SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
    of 1934 for the fiscal year ended June 30, 1999 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the transition period from _________  to ____________

Commission file number 2-18868

                       KNAPE & VOGT MANUFACTURING COMPANY
             (Exact name of registrant as specified in its charter)

         Michigan                                       38-0722920
(State or other jurisdiction
of incorporation or organization)           (I.R.S. Employer Identification No.)

                     2700 Oak Industrial Drive, N.E., Grand
                     Rapids, MI 49505 (Address of principal
                          executive offices) (Zip Code)

                                 (616) 459-3311
              (Registrant's telephone number, including area code)

               Securities registered pursuant to 12(b) of the Act:

          Title of each class         Name of each exchange on which registered

                 None                                   None

           Securities Registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $2.00 per share
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _X_ No ____

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The  aggregate  market  value  of  voting  stock  held by  nonaffiliates  of the
registrant was $67,909,280 as of August 27, 1999.

Number of shares  outstanding  of each  class of common  stock as of August  27,
1999: 2,080,531 shares of Common Stock, par value $2.00 per share, and 2,195,872
shares of Class B Common Stock, par value $2.00 per share.

Documents incorporated by reference.  Certain portions of the Registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on October 15, 1999,
are incorporated by reference into Part III of this Report.
<PAGE>
                                     PART I
                                ITEM 1--BUSINESS

Item 1(a)--General Development of Business

     The Company 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 Drive,  N.E., Grand Rapids,  Michigan 49505, and its telephone number
is (616) 459-3311.  Unless otherwise noted or indicated by the context, the term
"Company" includes Knape & Vogt Manufacturing  Company, its predecessors and its
subsidiaries.

     The following significant events occurred in fiscal 1999:

     On September 1, 1998,  the Company  completed the sale of The Hirsh Company
     (Hirsh),  a  wholly-owned  subsidiary.  This  resulted in a pre-tax loss of
     $11,800,000,  which was included in the June 30, 1998,  financial  results.
     The loss  included  the  write-off of the  unamortized  balance of goodwill
     recorded in connection  with the purchase of Hirsh.  In connection with the
     sale,  the  Company  recognized  an  additional  tax  cost  of  $1,000,000,
     resulting in a total loss related to the sale of Hirsh of $12,800,000.

     On  September 1, 1998,  the Company  announced  its Board of Directors  had
     approved a new financial strategy which included  authorization to purchase
     up to 1,350,000 shares of the Company's common stock,  including  1,200,000
     shares pursuant to a "Dutch Auction"  self-tender  offer.  Also included in
     the new financial strategy was approval by the Board of Directors of a post
     Dutch  Auction  purchase  in the open  market  or in  privately  negotiated
     transactions of common stock in an amount which when added to the number of
     shares  of  common  stock  purchased  in  the  Dutch  Auction  would  equal
     1,350,000.  On January 22,  1999,  the Board of  Directors  authorized  the
     repurchase  of up  to  another  400,000  shares.  Through  June  30,  1999,
     1,672,743  shares  had  been  repurchased  for  a  total  of  approximately
     $33,400,000.

Item 1(b)--Financial Information About Industry Segments

     The Company  believes that a dominant  portion of the Company's  operations
(more than 95%) is in a single industry segment -- the design, manufacture,  and
marketing  of  storage  products.  Accordingly,  no  separate  industry  segment
information is presented.

Item 1(c)--Narrative Description of Business

     Products,  Services,  Markets and Methods of  Distribution.  The  Company's
storage products include a complete line of decorative and utility wall-attached
shelving systems.  Drawer slides  manufactured by the Company include precision,
Euro-style and utility slides.  Precision  drawer slides use ball bearings,  and
Euro-style and utility  drawer slides use rollers.  The Company's many different
hardware  products  include closet rods,  kitchen  storage  products and various
fixtures.

     Approximately  33% of the Company's  sales were to the consumer  market and
67%  of the  Company's  sales  were  to  original  equipment  manufacturers  and
specialty   distributors.   Most  sales  are  made  through   independent  sales
representatives.

     New Product and Capital  Spending  Information.  Management  believes  that
capital  spending  in fiscal 2000 will  increase  from the  $4,786,263  spent in
fiscal 1999.  The increased  spending will reflect  investments  made to improve
manufacturing  technology and to bring new products and product  enhancements to
the Company's customers.

     Sources and  Availability of Raw Materials.  Most of the Company's  storage
products are produced  primarily from steel or wood.  Historically,  the Company
has not  experienced  difficulty  in obtaining  these raw materials and does not
anticipate  any  difficulty  in the future,  as the raw  materials  used are not
unique.

     Patents,  Licenses, Etc. Patents,  trademarks,  licenses,  franchises,  and
concessions play a part in the Company's business, but the Company as a whole is
not dependent to any material extent upon any single patent.

     Seasonal Nature of Business. The Company's business is not seasonal.

     Working  Capital  Practices.  The Company  does not believe that it, or the
industry in general,  has any special practices or special conditions  affecting
working capital items that are significant for an understanding of the Company's
business.

     Importance of Limited  Number of  Customers.  The Company sells to both the
consumer  market and to the  OEM/speciality  distributor  market.  The  consumer
market is  comprised  of a broad  base of  retail  outlets.  The  OEM/speciality
distributor  market is more concentrated with a fewer number of customers and is
more closely tied to the office furniture industry. The Company does not believe
that its business is dependent upon any single or small number of customers, the
loss of which would have a

                                       2
<PAGE>
materially  adverse  effect  upon the  Company.  The Company  estimates  that at
present it has over 1,500 active customers with approximately 35,000 outlets, of
which the five largest  customers  account for approximately 15% of sales and no
one of which accounts for more than 5% of sales.

     Backlog of Orders.  The  Company  typically  has a short  lead-time  on its
orders and therefore  does not believe that  information  concerning  backlog is
material to an understanding of its business.

     Government Contracts.  The Company does not believe that any portion of its
business is subject to  renegotiation  of profits or termination of contracts or
subcontracts at the election of the government.

     Competition.  All  aspects of the  business in which the Company is engaged
are highly competitive. Competition is based upon price, service and quality. In
the  various  markets  served  by the  Company,  it  competes  with a number  of
manufacturers  that have  significantly  greater resources and sales,  including
several conglomerate  corporations,  and with numerous smaller companies.  While
the Company is not aware of any reliable statistics that are available to enable
the Company to  accurately  determine  its  relative  position in the  industry,
either overall or with respect to any particular  product or market, the Company
believes that it is one of the three leading  manufacturers  of drawer slides in
North America.

     Research,  Design and  Development.  Approximately  $1,543,000 was spent in
fiscal  1999  in the  development  of new  products  and in the  improvement  of
existing  products;  approximately  $1,225,000  was  spent  in  fiscal  1998 and
$1,373,000  in fiscal 1997 for the same  purposes.  The amount of  research  and
development expenditures are determined by specific identification of the costs,
which are expensed as incurred.

     Environmental   Matters.   The  Company  does  not  believe  that  existing
environmental  regulations  will  have any  material  effect  upon  the  capital
expenditures, earnings and competitive position of the Company.

     Employees.  At June 30, 1999, the Company employed 846 persons. None of the
Company's employees are represented by collective bargaining agents.

Item 1(d)--Information About Foreign Operations

     The  Company's  Canadian  operation   accounted  for  approximately  7%  of
consolidated sales. Approximately 4% of consolidated net sales were derived from
export  shipments  from the Company's  United States  operations to customers in
other  foreign  countries.  The Company  does not know of any  particular  risks
attendant  thereto,  except that  fluctuating  exchange rates between the United
States and  Canadian  currencies  and other  factors  beyond the  control of the
Company, such as tariff and foreign economic policies, may affect future results
of such  business.  Reference  is made to Notes 2, 3 and 12 of the  Notes to the
Company's Consolidated Financial Statements contained herein for the fiscal year
ended June 30, 1999, for a presentation of additional information concerning the
Company's foreign operations.

                                       3
<PAGE>
                               ITEM 2--PROPERTIES

     The  Company  owned or  leased  the  following  offices  and  manufacturing
facilities as of June 30, 1999:

<TABLE>
        Location                             Description                                         Interest
<S>                                 <C>                                                          <C>
Grand Rapids, Michigan              Executive offices and manufacturing facilities;              Owned
                                    444,000 sq. ft. on 41 acres.

Sparks, Nevada                      Warehouse; 76,000 sq. ft.                                    Leased

Muncie, Indiana                     Manufacturing facilities and office;                         Owned
                                    98,000 sq. ft. on 12 acres.

Mississauga, Ontario                Office; 1,900 sq. ft.                                        Leased
</TABLE>

The  facilities  indicated  as owned  are  owned in fee by the  Company  and are
subject to no material  encumbrances.  The Company  believes that its facilities
are generally  adequate for its operations and are maintained in a state of good
repair.  The Company  believes it is in compliance with all applicable state and
federal air and water pollution  control laws.  During the five years ended June
30,  1999,   the  Company  spent   approximately   $22,000,000   for  expansion,
modernization and improvements of its facilities and equipment.

                            ITEM 3--LEGAL PROCEEDINGS

     As  of  the  date  hereof,  the  Company  has  no  material  pending  legal
proceedings other than ordinary routine  litigation  incidental to the Company's
business.


           ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year ended June 30, 1999.

              ADDITIONAL ITEM--EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers of the Company were, at June 30, 1999, as follows:
<TABLE>
                                                                                       Year First Elected
    Name                        Age           Positions and Offices Held               an Executive Officer
<S>                             <C>           <C>                                             <C>
William R. Dutmers              42            Chairman of the Board of Directors,
                                              Chief Executive Officer and President           1998

Jack D. Poindexter              36            Chief Financial Officer, Treasurer
                                              and Secretary                                   1998

Michael G. Van Rooy             46            Senior Vice President of Manufacturing          1993

</TABLE>
     Mr.  Dutmers was named  Chairman of the Board of Directors in January 1998.
Mr. Dutmers has been a member of the Board of Directors since April 1996. He was
named Chief  Executive  Officer and President in May 1999.  Mr.  Dutmers was the
President of G & L, Inc., a business consulting firm from 1991 to 1997.

     Mr. Poindexter was named Chief Financial  Officer,  Treasurer and Secretary
in September 1998. Mr.  Poindexter  joined the Company in June 1997 as Assistant
Treasurer.  Prior to joining Knape & Vogt,  Mr.  Poindexter  was employed as the
Director of Tax at Kysor Industrial Corporation from 1991 to 1997.

