-9). Facsimile copies of the Letter of Transmittal (with manual signatures) may be used to tender shares; 5. Notice of Guaranteed Delivery to be used to accept the Offer and tender Shares pursuant to the Offer if none of the procedures for tendering Shares set forth in the Offer to Purchase can be completed on a timely basis. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. A return envelope addressed to Harris Trust and Savings Bank, as Depositary for the Offer (the "Depositary"). YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. No fees or commissions will be payable by the Company nor any officer, director, shareholder, agents, or other representatives of the Company to any brokers, dealers, or any person for soliciting tenders of Shares pursuant to the Offer (other than fees paid to Credit Suisse First Boston Corporation as Dealer Manager, Morrow & Co., Inc. as the Information Agent, or the Depositary as described in the Offer to Purchase). The Company will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to the beneficial owners of Shares or Class B Common Stock held by you as a nominee or in a fiduciary capacity. The Company will pay or cause to be paid any stock transfer taxes applicable to its purchase of Shares, except as otherwise provided in Instruction 7 of the Letter of Transmittal. As described in the Offer to Purchase, if more than 1,200,000 Shares have been validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, as defined in Section 1 of the Offer to Purchase, the Company will purchase Shares in the following order of priority: (i) all Shares validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date by any shareholder who owns beneficially or of record an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan) and who validly tendered all of such Shares (partial tenders will not qualify for this preference) and completes the box captioned "Odd Lots" in the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; (ii) after purchase of all of the foregoing Shares, all Shares conditionally tendered in accordance with Section 6 of the Offer to Purchase, for which the condition was satisfied, and all other Shares tendered properly and unconditionally at prices at or below the Purchase Price and not properly withdrawn prior to the Expiration Date on a pro rata basis (with appropriate adjustments to avoid purchases of fractional shares) as described in Section 1 of the Offer to Purchase; and (iii) if necessary to permit the Company to purchase 1,200,000 Shares, Shares conditionally tendered, for which the condition was not satisfied, at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, selected by random lot in accordance with Section 6 of the Offer to Purchase. 2 THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, AT WHAT PRICE OR PRICES. SEE SECTION 12 OF THE OFFER TO PURCHASE FOR INFORMATION REGARDING THE INTENTIONS OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO TENDERING SHARES PURSUANT TO THE OFFER. Any inquiries you may have with respect to the Offer should be addressed to Credit Suisse First Boston Corporation, as Dealer Manager, Eleven Madison Avenue, New York, New York 10010-3629, (800) 881-8320 (toll free), or to Morrow & Co., Inc., as Information Agent, 445 Park Avenue, 5th Floor, New York, New York 10022, (800) 566-9061, Banks and Brokerage Firms, call (800) 662-5200. Additional copies of the enclosed material may be obtained from the undersigned or from the Information Agent at their respective addresses and telephone numbers set forth above. Very truly yours, Credit Suisse First Boston Corporation NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT, OR THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)6 7 FORM OF LETTER TO CLIENTS KNAPE & VOGT MANUFACTURING COMPANY OFFER TO PURCHASE FOR CASH UP TO 1,200,000 SHARES OF ITS COMMON STOCK AT A PURCHASE PRICE NOT IN EXCESS OF $22.00 NOR LESS THAN $19.00 NET PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration are the Offer to Purchase dated September 2, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") in connection with the offer by Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), to purchase up to 1,200,000 shares (or such lesser number of shares as are properly tendered) of its Common Stock, par value $2.00 per share ("Common Stock" or the "Shares"), at prices not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon, as specified by shareholders tendering their Shares, upon the terms and subject to the conditions of the Offer. Each share of the Company's Class B Common Stock, par value $2.00 per share ("Class B Common Stock"), is convertible into one Share. Holders of Class B Common Stock can participate in the Offer by tendering pursuant to the terms and conditions of the Offer a number of Shares into which their Class B Common Stock is convertible. Class B Common Stock will be automatically converted to Common Stock upon acceptance for payment of the Shares tendered. Any Class B Common Stock delivered relating to Shares tendered but not accepted for payment pursuant to the Offer will be returned as Class B Common Stock. The Company will, upon the terms and subject to the conditions of the Offer, determine the single per Share price, not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon (the "Purchase Price"), that it will pay for Shares properly tendered pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the lowest Purchase Price that will allow it to buy 1,200,000 Shares (or such lesser number of Shares as are properly tendered at prices not in excess of $22.00 nor less than $19.00 net per Share). All Shares properly tendered prior to the Expiration Date (as defined in the Offer to Purchase) at prices at or below the Purchase Price, and not properly withdrawn, will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration and conditional tender provisions. All Shares acquired in the Offer will be acquired at the Purchase Price. Shares tendered at prices in excess of the Purchase Price and Shares not purchased because of proration will be returned. Class B Common Stock delivered pursuant to the terms and conditions of the Offer will be returned as Class B Common Stock if the Shares they represent are not accepted for payment. A TENDER OF YOUR SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD THEREOF AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER YOUR SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions of the Offer. Please note the following: 1. Shares may be tendered at either the price determined by you, not in excess of $22.00 nor less than $19.00 net per Share, or at the price determined by the "Dutch Auction" tender process as indicated in the attached Instruction Form, net to the seller in cash, without interest thereon. You should mark the box entitled "Shares Tendered at Price Determined by Dutch Auction" if you are willing to accept the Purchase Price resulting from the Dutch Auction tender process. This could result in your receiving the minimum price of $19.00 per Share. 2. The priority in which Shares shall be purchased in the event of proration may be designated. 3. The Offer is not conditioned on any minimum number of Shares being tendered. The Offer is, however, subject to certain other conditions set forth in the Offer to Purchase. 4. The Offer, proration period and withdrawal rights will expire at 12:00 Midnight, New York City time, on Wednesday, September 30, 1998, unless the Offer is extended. 5. The Offer is for up to 1,200,000 Shares. Although the Company has no present intention to do so, the Company reserves the right, in its sole discretion but subject to applicable legal requirements, to purchase more than 1,200,000 Shares pursuant to the Offer. 6. The Board of Directors of the Company has approved the Offer. Neither the Company nor its Board of Directors, however, makes any recommendation to shareholders as to whether to tender or refrain from tendering their Shares. Each shareholder must make the decision whether to tender such shareholder's Shares and, if so, how many Shares to tender and the price or prices at which such Shares should be tendered. 7. Tendering shareholders will not be obligated to pay any brokerage fees or commissions or solicitation fees to the Dealer Manager, Depositary, Information Agent or the Company, or except as set forth in the Letter of Transmittal, stock transfer taxes on the transfer of Shares pursuant to the Offer. If (i) you own beneficially or of record an aggregate of fewer than 100 Shares (excluding Shares attributable to your individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan); (ii) you instruct us to tender on your behalf all such Shares at or below the Purchase Price prior to the Expiration Date; and (iii) you complete the section entitled "Odd Lots" in the attached Instruction Form, the Company, upon the terms and subject to the conditions of the Offer, will accept all such Shares for purchase before proration, if any, of the purchase of other Shares properly tendered at or below the Purchase Price. If you wish to tender portions of your Shares at different prices, you must complete a separate Instruction Form for each price at which you wish to tender each such portion of your Shares. We must submit separate Letters of Transmittal on your behalf of each such price you will accept for each such portion tendered. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the attached Instruction Form. An envelope to return your Instruction Form to us is enclosed. If you authorize us to tender your Shares, all such Shares will be tendered unless otherwise indicated on the attached Instruction Form. PLEASE FORWARD YOUR INSTRUCTION FORM TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. As described in the Offer to Purchase, if more than 1,200,000 Shares (or such greater number of Shares as the Company may elect to purchase) have been properly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, the Company will purchase tendered Shares on the basis set forth below: 1. First, all Shares validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date by any shareholder who owns beneficially or of record an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan) (an "Odd Lot Owner") who: a. tenders all Shares owned beneficially or of record by such Odd Lot Owner at a price at or below the Purchase Price (tenders of less than all Shares owned by such Odd Lot Owner will not qualify for this preference); and 2 b. completes the box captioned "Odd Lots" on the Letter of Transmittal and if applicable on the Notice of Guaranteed Delivery; and 2. Second, after purchase of all of the foregoing Shares, all Shares conditionally tendered in accordance with Section 6 of the Offer to Purchase for which the condition was satisfied, and all other Shares properly tendered at prices at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, on a pro rata basis (with appropriate adjustments to avoid purchases of fractional Shares) as described in the Offer to Purchase; and 3. Third, if necessary, to permit the Company to purchase 1,200,000 Shares, Shares conditionally tendered, for which the condition was not satisfied, at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, selected by random lot in accordance with Section 6 of the Offer to Purchase. The Offer is being made solely pursuant to the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares residing in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the securities laws of such jurisdiction. 3 INSTRUCTION FORM INSTRUCTIONS FOR TENDER OF SHARES OF KNAPE & VOGT MANUFACTURING COMPANY The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated September 2, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") in connection with the offer by Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), to purchase up to 1,200,000 shares (or such lesser number of shares as are properly tendered) of its Common Stock, par value $2.00 per share (the "Shares"), at prices not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon, as specified by shareholders tendering their Shares, upon the terms and subject to the conditions of the Offer. This will instruct you to tender to the Company, on (our) (my) behalf, the number of Shares indicated below (or if no number is indicated below, all Shares) which are beneficially owned by (us) (me) and registered in your name, upon terms and subject to the conditions of the Offer. NUMBER OF SHARES TO BE TENDERED: __________________________________ SHARES* - -------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. ODD LOTS (SEE INSTRUCTION 8 OF LETTER OF TRANSMITTAL) To be completed ONLY if the Shares are being tendered by or on behalf of a person owning beneficially or of record, an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan). The undersigned either (check one box): [_] is the beneficial or record owner of an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan), all of which are being tendered; or [_] is a broker dealer, commercial bank, trust company, or other nominee that (a) is tendering for the beneficial owner(s) thereof, Shares with respect to which it is the record holder and (b) believes, based upon representations made to it by such beneficial owner(s), that each such person is the beneficial owner of an aggregate of fewer than 100 Shares (excluding Shares attributable to the individual accounts under the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan) and is tendering all of such Shares. ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED CONDITIONAL TENDER (SEE INSTRUCTION 9 OF LETTER OF TRANSMITTAL) A tendering Shareholder may condition the tender of Shares upon the purchase by the Company of a specified minimum number of Shares tendered hereby, all as described in the Offer to Purchase, particularly Section 6 thereof. Except as set forth in Section 6 of the Offer to Purchase, unless at least a minimum number of Shares is purchased by the Company pursuant to the terms of the Offer, none of the Shares tendered hereby will be purchased. It is the tendering Shareholder's responsibility to calculate and appropriately indicate a minimum number of Shares, and each Shareholder is urged to consult a tax advisor. Unless this box is completed and a minimum number specified, the tender will be deemed unconditional. [_] CHECK HERE IF TENDER OF SHARES IS CONDITIONAL ON THE COMPANY PURCHASING ALL OR A MINIMUM NUMBER OF THE TENDERED SHARES AND COMPLETE THE FOLLOWING: Minimum number of Shares to be sold: _____________________________________ PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED (SEE INSTRUCTION 5 OF LETTER OF TRANSMITTAL) CHECK ONLY ONE BOX CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO PROPER TENDER OF SHARES (Shareholders who desire to tender Shares at more than one price must complete a separate Instruction Form for each price at which Shares are tendered.) SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION: [_] The undersigned wants to maximize the chance of having the Company purchase all Shares the undersigned is tendering (subject to the possibility of proration). Accordingly, by checking this BOX INSTEAD OF ONE OF THE PRICES BELOW, the undersigned hereby tenders Shares and is willing to accept the Purchase Price resulting from the Dutch auction tender process. This action will result in receiving a price per Share as low as $19.00 or as high as $22.00. OR SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER: By checking ONE of the boxes below INSTEAD OF THE BOX ABOVE, the undersigned hereby tenders Shares at the price checked. This action could result in none of the Shares being purchased if the Purchase Price for the Shares is less than the price checked. A shareholder who desires to tender Shares at more than one price must complete a separate Instruction Form for each price at which Shares are tendered. The same Shares cannot be tendered at more than one price. PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
[_]$19.000 [_]$19.625 [_]$20.250 [_]$20.875 [_]$21.500 [_]$19.125 [_]$19.750 [_]$20.375 [_]$21.000 [_]$21.625 [_]$19.250 [_]$19.875 [_]$20.500 [_]$21.125 [_]$21.750 [_]$19.375 [_]$20.000 [_]$20.625 [_]$21.250 [_]$21.875 [_]$19.500 [_]$20.125 [_]$20.750 [_]$21.375 [_]$22.000
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDERS. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. SIGN HERE: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Signature(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please Print Name(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capacity - -------------------------------------------------------------------------------- Address(es) - -------------------------------------------------------------------------------- Area Code and Telephone Number - -------------------------------------------------------------------------------- Taxpayer Identification Number or Social Security Number EX-99.(A)7 8 FORM OF LETTER FROM OLD KENT BANK OLD KENT BANK ("OLD KENT") 111 LYON STREET GRAND RAPIDS, MI 49503 IMMEDIATE ATTENTION REQUESTED Re: Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan (the "Plan") Dear Plan Participant: Enclosed for your consideration are the Offer to Purchase dated September 2, 1998, and related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") in connection with the Offer by Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company") to purchase up to 1,200,000 shares (or such lesser number as are properly tendered) of its Common Stock, par value $2.00 per share ("Common Stock" or "Shares"), at prices not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon, as specified by shareholders tendering their Shares upon the terms and subject to the conditions of the Offer. The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price, not in excess of $22.00 nor less than $19.00 per Share, net to seller in cash without interest thereon (the "Purchase Price"), that it will pay for Shares properly tendered pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the lowest Purchase Price that will allow it to buy 1,200,000 Shares (or such lesser number of Shares as are properly tendered at prices not in excess of $22.00 nor less than $19.00 net per Share). All Shares properly tendered prior to the Expiration Date (as defined in the Offer to Purchase) at prices at or below the Purchase Price, and not properly properly withdrawn, will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration and conditional tender provisions. All Shares will be acquired at the Purchase Price. Enclosed with this letter are all of the materials relating to the Offer. These materials contain important information about the Offer and should be carefully reviewed. As you know, your individual account under the Plan may be invested in any of seven different funds, six of which are invested in assets other than Shares of the Company, and the other one of which is invested in Shares (the "Stock Fund"). IN ACCORDANCE WITH THE TERMS OF THE PLAN, THE ADMINISTRATIVE COMMITTEE HAS PROVIDED PARTICIPANTS WITH THE ABILITY TO DECIDE WHETHER OR NOT TO DIRECT US TO TENDER SHARES IN THE OFFER WHICH ARE CREDITED TO YOUR INDIVIDUAL ACCOUNT IN THE STOCK FUND. A TENDER OF YOUR SHARES CAN BE MADE ONLY BY US AS HOLDER OF RECORD THEREOF AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES CREDITED TO YOUR INDIVIDUAL ACCOUNT IN THE STOCK FUND. ONLY OLD KENT, AS TRUSTEE FOR THE STOCK FUND, CAN ACTUALLY TENDER THE SHARES ATTRIBUTABLE TO YOUR INDIVIDUAL ACCOUNT. If you decide to direct us to tender any or all of the Shares attributable to your individual account in the Stock Fund, you will be entitled: (a) to specify the price or prices (within the limits of the Offer) at which they should be tendered; or (b) to accept the Purchase Price to be paid to all shareholders whose Shares will be purchased. If you do not direct us whether to tender the Shares credited to your individual account in the Stock Fund, we will not tender any Shares on your behalf. Refer to the instructions in the enclosed "Direction Form," which you should fill out and return. BE SURE TO COMPLETE AND RETURN THE DIRECTION FORM TO HARRIS TRUST AND SAVINGS BANK, WHICH IS ACTING AS OUR AGENT IN TABULATING THE DIRECTION FORMS, EVEN IF YOU DECIDE NOT TO INSTRUCT US TO TENDER ANY SHARES. YOU SHOULD MAIL YOUR COMPLETED, DATED, AND SIGNED ORIGINAL DIRECTION FORM TO HARRIS TRUST AND SAVINGS BANK, WALL STREET STATION, P.O. BOX 1010, NEW YORK, NEW YORK 10268-0523, IN THE ENCLOSED RETURN ENVELOPE. ALTHOUGH THE TENDER OFFER IS NOT SCHEDULED TO EXPIRE UNTIL 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS EXTENDED, HARRIS TRUST AND SAVINGS BANK MUST RECEIVE THE DIRECTION FORM BY 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 25, 1998, UNLESS THIS DEADLINE IS EXTENDED. IF HARRIS TRUST AND SAVINGS BANK DOES NOT RECEIVE A COMPLETED, DATED, AND SIGNED ORIGINAL DIRECTION FORM BY 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 25, 1998, UNLESS EXTENDED, THEN, IN ACCORDANCE WITH THE TERMS OF THE PLAN AND TRUST AGREEMENT RELATED THERETO, WE WILL NOT TENDER ANY SHARES ON YOUR BEHALF. If you submit a Direction Form to Harris Trust and Savings Bank directing us to tender Shares credited to your individual account and later decide to withdraw your tender, you must follow the following procedures for your withdrawal to be effective. Harris Trust and Savings Bank (at its address set forth on the back cover of the Offer to Purchase) must receive a written notice of withdrawal by 5:00 p.m., New York City time, on Friday, September 25, 1998, unless extended. Such notice of withdrawal must specify your name, the number of Shares attributable to your individual account which you directed us to tender, and the number of such Shares withdrawn. Any Shares acquired by the Plan after a Direction Form has been received by Harris Trust and Savings Bank will be tendered in the same proportion as the Shares you tender pursuant to the Direction Form. IMPORTANT: IF YOU DIRECT US TO TENDER SHARES ATTRIBUTABLE TO YOUR INDIVIDUAL ACCOUNT AND THEY ARE PURCHASED BY THE COMPANY, ANY PROCEEDS WILL BE INVESTED INITIALLY IN MONEY MARKET FUNDS. SUCH PROCEEDS WILL BE REINVESTED AS SOON AS ADMINISTRATIVELY PRACTICAL, WHICH MAY NOT BE UNTIL JANUARY 1, 1999, IN ACCORDANCE WITH THE TENDERING PARTICIPANT'S INVESTMENT ELECTION IN EFFECT ON THE DATE OF REINVESTMENT, EXCLUDING ANY ALLOCATION TO THE FUND THAT INVESTS IN SHARES. While you will not recognize any immediate tax gain or loss as a result of tendering Shares in the Offer, the tax treatment of your future withdrawals or distributions from the Plan may be adversely impacted by a tender and sale of Shares in the Stock Fund. Specifically, under current federal income tax rules, if you receive a distribution from the Plan of Shares that have increased in value while they were held by the Plan, under certain circumstances you may have the option of not paying tax on this increase in value, which is called "net unrealized appreciation," until you sell the Shares. When the Shares are sold, any gain up to the amount of the untaxed net unrealized appreciation is generally taxed as capital gain. If Shares attributable to your individual account are purchased by the Company in the Offer, you will no longer be able to take advantage of this tax benefit. Each Direction Form received by our agent, Harris Trust and Savings Bank, will be held in confidence and will not be released or divulged to any directors, officers, employees, or other representatives of the Company. Neither the Company, its Board of Directors, Old Kent, Harris Trust and Savings Bank, as our agent in tabulating the Direction Forms, Credit Suisse First Boston Corporation, the Dealer Manager for the Offer, nor any other party makes any recommendations to you as to whether or not to tender Shares or the price or prices at which to tender. You should make your own decision with respect to the Offer but, if Harris Trust and Savings Bank does not receive a completed Direction Form from you by 5:00 p.m., New York City time, on Friday, September 25, 1998, unless extended, we will not tender any Shares on your behalf. If you have any questions after reviewing the materials, contact Morrow & Co., Inc., the Information Agent for the tender offer, at (800) 566-9061, or Credit Suisse First Boston Corporation, the Dealer Manager for the tender offer, at (800) 881-8320. 2 OLD KENT BANK ("OLD KENT") DIRECTION FORM KNAPE & VOGT MANUFACTURING COMPANY EMPLOYEES' RETIREMENT SAVINGS PLAN BEFORE COMPLETING THIS FORM, PLEASE READ CAREFULLY THE ACCOMPANYING OFFER TO PURCHASE AND ALL OTHER ENCLOSED MATERIALS. ---------------- INSTRUCTIONS Carefully complete this Direction Form below. Be sure to sign and date the form. Enclose the Direction Form in the included postage prepaid envelope and mail it promptly. YOUR DIRECTION FORM MUST BE RECEIVED BY HARRIS TRUST AND SAVINGS BANK, AS AGENT FOR OLD KENT, NOT LATER THAN 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 25, 1998, UNLESS EXTENDED. EVEN IF YOU DECIDE NOT TO PARTICIPATE IN THE OFFER, YOU SHOULD COMPLETE AND RETURN THE DIRECTION FORM. If Harris Trust and Savings Bank, as agent for Old Kent, does not receive a completed, dated, and signed original Direction Form from you by such deadline, then, in accordance with the terms of the Plan and trust agreement related thereto, Old Kent will not tender any Shares on your behalf. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, YOU SHOULD MAKE YOUR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. NEITHER OLD KENT, THE COMPANY, NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. SEE SECTION 12 OF THE OFFER TO PURCHASE FOR INFORMATION REGARDING THE INTENTIONS OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO TENDERING SHARES PURSUANT TO THE OFFER. Please check ONE box and ONLY ONE box below: [_] 1.Please DO NOT TENDER, but continue to HOLD all Shares credited to my individual account in the Stock Fund. [_] 2.Please TENDER Shares, including fractional shares, if any, (please write in number) reflecting Shares credited to my individual account in the Stock Fund at the Purchase Price determined by the "Dutch auction" tender process as described in the Offer to Purchase. If this box is checked and no number is entered in the blank, all Shares credited to my individual account in the Stock Fund will be tendered in accordance with the previous sentence. [_] 3.Please TENDER Shares (including fractional shares, if any) reflecting Shares credited to my account in the Stock Fund in the quantities indicated below for each of the prices provided. A blank space before a given price will be taken to mean that no Shares credited to my individual account in the Stock Fund will be tendered at that price. FILL IN THE TABLE BELOW ONLY IF YOU HAVE CHECKED BOX 3. THE TOTAL NUMBER OF SHARES TO BE TENDERED WHICH YOU INDICATE AFTER BOX 2 AND IN THE TABLE BELOW MAY NOT EXCEED THE NUMBER OF SHARES CREDITED TO YOUR INDIVIDUAL ACCOUNT IN THE STOCK FUND, BUT IT MAY BE LESS THAN OR EQUAL TO SUCH NUMBER. FILL IN THE TABLE BELOW ONLY IF YOU HAVE CHECKED BOX 3 ABOVE.
PERCENTAGE PERCENTAGE PERCENTAGE OF SHARES OF SHARES OF SHARES TENDERED PRICE TENDERED PRICE TENDERED PRICE ---------- -------- ---------- -------- ---------- -------- % $19.000 % $20.000 % $21.000 % $19.125 % $20.125 % $21.125 % $19.250 % $20.250 % $21.250 % $19.375 % $20.375 % $21.375 % $19.500 % $20.500 % $21.500 % $19.625 % $20.625 % $21.625 % $19.750 % $20.750 % $21.750 % $19.875 % $20.875 % $21.875 % $22.000
The undersigned hereby directs Old Kent, as trustee of the Knape & Vogt Manufacturing Company Employees' Retirement Savings Plan, to tender to the Company, in accordance with the Offer to Purchase, dated September 2, 1998, including the related Letter of Transmittal, copies of which I have received and read, the indicated number of Shares credited to my individual account in the Stock Fund. Signature: ____________________________________________________________________ Please print name: ____________________________________________________________ Date: _____________________________________ , 1998 THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE PLAN PARTICIPANT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. EX-99.(A)8 9 FORM OF SUMMARY ADVERTISEMENT This announcement is neither an offer to purchase or a solicitation of an offer to sell Shares (as defined below). The offer is made solely by the Offer to Purchase dated September 2, 1998, and the related Letter of Transmittal which are being mailed to all holders of Shares (or Class B Common Stock). Capitalized terms not defined in this announcement are defined in the Offer to Purchase. The Company is not aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law. If the Company becomes aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law, the Company will make a good faith effort to comply with such law. If after such good faith effort, the Company cannot comply with such law, the Offer will not be made to (nor will tenders be accepted on behalf of) the holders of Shares (or equivalent securities) residing in such jurisdiction. In any jurisdiction whose laws require the offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by Credit Suisse First Boston Corporation ("Credit Suisse First Boston" or the "Dealer Manager") or one or more registered brokers or dealers license under the laws of such jurisdiction. Notice of Offer to Purchase for Cash by Knape & Vogt Manufacturing Company Up to 1,200,000 Shares Of Its Common Stock At A Purchase Price Not In Excess Of $22.00 Nor Less Than $19.00 Net Per Share Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), hereby invites its shareholders to tender up to 1,200,000 shares (or such lesser number of shares as are validly tendered) of its Common Stock, par value $2.00 per share (the "Shares"), at prices not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon, as specified by shareholders tendering their Shares, upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 2, 1998, and in the related Letter of Transmittal (which together, as amended or supplemented from time to time, constitute the "Offer"). The information contained in the Offer to Purchase and Letter of Transmittal is incorporated by reference herein in its entirety. - -------------------------------------------------------------------------------- THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- The Offer is not conditioned on any minimum number of Shares being tendered, but is subject to certain other conditions set forth in the Offer to Purchase. The Board of Directors of the Company has approved the Offer. Neither the Company nor its Board of Directors, however, makes any recommendation to shareholders as to whether to tender or refrain from tendering their Shares. Each shareholder must make the decision whether to tender such shareholder's Shares and, if so, how many Shares to tender and the price or prices at which such Shares should be tendered. See the Offer to Purchase for information regarding the Intentions of the Company's directors and executive officers with respect to tendering of Shares pursuant to the Offer. As promptly as practicable following the Expiration Date (as defined below), the Company will purchase 1,200,000 Shares or such lesser number of Shares as are validly tendered (and not properly withdrawn in accordance with Section 4 of the Offer to Purchase) prior to the Expiration Date at prices not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon. The term "Expiration Date" means 12:00 Midnight, New York City time, on September 30, 1998, unless and until the Company, in its sole discretion, shall have extended the period of time during which the Offer will remain open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by the Company, shall expire. The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price not in excess of $22.00 nor less than $19.00 per Share, net to the seller in cash, without interest thereon (the "Purchase Price"), that it will pay for the Shares validly tendered and not properly withdrawn taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the lowest Purchase Price that will allow it to purchase 1,200,000 Shares validly tendered and not properly withdrawn pursuant to the Offer (or such lesser number of Shares as are validly tendered and not properly withdrawn at prices not in excess of $22.00 nor less than $19.00 net per Share). All Shares validly tendered at prices at or below the Purchase Price and not properly withdrawn will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the terms thereof relating to proration and conditional tenders discussed in the Offer. For purposes of the Offer, the Company will be deemed to have accepted for payment (and therefore purchased) Shares validly tendered at or below the Purchase Price and not properly withdrawn (subject to the proration and conditional tender provisions of the Offer) when, as, and if the Company gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. Payment for Shares validly tendered and accepted for payment pursuant to the Offer will be made promptly (subject to possible delay in the event of proration or conditional tenders), but only after timely receipt by the Depositary of certificates (or a timely Book-Entry Confirmation of Shares into the Depositary's account at the Book-Entry Transfer Facility, as defined in the Offer to Purchase), a properly completed and duly executed Letter of Transmittal (or facsimile thereof), or in the case of a Book-Entry Transfer, an Agent's Message, or, in the case of a tender through the Automated Tender Offer Program, the specific acknowledgment, in each case together with any other documents required by the Letter of Transmittal. Under no circumstances will the Company pay interest on the Purchase Price, including, without limitation, by reason of any delay in making payment. Upon the terms and subject to the conditions of the Offer, if more than 1,200,000 Shares (or such greater number of Shares as the Company may elect to purchase pursuant to the Offer) have been validly tendered at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, the Company will purchase validly tendered Shares on the following basis: (a) first, all Shares validly tendered and not properly withdrawn prior to the Expiration Date by any Odd Lot Owner (as defined in the Offer to Purchase) who: (1) tenders all Shares beneficially owned by such Odd Lot Owner at or below the Purchase Price, and (2) completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; (b) second, after purchase of all of the foregoing Shares, all Shares conditionally tendered, for which the condition was satisfied, and all other Shares tendered validly and unconditionally at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, on a pro rate basis, if necessary (with appropriate adjustments to avoid purchases of fractional Shares); and (c) third, if necessary, Shares conditionally tendered, for which the condition was not satisfied, at or below the Purchase Price and not properly withdrawn prior to the Expiration Date, selected by random lot (as described in the Offer). The Offer is the first step of the implementation of a new financial strategy for the Company that makes greater use of financial leverage and will change the way the Company distributes cash to shareholders. The new strategy provides a more balanced capital structure consistent with the Company's goal of maximizing Economic Value Added ("EVA"). Stern Stewart & Company acted as the Company's financial advisor in developing the new financial strategy and previously worked with the Company to implement EVA. EVA is founded on the principle that the only way to increase the value of a business is to produce profits over and above the minimum required rate of return on the capital entrusted it by lenders and shareholders. The Offer also provides shareholders who have Shares registered in their own name and who tender directly to the Depositary who are considering a sale of all or a portion of their Shares the opportunity to determine the price or prices (not in excess of $22.00 nor less than $19.00 net per Share) at which they are willing to sell their Shares and, if any of such Shares are purchased directly pursuant to the Offer, to sell those Shares for cash to the Company without the usual costs associated with a market sale. The Company expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in the Offer shall have occurred, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and payment for any Shares by giving oral or writen notice of such extension to the Depositary and making a public announcement thereof. The Company also expressly reserves the right, in its sole discretion, to terminate the Offer and not accept for payment or pay for any Shares not theretofore accepted for payment or paid for or, subject to applicable law, to postpone payment for Shares upon the occurrence of any of the conditions specified in the Offer by giving oral or written notice of such termination or postponement to the Depositary and making a public announcement thereof. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Company pursuant to the Offer, may also be withdrawn at any time after 12:00 Midnight, New York City time, on October 30, 1998. For a withdrawal to be effective, a notice of withdrawal must be in written or facsimile transmission form and must be received in a timely manner by the Depositary at its address set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the tendering shareholder, the name of the registered holder, if different from that of the person who tendered such Shares, the number of Shares tendered, and the number of Shares to be withdrawn. If certificates to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the release of such certificates, the tendering shareholder must also submit the serial numbers shown on the particular certificates to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in the Offer to Purchase, the notice of withdrawal also must specify the name and the number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. The Offer to Purchase and the Letter of Transmittal contain Important Information which should be read carefully before any tenders are made. The information required to be disclosed by Rule 13e-4(d)(1) under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Offer to Purchase and the related Letter of Transmittal are being mailed to record holders of Shares (and Class B Common Stock) as of August 27, 1998, and are being furnished to brokers, banks and similar persons whose names or the names of whose nominees appear on the Company's shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners. Questions and requests for assistance or for copies of the Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent or the Dealer Manager and will be furnished promptly at the Company's expense. The Financial Advisor for the Offer is: Stern Stewart & Company The Information Agent for the Offer is: Morrow & Co., Inc. 445 Park Avenue, 5th floor New York, New York 10022 Toll Free (800) 566-9061 Call Collect (212) 754-8000 Banks and Brokerage Firms Please Call: (800) 662-5200 The Dealer Manager for the Offer is: CREDIT FIRST SUISSE BOSTON Eleven Madison Avenue New York, New York 10010-3629 (800) 881-8320 (toll free) September 2, 1998 EX-99.(A)9 10 TEXT OF PRESS RELEASE ISSUED BY THE COMPANY 9/1/98 [LETTERHEAD OF KNAPE & VOGT MANUFACTURING CO.] FOR IMMEDIATE RELEASE CONTACT: Jack Poindexter, Chief Financial Officer and Treasurer Knape & Vogt Manufacturing Company (616) 459-3311 x. 250 or Jeffrey Lambert, John Vonder Haar - (800) 435-9539 Seyferth & Associates, Inc. (SeyferthPR@aol.com) KNAPE & VOGT REPORTS FISCAL 1998 RESULTS; ANNOUNCES SALE OF HIRSH; ------------------------------------------------------------------ New Financial Strategy to Include "Dutch Auction" Tender Offer, Additional Share Repurchases, Substitution of Quarterly Stock Dividends for Cash Dividends and Stock Dividend Sale Plan
- ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended Fiscal Year Ended June 30, June 30, - ------------------------------------------------------------------------------------------------------------------------------------ 1998 1997 1998 1997 ---- ---- ---- ---- - ----------------------------------------------------------------------------------------------------------------------------------- Net Sales $ 44,826,757 $43,954,363 $181,632,570 $176,630,294 - ----------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from Contin. Oper. $(11,799,596) (a)(b) $ 2,102,489 $ (8,369,182) (a)(b)(c) $ 8,325,228 (d) - ----------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from Discont. Oper. 0 $ 0 $ (1,368,278) $ (471,624) (e) - ----------------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) $(11,799,596) (a)(b) $ 2,102,489 $ (9,737,460) (a)(b)(c) $ 7,853,604 (d)(e) - ----------------------------------------------------------------------------------------------------------------------------------- Per Share (basic) - ----------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from Contin. Oper. $ (1.99) (a)(b) $ .35 $ (1.41) (a)(b)(c) $ 1.41 (d) - ----------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from Discont. Oper. $ .00 $ .00 $ (.23) $ (.08) (e) - ----------------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) $ (1.99) (a)(b) $ .35 $ (1.64) (a)(b)(c) $ 1.33 (d)(e) - ----------------------------------------------------------------------------------------------------------------------------------- Per Share (diluted) - ----------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from Contin. Oper. $ (1.99) (a)(b) $ .36 $ (1.41) (a)(b)(c) $ 1.41 (d) - ----------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from Discont. Oper. $ .00 $ .00 $ (.23) $ (.08) (e) - ----------------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) $ (1.99) (a)(b) $ .36 $ (1.64) (a)(b)(c) $ 1.33 (d)(e) - -----------------------------------------------------------------------------------------------------------------------------------
(a) Includes the after-tax effect of $12,800,000 or $2.15 per diluted share for an impairment charge pertaining to the sale of the Hirsh Company. (b) Includes the after-tax effect of an inventory reserve adjustment and write- off of idle equipment of $785,000 or $0.13 per diluted share. (c) Includes the after-tax effect of a restructuring charge and impairment of assets of $3,392,276 or $0.57 per diluted share pertaining to the reorganization of KV Canada Inc. (d) Includes an after-tax charge of $246,235 or $0.04 per diluted share for restructuring charges pertaining to the sale of Modar Inc. (e) To record an adjustment to the provision for operating losses of Roll-it through fiscal year 1997. GRAND RAPIDS, Michigan, September 1, 1998 Knape & Vogt Manufacturing Company (NASDAQ/NMS:KNAP) today announced the results of its fiscal year ended June 30, 1998, including the sale of the Company's Hirsh operation. Knape & Vogt also said its board of directors has approved a new financial strategy that includes the authorization to repurchase up to 1.35 million shares, including up to 1.2 million shares pursuant to a "Dutch Auction" self-tender offer at a price not less than $19.00 nor greater than $22.00 per share that expires on September 30, 1998, unless extended, and beginning in the second quarter of fiscal 1999, the planned distribution of quarterly stock dividends instead of cash dividends and the implementation of a stock dividend sale plan. -- more -- Knape & Vogt -- page 2 "Knape & Vogt accomplished a great deal in restructuring and refining our operations in fiscal 1998. Our new financial strategy reflects our drive to carry this momentum into the future," said Allan Perry, Knape & Vogt president and chief executive officer. The Grand Rapids, Mich.-based manufacturer and distributor of shelving products, drawer slides and other storage-related products reported a loss from continuing operations of $8.4 million, or $1.41 per diluted share, on record net sales of $181.6 million for fiscal 1998, compared with income from continuing operations of $8.3 million, or $1.41 per diluted share, on net sales of $176.6 million for fiscal 1997. Excluding impairment and restructuring charges in both periods and the one-time inventory and idle equipment writedown in 1998, income from continuing operations was flat at $8.61 million, or $1.45 per diluted share, in fiscal 1998, compared with $8.57 million, or $1.45 per diluted share, in fiscal 1997. Knape & Vogt's fiscal 1998 results include a $12.8 million, or $2.15 per diluted share, after-tax impairment charge to reflect the sale of its Hirsh Company subsidiary and a $785,000, or $0.13 per diluted share, after-tax write- off for idle equipment and adjustments in inventory reserves, both in the fourth quarter of fiscal 1998. Fiscal 1998 also includes a one-time, after-tax charge of $3.4 million, or $0.57 per diluted share, in the third quarter to restructure Knape & Vogt Canada Inc. KV plans to continue to sell and distribute its products in Canada and maintain a sales office in the Toronto area. The fiscal 1997 results include a one-time, after-tax charge of $246,235, or $0.04 per diluted share, for restructuring costs associated with the sale of Modar Inc. KV recorded solid sales increases in its Knape & Vogt and Feeny product lines in fiscal 1998, while its Hirsh products posted a modest decline for the year. The addition of new distributor and OEM customers and increased placement of Feeny's kitchen and bath storage products contributed to its sales strength. Increased sales of precision drawer slides to both the wood and metal office furniture market fueled sales growth in the Knape & Vogt product line. Hirsh sales declined primarily as a result of fewer retail promotions and several customers delaying shipments until the first quarter of fiscal 1999. "Our strategy to be among the market leaders complements our commitment to profitability. We believe both targets are achievable and sustainable for our core shelving systems, drawer slides and kitchen and bath storage products," said Perry. "Our greatest near-term opportunities for strong sales improvement are in drawer slides for the metal office furniture market and continued penetration with our Feeny products. These will be key sales drivers in the coming year." For the year ended June 30, 1998, Knape & Vogt's gross margin (gross profit as a percentage of sales) declined to 23.3 percent, compared with 24.7 percent in the prior year period. KV attributed the decline to its ongoing investments in production and sales in order to aggressively pursue the metal office furniture market, the establishment of inventory reserves in the fourth quarter, the continued softness of the Canadian dollar, and continuing pricing pressures in the marketplace. KV's selling, general and administrative (SG&A) expenses as a percentage of sales were flat at 16.1 percent in both the fiscal 1998 and 1997 periods. Knape & Vogt lowered its long-term debt by $19.3 million, or 67 percent since the beginning of fiscal 1998. Subsequently, the Company reported a 38 percent decline in interest expense to $1.2 million in 1998, compared with $2.0 million in the prior year, reflecting the Company's continuing dedication to improving cash flow in line with EVA (Economic Value Added) principles. Knape & Vogt reported a net loss of $9.7 million, or $1.64 per diluted share, in fiscal 1998, compared with net income of $7.9 million, or $1.33 per diluted share, in fiscal 1997. KV's 1998 net results include a loss from discontinued operations of $1.3 million reflecting the Company's sale of its former store fixture operation, Roll-it. -- more -- Knape & Vogt -- page 3 As a result of a change in the treatment of the cumulative foreign translation adjustment, Knape & Vogt reported an additional charge of $1.6 million in the third quarter of fiscal 1998 for the restructuring of its KV Canada operation. The amendment results in a total restructuring charge of $3.4 million in KV's fiscal 1998 third quarter. "Net of the 1998 restructuring, impairment of assets and other one-time charges, we expect fiscal 1999 to generate improved income from continuing operations over 1998. However, we anticipate that our 1999 first quarter operating profit will be less than last year's first quarter with other income causing earnings to be only slightly less than the 1998 first quarter," said Perry. "We expect most of our profit improvement will be generated in the second half of the year as we further increase our sales of precision drawer slides and receive the benefit from the implementation of our new KVOPS "Operation Improvement Program." At the cornerstone of KVOPS is Continuous Flow Manufacturing (CFM), which is designed to make KV the low-cost producer, the best service provider, and the quality leader." SALE OF HIRSH Knape & Vogt announced it signed a definitive agreement to sell substantially all the assets of its wholly owned subsidiary, The Hirsh Company, to Steelworks, Inc., an Iowa corporation. Hirsh manufactures free-standing shelving systems, workshop items and other storage products. The move reflects the Company's desire to enhance its corporate margins and profitability and remain focused on