     Mr. Van Rooy has been the Senior  Vice  President  of  Manufacturing  since
December  1993.  Mr.  Van Rooy  joined the  Company  in 1985 in the  engineering
department and has held a variety of management positions.

                                       4
<PAGE>
     All terms of office are on an annual  basis and will  expire on October 15,
1999.



                                       5
<PAGE>
                                     PART II

            ITEM 5--MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
                COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

     Market Price.  The Company's  Common Stock is traded on the NASDAQ National
Market under the ticker  symbol  KNAP.  Stock price  quotations  can be found in
major daily  newspapers  (listed  KnapeV) and in the Wall Street Journal (listed
KnapeVogt).  As of August 27, 1999, there were approximately  3,100 shareholders
of the Company's Common Stock and Class B Common Stock.

<TABLE>
                                                         1999                                     1998
                                       ------------------------------------------------------------------------------
Quarter                                       High                 Low                 High                  Low
---------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                  <C>                 <C>                  <C>
First                                        $22.75               $16.875             $18.50               $15.875
Second                                       $20.50               $16.50              $22.75               $18.50
Third                                        $18.00               $12.00              $23.00               $20.00
Fourth                                       $17.875              $12.00              $24.75               $21.25
</TABLE>

     Dividends.  The  Company  paid per share  cash  dividends  on its shares of
Common Stock and Class B Common Stock in the following  amounts  during the last
two fiscal years.

<TABLE>
                                                                          Per Share Cash Dividends
Year Ended June 30, 1999                                        Common Stock                Class B Common Stock
<S>                                                                <C>                              <C>
First Quarter                                                      $.165                            $.15
Second Quarter                                                     $.165                            $.15
Third Quarter                                                      $.165                            $.15
Fourth Quarter                                                     $.165                            $.15


                                                                          Per Share Cash Dividends
Year Ended June 30, 1998                                        Common Stock                Class B Common Stock

First Quarter                                                       $.165                           $.15
Second Quarter                                                      $.165                           $.15
Third Quarter                                                       $.165                           $.15
Fourth Quarter                                                      $.165                           $.15
</TABLE>


     On August 20, 1999, the Board of Directors  declared a $.165 per share cash
dividend  on  shares of the  Company's  Common  Stock  and $.15 per  share  cash
dividend on shares of its Class B Common Stock,  payable  September 10, 1999, to
shareholders of record on August 31, 1999.

                                       6
<PAGE>
                         ITEM 6--SELECTED FINANCIAL DATA
<TABLE>
For the Year Ended                                       1999              1998            1997              1996           1995

                                                         (a)               (b)              (c)              (d)
<S>                                                  <C>              <C>             <C>                <C>            <C>
Summary of Operations
Net sales..........................................  $150,259,355     $181,632,570    $176,630,294       $163,012,030   $168,190,969
  Sales growth %...................................       (17.3)%             2.8%            8.4%             (3.1)%          15.6%
Gross profit.......................................    36,092,104       42,299,900      43,548,529         38,603,382     40,894,499
  Gross profit %...................................         24.0%            23.3%           24.7%              23.7%          24.3%
Selling and administrative.........................    25,721,924       29,152,388      28,436,330         27,438,017     26,804,654
  Selling and administrative %.....................         17.1%            16.1%           16.1%              16.8%          15.9%
Operating income (loss)............................     9,770,180      (2,644,764)      14,738,964          7,669,365     14,089,845
  Operating income (loss) %........................          6.5%           (1.5)%            8.3%               4.7%           8.4%
Income (loss) from continuing operations...........     6,161,769      (8,369,182)       8,325,228          3,103,058      7,590,705
Income (loss) from discontinued operation..........             -      (1,368,278)       (471,624)        (3,037,926)        654,433
Net income (loss)..................................     6,161,769      (9,737,460)       7,853,604             65,132      8,245,138

Common Stock Data
Diluted earnings per share from continuing
  operations.......................................          1.24           (1.41)            1.41               0.53           1.29
Diluted earnings per share from discontinued
  operation........................................             -           (0.23)          (0.08)             (0.52)           0.11
Diluted earnings per share.........................          1.24           (1.64)            1.33               0.01           1.40
Weighted-average shares outstanding-diluted........     4,950,008        5,954,713       5,903,237          5,897,237      5,893,651
Dividends per share--common........................          0.66             0.66            0.66               0.66           0.66
Dividends per share--Class B common ...............          0.60             0.60            0.60               0.60           0.60
Year-end stock price...............................        17.625            22.50           16.00              15.75          15.00

Year-end Financial Position
Total assets.......................................    75,059,989      104,033,087     125,741,698        129,225,159    131,433,714
Working capital....................................    18,298,515       38,276,167      39,266,034         39,535,991     45,796,753
Current ratio......................................           2.0              2.5             4.2                4.0            5.8
Long-term debt.....................................    17,700,000        9,700,000      29,000,000         35,000,000     35,800,000
Long-term debt as a % of total capital.............         35.8%            13.6%           28.3%              33.6%          33.0%
Stockholders' equity...............................    31,758,785       61,756,674      73,460,498         69,173,750     72,713,836

Other Data/Key Ratios
Cash flow from operating activities................    13,471,459       23,234,772      16,186,397         13,485,377     12,779,621
Capital expenditures...............................     4,786,263        4,228,552       7,763,482          8,032,779      4,181,472
Depreciation and amortization......................     5,914,739        7,966,383       7,728,603          7,345,353      6,898,438
Research and development expenses..................     1,543,000        1,225,000       1,373,000          1,223,000      1,038,000
Return on average assets...........................          6.9%           (8.5)%            6.2%               0.0%           6.2%
Return on average equity...........................         13.2%          (14.4)%           11.0%               0.1%          11.7%
Number of employees................................           846              944           1,061              1,084          1,136
</TABLE>

(a)       1999 figures include an impairment  charge of $600,000  pre-tax and an
          inventory   write-off   of   $400,000   pre-tax   recorded   for   the
          discontinuance  of  certain  utility  slides.   This  resulted  in  an
          after-tax reduction of $650,000, or $0.13 per diluted share.

(b)       1998 figures  include 1) an adjustment  to the inventory  obsolescence
          reserve of  $910,000  recorded  in cost of sales;  2) a  restructuring
          charge for the  reorganization of KV Canada of $3,992,276  recorded in
          operating  expenses,  and an income tax  benefit of  $600,000,  for an
          after-tax  effect of  $3,392,276,  or $0.57 per diluted  share;  3) an
          impairment  charge for the sale of Hirsh of  $11,800,000  recorded  in
          operating  expenses,  and an income tax expense of $1,000,000,  for an
          after-tax  effect of  $12,800,000,  or $2.16 per diluted  share;  4) a
          $448,284  write-off of idle equipment;  and 5) an after-tax  charge of
          $937,268 or $0.16 per diluted  share to record the sale of Roll-it,  a
          discontinued operation.

(c)       1997  figures  include an  after-tax  charge of  $246,235 or $0.04 per
          diluted share to record the March 1997 sale of Modar.

(d)       1996 figures include an inventory  liquidation of $863,000 recorded in
          cost of sales,  a  restructuring  charge  of  $3,496,000  recorded  in
          operating  expenses,  and an income tax benefit of $1,534,000,  for an
          after-tax  effect of $2,825,000,  or $0.48 per diluted share. The 1996
          figures also include an after-tax  charge of  $2,700,000  to recognize
          the estimated loss on the sale of Roll-it, the Company's  discontinued
          store fixture operation.

                                       7
<PAGE>
      ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

     The following discussion and analysis provides information which management
believes  is  relevant  to an  assessment  and  understanding  of the  Company's
financial condition and results of operations.  The discussion should be read in
conjunction with the consolidated financial statements and footnotes.

Overview

     The Company recorded  consolidated net income of $6.2 million, or $1.24 per
diluted share in fiscal 1999,  compared to a loss of $9.7 million,  or $1.64 per
diluted  share  in the  prior  year.  While  this may  seem  like a  substantial
improvement  in the  bottom-line  performance,  the  loss  in  fiscal  1998  was
primarily  attributable to the impairment and restructuring  charges  associated
with the  implementation  of the Company's  strategy.  Key  activities  included
selling those operations which did not fit with the Company's core competencies,
eliminating redundant operations, continuously improving existing operations and
investing  in new  products for and ways of doing  business  with the  Company's
targeted  customer  base.  Some  of the  current  year  steps  accomplished  are
highlighted below:

     In  September  1998,  the  Company  sold The  Hirsh  Company  ("Hirsh"),  a
     wholly-owned  subsidiary which manufactured  free-standing  shelving,  wood
     storage  products  and  workshop  accessories.   The  loss  of  $12,800,000
     associated  with  this  sale  was  recorded  in  fiscal  1998.  While  this
     subsidiary produced products which did serve the targeted customer base, it
     did not do so profitably.

     The Dutch  Auction  self-tender  offer was  completed  early in the  second
     quarter of fiscal 1999,  which resulted in the purchase of 1,230,784 shares
     of the Company's outstanding stock. In addition,  another 441,959 shares of
     stock were  repurchased  through June 30, 1999. In total,  slightly over 25
     percent of the Company's  outstanding  stock was repurchased  during fiscal
     1999.

     Lean manufacturing  techniques were implemented in the existing operations.
     This step  allowed  the Company to operate in a more  efficient  manner and
     enjoy increased profitability on the products it sold during the year.