its core drawer slide, kitchen and bath storage and wall- attached shelving products. "We made tremendous progress in 1998 on the path we began two years ago to evaluate all our operations and make the critical decisions to maximize Knape & Vogt's long-term profit potential," said Perry. "The sale of Hirsh, like our restructuring of our KV Canada operation and the completion of the sale of Roll- it during the year, demonstrates this focus on maintaining and building profitable, complementary businesses. Hirsh did not fit our growth criteria moving forward, and we are pleased that we were able to complete the sale." "Net of taxes and expenses, we will receive $16 million in cash for a company that had a negative impact on operating income in fiscal 1998," Perry concluded. Hirsh was acquired by Knape & Vogt in November 1993 and contributed approximately $38 million in net sales to KV in fiscal 1998. EVA PROGRESS Knape & Vogt reported a 15% improvement in Economic Value Added (EVA) in the fourth quarter 1998, culminating in a 18% improvement in EVA for fiscal year 1998, KV's first as an EVA-driven company. EVA is the after tax operating profits that remain after subtracting the cost of capital employed to generate that profit. Knape & Vogt's growth in EVA came from improved cash flow and the Company's commitment to effective balance sheet management. KV anticipates continuing improvement in EVA in fiscal 1999 as it begins to realize the benefits of the sale of Roll-it, the restructuring of KV Canada, and the sale of Hirsh. "Effective balance sheet management was a key accomplishment for Knape & Vogt in 1998 as we worked aggressively to pay down debt, reduce inventories and strengthen the financial flexibility of the Company," said Perry. "The measurement and rationalization tools of EVA have had a dramatic and positive impact on the operations and outlook of Knape & Vogt." -- more -- Knape & Vogt -- page 4 NEW FINANCIAL STRATEGY The Knape & Vogt board of directors approved a comprehensive new financial strategy. Stern Stewart & Co. acted as financial advisor in developing KV's new financial strategy to make greater use of financial leverage and change the way the Company distributes cash to shareholders. It provides a more balanced capital structure consistent with the Company's goal of maximizing Economic Value Added (EVA). EVA is founded on the principle that the only way for managers to increase the value of a business is to produce profits over and above the minimum required rate of return on the capital entrusted to them by lenders and shareowners. As the first step in implementing its new financial strategy, Knape & Vogt's board of directors authorized the purchase of up to 1.35 million shares of the Company's Common Stock, including up to 1.2 million shares pursuant to a "Dutch Auction" self-tender offer. The tender offer price range will be from $19.00 to $22.00 net per share in cash. The offer will expire at 12 Midnight, New York Time, on September 30, 1998, unless extended. On August 31, 1998, Knape & Vogt's shares of Common Stock closed at $19.125. Holders of Class B Common Stock can participate in the "Dutch Auction" by tendering a number of shares of Common Stock in an equivalent number of shares of Class B Common Stock held. Shares of Class B Common Stock will be converted to Common Stock upon acceptance for payment by Knape & Vogt. The "Dutch Auction" will be subject to the various terms and conditions described in offering materials to be distributed to shareholders in the next few days. Under the terms of the "Dutch Auction" offer, the Company's shareholders will be given the opportunity to specify prices within the Company's stated price range at which they are willing to tender their Common Stock. Upon receipt of the tenders, the Company will determine one final price that enables it to purchase up to 1.2 million shares of Common Stock from those shareholders who agreed to sell at or below the Company's one selected purchase price. All shares purchased will be at that one selected price. No transaction costs will be charged to tendering shareholders. If more than 1.2 million shares of Common Stock are tendered at or below the purchase price, there will be a proration. The tender offer will not be contingent upon any minimum number of shares being tendered. The Company currently has approximately 3.5 million shares of Common Stock and 2.4 million shares of Class B Common Stock outstanding. The Company will purchase the shares of Common Stock with cash on hand and the use of its commercial bank revolving credit facility. Although the board of directors of the Company has approved the tender offer, neither the Company nor its board of directors makes any recommendation to shareholders as to whether to tender or refrain from tendering their shares of Common Stock. Each shareholder must make the decision as to whether to tender shares of Common Stock and, if so, how many shares and at what price or prices shares of Common Stock should be tendered. Credit Suisse First Boston will serve as the Dealer Manager for the offer. Harris Trust and Savings Bank will be the Depository for the offer, and Morrow & Company, Inc. will serve as the Information Agent. Copies of the Offer to Purchase and Letter of Transmittal will be mailed beginning on September 2, 1998, to all shareholders as reflected on the records of the transfer agent for the Company as of August 27, 1998. Shareholders are urged to carefully read these materials before making any decision to tender shares. Persons with questions about the tender offer should contact the Dealer Manager at (800) 881-8320, or the Information Agent at (800) 566-9061. -- more -- Knape & Vogt -- page 5 Knape & Vogt's board of directors has authorized the purchase of shares of Common Stock through open market or privately negotiated transactions following the completion of the "Dutch Auction" until the full 1.35 million share repurchase authorization is achieved. "This will allow the Company to maintain its target capital structure and return cash to shareholders through these repurchases," Perry stated. In addition to the new capital structure, KV's board of directors declared its intention, beginning with the fiscal 1999 second quarter, to substitute quarterly stock dividends for quarterly cash dividends, having a market value approximately equivalent to cash dividends that might otherwise have been paid. The Company also intends to adopt a stock dividend sale plan that will provide the shareholders the opportunity to have their stock dividends sold through a brokerage firm and have the cash proceeds of the sale distributed to them. The Company has been advised that for federal income tax purposes, the net cash proceeds from the sale of stock dividend shares would generally be treated as capital gains rather than ordinary income. "We will be giving our shareholders a choice," Perry added. "Shareholders may choose to sell their stock dividends through the stock dividend sale plan, which will enable them to maintain a steady flow of cash, or by not selling the stock dividends, shareholders can continue to reinvest in the Company the same way as through our Dividend Reinvestment Program, but on a more tax efficient basis." Knape & Vogt will discontinue its Dividend Reinvestment Program. Final details of the plan will be announced by the second quarter of fiscal 1999. "This new financial strategy, which includes the "Dutch Auction," the share repurchase, quarterly stock dividends and the stock dividend sale plan, is a perfect complement to our focus on using Economic Value Added to guide our decision making," Perry said. "This new direction allows Knape & Vogt to make greater use of financial leverage and improve the way the Company makes cash available to shareholders, both of which support our ultimate focus on maximizing the wealth of all shareholders." Knape & Vogt Manufacturing Company, which celebrates its 100th anniversary in 1998, designs, manufactures and distributes storage-related products for original equipment manufacturers, specialty distributors, hardware chains and every major home center in the country. KV's major product categories include precision, Euro-style and utility drawer slides; wall-attached shelving units; kitchen, closet and bath storage products; and specialty hardware products. Additional information on Knape & Vogt is available on the Company's Internet site, which is located at http://www.kv.com. Cautionary Statement: This press release contains certain forward-looking statements that involve risks and uncertainties. When used in this release, the words "believe," "anticipate," "think," "intend," "goal," "forecast," "expect" and similar expressions identifying forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning potential benefits from the sales of Roll-it and Hirsh and the restructuring of KV Canada, future improvements in EVA, the benefits of the Operation Improvement Program, future improvements in margins and profitability, expected fiscal 1999 first quarter and year-end results, and the strategic reasons for the "Dutch Auction" self-tender. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. # # # EX-99.(B) 11 LOAN AGREEMENT LOAN AGREEMENT between KNAPE & VOGT MANUFACTURING COMPANY and OLD KENT BANK AND TRUST COMPANY Dated November 29, 1993 TABLE OF CONTENTS -----------------
ARTICLE I. DEFINITIONS AND TERMS........................................ 1 1.1 Definitions.................................................... 1 1.2 Financial Terms................................................ 5 ARTICLE II. THE LOANS................................................... 5 2.1 Revolving Loans................................................ 5 2.2 Loan Options................................................... 5 2.3 Borrowing Procedures........................................... 5 2.4 Continuation and/or Conversion of Loans........................ 6 2.5 Termination and Reduction of Credit............................ 6 2.6 Conditions for Disbursement of Initial Loan.................... 6 2.7 Conditions for Disbursement of Each Loan....................... 7 2.8 Minimum Amounts; Limitation on Number of Loans................. 7 ARTICLE III. PAYMENTS, OFFSETS AND PREPAYMENTS.......................... 8 3.1 Method and Place of Payment.................................... 8 3.2 Principal Payments............................................. 8 3.3 Prepayments.................................................... 8 3.4 Interest Payments.............................................. 8 3.5 Method of Calculation Interest................................. 9 3.6 Offset......................................................... 9 3.7 Payment on Non-Banking Day; Payment Computations............... 9 3.8 HLT Classification............................................. 9 ARTICLE IV. YIELD PROTECTION AND CONTINGENCIES.......................... 10 4.1 Additional Costs............................................... 10 4.2 Limitation of Requests and Elections........................... 10 4.3 Capital Adequacy Adjustment.................................... 10 4.4 Illegality and Impossibility................................... 11 4.5 Indemnification................................................ 11 ARTICLE V. WARRANTIES AND REPRESENTATIONS............................... 12 5.1 Corporate Existence............................................ 12 5.2 Qualifications................................................. 12 5.3 Power, Authority, Licenses and Permits......................... 12 5.4 Financial Statements........................................... 12 5.5 Adverse Changes................................................ 12 5.6 No Misrepresentations.......................................... 12
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5.7 No Litigation Defaults............................................. 12 5.8 Corporate Power, Due Authorization, No Conflict and Approvals...... 13 5.9 Taxes.............................................................. 13 5.10 Margin Securities.................................................. 13 5.11 Liens.............................................................. 13 5.12 Subsidiaries....................................................... 13 5.13 Purpose............................................................ 13 5.14 Compliance......................................................... 13 5.15 Investment Company Act Representation.............................. 14 5.16 Public Utility Holding Company Act Representation.................. 14 ARTICLE VI. AFFIRMATIVE AND NEGATIVE COVENANTS.............................. 14 6.1 Financial Statements and Other Information......................... 14 6.2 Corporate Existence................................................ 15 6.3 Access............................................................. 15 6.4 Insurance.......................................................... 15 6.5 Repair............................................................. 15 6.6 Taxes and Liabilities.............................................. 15 6.7 Merger, Acquisitions, Purchase and Sale............................ 15 6.8 Compliance with ERISA.............................................. 16 6.9 Minimum Working Capital............................................ 16 6.10 Minimum Stockholders' Equity....................................... 16 6.11 Ratio of Liabilities to Stockholders' Equity....................... 16 6.12 Intangibles........................................................ 16 6.13 Liens.............................................................. 16 6.14 Rental Payments.................................................... 17 6.15 Other Agreements................................................... 17 6.16 Use of Proceeds.................................................... 17 6.17 Notice of Investigations, and Proceedings and Litigation........... 17 6.18 Dividends.......................................................... 17 6.19 Distribution of Assets............................................. 17 ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES................................. 17 7.1 Events of Default.................................................. 17 7.2 Remedies........................................................... 19 ARTICLE VIII. OTHER PROVISIONS.............................................. 19 8.1 Delay.............................................................. 19 8.2 Notice............................................................. 19 8.3 Expenses........................................................... 19 8.4 Law................................................................ 20 8.5 Successors......................................................... 20 8.6 Usury.............................................................. 20
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8.7 Amendments, Etc................................................. 20 8.8 Headings........................................................ 20 8.9 Integration and Severability.................................... 20 8.10 Independence of Covenants....................................... 21 8.11 Rights Cumulative and Waivers................................... 21 8.12 Relationship of Company and Bank................................ 21
EXHIBIT A REVOLVING NOTE EXHIBIT B FORM OF COMPANY COUNSEL OPINION EXHIBIT C DESCRIPTION OF PENDING LITIGATION EXHIBIT D SCHEDULE OF LIENS EXHIBIT E SUBSIDIARIES OF THE COMPANY iii LOAN AGREEMENT -------------- THIS LOAN AGREEMENT (the "Agreement"), dated November 29, 1993, is entered into between KNAPE & VOGT MANUFACTURING COMPANY, a Michigan corporation (the "Company") and OLD KENT BANK AND TRUST COMPANY, a Michigan banking corporation (the "Bank"). The Company desires to obtain a revolving bank credit in the principal sum not to exceed Forty-three Million Five Hundred Thousand Dollars ($43,500,000), in order to provide funds for the acquisition of the stock of The Hirsh Company and for its general corporate purposes, and the Bank is willing to extend that credit to the Company upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I. DEFINITIONS AND TERMS. ---------------------------------- 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings indicated for purposes of this Agreement (those meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted Federal Funds Rate" means eighty-five one hundredths of one percent (.85%) above the Federal Funds Rate in effect from time to time. "Affiliate" has the meaning given to such term under Section 407(d)(7) of ERISA. "Banking Day" means any day other than a Saturday, Sunday or other day on which Bank is open for the transaction of substantially all of its banking functions and, with respect to Eurodollar Loans, on which dealings in foreign exchange and currencies may be carried on by the Bank in the interbank Eurodollar market. "Capitalized Lease Obligation" means any obligation of the Company to pay future rentals under a lease which, in accordance with GAAP, is required to be shown as a liability on the combined balance sheet of the Company. "Credit" means the Bank's commitment to make Revolving Loans under the term of this Agreement. "Current Assets" and "Current Liabilities" mean, at any time, all assets or liabilities, respectively, that, in accordance with GAAP, should be classified as current assets or current liabilities, respectively, on a balance sheet of the Company. "Dollars" and the sign "$" means lawful money of the United States of America. "Effective Date" means November 29, 1993. "Environmental Laws" means all applicable laws, ordinances, rules, regulations, and orders that regulate or are intended to protect public health or the environment, or that establish liability for the investigation, removal, or cleanup of or damage caused by any contamination including, without limitation, any law, ordinance, rule, regulation, or order that regulates, or prescribes requirements for, air quality, water quality, or the disposition, transportation, or management of waste materials or toxic substances. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Eurodollar Interest Period" means, with respect to any Eurodollar Loan, the period commencing on the day that Loan is made or converted to a Eurodollar Loan and ending on the date one (1), two (2), three (3) or six (6) months thereafter, as the Company may elect under Sections 2.3 or 2.4 hereof, and each subsequent period commencing on the expiration of the immediately preceding Eurodollar Interest Period and ending on the date one (1), two (2), three (3) or six (6) months thereafter, as the Company may elect under Sections 2.3 or 2.4 hereof, provided, however that (a) any Eurodollar Interest Period which commences on the last Banking Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Banking Day of the appropriate subsequent calendar month), (b) each Eurodollar Interest Period which would otherwise end on a day which is not a Banking Day shall end on the next succeeding Banking Day or if that next succeeding Banking Day falls in the next succeeding calendar month, on the next preceding Banking Day, and (c) no Eurodollar Interest Period shall be permitted which extends beyond the Termination Date. "Eurodollar Loan" means, any Revolving Loan that bears interest at the Eurodollar Rate. "Eurodollar Rate" means, with respect to any Eurodollar Loan and the related Eurodollar Interest Period, the per annum rate that is equal to the sum of: (a) seventy-five one hundredths of one percent (.75%) per annum, plus (b) the rate obtained by dividing (1) the per annum rate of interest at which deposits in Dollars for that Eurodollar Interest Period and in an aggregate amount comparable to the amount of such Eurodollar Loan are offered to the Bank by other prime banks in the London interbank market, selected in the Bank's discretion, at approximately 11:00 a.m. London time, as the case may be, on the second Banking Day prior to the first day of that Eurodollar Interest Period, by (h) a percentage equal to 100 percent minus the daily average during that Eurodollar Interest Period of the percentages in effect on each day of that Interest Period of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that are prescribed by the Board of Governors of the Federal Reserve System (or any successor agency thereto) for determining the reserve requirements with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities" in Regulation D of that Board maintained by a member bank of that System, and for purposes hereof, any Eurodollar Loan 2 shall be deemed to be "eurocurrency liabilities" as defined in said Regulation D) maintained by member banks of such System; all as conclusively determined by the Bank, that sum to be rounded up, if necessary, to the nearest whole multiple of one one-hundredth of one percent (1/100 of 1%), and that Eurodollar Rate to be adjusted as and when any change occurs in the reserve requirements referred to in subparagraph (b) above. "Event of Default" means any of the events described in Section 7. "FDIC" means the Federal Deposit Insurance Corporation. "Federal Funds Rate" means the rate of interest announced from time to time by the Federal Reserve Bank of New York as the "average federal funds rate," which Federal Funds Rate shall change simultaneously with any change in that "average federal funds rate." "Federal Funds Loan" means any Loan that bears interest at the Adjusted Federal Funds Rate. "GAAP" means generally accepted accounting principles, consistently applied. "Indebtedness" means indebtedness for borrowed money, indebtedness representing the deferred purchase price of property (excluding indebtedness under normal trade credit for property purchased in the normal course of operations), obligations under notes payable or drafts accepted representing extensions of credit, indebtedness (whether or not assumed) secured by mortgages, security interests, or other liens on property owned by the Company or any Subsidiary and any Capitalized Lease Obligation. "Intangibles" means (a) goodwill, including any amounts, however designated on a combined balance sheet of the Company, representing the excess of the purchase price paid for assets or stock acquired over the value assigned thereto on the books of the Company; (b) patents, trademarks, trade names, and copyrights; (c) treasury stock; and (d) loans and advances to stockholders, directors, officers or employees. "Interest Period" means any Eurodollar Interest Period. "Liabilities" means all Indebtedness that, in accordance with GAAP, is required to be classified as liabilities on a consolidated balance sheet of the Company. "Loans" means the Revolving Loans made pursuant to Section 2.1. "Note" means the Revolving Note referred to in Section 2.3. "Overdue Rate" means (a) in respect of principal of any Eurodollar Loan a rate per annum that is equal to the sum of two percent (2%) per annum plus the per annum rate in effect thereon until the end of the then current Interest Period of that Loan and, thereafter, a rate per annum 3 that is equal to the sum of two percent (2%) per annum plus the Prime Rate, (b) in respect of principal of any Prime Loan or Federal Funds Loan, a rate per annum that is equal to the sum of two percent (2%) per annum plus the Prime Rate, and (c) in respect of other amounts payable by the Company hereunder (other than interest), a per annum rate that is equal to the sum of two percent (2%) per annum. plus the Prime Rate. "Payment Date" shall mean as to any Eurodollar Loan the last day of each Interest Period with respect thereto, and as to any Prime Loan or Federal Funds Loan, the 12th calendar day of each month. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Plan" has the meaning given to that term in Section 3(3) of ERISA and established or maintained by the Company, any of its Subsidiaries or any Affiliate and includes any Plan as to which the Company, any of its Subsidiaries or any Affiliate may have any liability. "Prime Loan" means any Loan that bears interest at the Prime Rate. "Prime Rate means at any time the rate of interest most recently announced by the Bank as its "prime rate," which is not necessarily the lowest rate of interest charged by the Bank to its customers, which Prime Rate shall change simultaneously with any change in the Bank's "prime rate." "Revolving Loans" means the Loans described in Section 2.1, and shall be Prime Loans or Eurodollar Loans, or Federal Funds Loans. "Revolving Note" means the Note described in Section 2.3. "Stock Acquisition Agreement" means the Stock Acquisition Agreement, dated October 26, 1993, between the Company, The Hirsh Company and all of the shareholders of The Hirsh Company. "Stockholders' Equity" means, at any time, the sum of the following accounts set forth in a combined balance sheet of the Company, prepared in accordance with GAAP: (a) all outstanding capital stock; (b) capital surplus and additional paid in capital; and (c) retained earnings. "Subsidiary" means any corporation, voluntary association, joint stock company, voting trust or similar organization of which the Company and its other subsidiaries own directly or indirectly more than 50 percent of the shares of stock having general voting power under ordinary circumstances to elect a majority of the board of directors, managers, trustees or others performing similar functions. "Termination Date" means the earlier to occur of (a) December 1, 1995 and (b) the date on which the Credit shall be terminated pursuant to Sections 2.5 or 7. 4 "Unmatured Event of Default" means an event or condition which with the lapse of time or giving of notice to the Company, or both, would constitute an Event of Default. "Working Capital" means at any time, the amount by which Current Assets exceed Current Liabilities. 1.2 Financial Terms. Unless otherwise defined or the context otherwise requires, all financial and accounting terms shall be defined under generally accepted accounting principles. For purposes of calculating covenants under this Agreement, any amounts which would otherwise be included as liabilities or amortized on any financial statement of the Company pursuant to SFAS #106, regarding post retirement health care benefits, shall not be considered as liabilities or expenses of the Company. ARTICLE II. THE LOANS. ---------------------- 2.1 Revolving Loans. Subject to the terms and conditions of this Agreement, the Bank agrees to make loans (collectively called the "Revolving Loans" and individually called a "Revolving Loan") to the Company, which Revolving Loans the Company may repay and reborrow during the period from the Effective Date, to but not including, the Termination Date, in those amounts as the Company may from time to time request, but not exceeding Forty-three Million Five Hundred Thousand Dollars ($43,500,000) (or that amount as may be fixed by the Company pursuant to Section 2.5) in the aggregate at any one time outstanding. 2.2 Loan Options. Each Revolving Loan shall bear interest at the Eurodollar Rate, the Prime Rate, or the Adjusted Federal Funds Rate and for those Interest Periods as the Company may elect. As to the Eurodollar Loan, the Bank may, if it so elects, fulfill its commitment by causing a branch or affiliate to make or continue that Loan, provided that in that event that Loan shall be deemed for the purposes of this Agreement to have been made by the Bank and the obligation of the Company to repay such Loan shall nevertheless be to the Bank and shall be deemed held by the Bank, to the extent of that Loan, for the account of such branch or affiliate. Notwithstanding any provision of this Agreement to the contrary, the Bank shall be entitled to fund and maintain its funding of all or any part of the Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if the Bank had actually funded and maintained each Eurodollar Loan during each related Interest Period through the purchase of deposits in the interbank Eurodollar market having a maturity corresponding to that related Interest Period and bearing an interest rate equal to the Eurodollar Rate for that Interest Period. 2.3 Borrowing Procedures. The Company shall before 1:00 p.m. on a Banking Day give the Bank at least three (3) full Banking Days' prior telephonic notice (promptly confirmed in writing) of each request for a Eurodollar Loan. The Company shall give the Bank telephonic notice (promptly confirmed in writing) before 3:00 p.m. on any Banking Day on which the Company wants the Bank to make a Prime Loan or Federal Funds Loan. Each request shall specify the date (which day shall be a Banking Day), amount and type of Loan and, if that Loan is to be a Eurodollar Loan, the initial 5 Interest Period for that Loan. The Company shall apportion each Eurodollar Loan, Prime Loan or Federal Funds Loan only in minimum aggregate amounts of $100,000 or integral multiples thereof. Subject to the terms and conditions of this Agreement, the proceeds of each requested Loan shall be made available to the Company by depositing the proceeds thereof, in immediately available funds, in an account maintained and designated by the Company at the Bank. All Revolving Loans shall be evidenced by the Revolving Note in the form set forth as Exhibit A hereto, with appropriate insertions, which Revolving Note shall be dated the date of the initial Revolving Loan and shall mature on the Termination date. The Bank is hereby authorized by the Company to note on the schedule attached to the Revolving Note or on its books and records, the date, amount and type of each Loan and the duration of the related Interest Period (if applicable), the amount of each payment or prepayment of principal thereon, and the other information provided for on that schedule, which schedule or books and records, as the case may be, shall constitute prima facie evidence of the information so noted, provided that failure of the Bank to make any such notation shall not relieve the Company of its obligation to repay, the outstanding principal amount of the Loans, all accrued interest thereon and other amounts payable with respect thereto in accordance with the terms of the Revolving Note and this Agreement. 2.4 Continuation and/or Conversion of Loans. The Company may elect (i) to continue any outstanding Eurodollar Loan from the current Interest Period into a subsequent Interest Period to begin on the last day of that current Interest Period, or (ii) subject to the limitations of Section 2.8 hereof to convert any portion of a Eurodollar Loan, Prime Loan or a Federal Funds Loan from a Loan of one type into a Loan of another type, by giving at least three (3) Banking Days' prior telephonic notice (promptly confirmed in writing) to the Bank of such continuation or conversion, specifying the date, amount and, for each Eurodollar Loan, the Interest Period. Absent notice of continuation or conversion, each Loan shall automatically continue as a Loan of the current type, in the same amount and the same Interest Period on the last day of the current Interest Period for that Loan. No portion of the Loan shall be converted to another type of Loan at any time that an Event of Default or an Unmatured Event of Default shall exist. 2.5 Termination and Reduction of Credit. The Company shall have the right to terminate or permanently reduce the amount of the Credit at any time and from time to time, subject to the requirements set forth under Section 4.5, provided, however, that (a) the Company shall give written notice of such termination or reduction to the Bank specifying the amount and effective date thereof, (b) each partial reduction of the Credit shall be in an amount equal to $100,000 or an integral multiple thereof, (c) no termination or reduction shall be permitted with respect to any portion of the Credit as to which a request for a Loan pursuant to Section 2.3 is then pending, and (d) the Company shall repay the outstanding principal of the Revolving Note in excess of the then reduced amount of the Credit, including accrued interest to the date of the reduction on the principal amount being repaid. The Credit or any portion thereof so terminated or reduced may not be reinstated. 2.6 Conditions for Disbursement of Initial Loan. The obligation of the Bank to make the initial Loan hereunder subject to receipt by the Bank of the following documents and fulfillment by the Company of the following requirements, in form and substance satisfactory to the Bank: 6 (a) Certificates of recent date of the appropriate authority or official of the Company's and each of its Subsidiaries' respective states of incorporation certifying as to the good standing and corporate existence of the Company and each Subsidiary together with copies of all articles or certificates of incorporation of the Company and each such Subsidiary on file in that office certified as a recent date by that authority or official and certified as true and correct as of the date of that Loan by a duly authorized officer of the Company; (b) Copies of the bylaws of the Company together with all authorizing resolutions and evidence of other corporate action taken by the Company to authorize the execution, delivery and performance by the Company of this Agreement and the Note and the consummation by the Company of the transactions contemplated hereby, each certified as true and correct as of the date of that Loan by a duly authorized officer of the Company; (c) Certificates of incumbency of the Company, containing, and attesting to the genuineness o& the signatures of those officers authorized to act on behalf of the Company in connection with this Agreement and the Revolving Note and the consummation by the Company of the transactions contemplated hereby, certified as true and correct as of the date of such Loan by a duly authorized officer of the Company; (d) The Revolving Note duly executed on behalf of the Company and dated on or before the date of such Loan; and (e) The favorable written opinion of the Company's counsel, addressed to the Bank and dated the Effective Date, in substantially the form of Exhibit B. 2.7 Conditions for Disbursement of Each Loan. The obligation of the Bank to make any Loan (including the initial Loan) is subject to the satisfaction of the following conditions precedent: (a) The representations and warranties contained in Article V of this Agreement shall be true and correct on and as of the date that Loan is made; and (b) No Event of Default, and no event or condition which might become such an Event of Default with notice or lapse of time, or both, shall exist or shall have occurred and be continuing on the date such Loan is made. The Company shall be deemed to have made a certification to the Bank at the time of the making of each Loan to the effects set forth in clauses (a) and (b) of this Section 2.7. 2.8 Minimum Amounts; Limitation on Number of Loans. Except for conversions or payments required pursuant to Section 4.4, each Loan and each prepayment thereof shall be in a minimum amount of $100,000. 7 ARTICLE III. PAYMENTS, OFFSETS AND PREPAYMENTS. ------------------------------------------------ 3.1 Method and Place of Payment. All payments hereunder shall be made without set off or counterclaim and shall be made to the Bank prior to 3:00 p.m., Grand Rapids, Michigan time, on the date due at its principal banking office in the City of Grand Rapids, Michigan, or at any other place as may be designated by the Bank to the Company in writing. Any payments received after 3:00 p.m., Grand Rapids, Michigan time, shall be deemed received on the next Banking Day. Subject to the definition of "Interest Period", whenever any payment to be made hereunder or under the Note shall be stated to be due on a date other than a Banking Day, that payment may be made on the next Banking Day, and that extension of time shall be included in the computation of interest or any fees. At the time of mailing each payment, the Company shall specify to the Bank that obligation of the Company hereunder to which that payment is to be applied, or, in the event that the Company fails to so specify or if an Event of Default has occurred and is continuing, that payment shall be applied as the Bank may determine in its sole discretion. 3.2 Principal Payments. Unless earlier payment is required under this Agreement, the Company shall pay to the Bank on the Termination Date the outstanding principal amount of the Revolving Loans. 3.3 Prepayments. (a) The Company may from time to time prepay the principal of the Revolving Loan in whole or in part without premium, provided, however, that any prepayment of a Eurodollar Loan shall be made on a Payment Date; provided further that any partial prepayment of principal shall be in an amount of $100,000 or an integral multiple thereof. (b) The Company shall prepay the principal of the Revolving Loan in whole without premium within sixty (60) days of a material change in the Company's management, provided, however, that any such prepayment of a Eurodollar Loan shall be made on the last day of that 60-day period, if that last day is a Payment Date, and if it is not a Payment Date, on the next Payment Date immediately following the end of that 60-day period, and provided, further that any such prepayment shall include accrued interest to the date of prepayment. For the purposes hereof, "a material change in the Company's management" shall mean a majority of the people who are members of the Board of Directors of the Company on the date hereof ceasing to hold those positions. 3.4 Interest Payments. The Company shall pay interest to the Bank on the unpaid principal amount of each Loan, for the period commencing on the date such Loan is made until such Loan is paid in full, on the Payment Date applicable thereto and at maturity (whether at stated maturity, by acceleration or otherwise), and thereafter on demand, at the following rates per annum: (a) During those periods that that Loan is a Eurodollar Loan, the Eurodollar Rate applicable to that Loan for each related Eurodollar Interest Period. 8 (b) During those periods that that Loan is a Prime Loan, the Prime Rate. (c) During those periods that that Loan is a Federal Funds Loan, the Adjusted Federal Funds Rate. (d) Notwithstanding the foregoing paragraphs (a), (b) and (c), the Company agrees to pay interest on demand at the Overdue Rate on the outstanding principal amount of any Loan and any other amount payable by the Company hereunder (other than interest) which is not paid in full when due (whether at stated maturity, by acceleration or otherwise) for the period commencing on the due date thereof until the same is paid in full. 3.5 Method of Calculation Interest. Interest on the Loan and other amounts due under this Agreement shall be computed on the basis of a year consisting of 360 days and paid for actual days elapsed, calculated as to each Interest Period from and including the day thereof but excluding the last day of the relevant period. 3.6 Offset. In addition to and not in limitation of all rights of offset that the Bank or other holder of the Revolving Note may have under applicable law, the Bank or other holder of the Revolving Note shall, upon the occurrence of any Event of Default, have the right to appropriate and apply to the payment of the Revolving Note, any and all balances, credits, deposits, accounts or moneys of the Company then or thereafter with the Bank or other holder. 3.7 Payment on Non-Banking Day; Payment Computations. Except as otherwise provided in this Agreement to the contrary, whenever any installment of principal of, or interest on, any Loan outstanding hereunder or any other amount due hereunder, becomes due and payable on a day that is not a Banking Day, the maturity thereof shall be extended to the next succeeding Banking Day and, in the case of any installment of principal, interest shall be payable thereon at the rate per annum. determined in accordance with this Agreement during that extension. 3.8 HLT Classification. In the event that after the Effective Date, the Loans or any Credit hereunder are classified on the Bank's books as a "highly leveraged transaction" (an "HLT Classification") by the Bank or any governmental authority, central bank or comparable agency having jurisdiction over the Bank, the Bank shall promptly give notice of that HLT Classification to the Company whereupon the Bank and the Company shall commence negotiations in good faith to agree on revised interest rates and/or margins hereunder reflecting that HLT Classification. In the event that the Company and the Bank fail to agree on revised interest rates and/or margins within 90 days of the notice given by the Bank referred to above, then the Bank may (i) by five Banking Days' notice to the Company terminate the unused portions of the Credit and they shall thereupon terminate, and (ii) by five Banking Days' notice to the Company declare all amounts outstanding under the Revolving Note (together with accrued interest thereon and any other amounts payable hereunder) to be, and all such amounts shall thereupon become, absolutely and immediately due and payable. The Company hereby absolutely and unconditionally agrees to pay to the Bank on the date of any such acceleration all amounts payable hereunder and under the Note. The Bank acknowledges that an HLT Classification (including any election to accelerate amounts payable hereunder and under the Notes, as provided herein) is not a Default or an Event of Default hereunder. 9 ARTICLE IV. YIELD PROTECTION AND CONTINGENCIES. ------------------------------------------------ 4.1 Additional Costs. In the event that any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not presently applicable to the Bank, or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive of any such authority (whether or not having the force of law), shall (i) affect the basis of taxation of payments to the Bank of any amounts payable by the Company under this Agreement (other than taxes imposed on the overall net income of the Bank), or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by the Bank, or (iii) shall impose any other condition with respect to this Agreement, the Revolving Note or the Loans, and the result of any of the foregoing is to increase the cost to the Bank of making or maintaining any Eurodollar Loan or to reduce the amount of any sum receivable by the Bank thereon, then the Company shall pay to the Bank, from time to time, upon request by the Bank additional amounts sufficient to compensate the Bank for such increased cost or reduced sum receivable to the extent the Bank is not compensated therefor in the computation of the interest rate applicable to that Eurodollar Loan. A detailed statement as to the amount of that increased cost or reduced sum receivable, prepared in good faith and submitted by the Bank to the Company, shall be conclusive and binding for all purposes absent manifest error in computation. 4.2 Limitation of Requests and Elections. Notwithstanding any other provision of this Agreement to the contrary, if, upon receiving a request for a Eurodollar Loan, pursuant to Section 2.3, or a request for a continuation of a Loan as a Loan of the then existing type pursuant to Section 2.4, or conversion of a Loan to a Loan of a different type pursuant to Section 2.4, (a) in the case of any Eurodollar Loan, deposits in Dollars for periods comparable to the Interest Period elected by the Company are not available to the Bank in the relevant interbank or secondary market or otherwise, or (b) the Eurodollar Rate will not adequately and fairly reflect the cost to the Bank of making or maintaining the related Eurodollar Loan, or (c) by reason of national or international financial, political or economic conditions or by reason of any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect, or the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive of that authority (whether or not having the force of law), including without limitation exchange controls, it is impracticable, unlawful or impossible for the Bank (i) to make the relevant Loan or (ii) to continue such Loan as a Loan of the then existing type or (iii) to convert a Loan, then the Company shall not be entitled, so long as such circumstances continue, to request a Loan of the affected type pursuant to Section 2.3 or a continuation of or conversion to a Loan of the affected type pursuant to Section 2.4. In the event that such circumstances no longer exist, the Bank shall again consider requests for continuations of and conversions to Loans of the affected type pursuant to Section 2.4. 4.3 Capital Adequacy Adjustment. In the event that any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not presently applicable to the Bank, or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by the Bank with any guideline, request or directive of that authority (whether or not having the force of law), including any risk-based capital guidelines, affects or would affect the amount of capital required or expected 10 to be maintained by the Bank or any corporation controlling the Bank and the Bank determines that the amount of that capital is increased by or based upon the existence of the Bank's obligations hereunder and that increase has the effect of reducing the rate of return on the Bank's or that controlling corporation's capital as a consequence of those obligations hereunder to a level below that which the Bank or that controlling corporation could have achieved but for such circumstances (taking into consideration its policies with respect to capital adequacy) by an amount deemed by the Bank to be material, then the Company shall pay to the Bank, from time to time, upon written request by the Bank, additional amounts sufficient to compensate the Bank for any increase in the amount of capital and reduced rate of return which the Bank reasonably determines to be allocable to the existence of the Bank's obligations hereunder. A statement as to the amount of that compensation, prepared in good faith and in reasonable detail by the Bank, and submitted by the Bank to the Company, shall be conclusive and binding for all purposes absent manifest error in computation. 4.4 Illegality and Impossibility. In the event that any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect, or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive of such authority (whether or not having the force of law), including without limitation exchange controls, shall make it unlawful or impossible for the Bank to maintain any Loan under this Agreement, the Company shall upon receipt of notice thereof from. the Bank, either convert the Loan to a Loan of a different type, or repay in full the then outstanding principal amount of each Loan so affected together with all accrued interest thereon to the date of payment and all amounts due to the Bank under Section 4.5 (a) on the last day of the then current Interest Period applicable to that Loan if the Bank may lawfully continue to maintain such Loan to that day, or (b) immediately if the Bank may not continue to maintain that Loan to that day. 4.5 Indemnification. If the Company makes any payment of principal with respect to any Loan on any other date than the last day of an Interest Period applicable thereto (except for any prepayment made under Section 4.4 of this Agreement) or if the Company fails to make any payment of principal or interest in respect of a Loan when due, the Company shall reimburse the Bank on demand for any resulting loss or expense incurred by the Bank, including without limitation any loss incurred in obtaining, liquidating or employing deposits from third parties. A detailed statement as to the amount of that loss or expense, prepared in good faith and submitted by the Bank to the Company, shall be conclusive and binding for all purposes absent manifest error in computation. Notwithstanding the foregoing, if the Bank proposes to charge any amount to the Company under Section 4.1 or Section 4.3, the Company shall have the right to immediately prepay all Revolving Loans and shall not be responsible for any loss or expense incurred by the Bank as a result of that prepayment. 11 ARTICLE V. WARRANTIES AND REPRESENTATIONS. -------------------------------------------- The Company represents and warrants to the Bank as follows: 5.1 Corporate Existence. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Michigan. 5.2 Qualifications. The Company and its Subsidiaries are duly qualified and authorized to do business, and are in good standing as foreign corporations, in each jurisdiction in which the failure to be so qualified or authorized to do business would have a material adverse effect upon the Company's consolidated financial condition, their contracts, their continuing business operations or the validity or enforceability of this Agreement or the Note. 5.3 Power, Authority, Licenses and Permits. The Company and its Subsidiaries have all requisite corporate power and authority and all necessary licenses and permits to own and operate their properties and to carry on their businesses as now conducted. 5.4 Financial Statements. The consolidated balance sheet of the Company as of June 30, 1993, and the related consolidated statements of income, of retained earnings and of changes in financial position for the fiscal year then ended, accompanied by audit reports thereon containing opinions without qualification, except as therein noted, of the Company's independent certified public accountants, copies of all of which have been delivered to the Bank, have been prepared by the Company in accordance with generally accepted accounting principles consistently applied and present fairly the consolidated financial position of the Company as of such date and the results of its consolidated operations for such fiscal year. 5.5 Adverse Changes. Since June 30, 1993, there has been no change in the business, prospects, profits, properties or condition (financial or otherwise) of the Company or its Subsidiaries that individually or in the aggregate has been or is likely to be materially adverse. 5.6 No Misrepresentations. Neither this Agreement, nor the financial statements referred to in Section 5.4 above, nor any other written statement furnished by the Company to the Bank in connection with the negotiation of the Loans provided for herein, contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or herein not misleading. There is no fact that the Company has not disclosed to the Bank in writing that materially affects adversely, or, to the best of the knowledge of the officers and directors of the Company, in the future is likely to materially affect adversely, the properties, business, prospects, profits or condition (financial or otherwise) of the Company or its ability to perform its obligations under this Agreement. 5.7 No Litigation Defaults. Except as disclosed on Exhibit C attached hereto, there are no proceedings pending, or to the knowledge of the officers of the Company threatened, before any court, governmental authority or arbitration board or tribunal against or affecting the Company or any of its Subsidiaries, the outcome of which may reasonably be expected to materially adversely affect the financial condition, business, operations or properties of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is in default with respect to any order, judgment or decree of any court, governmental authority or arbitration board or tribunal. 12 5.8 Corporate Power, Due Authorization, No Conflict and Approvals. The Company has full corporate power to execute, deliver and perform this Agreement and the Note; the execution, delivery and performance of this Agreement and of the Note, have been duly authorized by appropriate corporate action of the Company and will not conflict with or violate the provisions of the articles of incorporation or bylaws of the Company or of any law, rule, judgment, order, agreement or instrument to which the Company is a party or by which it is bound, nor do the same require any approval or consent of any public authority or other third party, and this Agreement and the Note have been duly executed and delivered by, and constitute the valid and binding obligations of the Company, enforceable in accordance with their terms. 5.9 Taxes. To the best of the knowledge of the Company and its officers and directors, all tax returns required to be filed by the Company and its Subsidiaries in any jurisdiction have been filed, and all taxes, assessments, fees and other governmental charges upon the Company or upon its assets, income or Franchises, which are shown on such returns to be due and payable, have been paid. The Company knows of no proposed additional tax assessment against it or its Subsidiaries. 5.10 Margin Securities. The Company does not own or intend to carry or purchase any "margin security" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R. Chapter II. 5.11 Liens. None of the assets of the Company or any of its Subsidiaries is subject to any mortgage, pledge, title retention lien, or other lien, encumbrance or security interest, except (i) for current taxes not delinquent or taxes being contested in good faith and by appropriate proceedings, (ii) for liens arising in the ordinary course of business for sums not due or sums being contested in good faith and by appropriate proceedings and not involving any deposits or advances or borrowed money or the deferred purchase price of property or services, (iii) to the extent shown in the financial statements referred to in Section 5.4 and (iv) as listed on Exhibit D. 5.12 Subsidiaries. Exhibit E to this Agreement correctly sets forth (i) the state in which the Company and its Subsidiaries, respectively, are incorporated, (ii) the state or states in which the Company and its Subsidiaries conduct their respective businesses and (iii) a list of the stock of each class of each Subsidiary of the Company, showing in each case the number of shares of stock of each class outstanding and the shares of each class owned by the Company and each Subsidiary of the Company. The shares of stock listed on Exhibit E as owned by the Company have been duly issued and are fully paid and nonassessable, and are so owned free and clear of any liens, claims or other encumbrances. 5.13 Purpose. The proceeds of the Loans will be used by the Company (a) to acquire the stock of The Hirsh Company pursuant to the Stock Purchase Agreement and (b) for general working capital purposes. 5.14 Compliance. The Company and its Subsidiaries are in material compliance with all statutes and governmental rules and regulations applicable to them, including without limitation, ERISA insofar as such Act applies to them. There is no condition with any Plan which could result in the incurrence by the Company or any of its Subsidiaries of any material liability, fine or penalty. 13 5.15 Investment Company Act Representation. The Company is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.16 Public Utility Holding Company Act Representation. The Company is not a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. ARTICLE VI. AFFIRMATIVE AND NEGATIVE COVENANTS. ------------------------------------------------ From the date of this Agreement and thereafter until the Termination Date and until the Note and other liabilities of the Company hereunder are paid in full the Company agrees that it will: 6.1 Financial Statements and Other Information. Furnish to the Bank: (i) within 100 days after each fiscal year of the Company, a copy of the Company's annual audit report prepared on a consolidated basis in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal year and certified by an independent certified public accountant who shall be satisfactory to the Bank; (ii) within 45 days after each quarter (except the last quarter) of each fiscal year of the Company, a copy of its unaudited financial statement, prepared in the same manner as the audit report referred to in clause (i) hereof and signed by the Company's chief financial officer; (iii) together with the financial statements furnished by the Company under preceding clauses (i) and (ii), a certificate of the Company's chief financial officer to the effect that no, Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it and containing a computation of, and showing compliance with, each of the financial ratios and restrictions contained in this Section 6; (iv) copies of each filing and report made by the Company or any Subsidiary with or to any securities exchange or the Securities and Exchange Commission, and of each communication from the Company or any Subsidiary to shareholders generally, promptly upon the filing or making thereof; (v) immediately upon learning of the occurrence of any of the following, written notice thereof, describing the same and the steps being taken by the Company or the Subsidiary affected with respect thereto: (a) the occurrence of an Event of Default or an Unmatured Event of Default or (b) the institution of, or any adverse determination in, any litigation, arbitration proceeding or governmental proceeding which is material to the Company and its Subsidiaries on a consolidated basis; and 14 (vi) from time to time, such other information as the Bank may reasonably request. 6.2 Corporate Existence. Maintain and preserve, and cause each Subsidiary to maintain and preserve, its respective corporate existence and all rights, privileges, license, patents, patent rights, copyrights, trademarks, trade names, franchises and other authority to the extent material and necessary for the conduct of its respective business in the ordinary course as conducted from time to time. 6.3 Access. Permit, and cause each Subsidiary to permit, access by the Bank to the books and records of the Company and each Subsidiary during normal business hours and permit, and cause each Subsidiary to permit, the Bank to make copies of said books and records. 6.4 Insurance. Maintain, and cause each Subsidiary to maintain, insurance to such extent and against such hazards and liabilities as is commonly maintained by companies similarly situated or as the Bank may reasonably request from time to time. 6.5 Repair. Maintain, preserve and keep its, and cause each Subsidiary to maintain, preserve and keep their, properties in good repair, working order and condition and from time to time make and cause each Subsidiary to make, all necessary and proper repairs, renewals, replacements, additions and improvements thereto so that at all times the efficiency thereof shall be fully preserved and maintained. 6.6 Taxes and Liabilities. Pay, and cause each Subsidiary to pay, before the same becomes delinquent all taxes, assessments and other liabilities, except as contested in good faith and by appropriate proceedings. 6.7 Merger, Acquisitions, Purchase and Sale. Not: (i) be a party to any merger or consolidation; (ii) except in the normal course of its business, sell transfer, convey or lease all or any substantial part of its assets; or (iii) sell or assign, with or without recourse, any accounts receivable or chattel paper; (iv) purchase or otherwise acquire all or substantially all the assets of any person, corporation, or other entity, or any shares of the stock of, or similar interest in, any other corporation or entity, except that the Bank agrees that the Company may (a) merge or consolidate with or acquire another corporation so long as the Company is the surviving entity of any of the foregoing and (b) sell, transfer, convey or lease any of its assets so long as such arrangement does not result in a material adverse change in the business, financial condition or operations of the Company, provided, 15 however, that the foregoing exceptions and consent shall only be applicable if (x) in the event of any transaction involving ten percent (10%) or more of the Company's assets (determined on a consolidated basis), the Bank shall have given its prior written consent thereto and (y) in all cases, immediately prior to and following that transaction, the Company shall be in compliance with all covenants contained in Article VI hereof and there shall not have occurred an Event of Default or Unmatured Event of Default. 6.8 Compliance with ERISA. Comply, and cause each Subsidiary to comply, with all statutes and governmental rules and regulations applicable to them, including, without limitation, ERISA insofar as that Act applies to them. Not permit, and not permit any Subsidiary to permit, any condition to exist in connection with any Plan which might constitute grounds for the PBGC to institute proceedings to have such Plan terminated or a trustee appointed to administer that Plan; and not engage in, or permit to exist or occur, or permit any of its Subsidiaries to engage in, or permit to exist or occur, any other condition, event or transaction with respect to any such Plan which could result in the incurrence by the Company or any of its Subsidiaries of any material liability, fine or penalty. 6.9 Minimum Working Capital. Maintain at all times a consolidated Working Capital of not less than $20,000,000. 6.10 Minimum Stockholders' Equity. Maintain at all times a consolidated Stockholders' Equity of not less than $62,000,000. 6.11 Ratio of Liabilities to Stockholders' Equity. Maintain a ratio of total consolidated Liabilities to consolidated Stockholders' Equity that is not greater than 1.25 to 1.0. 6.12 Intangibles. Not permit consolidated Intangibles to exceed $23,000,000. 6.13 Liens. Not, and not permit any Subsidiary to, create or permit to exist any mortgage, pledge, title retention lien, or other lien, encumbrance or security interest ("Lien") with respect to any assets now owned or hereafter acquired, except for Liens: (i) for current taxes not delinquent or taxes being contested in good faith and by appropriate proceedings; (ii) arising in the ordinary course of business for sums not due or sums being contested in good faith and by appropriate proceedings and not involving any deposits or advances or borrowed money or the deferred purchase price of property or services; (iii) referred to in Section 5.11; or (iv) arising in connection with property acquired after the date hereof and attaching only to the property being acquired, 16 provided, however that except for Liens permitted by paragraphs (i) and (iii) of this Section, no Liens may attach to any of the Company's current assets. 6.14 Rental Payments. Not make aggregate rental payments on non- capitalized, non cancellable leases with remaining terms in excess of one (1) year in any twelve (12) month period that exceed five percent (5%) of the Company's consolidated Stockholders' Equity determined as of the last day of such period, provided that rental payments made under the following leases shall be excluded in determining whether the Company has complied with this covenant: (a) Lease, dated August 17, 1993, between The Hirsh Company and American National Bank and Trust Company of Chicago, et al., and (b) Agreement of Lease, dated March 1, 1988, between 160508 Canada, Inc. and Roll-it, Inc. 6.15 Other Agreements. Not enter into any agreement containing any provision which would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered hereunder. 6.16 Use of Proceeds. Not use or permit any Loans hereunder to be used, either directly or indirectly, for any purpose which would violate Regulation G or U of the Board of Governors of the Federal Reserve System, as amended from time to time (and furnish to the Bank, upon its request, a statement of conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U of the Board of Governors of the Federal Reserve. 6.17 Notice of Investigations, and Proceedings and Litigation. Notify the Bank in writing within 10 days after receipt whenever the Company receives notice of the commencement of (a) formal proceedings or any investigation by a federal or state environmental agency against the Company or any Subsidiary regarding the compliance by the Company or any Subsidiary with Environmental Laws, or (b) any other material, judicial or administrative proceeding or litigation commenced by or against the Company or any Subsidiary. 6.18 Dividends. Pay any dividends, other than dividends payable in the capital stock of the Company on any shares of any class of its capital stock during any period when an Event of Default or an Unmatured Event of Default shall exist. 6.19 Distribution of Assets. Except for dividends permitted by Section 6.18 hereof, and except for redemptions of the Company not in excess of $100,000 in any fiscal year, purchase, redeem, or otherwise acquire or make other distribution of its assets, by reduction of capital or otherwise, with respect to any shares of any class of its capital stock. ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES. --------------------------------------------- 7.1 Events of Default. Each of the following shall constitute an Event of Default under this Agreement: (i) Non-Payment. Default, and the continuance thereof for five (5) days, in the payment of principal of, or interest on, the Note when due, or any fee hereunder. 17 (ii) Default Under Other Indebtedness. Default in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any other Indebtedness (whether owed to the Bank or any other person or entity) in excess of $50,000 of, or guaranteed by, the Company or any Subsidiary (except any such indebtedness of any Subsidiary to the Company or to any other Subsidiary) or default in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of that Indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to immediately cause that Indebtedness to become due and payable prior to its expressed maturity. (iii) Insolvency. The Company or any of its Subsidiaries becomes insolvent or generally fails, to pay, or admits in writing its inability to pay, its debts as they mature, or applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for the Company, such Subsidiary or any property thereof, or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for the Company, any of its Subsidiaries or for a substantial part of the property of the Company or any of its Subsidiaries and is not discharged within sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding is instituted by or against the Company or any of its Subsidiaries and if instituted against the Company or any of its Subsidiaries is consented to or acquiesced in by the Company or such Subsidiary or remains for sixty (60) days undismissed; or any warrant of attachment is issued against any substantial portion of the property of the Company or any of its Subsidiaries which is not released within sixty (60) days of service. (iv) ERISA. The PBGC applies to a United States District Court for the appointment of a trustee to administer any Plan or for a decree adjudicating that any Plan must be terminated; a trustee is appointed pursuant to ERISA to administer any Plan; any action is taken to terminate any such Plan or any Plan is permitted or caused to be terminated if, at the time such action is taken or such termination of any such Plan occurs, the Plan's "vested liabilities", as defined in Section 3(25) of ERISA, exceed the then value of its assets at the time of such termination. (v) Agreements. Default in the performance of any of the Company's agreements herein set forth (and not constituting an Event of Default under any of the preceding subsections of this Section 7.1) and continuance of such default for thirty (30) days after notice thereof to the Company from the Bank, provided that any failure by the Company to comply with its covenants set forth in Sections 6.7, 6.9, 6.10, 6.11, 6.12, 6.13, 6.18 and 6.19 shall constitute an Event of Default without notice to the Company from the Bank. (vi) Warranty. Any warranty made by the Company herein is untrue in any material respect, or any schedule, statement, report, notice, writing or certification furnished by the Company to the Bank is untrue in any material respect on the date as of which the facts set forth are stated or certified. 