Results of Operations

     The table below  shows  certain  items in the  Consolidated  Statements  of
Operations from continuing operations as a percentage of net sales:
<TABLE>
Year ended June 30,                                1999            1998           1997
-----------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>
Net sales.....................................    100.0%          100.0%         100.0%
Cost of sales.................................     76.0            76.7           75.3
                                                -----------------------------------------
  Gross profit................................     24.0            23.3           24.7
Selling and administrative expenses...........     17.1            16.1           16.1
Restructuring and impairment of assets........       .4             8.7             .3
                                                -----------------------------------------
  Operating income (loss).....................      6.5            (1.5)           8.3
Interest expense..............................       .5              .6            1.1
Other expense (income)........................      (.2)             .3             .1
                                                -----------------------------------------
Income (loss) from continuing operations
   before income taxes........................      6.2            (2.4)           7.1
Income taxes - continuing operations..........      2.1             2.2            2.4
                                                -----------------------------------------
Income (loss) from continuing operations......      4.1%           (4.6)%          4.7%
-----------------------------------------------------------------------------------------
</TABLE>

Sales

     In accordance  with  Statement of Financial  Accounting  Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information,  the Company
operates as a single reportable  segment,  storage  products.  While the Company
does not maintain its sales records by product category, management believes the
table below (unaudited)  approximates  total net sales (in millions) for each of
the product categories:

                                       8
<PAGE>
<TABLE>
Year ended June 30                    1999            %             1998              %             1997             %
----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>               <C>           <C>               <C>           <C>             <C>
Shelving systems                   $   55.5          37.0%         $   83.0          45.7%         $    82.0        46.4%
Drawer slides                          70.8          47.1%             69.8          38.4%              62.3        35.3%
Hardware                               24.0          15.9%             28.8          15.9%              29.3        16.6%
Furniture components                      -              -                -              -               3.0         1.7%
----------------------------------------------------------------------------------------------------------------------------
Total                              $  150.3           100%         $  181.6           100%         $   176.6         100%
============================================================================================================================
</TABLE>

     Net  sales in  fiscal  1999  declined  $31.4  million,  or 17.3% to  $150.3
million.  The most significant decline was in shelving systems and was primarily
due to the  sales  contribution  of  Hirsh  which  was sold in  September  1998.
Excluding Hirsh sales, fiscal 1998 net sales were $152.1 million.  The remaining
year to year decline was due to two key factors.  First, the Company performed a
profitability review of its current product offerings and decided to discontinue
certain product lines which were either  unprofitable or provided only a minimal
return.  Specifically,  the Company opted to re-deploy  production  assets which
were utilized to produce  certain  utility  slides to the production of the more
profitable  precision  drawer  slides.  While this decision  improved the bottom
line,  it did result in lower net sales for the fiscal year.  Second,  while the
Company experienced double-digit growth in precision drawer slides when compared
to the prior year, it did not achieve its planned level of sales during the last
six months of the fiscal year. Management believes that the lower level of sales
can be  attributed  to the fact that the office  furniture  market,  the primary
customer for the precision drawer slides,  had relatively flat sales during this
period.  Given that the office  furniture  industry is  projecting  only nominal
growth through the remainder of the calendar  year,  this will continue to be an
area monitored closely by management.

     Net sales in fiscal 1998 increased $5.0 million to a record $181.6 million,
or 2.8%, over fiscal 1997 sales of $176.6 million. The increase in sales was due
primarily to an increase in unit  volumes.  Drawer slide sales led this increase
with a $7.5  million  improvement.  The  increase was due to growth in precision
drawer slide sales as the Company  expanded its shipments  into the metal office
furniture  market.  Euro-style  drawer slide sales increases in fiscal 1998 were
offset by a decline in sales of utility slides.  Shelving system sales increased
by $1.0 million due to increases in sales of  wall-attached  shelving.  Hardware
sales  declined  $0.5 million in fiscal 1998  compared to fiscal  1997.  Feeny's
continued  increase in the sales of its kitchen and bath storage  products  were
offset by a decrease in the Hirsh Iron Horse product line.  The decrease in Iron
Horse sales was caused by a reduction in promotions of the product line at major
home centers.  Furniture  component  sales declined $3.0 million.  No sales were
recorded in fiscal  1998 due to the  elimination  of the product  line in fiscal
1997 with the sale of Modar Inc.

Gross Profit

     Gross  profit,  as a  percentage  of net sales,  was 24.0% in fiscal  1999,
compared to 23.3% in fiscal 1998,  and 24.7% in fiscal 1997.  Initially the sale
of Hirsh and the  discontinuance of other low-margin product lines resulted in a
more favorable  product mix which translated to improved gross profits beginning
in the second  quarter of fiscal 1999. In the third quarter of fiscal 1999,  the
Company started to realize some of the benefits from the  implementation of lean
manufacturing  techniques,  which not only  resulted  in  reduced  manufacturing
costs,  but also  allowed the  Company to improve its service to its  customers.
During  fiscal  2000,  management  will  continue  the efforts to improve  gross
profits by utilizing lean manufacturing principles to help eliminate unnecessary
costs in all aspects of the business,  coupled with various initiatives underway
to reduce the cost of its purchased components.

     The  decrease in the fiscal 1998 gross  profit  compared to fiscal 1997 was
attributable to the Company's continued investment in manufacturing and sales to
aggressively  enter the metal office  furniture  market;  transition  costs that
cannot be  classified  as  restructuring  related to the  reorganization  of the
Company's  Canadian  operation near Toronto;  continued softness in the Canadian
dollar; and an obsolete inventory charge of $910,000.

Selling and Administrative

     Selling and administrative  expenses, as a percent of net sales, were 17.1%
in fiscal 1999, compared to 16.1% in both fiscal 1998 and 1997. While management
took steps to reduce  discretionary  spending  in response to the lower level of
sales,  total  spending,  as a percent of net sales,  increased  in fiscal  1999
primarily  due to severance  payments and costs  associated  with the  Company's
strategic  planning  effort.  These  increases  were  only  partially  offset by
reductions  in costs which are  variable  with  performance,  such as  incentive
programs and commissions.

Restructuring/Impairment

     As a result of the decision to re-deploy  certain utility slide  production
assets,  the Company  recorded an impairment  loss of $.6 million pre-tax in the
second quarter of fiscal 1999 to write the related  tooling assets down to their
estimated  fair value.  In addition,  excess  inventory  of $.4 million  pre-tax
related to the discontinued product lines was charged directly to cost of sales.

     In September 1998, the Company sold Hirsh, a wholly-owned  subsidiary.  The
sale of Hirsh  reflected the Company's  desire to enhance its corporate  margins
and profitability and remain focused on its core products.  The sale resulted in
a pre-tax loss of $11.8

                                       9
<PAGE>
million,  which was included in the June 30, 1998,  financial results.  The loss
included  the  write-off  of the  unamortized  balance of  goodwill  recorded in
connection  with the purchase of Hirsh. In connection with the sale, the Company
recognized  an additional  tax cost of $1.0  million,  resulting in a total loss
related to the sale of Hirsh of $12.8 million. A pre-tax restructuring charge of
$4.0 million was  recorded in the third  quarter of fiscal 1998 for Knape & Vogt
Canada.  In March  1998,  Knape & Vogt  announced  its plans to  reorganize  its
Canadian operation,  including the sale of the Company's  manufacturing facility
and  equipment in the Toronto area.  The sale was completed in May of 1998.  The
Company will continue to sell and distribute its products in Canada and maintain
a sales office in the Toronto area.  During  fiscal 1997,  the sale of Modar was
completed and resulted in an additional pre-tax  restructuring and impairment of
assets  charge of $.4  million  which  represented  the  difference  between the
original estimate and the actual loss from the sale.

Other Expenses/(Income) and Income Taxes

     Interest  expense was $.8 million in fiscal 1999,  compared to $1.2 million
and $2.0 million,  respectively,  in fiscal years 1998 and 1997. The decrease in
interest  expense  reflected the lower average  borrowing  levels in both fiscal
1999 and fiscal 1998  resulting  from proceeds  received from the sales of Hirsh
and Roll-it, along with cash flow from operating activities.

     Other  miscellaneous  expense/(income)  in fiscal  1999  included  interest
received on Michigan  Single  Business  Tax refunds and two patent  infringement
settlements,  partially  offset  by losses  incurred  on the  disposal  of fixed
assets.  The other  expense in fiscal  1998 was  primarily  attributable  to the
write-off of fixed assets associated with a discontinued product line.

Net Income

     Income from continuing operations in fiscal 1999 was $6.2 million, or $1.24
per diluted share  compared to a loss of $8.4 million or $1.41 per diluted share
in fiscal 1998 and net income of $8.3  million,  or $1.41 per  diluted  share in
fiscal 1997.  The loss  recorded in fiscal 1998 was  primarily due to the losses
incurred on the sale of Hirsh and the restructuring of Knape & Vogt Canada.

     The results of operations of Roll-it,  net of income taxes,  were presented
as a discontinued operation in both fiscal 1998 and fiscal 1997. In fiscal 1998,
the after-tax loss from discontinued operation was $1.4 million compared to $0.5
million in fiscal 1997.  On March 27, 1998,  the Company  signed an agreement to
sell Roll-it  which  resulted in an additional  loss of $.9 million,  due to the
difference  between the  original  estimate and the actual loss from the sale of
Roll-it.

     Net income was $6.2  million,  or $1.24 per diluted  share in fiscal  1999,
compared to a loss of $9.7  million,  or $1.64 per diluted share in fiscal 1998.
The  improvement  over the  prior  year was due to the $12.8  million  after-tax
charge recorded for the sale of Hirsh, the $3.4 million restructuring charge for
Knape & Vogt  Canada  and the  additional  loss of $.9  million  on the  sale of
Roll-it.  Without these  charges,  net income would have been $7.4  million,  or
$1.25 per  diluted  share in fiscal  1998.  This  compares to net income of $7.9
million, or $1.33 per diluted share in fiscal 1997.

Liquidity And Capital Resources

     Cash flows from operating activities generated $13.5 million in fiscal 1999
compared to $23.2  million in fiscal 1998 and $16.2  million in fiscal 1997.  In
fiscal  1999,  the  cash  flows  from  the  change  in  accounts   payable  were
substantially lower than in fiscal 1998, due to two factors. First, in the prior
year,  the Company  adopted a more  aggressive  payment  policy with its vendors
which resulted in a higher accounts  payable balance and a significant  one-time
increase in cash flows.  Second, even though the Company was still utilizing the
more  aggressive  payment  policy  with its  vendors  in fiscal  1999,  payables
decreased due to the sale of Hirsh.

     Cash flows  from  investing  activities  of $13.1  million  in fiscal  1999
included the cash proceeds of $18.2 million received from the sale of Hirsh. The
balance also  included  $4.8 million of capital  expenditures,  compared to $4.2
million  and  $7.8  million,   respectively,   in  fiscal  1998  and  1997.  The
expenditures  in fiscal 1999 were  primarily for  improvements  in the Company's
manufacturing  process,  including the installation of the new powder coat paint
line.  Management  believes  that capital  expenditures  will increase in fiscal
2000, as investments are made to improve  manufacturing  technology and to bring
new products and product enhancements to the Company's customers.

     Following the financial strategy announced last year, the Company completed
a Dutch Auction early in the second quarter of fiscal 1999. This resulted in the
repurchase  of  1,230,784  shares of the  Company's  stock at a price of $21 per
share.  In addition,  the Company  repurchased  an additional  441,959 shares at
prices ranging from approximately $13 to $19 per share through June 30, 1999. In
total, the cost of the repurchased  shares was $33.4 million in fiscal 1999. The
Company has authorization to repurchase an additional 77,257 shares.

     During fiscal 1999, the Company renegotiated its revolving credit facility.
The new facility allows for borrowings up to $45 million and expires on November
1, 2004. In addition,  the Company  entered into an interest rate swap agreement
in order to fix the  interest  rate on a  portion  of the  borrowings  under the
revolving  credit facility.  The swap agreement,  which expires on June 1, 2006,
fixes the interest on $17 million of  borrowings  through  August 31, 1999,  and
increases to $20 million  beginning  September 1, 1999. The swap agreement fixes
the rate at 6.25%  plus the  Company's  credit  spread on the  revolving  credit
agreement.

                                       10
<PAGE>
     The  Company's  outstanding  debt at June  30,  1999,  was  $17.7  million,
compared  to $9.7  million  in  fiscal  1998.  The debt to total  capital  ratio
increased  to 35.8% at June 30, 1999,  from 13.6% at June 30, 1998.  The Company
continues to manage its debt levels in an effort to reach its  targeted  capital
structure.  The  Company  believes  that cash  flows from  operations  and funds
available  under the new credit  facility  will be  sufficient  to fund  working
capital requirements and capital expenditures in fiscal 2000.

Year 2000 Compliance

     The Year 2000 issue is the result of computer  systems  that use two digits
rather than four to define the applicable  year,  which may prevent such systems
from accurately  processing dates ending in the year 2000 and after.  This could
result  in  system  failures  or  in  miscalculations,   causing  disruption  of
operations, including, but not limited to, an inability to process transactions,
to send and receive electronic data, or to engage in routine business activities
and operations.

     In 1995,  the Company  established  a Year 2000 task force for  Information
Technology  ("IT") to develop and implement a Year 2000 readiness  program.  The
Company has developed a Year 2000  readiness  plan, and has completed the audit,
assessment  and scope phases of its plan. The Company has completed an inventory
of the software  applications  that it uses.  The Company has also installed its
Corporate  Information System software at its subsidiaries to improve efficiency
and facilitate Year 2000  compliance.  The Company  estimates that the readiness
program phase is  approximately  90% complete for the Company's IT systems.  The
Company's  readiness program includes  installing  software releases designed to
cause the software to be Year 2000  compliant.  The Company is in the process of
testing its IT systems for Year 2000 compliance,  and expects testing activities
to continue through 1999. The Company reached its goal to be substantially  Year
2000 compliant by December 1998, to allow for testing all systems during 1999.

     In addition,  in 1997 the Company began  evaluating  non-IT systems such as
imbedded  chips in  production  equipment  and  personal  computer  hardware and
software.  The Company's goal was substantially complete with the remediation of
non-IT systems by June 30, 1999. The Company  presently is finishing the process
of testing and  implementation,  and is upgrading  its non-IT  systems to become
Year 2000 compliant as new releases are available from software vendors.

     In addition to reviewing its internal  systems,  the Company has had formal
communications  with its significant  customers,  vendors and freight  companies
concerning Year 2000 compliance,  including electronic commerce. There can be no
assurance  that the systems of other  companies  that  interact with the Company
will be sufficiently Year 2000 compliant so as to avoid an adverse impact on the
Company's operations, financial condition and results of operations.

     The Company  does not  presently  anticipate  that the costs to address the
Year 2000 issue will have a materially adverse effect on the Company's financial
condition,  results of operations or liquidity.  To date,  the Company has spent
approximately $823,000 on the Year 2000 issue and expects to spend an additional
$62,000 to complete this work.

     The  Company  presently  anticipates  that it will  complete  its Year 2000
assessment  and  remediation  by December  31,  1999.  However,  there can be no
assurance  that the Company will be  successful  in  implementing  its Year 2000
remediation plan according to the anticipated schedule.

     Although the Company expects its internal systems to be Year 2000 compliant
as  described  above,  the  Company is  developing  contingency  plans for major
processes,  in the event that it should have interruption  during the first week
of calendar  2000.  In addition,  the Company may be  adversely  affected by the
inability of other companies, whose systems interact with the Company, to become
Year 2000 compliant and by potential interruptions of utility,  communication or
transportation systems as a result of Year 2000 issues. The Company is preparing
a scenario where business could be interrupted for 3-5 days similar to an outage
from a major storm.

     This report contains certain forward-looking statements which involve risks
and uncertainties.  When used in this report, the words "believe," "anticipate,"
"think," "intend," "goal," "forecast," "expect" and similar expressions identify
forward-looking  statements.  Forward-looking  statements  include,  but are not
limited to,  statements  concerning  new product  introductions,  future revenue
growth and gross margin improvement, and the expected ability of the Company and
its key  customers,  dealers  and  suppliers  to  successfully  manage Year 2000
issues.  Such  statements are subject to certain risks and  uncertainties  which
would cause actual results to differ  materially from those expressed or implied
by such  forward-looking  statements.  Readers are  cautioned not to place undue
reliance on those forward-looking  statements which speak only as of the date of
this report.

                                       11
<PAGE>
                ITEM 7A--QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK

     The  Company is  exposed  to market  risks,  which  include  changes in the
foreign  currency  exchange rate as measured against the U.S. dollar and changes
in U.S. interest rates. The Company holds a derivative instrument in the form of
an interest rate swap, which is viewed as a risk management tool and is not used
for trading or speculative purposes.  The intent of the interest rate swap is to
effectively  fix the interest  rate on part of the  borrowings  on the Company's
variable rate revolving credit agreement.

     A discussion of the Company's  accounting policies for derivative financial
instruments is included in the Summary of Significant Accounting Policies in the
Notes to Consolidated  Financial Statements.  Additional information relating to
financial instruments and debt is included in Note 5 - Long-Term Debt and Note 7
-  Derivative  Financial  Instruments.   Quantitative  disclosures  relating  to
financial instruments and debt are included in the tables below.

     The following  table provides  information on the Company's  fixed maturity
investments  as of June 30,  1999,  that are  sensitive  to changes in  interest
rates.  The table also  presents the  corresponding  interest  rate swap on this
debt.  Since the interest rate swap  effectively  fixes the interest rate on the
notional amount of debt, changes in interest rates have no current effect on the
interest  expense  recorded by the Company on the portion of the debt covered by
the interest rate swap.

<TABLE>
Liability                                                     Amount                    Maturity Date
<S>                                                           <C>                       <C>
Variable rate revolving credit
  agreement                                                   $45 million               November 1, 2004
  First $17,000,000 at an interest rate of 5.0425%
      plus weighted average credit spread of .5%
  Amounts in excess of $17,000,000 had an interest rate
      ranging from 5.10% to 5.77% in 1999

Interest Rate Swaps
Notional amount                                               $17 million               August 31, 1999
  Increased to                                                $20 million               June 1, 2006
  Pay fixed/Receive variable - 5.05125%
     Pay fixed interest rate - 6.25%
</TABLE>

     The  Company  has a sales  office  located in Canada.  Sales are  typically
denominated  in  Canadian  dollars,  thereby  creating  exposures  to changes in
exchange rates. The changes in the Canadian/U.S. exchange rate may positively or
negatively affect the Company's sales, gross margins and retained earnings.  The
Company  attempts to minimize  currency  exposure risk through  working  capital
management.  The Company  does not hedge its exposure to  translation  gains and
losses relating to foreign currency net asset exposures.

                                       12
<PAGE>
               ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Immediately  following are the  consolidated  balance sheets of the Company
and  its  subsidiaries  as of  June  30,  1999,  and  the  related  consolidated
statements of income,  stockholders' equity and cash flows for each of the three
years  in the  period  ended  June 30,  1999,  the  notes  thereto,  summary  of
accounting policies, and the independent auditors' report.







                                       13
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                      Consolidated Statements of Operations

<TABLE>
Year ended June 30,                                               1999                 1998                 1997
---------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                  <C>                  <C>
Net Sales                                                     $ 150,259,355        $ 181,632,570        $ 176,630,294

Cost of Sales                                                   114,167,251          139,332,670          133,081,765
---------------------------------------------------------------------------------------------------------------------

Gross Profit                                                     36,092,104           42,299,900           43,548,529
---------------------------------------------------------------------------------------------------------------------

Expenses
     Selling and shipping                                        19,953,864           22,594,546           21,545,425
     Administrative and general                                   5,768,060            6,557,842            6,890,905
     Restructuring and impairment of assets                         600,000           15,792,276              373,235
---------------------------------------------------------------------------------------------------------------------

Total Expenses                                                   26,321,924           44,944,664           28,809,565
---------------------------------------------------------------------------------------------------------------------

Operating Income (Loss)                                           9,770,180           (2,644,764)          14,738,964
---------------------------------------------------------------------------------------------------------------------
Other Expenses (Income)
     Interest                                                       802,202            1,224,394            1,986,522
     Other, net                                                    (355,791)             569,024              163,214
---------------------------------------------------------------------------------------------------------------------

Total Other Expenses                                                446,411            1,793,418            2,149,736
---------------------------------------------------------------------------------------------------------------------

Income (Loss) From Continuing Operations Before
     Income Taxes                                                 9,323,769           (4,438,182)          12,589,228
Income Taxes - Continuing Operations                              3,162,000            3,931,000            4,264,000
---------------------------------------------------------------------------------------------------------------------

Income (Loss) From Continuing Operations                          6,161,769           (8,369,182)           8,325,228
---------------------------------------------------------------------------------------------------------------------

Discontinued Operation, Net of Income Taxes
     Loss from operations                                                 -             (431,010)            (471,624)
     Estimated loss on sale                                               -             (937,268)                   -
---------------------------------------------------------------------------------------------------------------------

Total Discontinued Operation, Net of
     Income Taxes                                                         -           (1,368,278)            (471,624)
---------------------------------------------------------------------------------------------------------------------

Net Income (Loss)                                               $ 6,161,769         $ (9,737,460)         $ 7,853,604
---------------------------------------------------------------------------------------------------------------------

Basic Earnings Per Share
     Income (loss) from continuing operations                   $      1.25         $      (1.41)         $      1.41
     Loss from discontinued operation                                     -                (0.23)               (0.08)
                                                                      -----                -----                -----
Net Income (Loss) Per Share                                     $      1.25         $      (1.64)         $      1.33
---------------------------------------------------------------------------------------------------------------------
Weighted Average Shares Outstanding                               4,938,356            5,920,380            5,889,420
---------------------------------------------------------------------------------------------------------------------

Diluted Earnings Per Share
      Income (loss) from continuing operations                  $      1.24         $      (1.41)        $       1.41
      Loss from discontinued operation                                    -                (0.23)               (0.08)
                                                                      -----               ------                -----
Net Income (Loss) Per Share                                     $      1.24         $      (1.64)        $       1.33
---------------------------------------------------------------------------------------------------------------------
Weighted Average Shares Outstanding                               4,950,008            5,954,713            5,903,237
---------------------------------------------------------------------------------------------------------------------