18 (vii) Litigation. Notice is given to the Company by the Bank that, in the good faith opinion of the Bank, any litigation, arbitration proceeding or government proceeding which has been instituted against the Company or any of its Subsidiaries will, to a material extent, adversely affect the consolidated financial condition or continued operation of the Company, and such litigation or proceeding is not dismissed within 30 days after such notice. 7.2 Remedies. If any Event of Default described in Section 7.1 is continuing, the Bank may declare the Credit to be terminated and the Note to be due and payable, whereupon the Credit shall immediately terminate and the Note shall become immediately due and payable, all without notice of any kind (except that if an event described in Section 7.1(iii) occurs, the Credit shall immediately terminate and the outstanding Note shall become immediately due and payable without declaration or notice of any kind). The Bank shall promptly advise the Company of any declaration, but failure to do so shall not impair the effect of that declaration. ARTICLE VIII. OTHER PROVISIONS. -------------------------------- 8.1 Delay. No delay on the part of the Bank or the holder of the Note in the exercise of any power or right shall operate as a waiver thereof, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof, or the exercise of any other power or right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 8.2 Notice. Any notice hereunder to the Company or the Bank shall be in writing and, if mailed, shall be deemed to be given one business day after being sent by registered or certified mail, postage prepaid, and addressed to the Company or the Bank as its address set forth below, or at such other address as the Company or the Bank may, by written notice, designate as its address for purposes of notice hereunder. Bank. Old Kent Bank and Trust Company Corporate Banking Department One Vandenberg Center Grand Rapids, Michigan 49503 ATTN: David W. Edwards, Vice President Company. Knape & Vogt Manufacturing Company 2700 Oak Industrial Drive, N.E. Grand Rapids, Michigan 49505 ATTN: Raymond E. Knape, President 8.3 Expenses. The Company agrees, whether or not any Loan is made hereunder, to pay the Bank upon demand for all reasonable expenses, including reasonable fees of attorneys for the Bank incurred by the Bank in connection with (i) the preparation, negotiation and execution of this Agreement, the Note and any document required to be furnished in connection therewith, (ii) the negotiation, preparation and signing of waivers of this Agreement or the Note, (iii) the preparation of any and all amendments to this Agreement or the Note and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith, and (iv) the 19 enforcement of the Company's obligations hereunder or under the Note. The Company also agrees (v) to indemnify and hold the Bank harmless from any loss or expense that may arise or be created by the acceptance of telephonic or other instructions for making Loans and (vi) to pay, and save the Bank harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of this Agreement or the issuance of the Note or of any other instruments or documents provided for herein or to be delivered hereunder or in connection herewith. The Company's foregoing obligations shall survive any termination of this Agreement. 8.4 Law. This Agreement and the Revolving Note shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to principles of conflicts of law. 8.5 Successors. This Agreement shall be binding upon the Company and the Bank and their respective successor and assigns, and shall inure to the benefit of the Company and the Bank and the successors and assigns of the Bank. The Company shall not assign its rights or delegate its duties hereunder without the consent of the Bank. 8.6 Usury. Notwithstanding any provisions of this Agreement or the Revolving Note, in no event shall the amount of interest paid or agreed to be paid to the Bank exceed an amount computed as the highest rate of interest permissible under applicable law. If, from any circumstances whatsoever, fulfillment of any provisions of this Agreement or the Revolving Note at the time performance of such provision shall be due, shall involve exceeding the interest rate limitation validly prescribed by law which a count of competent jurisdiction may deem applicable hereto, then ipso facto, the obligations to be fulfilled shall be reduced to an amount computed at the highest rate of interest permissible under applicable law, and if for any reason whatsoever the Bank shall ever receive as interest an amount that would be deemed unlawful under applicable law, that interest shall be automatically applied to the payment of principal of the Loan outstanding hereunder (whether or not then due and payable) and not to the payment of interest, or shall be refunded to the Company if such principal has been paid in full. 8.7 Amendments, Etc. This Agreement and any term or provision hereof may be amended, waived or terminated by an instrument in writing by the party against which it is to be enforced, unless that instrument by its terms calls for the execution by both parties, in which event such instrument must be signed by both the Company and the Bank. Any such amendment, waiver or termination shall be effective only in the specific instance and for the specific purpose for which given. 8.8 Headings. The headings of the various subdivisions hereof are for the convenience of reference only and shall in no way modify any of the terms or provisions hereof. 8.9 Integration and Severability. This Agreement embodies the entire agreement and understanding between the Company and the Bank and supersedes all prior agreements and understandings relating to the subject matter hereof. In case any one or more of the obligations of the Company under this Agreement or the Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining obligations of the Company shall not in any way be affected or impaired thereby, and any invalidity, illegality or unenforceability in one jurisdiction shall not affect the validity, legality or enforceability of the obligations of the Company under this Agreement or the Note in any other jurisdiction. 20 8.10 Independence of Covenants. All covenants contained herein shall be given independent effect so that if a particular action or condition is not permitted by any of those covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitation of, another covenant shall not avoid the occurrence of an Event of Default if that action is taken or condition exists. 8.11 Rights Cumulative and Waivers. Each and every right granted to the Bank hereunder or under any other document delivered hereunder, or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Bank to exercise, and no delay in exercising, any right shall operate as a waiver thereof or as a waiver of any other right. 8.12 Relationship of Company and Bank. The relationship between the Company and the Bank is solely that of borrower and lender. The Bank has no fiduciary responsibilities to the Company. The Bank does not undertake any responsibility to the Company to review or inform the Company of any matter in connection with any phase of the Company's business or operations. The Company shall rely entirely upon its own judgment with respect to its business, and any review, inspection, supervision, or information supplied to the Company by the Bank is for the protection of the Bank and neither the Company nor any third party is entitled to rely thereon. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date stated above in the first paragraph of this Agreement. KNAPE & VOGT MANUFACTURING COMPANY By /s/ Raymond E. Knape ------------------------------------- Raymond E. Knape, President OLD KENT BANK AND TRUST COMPANY By /s/ David W. Edwards ------------------------------------- David W. Edwards, Vice President 21 EXHIBIT A --------- REVOLVING NOTE -------------- $43,500,000 Grand Rapids, Michigan November 29, 1993 FOR VALUE RECEIVED, the undersigned, KNAPE & VOGT MANUFACTURING COMPANY, a Michigan corporation (the "Company"), hereby promises to pay to the order of OLD KENT BANK AND TRUST COMPANY, a Michigan banking corporation (the "Bank"), in lawful currency of the United States of America and in immediately available funds, on December 1, 1995, the principal sum of Forty-three Million Five Hundred Thousand Dollars ($43,500,000), or, if less, the aggregate unpaid principal amount of Revolving Loans made by the Bank to the Company pursuant to the Loan Agreement described below, and to pay interest on the unpaid principal balance hereof from time to time outstanding, in like money and funds, for the period from the date hereof until those Revolving Loans shall be paid in full, at the rates per annum. and on the dates provided in the Loan Agreement referred to below. The Bank is hereby authorized by the Company to note on the schedule attached to this Revolving Note or on its books and records the date and amount of each Revolving Loan, the applicable interest rate and type and the duration of the related Interest Period (if applicable), the amount of each payment or prepayment of principal thereon, and the other information provided for on that schedule, which schedule or such books and records, as the case may be, shall constitute prima facie evidence of the information so noted, provided that any failure by the Bank to make any that notation shall not relieve the Company of its obligation to repay the outstanding principal amount of this Revolving Note, all accrued interest hereon and any amount payable with respect hereto in accordance with the terms of this Revolving Note and the Loan Agreement. The Company and each endorser or guarantor hereof waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Revolving Note. This Revolving Note evidences one or more Revolving Loans made under a Loan Agreement, dated as of November 29, 1993, (the "Loan Agreement"), between the Company and the Bank, to which reference is hereby made for a statement of the circumstances under which this Revolving Note is subject to prepayment and under which its due day may be accelerated. Capitalized terms used but not defined in this Revolving Note shall have the respective meanings assigned to them in the Loan Agreement. KNAPE & VOGT MANUFACTURING COMPANY By ----------------------------------- Raymond E. Knape, President A-1 Accepted by: OLD KENT BANK AND TRUST COMPANY By ----------------------------------- David W. Edwards, Vice President A-2 SCHEDULE TO REVOLVING NOTE DATED NOVEMBER 29,1993, MADE BY KNAPE & VOGT MANUFACTURING COMPANY IN FAVOR OF OLD KENT BANK AND TRUST COMPANY
Principal Date Loan Principal Type Interest Amount Paid, Principal Made or Amount of of Period (if Prepaid or Balance Notation Converted Loan Loan applicable) Converted Outstanding Made by - ----------- --------- ---- ----------- ------------ ----------- ---------
A-3 EXHIBIT B --------- FORM OF COMPANY COUNSEL OPINION ------------------------------- November 29, 1993 Old Kent Bank and Trust Company One Vandenberg Center Grand Rapids, Michigan 49503 Ladies and Gentlemen: We have acted as counsel to Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company") in connection with the Loan Agreement dated as of November 29, 1993 (the "Loan Agreement"), entered into between the Company and Old Kent Bank and Trust Company (the "Bank"). Except as otherwise indicated in this Opinion Letter, capitalized terms are defined as set forth in the Loan Agreement or the Accord (see below). This Opinion Letter is governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991). Accordingly, it is subject to a number of qualifications, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord. The law covered by the opinions expressed in this Opinion Letter is limited to the federal law of the United States and the law of the state of Michigan. For purposes of this Opinion Letter, we have examined copies of the Loan Agreement and the Revolving Note dated November 29, 1993 (the "Revolving Note") made by the Company in favor of the Bank in the principal amount of $43,500,000. The Loan Agreement and the Revolving Note are hereinafter together referred to as the "Loan Documents". Based upon and subject to the foregoing, we are of the opinion that: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Michigan, has the requisite corporate power and authority to carry on its business as presently conducted, and to own and operate its properties and to enter into and perform its obligations under the Loan Documents, and is duly qualified to transact business in all other jurisdictions where, because of the nature of its activities or properties, such qualification is required. 2. Each of the Affiliates (as hereinafter defined) is a corporation duly organized, validly existing and in good standing under the laws of the state of Michigan, and is duly qualified to transact business in all other jurisdictions where, because of the nature of its respective activities or properties, such qualification is required. As used herein, "Affiliates" means Modar, Inc., a Michigan corporation, and Feeny Manufacturing Company, a Michigan corporation. 3. The Loan Documents are enforceable against the Company. B-1 4. The execution, delivery and performance by the Company of the Loan Documents do not (i) violate the articles of incorporation or bylaws of the Company, or (ii) result in any breach of any of the obligations of, or constitute a default under, the provisions of any written agreement or other written instrument relating to the borrowing of money to which the Company is a party, or by which it may be bound, or (iii) violate applicable provisions of statutory law or regulation. 5. No consent or approval of any governmental body, federal or state of Michigan, or of any non-governmental person (including, without limitation, any creditor or stockholder of the Company or any of the Affiliates) is necessary for the execution, delivery and performance by the Company of the Loan Documents; provided, however, no opinion is expressed with respect to the effect of your compliance with any laws or regulations applicable to the transaction on account of the nature of your business, or facts relating specifically to you, or as to the effect of any such non-compliance on the opinions set forth above. 6. The Company does not, in its ordinary course of business, extend or maintain credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) and, based on the representations of the Company in the Loan Documents, no part of the proceeds of the Loan Documents will be used for the purpose, whether immediate, incidental or ultimate, of buying or carrying any such margin stock or maintaining or extending credit to others for such purpose. We hereby confirm to you that, except as set forth in Exhibit C to the Loan Agreement, there are not actions or proceedings against the Company pending, or overtly threatened in writing, before any court, governmental agency or arbitrator which, if adversely determined, could have a materially adverse effect on the Company's financial condition or business or on the Company's ability to perform or otherwise comply with its obligations set forth in the Loan Documents. Very truly yours, VARNUM, RIDDERING, SCHMIDT & HOWLETT Jeffrey L. Schad B-2 EXHIBIT C --------- DESCRIPTION OF PENDING LITIGATION --------------------------------- Kessler vs. Knape & Vogt Mfg, Co., et. al., U.S. District Court (S.D. Florida), Case No. 93-2174, relates to claimed infringement of Kessler Patent (U.S. Patent No.: 4,315,661) on a "Euro-slide" mechanism. Answer is due on December 10, 1993. Significant prior art has been uncovered which appears to support a defense of patent invalidity. Edward Frabizio, vs. Tomisite Systems Corp., et. al., Supreme Court of the State of New York, Case No.: 92-17657, relates to a personal injury case (injury to foot) resulting from a lateral file cabinet failure. Knape & Vogt was made a third party defendant by the cabinet manufacturer, Fillip Metal Cabinet Company. Plaintiff's demand is for $3 million with respect to first party defendants, Globe Desk Company and Fillip Metal Cabinet Company. Knape & Vogt has filed an answer and affirmative defenses. The Home Insurance Company has undertaken to defend for its insured, Knape & Vogt. See related case, Baer Supply vs. Fillip Metal, below. Baer Supply Company vs. Fillip Metal Cabinet Company, Circuit Court (Illinois 19th Judicial District), Case No.: 92 L 191, relates to a commercial contract claim asserted by Baer Supply as against Fillip Metal for nonpayment of open account. Fillip Metal counterclaimed against Baer and by third party complaint against Knape & Vogt alleging breach of express and/or implied warranties for drawer slide products. Knape & Vogt moved for and obtained summary judgment on the grounds of lack of privity and lack of warranty. Fillip Metal has appealed and all parties have filed briefs. Appellate decision will likely issue in 18 to 24 months. Rev-A-Shelf Inc., vs. Knape & Vogt Mfg. Co., U.S. District Court (W.D. Kentucky), Case No.: 92-0168-L (CS), relates to a declaratory judgment action brought by Rev-A-Shelf in order to determine whether their product infringes a patent licensed to Knape & Vogt. This matter has been in a settlement mode since the deposition of Rev-A-Shelf's key witness. It is anticipated that Rev-A- Shelf will cease its infringing activities and will enter into a consent order. Knape & Vogt Mfg. Co. vs. Advertising Technologies, Inc., U.S. District Court (W.D. Michigan), Case No.: 1:93 cv 866, relates to a breach of contract claim for a failure on the part of Adtech to provide advertising audit services. Damages are approximately $59,000. Counsel for Adtech has indicated he will propose a stipulated judgment. Knape & Vogt Mfg. Co. vs. Accuride International, Inc., U.S. District Court (W.D. Michigan), Case No.: 1:93 cv 959, relates to a claim by Knape & Vogt regarding deceptive trade practices on the part of a competing drawer slide manufacturer. A consent order enjoining the practices has entered with costs and fees to Knape & Vogt. The court retains jurisdiction for the purpose of monitoring the terms of the consent order for the next two months. In Re PNP Holdings Corporation (Pay'n Pak Stores, Inc.), U.S. Bankruptcy Court (W.D. Washington), Case No.: 91-06976/91-06977, Adversary No.: A93-07175, relates to a preference claim asserted by debtor PNP against Knape & Vogt. The claim totals approximately $341,000 although substantial set-offs (subsequent new value, tort claims, etc.) have been raised by Knape & C-1 Vogt. Exposure in this matter is believed to be less than $160,000. This case is likely to be set for trial in March of 1994. Knape & Vogt Mfg. Co. vs. Venture Horizon Corporation, State Court California, relates to a collection action to recover approximately $23,000 in accounts receivable. A verbal agreement to compromise this for approximately $13,000 in view of claimed set-offs has been reached. Northeast Gravel is a state (Michigan) waste site that is currently the focus of a voluntary remedial investigation. Knape & Vogt has been noticed as a potentially responsible party. Although it is far too early to forecast exposure potential, it is clear that Knape & Vogt's respective share will be quite small. U.S. E.P.A. vs. Butterworth Landfill relates to a Superfund action brought by the U.S. E.P.A. Currently the six major PRP's are working on a remedial design work plan. Knape & Vogt has been noticed as a de minimis PRP. Potential exposure is unknown. We have had some insurance reimbursement in this case for defense costs. U.S. E.P.A. vs. Conservation Chemical Company, relates to a Superfund action in Gary, Indiana involving a landfill. Knape & Vogt has been noticed as a de minimis PRP and has participated in a de minimis PRP group. Exposure so far has been limited to approximately $750,00. This site has a very large number of PRP's and it is expected that Knape & Vogt's liability, if any, will be modest. U.S. E.P.A. vs. Lakeland Disposal, relates to an Indiana landfill currently the subject of a Superfund action. Knape & Vogt has been noticed as a PRP although no evidence has been produced to link Knape & Vogt to the site. The U.S. E.P.A. is considering our arguments for removal from the PRP list. U.S. E.P.A. vs. State Disposal, relates to a landfill in Grand Rapids Township. Knape & Vogt received a Section 104(e) request from the U.S. E.P.A. in 1990, and no further agency action has been undertaken since that time. U.S. E.P.A. vs. Muncie Race Track, relates to a landfill in Muncie, Indiana currently the subject of Superfund action. Knape & Vogt's subsidiary, Feeny Mfg., was served with a Section 104(e) request from the U.S. E.P.A. A freedom of information request indicates that Feeny contributed general trash only to this site. Lucille Davis vs. Knape & Vogt, Workers' Compensation Appeals Board (California), Case No.: BGN 0129163, relates to a workers' compensation claim filed by a former employee of the Knape & Vogt Western Division. A settlement offer of $17,000 has reportedly been accepted by the claimant. In Re National Transport Services, Inc., U.S. Bankruptcy Court, (W.D. Arkansas), Case No.: 90-1204M, Adversary No.: 92-7595, relates to a rate undercharge claim by the Trustee against Modar, Inc. Case is being settled for $1,000. C-2 Knape & Vogt Mfg. Co. vs. Huls America, et. al., Kent County Circuit Court (Michigan), Case No.: 92-77171-NZ, relates to claims of breach of warranty, negligence and misrepresentation against defendants roof installer and manufacturer of roof membrane. Damages are believed to be in excess of $500,000. Trial is currently anticipated in the summer of 1994. Helen Brown, is a workers' compensation claim that has been paid voluntarily. Currently, the claimant is seeking to redeem her claim and terminate her employment with the company. Estimated settlement value of this case lies in the range of $25,000 to $60,000. Therese Foley vs. Knape & Vogt Mfg. Co., Bureau of Worker's Disability Compensation, (Michigan), relates to a claim of work related injury. This claim has been compromised and a redemption of $50,000 has been scheduled. Dorothy Johnson vs. Knape & Vogt Mfg. Co., Michigan Department of Civil Rights, Case No. - 124654-EMD, 23A926519R, relates to a claim of race/gender discrimination. The Company feels strongly that there is no basis for the claim. Estimated exposure presuming a finding in favor of the claimant would he in the range of $15,000 to $50,000. Diane L. Marr vs. Knape & Vogt Mfg. Co., Michigan Department of Civil Rights, Case No. 117813-EM20, relates to a claim of discrimination on the basis of a disability. Claimant had pursued and received a workers' compensation award for a shoulder pain that turned out to result from a torn rotator cuff. Claimant brought a concurrent claim with the MDCR owing to her belief that she was eligible for a return to work and, also, that she could be accommodated. Her initial claim was denied by MDCR and she has petitioned for a redetermination. The Company vigorously contests this claim and perceives no merit in it. Donald Teets vs. Knape & Vogt Mfg. Co., Bureau of Workers' Disability Compensation, (Michigan), relates to a claim of work related injury that has been handled on a voluntary basis. The last petition in this matter related to the establishment of a new date of injury. Claimant has affected a return to work under light duty status. The Bureau retains jurisdiction. C-3 EXHIBIT D LIST OF EXISTING LIENS ---------------------- Blanket filing by Irwin J. Ferdinand, as nominee and agent of the Landlords under the Skokie Lease dated August 20, 1990 D-1 EXHIBIT E SUBSIDIARIES OF THE COMPANY ---------------------------