Dividends Per Share
     Common stock                                               $       .66         $        .66         $        .66
     Class B common stock                                       $       .60         $        .60         $        .60
---------------------------------------------------------------------------------------------------------------------
                    See accompanying notes to consolidated financial statements.
</TABLE>

                                       14
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                           Consolidated Balance Sheets
<TABLE>
----------------------------------------------------------------------------------------------------------------------------
June 30,                                                                                       1999                1998
----------------------------------------------------------------------------------------------------------------------------

Assets
<S>                                                                                <C>                 <C>
Current Assets
     Cash                                                                          $      1,621,002    $      3,057,158
     Accounts receivable, less allowances of $389,000 and $352,000, respectively         18,930,039          25,677,043
     Refundable income taxes                                                                140,708             176,204
     Inventories                                                                         13,149,649          12,808,532
     Prepaid expenses                                                                     2,030,916           2,706,490
     Net assets held for sale                                                                     -          18,648,000
----------------------------------------------------------------------------------------------------------------------------

Total Current Assets                                                                     35,872,314          63,073,427
----------------------------------------------------------------------------------------------------------------------------

Property and Equipment
     Land and improvements                                                                1,815,127           1,804,948
     Buildings                                                                           14,436,028          14,353,886
     Machinery and equipment                                                             48,180,990          44,207,020
     Construction in progress                                                             2,224,266             536,047
----------------------------------------------------------------------------------------------------------------------------

                                                                                         66,656,411          60,901,901
     Less accumulated depreciation                                                       31,357,471          24,247,181
----------------------------------------------------------------------------------------------------------------------------

Net Property and Equipment                                                               35,298,940          36,654,720
----------------------------------------------------------------------------------------------------------------------------

Goodwill, net                                                                               575,433             593,277
----------------------------------------------------------------------------------------------------------------------------

Other Assets                                                                              3,313,302           3,711,663
----------------------------------------------------------------------------------------------------------------------------

                                                                                  $      75,059,989    $    104,033,087
----------------------------------------------------------------------------------------------------------------------------
                    See accompanying notes to consolidated financial statements.
</TABLE>
                                       15
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                           Consolidated Balance Sheets
<TABLE>
-------------------------------------------------------------------------------------------------------------------
June 30,                                                                                 1999                1998
-------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
<S>                                                                          <C>                 <C>
Current Liabilities
     Accounts payable                                                        $      9,129,514    $     17,765,610
     Accruals:
         Income taxes                                                                 732,344             847,306
         Taxes other than income                                                      864,734             860,928
         Compensation                                                               3,055,717           3,067,186
         Restructuring costs                                                          377,515             828,932
         Miscellaneous                                                              3,413,975           1,427,298
-------------------------------------------------------------------------------------------------------------------

Total Current Liabilities                                                          17,573,799          24,797,260

Supplemental Retirement Benefits                                                    3,155,405           1,837,153

Long-Term Debt                                                                     17,700,000           9,700,000

Deferred Income Taxes                                                               4,872,000           5,942,000
-------------------------------------------------------------------------------------------------------------------

Total Liabilities                                                                  43,301,204          42,276,413
-------------------------------------------------------------------------------------------------------------------

Stockholders' Equity
     Stock:
       Common, $2 par - 6,000,000 shares authorized; 2,073,148
          and 3,530,042 issued                                                      4,146,296           7,060,084
       Class B common, $2 par - 4,000,000 shares authorized;
          2,238,227 and 2,405,583 issued                                            4,476,454           4,811,166
        Preferred - 2,000,000 shares authorized and unissued                                -                   -
     Additional paid-in capital                                                     4,409,415          33,724,990
     Accumulated other comprehensive income (loss)                                   (478,606)                  -
     Retained earnings                                                             19,205,226          16,160,434
-------------------------------------------------------------------------------------------------------------------

Total Stockholders' Equity                                                         31,758,785          61,756,674
-------------------------------------------------------------------------------------------------------------------

                                                                             $     75,059,989    $    104,033,087
-------------------------------------------------------------------------------------------------------------------
                    See accompanying notes to consolidated financial statements.
</TABLE>
                                       16

<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
<TABLE>

                                                                                         Accumulated
                                                            Additional     Restricted      other
                                               Common        paid-in         stock      comprehensive     Retained
                                               stock         capital         grants      income (loss)    earnings        Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>             <C>         <C>             <C>            <C>
Balance, July 1, 1996                        $11,762,138    $ 33,080,087    $      -    $ (1,211,286)   $ 25,542,811   $ 69,173,750
Net income for 1997                                    -               -           -               -       7,853,604      7,853,604
Cash dividends                                         -               -           -               -      (3,738,138)    (3,738,138)
Stock issued under stock option plan              45,520         260,454           -               -               -        305,974
Foreign currency translation adjustment                -               -           -        (134,692)              -       (134,692)

-----------------------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1997                        11,807,658      33,340,541           -      (1,345,978)     29,658,277     73,460,498
Net loss for 1998                                      -               -           -               -      (9,737,460)    (9,737,460)
Cash dividends                                         -               -           -               -      (3,760,383)    (3,760,383)
Stock issued under stock option plan              63,592         384,449           -               -               -        448,041
Foreign currency translation adjustment                -               -           -        (259,327)              -       (259,327)
Sale of Knape & Vogt Canada assets                     -               -           -       1,605,305               -      1,605,305

-----------------------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1998                        11,871,250      33,724,990           -               -      16,160,434     61,756,674
Net income for 1999                                    -               -           -               -       6,161,769      6,161,769
Cash dividends                                         -               -           -               -      (3,116,977)    (3,116,977)
Stock issued under stock option plan              75,986         472,431           -               -               -        548,417
Tax benefit from exercise
  of stock options                                     -          69,133           -               -               -         69,133
Stock grants issued                               21,000         215,250    (236,250)              -               -              -
Stock grants earned                                    -               -     236,250               -               -        236,250
Repurchase and retirement of
  shares of common stock                      (3,345,486)    (30,072,389)          -               -               -    (33,417,875)
Foreign currency translation adjustment                -               -           -         (29,983)              -        (29,983)
Minimum SERP adjustment, net of tax
  benefit of $263,901                                  -               -           -        (448,623)              -       (448,623)
-----------------------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1999                       $ 8,622,750   $   4,409,415     $     -      $ (478,606)    $19,205,226   $ 31,758,785
-----------------------------------------------------------------------------------------------------------------------------------
                    See accompanying notes to consolidated financial statements.
</TABLE>
                                       17
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                      Consolidated Statements of Cash Flows

<TABLE>
Year ended June 30,                                                      1999             1998            1997
-----------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>               <C>
Operating Activities
  Net income (loss)                                                $ 6,161,769     $ (9,737,460)     $  7,853,604
  Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
     Depreciation of fixed assets                                    5,123,290        6,604,799         6,542,750
     Amortization of other assets                                      791,449        1,361,584         1,185,853
     Decrease in deferred income taxes                                (810,856)        (752,000)         (334,800)
     Increase in supplemental retirement ben                           605,313          264,957            76,740
     Decrease in deferred lease costs                                  (93,248)        (556,992)         (541,696)
     Loss on sale of the discontinued operation                              -          937,268                 -
     Write-off of foreign currency translation adjustment                    -        1,605,305                 -
     Loss on sale of The Hirsh Company                                       -       12,800,000                 -
     Impairment loss on product line discontinued                      600,000                -                 -
     Loss on disposal of property and equipment                        593,431                -                 -
     Stock grants earned                                               236,250                -                 -
     Changes in operating assets and liabilities:
          Decrease (increase) in:
             Accounts receivable                                     6,717,542         (809,180)       (2,248,856)
             Refundable income taxes                                    33,961        1,157,735           272,579
             Inventories                                              (341,117)       1,903,218         4,372,415
             Net assets of discontinued operation                            -         (995,000)          592,226
             Assets held for sale                                      490,116                -                 -
             Prepaid expenses                                          882,696          384,903          (629,600)
          Increase (decrease) in:
             Accounts payable                                       (8,631,246)       8,776,835         1,158,861
             Accrued restructuring costs                              (436,172)         672,004        (3,440,184)
             Accruals                                                1,548,281         (383,204)        1,326,505
-----------------------------------------------------------------------------------------------------------------

     Net cash provided by operating activities                      13,471,459       23,234,772        16,186,397
-----------------------------------------------------------------------------------------------------------------

Investing Activities

     Additions to property and equipment                            (4,786,263)      (4,228,552)       (7,763,482)
     Proceeds from sales of property and equipment                      20,250        2,564,744         2,985,833
     Proceeds from the sale of The Hirsh Company                    18,157,884                -                 -
     Disposition of discontinued operation                                   -        2,045,364                 -
     Other, net                                                       (312,330)         803,530        (1,079,168)
-----------------------------------------------------------------------------------------------------------------

     Net cash provided by (used for) investing activities           13,079,541        1,185,086        (5,856,817)
-----------------------------------------------------------------------------------------------------------------

Financing Activities
     Proceeds from issuance of common stock                            548,417          448,041           305,974
     Repurchase and retirement of common stock                     (33,417,875)               -                 -
     Cash dividends declared                                        (3,116,977)      (3,760,383)       (3,738,138)
     Borrowings (payments) on long-term debt                         8,000,000      (19,300,000)       (6,000,000)
-----------------------------------------------------------------------------------------------------------------

     Net cash used for financing activities                        (27,986,435)     (22,612,342)       (9,432,164)
-----------------------------------------------------------------------------------------------------------------

Effect of Exchange Rate Changes on Cash                                   (721)         103,096             4,859
-----------------------------------------------------------------------------------------------------------------

Net Increase (Decrease) in Cash                                     (1,436,156)       1,910,612           902,275

Cash, beginning of year                                              3,057,158        1,146,546           244,271
-----------------------------------------------------------------------------------------------------------------
Cash, end of year                                                  $ 1,621,002      $ 3,057,158      $  1,146,546
-----------------------------------------------------------------------------------------------------------------
                    See accompanying notes to consolidated financial statements.
</TABLE>
                                       18
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements



1.   Summary of Significant Accounting Policies

Principles of Consolidation

The  consolidated  financial  statements  include  the  accounts of Knape & Vogt
Manufacturing  Company and its  wholly-owned  subsidiaries  (the  Company).  All
material  intercompany  balances,   transactions  and  stockholdings  have  been
eliminated in consolidation.

Year End

Effective  July 1,  1999,  the  Company  adopted a 52- or 53-week  fiscal  year,
changing the year-end date from June 30 to the Saturday nearest the end of June.

Description of Business, Revenue Recognition and Concentration of Credit Risk

The Company  designs,  manufactures and distributes  storage products  including
decorative and utility wall-attached  shelving systems,  drawer slides,  kitchen
and closet  storage  products  and cabinet  hardware.  On August 20,  1996,  the
Company  announced  its decision to sell its store  fixture  operation  and this
portion  of the  business  was shown as a  discontinued  operation.  The sale of
Roll-it was completed in March 1998. The Company primarily sells its products to
hardware c  distributors  and original  equipment  manufacturers  and recognizes
revenue upon shipment of products to customers.  No single customer accounts for
more  than 10% of  consolidated  sales.  The  Company  performs  ongoing  credit
evaluations and maintains reserves for potential credit losses.

Foreign Currency Translation

The  accounts of the foreign  subsidiary  are  translated  into U.S.  dollars in
accordance  with  Statement of  Financial  Accounting  Standards  (SFAS) No. 52.
Assets and  liabilities are translated at year-end  exchange  rates.  Income and
expense  accounts are translated at average  exchange rates in effect during the
year. Translation  adjustments resulting from fluctuations in the exchange rates
are recorded in accumulated other comprehensive  income, a separate component of
stock

Fair Value of Financial Instruments

The carrying amounts of the Company's  financial  instruments,  which consist of
cash,  receivables,  bank  revolving  credit  agreement  and  accounts  payable,
approximate  their fair values.  The fair market value of the interest rate swap
agreement at June 30, 1999, was approximately $100,000.

Cash Equivalents

From time to time, the Company holds  short-term  investments with a maturity of
three months or less when purchased which are considered cash equivalents.

Inventories

Inventories  are  stated  at the  lower of FIFO  (first-in,  first-out)  cost or
market.

Property, Equipment and Depreciation

Property  and  equipment  are  stated  at cost and  depreciated,  for  financial
reporting  purposes,  using the  straight-line  method over the estimated useful
lives of the assets. For income tax purposes,  accelerated  depreciation methods
and shorter useful lives are used.

                                       19
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements



Accounting for the Impairment of Long-Lived Assets

In accordance  with SFAS No. 121,  Accounting  for the  Impairment of Long-Lived
Assets, the Company reviews long-lived assets for impairment  whenever events or
changes in  circumstances  indicate that the carrying amount of an asset may not
be recoverable.

Goodwill

Goodwill represents the amount by which the cost of businesses purchased exceeds
the fair value of the net assets  acquired.  Goodwill is amortized over a period
of 40 years using the straight-line method. Accumulated amortization of goodwill
was $138,285 and $120,441 at June 30, 1999 and 1998,  respectively.  The Company
periodically  reviews goodwill for impairment based upon undiscounted  operating
income  over  the  remaining  life of the  goodwill.  While  the  estimates  are
experience and assumptions regarding future operations,  the amounts the Company
will  ultimately  realize  could differ from those used in the 1999 SFAS No. 121
analysis.

Income Taxes

The Company  accounts for certain  income and expenses in different  periods for
financial reporting and income tax purposes.  The Company utilizes the liability
method to account for deferred  income taxes by applying  statutory tax rates in
effect at the balance sheet date to differences  between the financial reporting
and tax bases of assets and liabilities.  The resulting deferred tax liabilities
or assets  are  adjusted  to  reflect  changes  in tax laws or rates by means of
expense.

Use of Estimates in Preparation of Financial Statements

The preparation of financial  statements in accordance  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Advertising

Costs incurred for  advertising,  including  costs  incurred  under  cooperative
advertising  programs  with  customers,  are expensed as  incurred.  Advertising
expense was $799,000 in 1999, $636,000 in 1998 and $678,000 in 1997.

Earnings Per Share

During fiscal 1998, the Company adopted SFAS No. 128,  Earnings per Share.  SFAS
No. 128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted  earnings per share.  Unlike primary  earnings per share,
basic earnings per share excludes the dilutive effects of options,  warrants and
convertible  securities.  Diluted  earnings  per  share is very  similar  to the
previously  reported fully diluted earnings per share. SFAS No. 128 requires tha
prior  periods  presented  be restated to give effect to the  provisions  of the
statement. SFAS No. 128 did not materially impact earnings per share information
previously reported. For the periods presented, the numerators remained the same
in both the basic and diluted earnings per share  calculations.  The denominator
was increased in the diluted computation due to the recognition of stock options
as common stock equivalents.

                                       20
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements



The following  table  reconciles  the numerators  and  denominators  used in the
calculations of basic and diluted EPS for each of the last three years:

<TABLE>
                                           1999             1998            1997
------------------------------------------------------------------------------------
<S>                                      <C>             <C>              <C>
Numerators:
  Numerator for both basic and
  diluted EPS, net income (loss)         $6,161,769      $(9,737,460)     $7,853,604
------------------------------------------------------------------------------------
Denominators:
  Denominator for basic EPS,
  weighted-average common
  shares outstanding                      4,938,356        5,920,380       5,889,420
  Potentially dilutive shares
  resulting from stock option
  plans                                      11,652           34,333          13,817
------------------------------------------------------------------------------------
  Denominator for diluted EPS             4,950,008        5,954,713       5,903,237
====================================================================================
</TABLE>

The following  exercisable stock options were not included in the computation of
diluted EPS because the option prices were greater than average quarterly market
prices.

<TABLE>
                                               1999             1998            1997
------------------------------------------------------------------------------------
<S>                                          <C>                 <C>          <C>
Exercise Price
$18.41                                       13,750                -          22,825
$20.00                                       13,500                -          22,250
</TABLE>

Derivative Financial Instruments

The Company  uses an  interest  rate swap  agreement  to modify a portion of the
variable  rate  revolving  line of credit to a fixed  rate  obligation,  thereby
reducing  the  exposure  to market rate  fluctuations.  The  interest  rate swap
agreement is designated as a hedge and  effectiveness  is determined by matching
the principal balance and terms with that specific obligation. Amounts currently
due to or from  interest  rate swap  counter  parties  are  recorded in interest
expense in the period in which they accrue.

New Accounting Standards

During fiscal 1999, the Company  adopted SFAS No. 130,  Reporting  Comprehensive
Income,  which established  standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity  except those  resulting  from  investments  by
owners  and  distributions  to owners.  Among  other  disclosures,  SFAS No. 130
requires  that all  items  that are  required  to be  recognized  under  current
accounting  comprehensive  income be reported in a financial  statement  that is
displayed with the same  prominence as other financial  statements.  The Company
elected to disclose  comprehensive income within the consolidated  statements of
stockholders'  equity.  Prior years' financial statements have been reclassified
to conform with these requirements.

                                       21
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements



During fiscal 1999, the Company adopted SFAS No. 131, Disclosures about Segments
of an  Enterprise  and  Related  Information,  which  superseded  SFAS  No.  14,
Financial  Reporting  for  Segments of a Business  Enterprise,  and  established
standards for the way that public enterprises report information about operating
segments in annual  financial  statements  and  required  reporting  of selected
information about operating  segments in interim financial  statements issued to
the public impact the Company as it operates in a single reportable segment.

During fiscal 1999,  the Company  adopted SFAS No. 132,  Employers'  Disclosures
about  Pensions  and  Other  Postretirement  Benefits,  which  revised  existing
disclosure  requirements for pension and other postretirement benefit plans. All
information in the Retirement Plans note has been presented accordingly.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
Accounting  for  Derivative  Instruments  and Hedging  Activities.  SFAS No. 133
requires  companies to recognize  all  derivatives  on the balance sheet at fair
value and  establishes  accounting  rules for  changes in fair value that result
from hedging  activities.  SFAS No. 133 is effective for fiscal years  beginning
after June 15, 2000. Management is currently evaluating the impact that SFAS No.
133 may have on its financial statements.

Reclassifications

Certain prior year  information has been  reclassified to conform to the current
year presentation.

2.   Restructuring and Impairment of Assets

During  1997,  the sale of Modar was  completed  and  resulted in an  additional
impairment  charge of  $373,235  which  represents  the  difference  between the
original  estimate and the actual loss from the sale. After a related income tax
benefit of $127,000, fiscal year 1997 earnings were reduced by $246,235 or $0.04
per diluted share.

A restructuring charge of $3,392,276, or $0.57 per diluted share was recorded in
the third quarter of fiscal 1998 for Knape & Vogt Canada. In March 1998, Knape &
Vogt  announced its plans to reorganize  its Canadian  operation,  including the
sale of the Company's  manufacturing facility and equipment in the Toronto area.
The sale  was  completed  in May of  1998.  The  Company  continues  to sell and
distribute  its  products in Canada and  maintain a sales  office in the Toronto
area.

In  September  1998,  the  Company  sold  The  Hirsh  Company,   a  wholly-owned
subsidiary. Hirsh manufactured free-standing shelving, wood storage products and
workshop  accessories.  The sale  resulted in a loss of  $12,800,000,  which was
included in the  restructuring  and impairment of assets line of the fiscal 1998
consolidated  statement of  operations.  The loss  included the write-off of the
unamortized  balance of goodwill  recorded in  connection  with the  purchase of
Hirsh.

In  connection  with its  restructuring  activities,  the Company  has  recorded
reserves for various costs to be incurred. Amounts paid or charged against these
reserves were as follows:

                                       22
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

<TABLE>
                          Fiscal 1998   Costs Paid     June 30,     Costs Paid     June 30,
                          Additions     or Charged       1998       or Charged      1999
--------------------------------------------------------------------------------------------
<S>                        <C>          <C>             <C>         <C>             <C>
Facilities and equipment   $1,076,453   $(1,063,232)    $  13,221   $  (13,221)            -
Severance                     994,698      (575,269)      419,429     (358,095)       61,334
Settlement cost               681,300      (303,037)      378,263      (80,101)      298,162
Other exit costs              340,650      (322,631)       18,019             -       18,019
--------------------------------------------------------------------------------------------
Total                      $3,093,101   $(2,264,169)     $828,932    $(451,417)     $377,515
============================================================================================
</TABLE>

Summary operating results for Hirsh (in thousands) were as follows:

<TABLE>
Year ended June 30,                          1998         1997
----------------------------------------------------------------
<S>                                       <C>          <C>
Revenues                                  $  35,634    $  36,589
Costs and expenses                           47,880       37,344
----------------------------------------------------------------
Income (loss) before taxes                  (12,246)        (755)

Income tax expense (benefit)                    998          (79)
----------------------------------------------------------------
Net income (loss)                         $ (13,244)    $   (676)
================================================================
</TABLE>
During the second  quarter of fiscal  1999,  the  Company  decided to  re-deploy
certain  drawer slide  production  assets to product  lines  considered  to have
higher growth  potential.  This  resulted in the  write-down of the tooling ($.6
million pre-tax) and excess inventory ($.4 million pre-tax,  charged directly to
cost of sales) related to the discontinued product lines.