State in Which Stock of Stock Owned State of Business is Each Class by the Company Incorporation Conducted Outstanding Company - ------- ------------- --------- ----------- ------- Knape & Vogt Michigan Michigan, Common None Manufacturing Co. California 2,919,845 shares Class B Common - 2,402,784 shares Modar, Inc. Michigan Michigan Common - 100% 8,581 shares Feeny Michigan Michigan, Common - 100% Manufacturing Co. Indiana 1,000 shares Knape & Vogt Ontario, Quebec, Common - 100% Canada Inc. Canada Ontario 100,000 shares Preferred - 5,589,565 shares
E-1 CERTIFICATE OF KNAPE & VOGT MANUFACTURING COMPANY The undersigned, Raymond E. Knape, President and Chief Executive officer of Knape & Vogt Manufacturing Company, a Michigan corporation (the "Company"), hereby certifies that: 1. Except for the terms of that certain Loan Agreement between the Company and Metropolitan Life Insurance Company, dated March 16, 1988, and the terms of that certain Loan Agreement between the Company and Old Kent Bank & Trust Company of even date herewith, the Company is not a party to any other agreement pursuant to which the Company has borrowed funds from a bank or other lending source. 2. The execution, delivery and performance by the Company of the Loan Agreement by and among the Company and Old Kent Bank & Trust Company will not contravene any contract or undertaking entered into by Company. 3. Based in part upon an examination of the business and operation of the Company and its subsidiaries, Modar, Inc., a Michigan corporation, and Feeny Manufacturing Company, a Michigan corporation: A. The Company does business solely in the states of California and Michigan. The Company does not transact business in any other state. B. Modar, Inc. does business solely in the state of Michigan. Modar, Inc. does not transact business in any other state. C. Feeny Manufacturing Corporation does business solely in the states of Michigan and Indiana. Feeny Manufacturing Company does not transact business in any other state. Dated: November 29, 1993 KNAPE & VOGT MANUFACTURING COMPANY By: /s/ Raymond E. Knape ------------------------------- Raymond E. Knape Its President and CEO FIRST AMENDMENT TO LOAN AGREEMENT THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "Amendment"), is made as of February 16, 1995, by and between KNAPE & VOGT MANUFACTURING COMPANY, a Michigan corporation (the "Company") and OLD KENT BANK (formerly Old Kent Bank and Trust Company), a Michigan banking corporation (the "Bank"). RECITALS: -------- A. On November 29, 1993, Company and Bank signed a Loan Agreement (the "Loan Agreement"), providing for Bank to extend to Company a revolving bank credit of up to $43,500,000; B. Company and Bank wish to amend the Loan Agreement on the terms and conditions set forth in this Amendment. NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. Restatement of Warranties and Representations. Company hereby confirms to Bank that the warranties and representations set forth in the Loan Agreement were true, accurate and complete when made and remain true, accurate and complete as of the date of this Amendment. 2. No Events of Default; Compliance with Covenants. Company hereby confirms and acknowledges to Bank that no event of default has occurred under the Loan Agreement as of the date of this Amendment, and that as of the date of this Amendment, Company has complied with all of the affirmative and negative covenants set forth in the Loan Agreement. 3. Amendments Concerning Definitions Under the Loan Agreement. The following definitions set forth in Section 1.1 of the Loan Agreement are hereby amended in their entirety to read as follows: "Adjusted Federal Funds Rate" means fifty-five one-hundredths of one percent (.55%) above the Federal Funds Rate in effect from time to time. "Eurodollar Rate" means, with respect to any Eurodollar Loan and the related Eurodollar Interest Period, the per annum rate that is equal to the sum of: (a) fifty one-hundredths of one percent (.50%) per annum, plus (b) the rate obtained by dividing (1) the per annum rate of interest at which deposits in Dollars for that Eurodollar Interest Period and in an aggregate amount comparable to the amount of such Eurodollar Loan are offered to the Bank by other prime banks in the London interbank market, selected in the Bank's discretion, at approximately 11:00 a.m. London time, as the case may be, on the second Banking Day prior to the first day of that Eurodollar Interest Period, by (ii) a percentage equal to 100 percent minus the percentage, if any, that is specified on the first day of that Eurodollar Interest Period by the Board of Governors of the Federal Reserve System (or any successor agency) (including, without limitation, any marginal, emergency, supplemental, special or other reserves) for determining the reserve requirements with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities" in Regulation D of that Board maintained by a member bank of that System, and for purposes hereof, any Eurodollar Loan shall be considered to be "eurocurrency liabilities" as defined in Regulation D) to be maintained by member banks of such System; all as conclusively determined by the Bank, that sum to be rounded up, if necessary, to the nearest whole multiple of one one-hundredth of one percent (1/100 of 1%), and that Eurodollar Rate to be adjusted as and when any change occurs in the reserve requirements referred to in subparagraph (b) above. "Termination Date" means the earlier to occur of (a) November 1, 1996 and (b) the date on which the Credit shall be terminated pursuant to Sections 2.5 or 7. 4. Amendments Concerning Article 11 of the Loan Agreement. (a) Section 2.1 of the Loan Agreement is hereby amended to replace the number $43,500,000 with the number $47,500,000 so that the maximum amount of Revolving Loans that Company may borrow from Bank under the Loan Agreement is increased from $43,500,000 to $47,500,000. (b) To evidence the increase in the maximum amount of the Revolving Loans from $43,500,000 to $47,500,000, Company shall execute and deliver to Bank a Revolving Note in the form attached hereto as Exhibit A which will replace in its entirety the Revolving Note previously executed and delivered to Bank on November 29, 1993. (c) The following Section 2.9 is hereby added to the Loan Agreement: 2.9 Commitment Fee. As long as Bank is obligated to extend Revolving Loans to Company, Company shall pay to Bank a revolving line of credit facility fee on the daily average unused amount of the maximum $47,500,000 commitment of Bank to extend Revolving Loans at a rate equal to one-eighth of one percent (1/8%) per year, computed on the basis of a 360 day year for the actual number of days elapsed. These accrued revolving line of credit facility fees shall be paid quarterly in arrears on the first day of each May, August, November and February, commencing May 1, 1995. 5. Other Provisions Not Effected. Except as hereby amended, no other provisions of the Loan Agreement shall be amended and all provisions of the Loan Agreement shall hereafter remain in full and effect. IN WITNESS WHEREOF, the parties have signed and delivered this Amendment on the date first written above. KNAPE & VOGT MANUFACTURING COMPANY By: /s/ Raymond E. Knape -------------------------------- Raymond E. Knape, Chairman OLD KENT BANK By: /s/ David W. Edwards -------------------------------- David W. Edwards, Vice President EXHIBIT A --------- REVOLVING NOTE -------------- $47,500,000 Grand Rapids, Michigan February 6, 1995 FOR VALUE RECEIVED, the undersigned, KNAPE & VOGT MANUFACTURING COMPANY, a Michigan corporation (the "Company"), hereby promises to pay to the order of OLD KENT BANK, a Michigan banking corporation (the "Bank"), in lawful currency of the United States of America and in immediately available funds, on November 1, 1996, the principal sum of Forty-seven Million Five Hundred Thousand Dollars ($47,500,000), or, if less, the aggregate unpaid principal amount of Revolving Loans made by the Bank to the Company pursuant to the Loan Agreement described below; and to pay interest on the unpaid principal balance hereof from time to time outstanding, in like money and funds, for the period from the date hereof until those Revolving Loans shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement referred to below. The Bank is hereby authorized by the Company to note on the schedule attached to this Revolving Note or on its books and records the date and amount of each Revolving Loan, the applicable interest rate and type and the duration of the related Interest Period (if applicable), the amount of each payment or prepayment of principal thereon, and the other information provided for on that schedule, which schedule or such books and records, as the case may be, shall constitute prima facie evidence of the information so noted, provided that any failure by the Bank to make any that notation shall not relieve the Company of its obligation to repay the outstanding principal amount of this Revolving Note, all accrued interest hereon and any amount payable with respect hereto in accordance with the terms of this Revolving Note and the Loan Agreement. The Company and each endorser or guarantor hereof waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Revolving Note. This Revolving Note evidences one or more Revolving Loans made under a Loan Agreement, dated as of November 29, 1993, and amended on February 16, 1995 (collectively, the "Loan Agreement"), between the Company and the Bank, to which reference is hereby made for a statement of the circumstances under which this Revolving Note is subject to prepayment and under which its due day may be accelerated. Capitalized terms used but not defined in this Revolving Note shall have the respective meanings assigned to them in the Loan Agreement. KNAPE & VOGT MANUFACTURING COMPANY By: /s/ Raymond E. Knape ------------------------------ Raymond E. Knape, Chairman A-1 Accepted by: OLD KENT BANK By: /s/ David W. Edwards --------------------------------- David W. Edwards, Vice President A-2 SCHEDULE TO REVOLVING NOTE DATED FEBRUARY 16, 1995, MADE BY KNAPE & VOGT MANUFACTURING COMPANY IN FAVOR OF OLD KENT BANK
Principal Date Loan Principal Type Interest Amount Paid, Principal Made or Amount of of Period (if Prepaid or Balance Notation Converted Loan Loan applicable) Converted Outstanding Made by - ----------- --------- ---- ---------- ------------ ----------- --------
A-3 SECOND AMENDMENT TO LOAN AGREEMENT THIS SECOND AMENDMENT TO LOAN AGREEMENT (the "Amendment"), made as of June 28, 1996, by and between KNAPE & VOGT MANUFACTURING COMPANY, a Michigan corporation (the "Company") and OLD KENT BANK (formerly Old Kent Bank and Trust Company), a Michigan banking corporation, of Grand Rapids, Michigan (the "Bank"): RECITALS: -------- A. Company and Bank have signed a Loan Agreement, dated as of November 29, 1993, and a First Amendment to Loan Agreement, dated as of February 16, 1995 (the Loan Agreement and the First Amendment to Loan Agreement are collectively the "Loan Agreement"), providing for Bank to extend to Company a revolving bank credit of up to $47,500,000; B. Company and Bank wish to amend the Loan Agreement on the terms and conditions set forth in this Amendment. NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. Restatement of Warranties and Representations. Company hereby confirms to Bank that the warranties and representations set forth in the Loan Agreement were true, accurate and complete when made and remain true, accurate and complete as of the date of this Amendment. 2. No Events of Default; Compliance with Covenants. Company hereby confirms and acknowledges to Bank that no event of default has occurred under the Loan Agreement as of the date of this Amendment, and that as of the date of this Amendment, Company has complied with all of the affirmative and negative covenants set forth in the Loan Agreement. 3. Amendments Concerning Definitions Under the Loan Agreement. (A) The following definitions set forth in Section 1. 1 of the Loan Agreement are hereby amended in their entirety to read as follows: "Adjusted Federal Funds Rate" means the Federal Funds Rate in effect from time to time, plus the Applicable Margin. "Eurodollar Rate" means, with respect to any Eurodollar Loan and the related Eurodollar Interest Period, the per annum rate that is equal to the sum of (a) the Applicable Margin, plus (b) the rate obtained by dividing (i) the per annum rate of interest at which deposits in Dollars for that Eurodollar Interest Period and in an aggregate amount comparable to the amount of such Eurodollar Loans are offered to the Bank by other prime banks in the London interbank market, selected in the Bank's discretion, at approximately 11:00 a.m. London time, as the case May be, on the second Banking Day prior to the first day of that Eurodollar Interest Period by (ii) a percentage equal to 100 percent minus the percentage, if any, that is specified on the first day of that Eurodollar Interest Period by the Board of Governors of the Federal Reserve System (or any successor agency) (including, without limitation, any marginal, emergency, supplemental, special or other reserves) for determining the reserve requirements with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities" in Regulation D of that Board maintained by a member bank of that System, and for purposes hereof, any Eurodollar Loan shall be considered to be "eurocurrency liabilities" as defined in Regulation D) to be maintained by member banks of such System; "Termination Date" means the earlier to occur of (a) November 1, 1997 and (b) the date on which the Credit shall be terminated pursuant to Sections 2.5 or 7. (B) The following definitions are hereby added to the Loan Agreement: "Applicable Margin" shall mean the following margin based upon the Interest Coverage Ratio as adjusted on the first day of each fiscal quarter of the Company based upon such ratio for the four fiscal quarters immediately preceding the fiscal quarter most recently ended; provided, that, the Eurodollar Rate shall not be adjusted pursuant to the Applicable Margin for any outstanding Eurodollar Loan until after the end of the Eurodollar Interest Period for such Eurodollar Loan:
APPLICABLE MARGIN ----------------- Eurodollar Federal Commitment Interest Coverage Ratio Loans Funds Loans Fee ---------- ----------- ---------- (a) Greater than 15.0 to 1.0 .25% .40% .10% (b) Greater than or equal to .30% .40% .125% 10.0 to 1.0 but less than Or equal to 15.0 to 1.0 (c) Greater than or equal to .35% .45% .125% 4.0 to 1.0 but less than 10.0 to 1.0 (d) Less than 4.0 to 1.0 .40% .50% .15%
"EBIT" shall mean, for any period, the earnings of the Company for such period before interest, extraordinary items consented to by the Bank in writing, and taxes, all as determined in accordance with GAAP. Interest Coverage Ratio" shall mean, as of the end of any fiscal quarter, the ratio of (a) EBIT for the four fiscal quarters then ending to (b) all interest paid or payable by Company on Indebtedness, all as determined in accordance with GAAP. 4. Amendments Concerning Article II of the Loan Agreement. (A) Execution of New Revolving Note. To reflect the change in the definition of the Termination Date, Company shall execute and deliver to Bank a Revolving Note in the form attached hereto as Exhibit A which will replace, in its entirety, the Revolving Note previously executed and delivered to Bank on February 16, 1995. (B) Commitment Fee. Section 2.9 of the Loan Agreement is hereby amended in its entirety as follows: As long as Bank is obligated to extend Revolving Loans to Company, Company shall pay to Bank a revolving line of credit facility fee on the daily average unused amount of the maximum $47,500,000 commitment of Bank to extend Revolving Loans at a rate equal to the Applicable Margin computed on the basis of a 360 day year for the actual number of days elapsed. These accrued revolving line of credit facility fees shall be paid quarterly in arrears on the first day of each May, August, November and February, commencing August 1, 1996. 5. Other Provisions Not Effected. Except as hereby amended, no other provisions of the Loan Agreement shall be amended and all provisions of the Loan Agreement shall hereafter remain in full force and effect. IN WITNESS WHEREOF, the parties have signed and delivered this Amendment on the date first written above. KNAPE & VOGT MANUFACTURING COMPANY By: /s/ Richard C. Simkins ------------------------------------- Richard C. Simkins Its: Executive Vice President ------------------------------------ OLD KENT BANK By: /s/ Peter T. Campbell ------------------------------------- Peter T. Campbell, Vice President EXHIBIT A --------- REVOLVING NOTE -------------- $47,500,000 Grand Rapids, Michigan June 28, 1996 FOR VALUE RECEIVED, the undersigned, KNAPE & VOGT MANUFACTURING COMPANY, a Michigan corporation (the "Company"), hereby promises to pay to the order of OLD KENT BANK, a Michigan banking corporation (the "Bank"), in lawful currency of the United States of America and in immediately available funds, on November 1, 1997, the principal sum of Forty-seven Million Five Hundred Thousand Dollars ($47,500,000), or, if less, the aggregate unpaid principal amount of Revolving Loans made by the Bank to the Company pursuant to the Loan Agreement described below; and to pay interest on the unpaid principal balance hereof from time to time outstanding, in like money and funds, for the period from the date hereof until those Revolving Loans shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement referred to below. The Bank is hereby authorized by the Company to note on the schedule attached to this Revolving Note or on its books and records the date and amount of each Revolving Loan, the applicable interest rate and type and the duration of the related Interest Period (if applicable), the amount of each payment or prepayment of principal thereon, and the other information provided for on that schedule, which schedule or such books and records, as the case may be, shall constitute prima facie evidence of the information so noted, provided that any failure by the Bank to make any that notation shall not relieve the Company of its obligation to repay the outstanding principal amount of this Revolving Note, all accrued interest hereon and any amount payable with respect hereto in accordance with the terms of this Revolving Note and the Loan Agreement. The Company and each endorser or guarantor hereof waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Revolving Note. This Revolving Note evidences one or more Revolving Loans made under a Loan Agreement, dated as of November 29, 1993, and amended on February 16, 1995, and June 28, 1996 (collectively, the "Loan Agreement"), between the Company and the Bank, to which reference is hereby made for a statement of the circumstances under which this Revolving Note is subject to prepayment and under which its due day may be accelerated. Capitalized terms used but not defined in this Revolving Note shall have the respective meanings assigned to them in the Loan Agreement. KNAPE & VOGT MANUFACTURING COMPANY By:_______________________________ Its:______________________________ A-1 Accepted by: OLD KENT BANK By:_________________________________ Peter T. Campbell, Vice President A-2 SCHEDULE TO REVOLVING NOTE DATED JUNE 28, 1996, MADE BY KNAPE & VOGT MANUFACTURING COMPANY IN FAVOR OF OLD KENT BANK