3.   Discontinued Operation

On August 20,  1996,  the  Company  announced  its  decision to sell the Roll-it
division of Knape & Vogt Canada Inc.,  the Company's  store  fixture  operation.
Accordingly,   Roll-it  was  reported  as  a  discontinued  operation,  and  the
consolidated  financial statements were reclassified to segregate the net assets
and operating results of the business.  During fiscal 1996, the Company recorded
an estimated loss of $3.9 million pre-tax or $2.7 million  after-tax on the sale
of Roll-it.

During the third  quarter of fiscal  1997,  the Company  recorded an  additional
after-tax  loss of $471,624  which was an adjustment to the estimated  provision
for operating loss of Roll-it through fiscal 1997.  Income or loss  attributable
to  Roll-it's  operations  beyond  fiscal year 1997 through the date of the sale
were reflected as incurred in the appropriate periods.

On March 27,  1998,  the  Company  signed an  agreement  to sell  Roll-it  which
resulted in an additional  loss of $937,268,  which  represented  the difference
between the original estimate and the actual loss from the sale of Roll-it.

Summary operating  results of the discontinued  operation (in thousands) were as
follows:

<TABLE>
Year ended June 30,                          1998         1997
---------------------------------------------------------------------
<S>                                       <C>          <C>
Revenues                                  $  11,865    $  10,531
Costs and expenses                           12,519       11,237
---------------------------------------------------------------------
Income (loss) before taxes                     (654)        (706)
Income tax expense (benefit)                   (223)        (234)
---------------------------------------------------------------------
Net income (loss)                         $    (431)    $   (472)
=====================================================================
</TABLE>

                                       23
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements


4.   Inventories

Inventories are summarized as follows:

<TABLE>
June 30,                                         1999              1998
-------------------------------------------------------------------------------
<S>                                         <C>                <C>
Finished products                           $     8,523,866    $    7,369,923
Work in process                                   1,634,904         1,719,891
Raw materials and supplies                        2,990,879         3,718,718
-------------------------------------------------------------------------------
                                            $    13,149,649    $   12,808,532
===============================================================================
</TABLE>

5.   Long-Term Debt

On June 1, 1999,  the Company  replaced  its prior  credit  facility  with a new
revolving  credit  agreement  that provides for up to  $45,000,000 in borrowings
through  November 1, 2004.  At June 30, 1999,  there was a  $17,700,000  balance
outstanding under this agreement.  The interest rate on the first $17,000,000 of
the  outstanding  balance was  5.5425%,  which was the 90-day LIBOR rate plus an
additional  50 basis points  credit  spread.  The interest rate on the remaining
$700,000 and  averaged  5.4% for the month of June 1999.  The  interest  rate is
adjusted to market rates at the end of each interest  period and is based on the
LIBOR rate, or, at the Company's option,  several other common indices. Both the
interest rate and the commitment fees on this agreement  fluctuate  according to
the ratio of the  Company's  funded debt to EBITDA  (earnings  before  interest,
income taxes,  depreciation  and  amortization).  Compensating  balances are not
required by t required under this agreement to maintain financial ratios, and at
June 30, 1999, was in compliance with these covenants.

The Company  entered  into a  seven-year  interest  rate swap  agreement  with a
notional  amount of  $17,000,000  through  August 31, 1999,  and  increasing  to
$20,000,000  thereafter,  which converts a corresponding amount of the revolving
credit agreement into a fixed-rate obligation with an effective interest rate of
6.25% plus the Company's  credit spread on the revolving credit  agreement.  The
swap agreement will terminate on June 1, 2006.


6.   Lease Commitments

The Company leases  certain real property and equipment  under  operating  lease
agreements which expire at various dates through fiscal 2004.

Annual minimum rental payments required under all noncancelable operating leases
are  as  follows:  2000-$217,076;   2001-$66,616;   2002-$66,616;  2003-$62,142;
2004-$9,101. Rent expense under all operating leases was approximately $553,000,
$1,848,000 and $1,991,000 in 1999, 1998 and 1997, respectively.

The signed  agreement  for the sale of the assets of Hirsh (see Note 2) included
the assumption of the lease for the Hirsh building by the buyer of the assets of
Hirsh. The Company  continues to guarantee to the landlord all lease obligations
through the expiration of this lease in August 2000.  Monthly lease payments are
$105,564 through August 1999 and $108,731 thereafter.

7.   Derivative Financial Instruments

The Company has entered into an interest  rate swap  agreement  designated  as a
partial hedge of the Company's  variable rate revolving  credit  agreement.  The
purpose of this swap is to fix the interest  rate on the variable  rate debt and
reduce the exposure to interest rate fluctuations. At June 30, 1999, the Company
had an interest rate swap with a notional amount of  $17,000,000,  increasing to
$20,000,000 on September 1, 1999.  Under this agreement,  the Company will pay t
rate of 6.25%, and the counterparty  will pay the Company interest at a variable
rate  equal to LIBOR.  The LIBOR  rate on this  agreement  was 5.05% at June 30,
1999. The notional amount does not represent an amount exchanged by the parties,
and thus is not a measure of  exposure  of the  Company.  The  variable  rate is
subject to change over time as LIBOR fluctuates.

                                       24
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

Neither the Company nor the counterparty, which is a prominent bank institution,
is required to  collateralize  the  respective  obligation  under the swap.  The
Company is exposed to loss if the counterparty should default. At June 30, 1999,
the  Company  had no exposure  to credit  loss on the  interest  rate swap.  The
Company does not believe that any  reasonably  likely  change in interest  rates
would have a materially adverse effect on the financial position, the results of
operations or cash flows of the Company.

8.   Retirement Plans

The  Company has  several  noncontributory  defined  benefit  pension  plans and
defined  contribution  plans covering  substantially  all of its employees.  The
defined  benefit  plans provide  benefits  based on the  participants'  years of
service.  The  Company's  funding  policy for defined  benefit  plans is to make
annual  contributions  which  equal  or  exceed  regulatory  requirements.   The
Company's  Board  of  Directors  annually  approves   contributions  to  defined
contribution  plans.  The  as  consist  primarily  of  equity  securities,  debt
securities and cash equivalents.  The pension and  profit-sharing  plans at June
30, 1999 and 1998,  hold a combined total of 258,761 shares and 304,425  shares,
respectively, of the Company's Class B common stock.

The defined  postretirement plan covers substantially all employees and provides
certain health care benefits. The plan is unfunded and contributory.

<TABLE>
                                               Pension Benefits          Postretirement Benefits
--------------------------------------------------------------------------------------------------
                                             1999          1998            1999           1998
--------------------------------------------------------------------------------------------------
<S>                                     <C>             <C>              <C>            <C>
Change in benefit obligations
    Benefit obligations at beginning
           of year                      $12,292,838     $10,681,208      $2,093,739     $1,821,448
    Service cost                            307,112         267,092          97,320         85,042
    Interest cost                           915,727         885,949         146,127        156,507
    Actuarial (gains)/losses                651,301       1,477,637         (56,649)       119,196
    Benefits paid                        (1,013,125)     (1,019,048)       (174,370)       (88,454)
    Other                                    (4,463)              -               -              -
--------------------------------------------------------------------------------------------------
Benefit obligation at end of year       $13,149,390     $12,292,838      $2,106,167     $2,093,739
--------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at
  beginning of year                     $13,389,253     $11,794,363      $        -      $       -
    Actual return on plan assets            706,224       2,102,398               -              -
    Employer contributions                  762,036         550,677         174,370         88,454
    Benefits paid                        (1,013,125)     (1,019,048)       (174,370)       (88,454)
    Other                                   (10,827)        (39,137)              -              -
--------------------------------------------------------------------------------------------------
Fair value of plan assets at
  end of year                           $13,833,561     $13,389,253      $        -      $       -
==================================================================================================
Funded status                              $684,171     $ 1,096,415     $(2,106,167)   $(2,093,739)
Unrecognized transition amount             (239,300)       (293,700)        624,487        672,524
Unrecognized net actuarial
    (gain)/loss                             643,546          47,659         602,271        679,380
Unrecognized prior service cost           1,153,202       1,287,172            -                 -
--------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost           $2,241,619     $ 2,137,546     $  (879,409)   $  (741,835)
==================================================================================================
Weighted -average assumptions
Discount rate                                 7.25%            7.5%           7.25%           7.5%
Expected return on plan assets                 8.5%            8.5%             N/A            N/A
==================================================================================================
</TABLE>

                                       25
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements


The net periodic  benefit cost related to the defined  benefit  pension plans is
made up of the following components:

<TABLE>
-------------------------------------------------------------------------------------------------------------
                                      1999        1998          1997           1999        1998        1997
-------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>            <C>           <C>         <C>         <C>
Service cost                        $307,112    $   267,092      $276,718    $ 97,320    $ 85,042    $ 86,588
Interest cost                        915,727        885,949       847,333     146,127     156,507     138,498
Expected return on plan assets      (841,093)    (2,102,398)   (1,504,890)          -           -           -
Net amortization                     276,217      1,282,412       715,578      68,497      75,651      60,994
-------------------------------------------------------------------------------------------------------------
Net periodic pension cost           $657,963    $   333,055      $334,739    $311,944    $317,200    $286,080
=============================================================================================================
</TABLE>

The health care cost trend rate used to  determine  the  postretirement  benefit
obligation was 6.84% for 1999.  This rate decreases  gradually to 5.00% in 2002,
and remains at that level thereafter.  The trend rate is a significant factor in
determining the amounts reported. A one-percentage-point change in these assumed
health care cost trend rates would have the following effect:

<TABLE>
One-Percentage Point                                       Increase          Decrease
--------------------------------------------------------------------------------------
<S>                                                         <C>              <C>
Effect on total of service and interest cost components     $ 38,343         $ (30,845)
Effect on postretirement benefit obligation                  267,694          (226,413)
</TABLE>

The  Company  also  has a  non-qualified  supplemental  retirement  program  for
designated officers of the Company which includes death and disability benefits.
The plan is funded from the general assets of the Company.  The pension  benefit
obligation and pension expense under this plan are as follows:

<TABLE>
                                              1999            1998            1997
----------------------------------------------------------------------------------
<S>                                     <C>             <C>             <C>
Pension benefit obligation              $2,275,996      $1,365,232      $1,217,740
Pension expense                            435,226         320,534         199,700
</TABLE>

Expense for the discretionary profit sharing plan amounted to $744,511, $758,055
and $685,564 in 1999, 1998 and 1997, respectively.