Principal Date Loan Principal Type Interest Amount Pd Principal Made or Amount of of Period (if Prepaid or Balance Notation Converted Loan Loan applicable) Converted Outstanding Made by - ----------- --------- ---- ----------- ---------- ----------- --------
A-3 REVOLVING NOTE -------------- $47,500,000 Grand Rapids, Michigan November 1, 1997 FOR VALUE RECEIVED, the undersigned, KNAPE & VOGT MANUFACTURING COMPANY, a Michigan corporation (the "Company"), hereby promises to pay to the order of OLD KENT BANK, a Michigan banking corporation (the "Bank"), in lawful currency of the United States of America and in immediately available funds, on November 1, 1999, the principal sum of Forty-seven Million Five Hundred Thousand Dollars ($47,500,000), or, if less, the aggregate unpaid principal amount of revolving Loans made by the Bank to the Company pursuant to the Loan Agreement described below and to pay interest on the unpaid principal balance hereof from time to time outstanding, in like money and funds, for the period from the date hereof until those Revolving Loans shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement referred to below. The Bank is hereby authorized by the Company to note on the schedule attached to this Revolving Note or on its books and records the date and amount of each Revolving Loan, the applicable interest rate and type and duration of the related Interest Period (if applicable), the amount of each payment or prepayment of principal thereon, and the other information provided for on that schedule, which schedule or such books and records, as the case may be, shall constitute prima facie evidence of the information so noted, provided that any failure by the Bank to make any that notation shall not relieve the Company of its obligation to repay the outstanding principal amount of this Revolving Note, all accrued interest hereon and any amount payable with respect hereto in accordance with the terms of this Revolving Note and the Loan Agreement. The Company and each endorser or guarantor hereof waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Revolving Note. This Revolving Note evidences one or more Revolving Loans made under a Loan Agreement, dated as of November 29, 1993, and amended on February 16, 1995, and June 28, 1996 (collectively, the "Loan Agreement'), between the Company and the Bank, to which reference is hereby made for a statement of the circumstances under which this Revolving Note is subject to prepayment and under which its due day may be accelerated. Capitalized terms used but not defined in this Revolving Note shall have the respective meanings assigned to them in the Loan Agreement. KNAPE & VOGT MANUFACTURING COMPANY By: ------------------------------------- Richard C. Simkins Its: Executive Vice President ------------------------------------- A-4 Accepted by: OLD KENT BANK By: ---------------------------------------- Andrew P. Gavulic, Vice President A-5 EX-99.(C) 12 LETTER AGREEMENT & RESTATED STOCK AWARD AGREEMENT July 1, 1998 Mr. William R. Dutmers 1848 Antisdale Road Muskegon, MI 49441 Dear Bill: This letter will serve as our agreement concerning your compensation and the services to be provided by you to Knape & Vogt Manufacturing Company (the "Company"). This agreement becomes effective as of July 1, 1998. Services Rendered. You are presently serving as Chairman of the Board of Directors of the Company. You have been providing and expect to continue providing consulting services to the Company concerning mergers, acquisitions, asset dispositions and other special projects that may be assigned to you from time to time by the Board of Directors or management of the Company. You will also be expected to perform those duties outlined in a written job description to be approved by the Compensation Committee and the full Board of Directors prior to July 1, 1998. It is expected that you will devote at least 80% of your business time to the Company's business. You will report directly to the Board of Directors. Restricted Shares. Your base compensation for services rendered will be an annual award at the beginning of each fiscal year of 10,500 restricted shares of the Company's common stock. This restricted share award will be granted as of the beginning of each fiscal year for five years, subject to prior termination of the arrangement by the Board of Directors. The restricted shares will not vest and may not be transferred until one year after they are issued. During the restricted period, the restricted shares will be forfeited if you cease to be Chairman of the Board of Directors for any reason or cease to be a member of the Board of Directors for any reason, other than your death or disability. After the one year restricted period, the restricted shares will vest and become freely transferrable. The restricted shares will be issued to you in a private placement and will not have been registered under state and federal securities law. During the one year restriction period, you will be permitted to vote the restricted shares and will be entitled to dividends paid on the restricted shares. The Mr. William R. Dutmers July 1, 1998 Page 2 restricted shares will vest automatically upon a change of control of the Company. The terms and conditions of the restricted shares will be described in more detail in a Restricted Share Award Agreement to be signed by you and the Company, a copy of which is attached to this letter. EVA Bonus. During the term of this Agreement, you will be paid a bonus based on Economic Value Added determined in the same manner as provided in the Company's Management Incentive Compensation Plan (the EVA Bonus Plan). For purposes of calculating an equivalent to the bonus that would be payable under the EVA Bonus Plan, your "base" for EVA bonus purposes for each fiscal year will equal the fair market value of the 10,500 restricted shares. Fair market value will be the average closing price per share during the month of June as reported in the Wall Street Journal prior to the date the restricted shares were awarded. July 1 will be the award date for the restricted shares. Your Target Bonus Percentage will be 65% for purposes of calculating your EVA bonus. Any bonus earned by you will be allocated to leveraged stock options in the same percentage as the maximum percentage of EVA bonus that the Company's President and Chief Executive Officer is eligible to designate as his EVA Bonus Option Amount under the EVA Bonus Plan. In addition, if the amount of leveraged stock options that the President and Chief Executive Officer of the Company is eligible to receive is reduced because of the limitations contained in Section 6.4(a) of the 1997 Stock Incentive Plan, then the number of leveraged stock options that you may receive will also be reduced on a pro rata basis. Although you are not a participant in the Company's EVA Bonus Plan, the leveraged stock options will be granted to you on terms equivalent to the leveraged stock options that would have been granted under the EVA Bonus Plan had you been a participant in the EVA Bonus Plan. The options and the shares covered by the options will be issued in a private placement and will not be registered under state and federal securities laws. Additional Compensation. The Company will also provide you with coverage under the Company's medical insurance plan. The Company will lease a suitable automobile for your use and reimburse you for automobile expenses related to the Company's business. Independent Contractor. We agree that you are providing services to the Company as an independent contractor, and not as an employee. As an independent contractor, you set your own hours and determine the manner and method of your performance. This agreement is not an employment agreement and does not create an employment relationship. Mr. William R. Dutmers July 1, 1998 Page 3 This agreement supersedes and replaces any and all other agreements or arrangements and may be canceled by you or the Company at any time. This agreement is not a commitment to nominate or elect you to the Company's Board of Directors. If this letter accurately reflects the agreement between you and the Company concerning these matters, please acknowledge below and return a copy to the Company. Sincerely, KNAPE & VOGT MANUFACTURING COMPANY By: -------------------------------- Its: ------------------------------- Acknowledged and agreed: /s/ William R. Dutmers ----------------------- William R. Dutmers RESTRICTED SHARE AWARD AGREEMENT AGREEMENT made as of this 1st day of July, 1998, by KNAPE & VOGT MANUFACTURING COMPANY, a Michigan corporation (the "Company"), and WILLIAM R. DUTMERS, an individual (the "Grantee"). RECITALS - -------- The Company and the Grantee have entered into a consulting agreement providing for the grant by the Company to the Grantee of restricted shares of common stock of the Company. The Board of Directors of the Company has approved an award of restricted shares to the Grantee upon the terms and conditions set forth in this Agreement. The Company and the Employee desire to confirm in this Agreement the terms, conditions and restrictions applicable to the award of restricted stock. NOW, THEREFORE, intending to be bound, the parties agree as follows: 1. DEFINITIONS ----------- 1.1 "Board" means the Board of Directors of the Company. 1.2 "Change in Control" shall have the meaning ascribed to such term in Section 10.2 of the Company's 1997 Stock Incentive Plan. 1.3 "Common Stock" means the common stock of the Company, par value $2.00 per share. 1.4 "Company" means Knape & Vogt Manufacturing Company, a Michigan corporation, its successors and assigns. 1.5 "Effective Date of this Agreement" means July 1, 1998. 1.6 "Fiscal Year" means the twelve month period ending June 30 of each year, or such other fiscal year as may be adopted for the Company by the Board. 1.7 "Restricted Share" means a Share which is subject to the restriction on sale, pledge or other transfer imposed by Section 3.1. An "Unrestricted Share" is a Share which is no longer a Restricted Share. 1.8 "Reverted Shares" means Shares which have reverted to the Company pursuant to Section 5.2. 1.9 "Shares" means the shares of Common Stock awarded, issued and delivered to the Grantee under this Agreement. If, as a result of a stock split, stock dividend, combination of stock, or any other change or exchange of securities, by reclassification, reorganization, recapitalization or otherwise, the Shares shall be increased or decreased, or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or another corporation, the term "Shares" shall mean and include the shares of stock or other securities issued with respect to the Shares. 1.10 "Vested Shares" shall have the meaning expressed in Section 5.1. 2. AWARD AND ACCEPTANCE OF AWARD; TAX ELECTION ------------------------------------------- 2.1 Award. The Company confirms the award to the Grantee of 10,500 shares of Common Stock (the "Shares") as restricted stock, upon the terms, restrictions and conditions of this Agreement. The award of Shares shall be effective as of the Effective Date of this Agreement. The Company agrees to issue and deliver to the Grantee a certificate representing the Shares promptly after the Effective Date of this Agreement. 2.2 Acceptance. The Grantee accepts this award of Shares and agrees to hold them subject to the terms, restrictions and conditions of this Agreement. 2.3 Tax Election. The Grantee may elect to be taxed in 1998 [the year in which this award is made] on the fair market value of the Shares awarded by signing an election to be so taxed under Section 83(b) of the Internal Revenue Code, and filing such election with the Internal Revenue Service within thirty (30) days after the Effective Date of this Agreement. If the Grantee chooses not to make such an election, the Grantee will be taxed on the fair market value of the Shares in the year in which the restrictions lapse. 2.4 No Withholding. The Grantee recognizes that he is an independent contractor with respect to the Company and not an employee of the Company. The Company will not withhold any amounts from the award of Shares for tax purposes. Grantee is responsible for his own tax consequences with respect to the award of Shares. -2- 3. RESTRICTIONS ON TRANSFER OF SHARES; LAPSE OF RESTRICTIONS --------------------------------------------------------- 3.1 Transfer Prohibition. The Grantee shall not sell, pledge or otherwise assign or transfer any Share or any interest in any Share while such Share is a Restricted Share. 3.2 Restricted Shares. Every Share shall be a Restricted Share until the restrictions lapse as provided in Section 3.6. 3.3 Securities Law Compliance. The Grantee shall not sell or transfer any Share or any interest in any Share, whether such Share is or is not a Restricted Share, unless either (a) the Company shall consent in writing to such transfer, or (b) the Company shall have received an opinion of counsel satisfactory to the Company to the effect that such transfer will not violate the registration requirements imposed by the Securities Act of 1933 or any other provision of law which the Company shall desire such opinion to cover. The Grantee acknowledges that the Shares have not been registered under the federal securities laws or the securities laws of any state. 3.4 Legend. Every certificate representing a Share shall at all times bear the following legend: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Award Agreement entered into between the registered owner and the Company, dated July 1, 1998. A copy of the Award Agreement is on file in the offices of the Company, 2700 Oak Industrial Drive, N.E., Grand Rapids, MI 49505." 3.5 Stop Transfer Instructions. The Company shall have the right to issue instructions to the transfer agent for the shares of the Company, prohibiting transfer of any Shares except in accordance with the requirements of this Agreement. 3.6 Unrestricted Shares. The restrictions imposed by Section 3.1 shall lapse at the time a Share becomes a Vested Share pursuant to Section 5.1. At that time, the Share will be an Unrestricted Share. 3.7 New Certificate for Unrestricted Shares. If the Grantee holds a certificate representing Shares which are no longer Restricted Shares, the Grantee shall be entitled to receive from the Company, in exchange therefor, a certificate representing such Unrestricted Shares, bearing a legend, if the Company shall deem such a legend to be appropriate, only to the effect that the transfer of such Shares is prohibited if it would violate the Securities Act of 1933, or any state securities law. If the Grantee's certificate represents both Restricted and -3- Unrestricted Shares, the Grantee shall be entitled to receive two certificates in exchange therefor, one of which shall represent the Restricted Shares and one of which shall represent Unrestricted Shares. 3.8 Rights of Shareholder. Except for the restrictions imposed in this Article 3 and unless the Shares have reverted to the Company pursuant to Section 5.2, the Grantee shall have all the rights of a shareholder with respect to the Restricted Shares, including the right to vote and to receive the dividends declared and paid thereon. 4. ACQUISITION WARRANTIES ---------------------- In order to induce the Company to issue and deliver the Shares on the terms of this Agreement, the Grantee warrants to and agrees with the Company as follows: 4.1 No Participating Interest. The Grantee is acquiring the Shares for the Grantee's own account, and has not made any arrangement to convey any interest in the Shares to any person, other than to transfer Reverted Shares to the Company pursuant to Section 5.3. 4.2 Ability to Evaluate. Because of the Grantee's knowledge and experience in financial and business matters, the Grantee is capable of evaluating the merits and risks of acquiring the Shares under the arrangements prescribed by this Agreement. 4.3 Familiarity with Company. The Grantee is familiar with the business, financial condition, earnings and prospects of the Company, and confirms that the Company has not made any representation regarding the foregoing matters or the merits of this Agreement. 4.4 All Questions Answered. The Grantee understands all of the terms of this Agreement and the consequences to the Grantee of any actions which may be taken under this Agreement. The Grantee confirms there are no questions relating to any such matters which have not been answered to the Grantee's complete satisfaction. 4.5 Accredited Investors Status. The Grantee represents and warrants to the Company that he is an "accredited investor" as such term is defined in Regulation D under the Securities Act of 1933, as amended, because Grantee's net worth exceeds $1,000,000. 4.6 Separate Award. The Company and the Grantee understand that Grantee is not a participant in the Company's 1997 Stock Incentive Plan, and this Agreement is not subject to the Company's 1997 Stock Incentive Plan. -4- 5. VESTING AND REVERSION --------------------- 5.1 Vesting. All Shares shall become 100% Vested Shares on the earlier of (i) July 1, 1999 (one year from the date of this Agreement), (ii) the occurrence of a Change of Control, (iii) Grantee's death, or (iv) Grantee's disability, unless prior to such time such shares revert to the Company pursuant to Section 5.2 of this Agreement because Grantee ceases to be Chairman of the board or a member of the Board of Directors for any reason (other than death or disability), whether Grantee's departure was because of resignation or any other reason (other than death or disability). 5.2 Reversion. Unless already vested pursuant to Section 5.1 above, all Shares which have not become Vested Shares shall automatically revert to the Company if prior to July 1, 1999 (one year from the date of this Agreement) Grantee ceases to be Chairman of the Board of Directors or a member of the Board of Directors for any reason (other than death or disability), whether Grantee's departure was because of resignation or any other reason. No compensation shall be payable to the Grantee for shares which revert to the Company (other than death or disability). 5.3 Effect of Reversion. Upon reversion of any Shares (a) absolute ownership thereof shall automatically revert to the Company at that time, (b) such Shares shall be deemed to be "Reverted Shares" for purposes of this Agreement, (c) all the Grantee's rights and interests in the Reverted Shares shall cease at that time, and (d) the Grantee shall be obligated immediately to surrender to the Company the certificates representing the Reverted Shares, but the failure to do so shall not impair the immediate effect of clauses (a), (b) and (c) above. 6. GENERAL PROVISIONS ------------------ 6.1 No Right to Employment. This Agreement is not an employment contract. Grantee is an independent contractor with respect to the Company. 6.2 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid and enforceable, but if any provision of this Agreement shall be held to be prohibited or unenforceable under applicable law (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law, and (b) all other provisions of this Agreement shall remain in full force and effect. 6.3 Captions. The captions used in this Agreement are for convenience only, do not constitute a part of this Agreement and all of the provisions of this Agreement shall be enforced and construed as if no captions had been used. -5- 6.4 Complete Agreement. This Agreement and the Letter Agreement dated July 1, 1998, between the Company and Grantee contain the complete agreement between the parties relating in any way to the subject matter of this Agreement and supersede any prior understandings, agreements or representations, written or oral, which may have related to such subject matter in any way. 6.5 Notices. ------- (a) Procedures Required. Each communication given or delivered under this Agreement must be in writing and may be given by personal delivery or by certified mail, return receipt requested. A written communication shall be deemed to have been given on the date it shall be delivered to the address required by this Agreement. (b) Communications to the Company. Communications to the Company shall be addressed to it at the principal corporate headquarters and marked to the attention of the Company's Executive Compensation Committee Chair. (c) Communications to the Grantee. Every communication to the Grantee shall be addressed to the Grantee at the address given immediately below the Grantee's signature to this Agreement, or to such other address as the Grantee shall specify to the Company. 6.6 Assignment. This Agreement is not assignable by the Grantee during the Grantee's lifetime. This Agreement shall be binding upon and inure to the benefit of (a) the successors and assigns of the Company, and (b) any person to whom the Grantee's rights under this Agreement may pass by reason of the Grantee's death. 6.7 Amendment. This Agreement may be amended, modified or terminated by written agreement between the Company and the Grantee. 6.8 Waiver. No delay or omission in exercising any right hereunder shall operate as a waiver of such right or of any other right hereunder. A waiver upon any one occasion shall not be construed as a bar or waiver of any right or remedy on any other occasion. All of the rights and remedies of the parties hereto, whether evidenced hereby or granted by law, shall be cumulative. 6.9 Choice of Law. This Agreement shall be deemed to be a contract made under the laws of the State of Michigan and for all purposes shall be construed in accordance with and governed by the laws of the State of Michigan. -6- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Grantee: KNAPE & VOGT MANUFACTURING COMPANY /s/William R. Dutmers By /s/Allan E. Perry - ----------------------------------- ------------------------------ William R. Dutmers Its President ------------------------------ Address: 1848 Antisdale - ----------------------------------- Muskegon, MI 49441 - ----------------------------------- -7- -----END PRIVACY-ENHANCED MESSAGE-----