The Company also provides a 401(k) plan for all of its employees.  Employees may
contribute up to 15 percent of their pay. For all hourly employees,  the Company
will match 25 percent of the first 4 percent that an employee  contributes.  The
amount  expensed  for the  Company  match  provision  of the plan was  $195,483,
$172,550 and $95,043 in fiscal 1999, 1998 and 1997, respectively.


9.   Income Taxes

The components of income (loss) from continuing operations before taxes consists
of:

<TABLE>
Year ended June 30,                     1999             1998            1997
-------------------------------------------------------------------------------
<S>                              <C>             <C>             <C>
United States                    $ 9,098,594     $  (919,274)    $ 12,028,340
Foreign                              225,175      (3,518,908)         560,888
-------------------------------------------------------------------------------
Income (loss) from
  continuing operations
  before income taxes            $ 9,323,769     $(4,438,182)    $ 12,589,228
===============================================================================
</TABLE>
                                       26
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements



Income tax expense (benefit) from continuing operations consists of:

<TABLE>
Year ended June 30,                   1999             1998              1997
-------------------------------------------------------------------------------
<S>                            <C>            <C>                 <C>
Current:
    United States              $ 3,950,000      $ 3,740,000      $  4,558,800
    Foreign                              -          541,000          (115,000)
    State and local                326,000          368,000           155,000
------------------------------------------------------------------------------
Total current                    4,276,000        4,649,000         4,598,800
------------------------------------------------------------------------------
Deferred:
    United States               (1,133,000)         377,000           (546,800)
    Foreign                         97,000         (955,000)           287,000
    State and local                (78,000)        (140,000)           (75,000)
-------------------------------------------------------------------------------
Total deferred                  (1,114,000)        (718,000)          (334,800)
-------------------------------------------------------------------------------
Income tax expense            $  3,162,000      $ 3,931,000       $  4,264,000
===============================================================================
</TABLE>

The difference between the federal statutory tax rate and the effective tax rate
on continuing operations was as follows:

<TABLE>
Year ended June 30,                     1999            1998            1997
----------------------------------------------------------------------------
<S>                             <C>             <C>              <C>
Income (loss) from
       continuing operations    $  3,170,000    $ (1,509,000)    $ 4,280,000
Foreign earnings taxed at
       different rate                 20,000         237,000         109,000
Nondeductible losses-Hirsh Sale            -       5,012,000               -
Write-off of foreign currency
       translation adjustment              -         546,000               -
State and local income taxes         102,000         530,000         159,000
Tax credits and other               (130,000)       (885,000)       (284,000)
----------------------------------------------------------------------------
Income tax expense              $  3,162,000    $  3,931,000    $  4,264,000
============================================================================
</TABLE>

The sources of the net deferred income tax liability were as follows:

<TABLE>
June 30,                                           1999              1998
-----------------------------------------------------------------------------
<S>                                            <C>               <C>
Property and equipment                         $  6,978,000      $  7,716,000
Pension accrual                                     762,000           705,000
Net operating loss carryforward                   (797,000)          (995,000)
Supplemental retirement plan                      (693,000)         (418,000)
Stock basis of Canadian subsidiary              (1,436,000)        (1,419,000)
Other                                                58,000           353,000
-----------------------------------------------------------------------------
                                               $  4,872,000      $  5,942,000
=============================================================================
</TABLE>

For Canadian tax purposes, the Company has net operating losses expiring through
2005 totaling  approximately  $2,800,000.  The tax benefit  reflected  above for
these loss carryforwards is net of a valuation allowance of $476,000.

                                       27
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements



10.  Stock Option Plans

The 1987 Stock  Option Plan  granted  key  employees  of the Company  options to
purchase  shares of common  stock.  Options  were granted at or above the market
price of the Company's  common stock on the date of the grant,  were exercisable
from that date and  terminated  ten years  from the  grant  date.  The plan,  as
amended  in  October  1994 and in October  1991,  authorized  a total of 300,000
shares to be available for issuance under the plan. Grants can no longer be made
under the 1987 Stock Option Plan.

Shareholders  at the 1997  annual  meeting  approved  the  Company's  1997 Stock
Incentive  Plan.  Under this plan, up to 600,000 shares of the Company's  common
stock are available  for issuance.  Issuance can be in the form of stock options
or  restricted  stock;  however,  no more than  50,000  shares  can be issued as
restricted  stock.  Stock  options can be granted as incentive  stock options or
nonqualified  stock options.  The number of shares of common stock subject to an
option  gr plan will be  determined  based on the  amount  of the  participant's
election under the EVA bonus plan. Each participant may elect to receive options
by  electing  to forego a portion  of the cash bonus that may be earned by them,
with the option price determined in accordance with the plan. The exercise price
per share of common  stock  purchasable  under an option shall be a single fixed
exercise price equal to 100% of the fair market value of the common stock at the
award da increase  (based on U.S.  Treasury  Securities plus 2% less a projected
dividend yield) compounded annually over the term of the option. In general, the
options  vest three  years after the date the option was granted and expire five
years after the grant date. During fiscal 1999,  177,850 options were granted to
participants  at an exercise price of $29.19 per share. No options or restricted
stock shares were granted during fiscal 1998.

Transactions under the plans are as follows:

<TABLE>
                                                           Weighted             Weighted
                                                           average              average
                                                           exercise             exercise
Year ended June 30,                            1999         price      1998      price
---------------------------------------------------------------------------------------
<S>                                          <C>            <C>       <C>        <C>
Options outstanding, beginning of year        134,041       $15.30    170,337    $15.55
Granted                                       177,850        29.19          -      0.00
Exercised                                     (34,924)       19.53    (31,796)    16.40
Forfeited                                    (116,121)       29.19     (4,500)    17.00
---------------------------------------------------------------------------------------
Options outstanding and
  exercisable, end of year                    160,846       $19.71    134,041    $15.30
=======================================================================================
Options available for grant,
  end of year                                  22,150                       -
=======================================================================================
Weighted average fair value of
  options granted during the year               $2.19                     N/A
=======================================================================================
</TABLE>

The Company  accounts for its stock option plans in accordance  with APB Opinion
25,  Accounting  for Stock Issued to Employees.  Since the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of the grant, no compensation  cost is recognized  under APB Opinion
25. In accordance with SFAS No. 123,  Accounting for  Stock-Based  Compensation,
the Company is required to provide pro forma  information  regarding  net income
compensation costs for the Company's stock option plan had been determined using
a fair value based estimate.  The Company uses the Black-Scholes  option-pricing
model to  determine  the fair  value of each  option at the grant  date with the
following weighted average assumptions:

                                       28
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements


<TABLE>
                                                            1999         1998
-------------------------------------------------------------------------------
<S>                                                    <C>           <C>
Dividends per share                                    $    0.66    $    0.66
Expected volatility                                       0.3251       0.3134
Risk-free interest rate                                    5.45%         5.4%
Expected lives                                               5.4         10.0
===============================================================================
</TABLE>

Under the  accounting  provisions  of SFAS No. 123, the Company's net income and
earnings  per share would have been reduced to the pro forma  amounts  indicated
below:

<TABLE>
                                                         1999            1998
-------------------------------------------------------------------------------
<S>                                             <C>              <C>
Net income (loss):
    As reported                                 $   6,161,769    $ (9,737,460)
    Pro forma                                       5,772,277      (9,737,460)
Earnings per share:
    As reported                                 $        1.24    $      (1.64)
    Pro forma                                            1.17           (1.64)
===============================================================================
</TABLE>

Of the 600,000  shares  available  for issuance  under the 1997 Stock  Incentive
Plan,  no more  than  50,000  shares  may be  issued as  restricted  stock.  The
Executive  Compensation Committee shall, subject to the approval of the Board of
Directors,  determine the eligible persons to whom, and the price (if any) to be
paid by the  participant.  The  participant  shall  not be  permitted  to  sell,
transfer,  pledge,  or assign the shares of the  restricted  stock awarded under
this Plan. S has sole discretion to set, accelerate or waive the restrictions of
the stock.  Except as provided above, upon issuance of the restricted stock, the
participant  will  have all the  rights of a  shareholder  with  respect  to the
shares,  including the right to vote them and to receive all dividends and other
related distributions. If termination of employment occurs within the restricted
period,  all  shares  of stock  still  subject  to  restriction  will vest or be
forfeited in ac established by the Committee.

On July 1, 1998,  William  Dutmers,  Chairman of the Board of Knape & Vogt,  was
granted 10,500 shares of common stock.  The stock was subject to restrictions on
transfer for one year. The stock was the principal  compensation  for one year's
service by Mr. Dutmers to the Company as Chairman of the Board of Directors.  In
addition, under the EVA bonus plan, Mr. Dutmers was eligible to receive a target
bonus of 65% times the value of the above awarded shares which was determ in the
30-day period  preceding the date of grant. Mr. Dutmers elected to receive up to
50% of his fiscal 1999 target bonus in  leveraged  stock  options.  The deferred
compensation  expense  related to the  restricted  stock grants was amortized to
expense on a straight-line basis over the one-year period.


11.  Stockholders' Equity


The Company has three classes of stock,  common stock,  Class B common stock and
unissued preferred stock. Each share of common stock entitles the holder thereof
to one vote on all matters submitted to the shareholders.  Each share of Class B
common stock  entitles the holder to ten votes on all such matters,  except that
the holders of common stock are entitled to elect, voting separately as a class,
at least one quarter of the  Company's  directors  to be elected at each meeting
held for the election of directors.  In all other  instances,  holders of common
stock and Class B common stock

                                       29
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements


vote together, except for matters affecting the powers, preferences or rights of
the respective classes or as otherwise  required under the Michigan  Corporation
Act. With respect to dividend rights,  each share of common stock is entitled to
cash  dividends  at least ten percent  (10%)  higher than those  payable on each
share of Class B  common  stock.  Class B common  stock is  subject  to  certain
restrictions   on  transfer,   but  is  convertible   into  common  stock  on  a
share-for-share basis at any time.

On  September 1, 1998,  the Company  announced  its  intention to purchase up to
1,200,000  shares of the  Company's  common  stock  pursuant to a Dutch  Auction
self-tender  offer  at a price  range  of $19 to $22 per  share.  The  Board  of
Directors  also  approved  the  purchase  in the  open  market  or in  privately
negotiated  transactions,  following  the  completion of the Dutch  Auction,  of
shares of common  stock in an amount which when added to the number of shares of
common stock purchased 1,350,000.  The Dutch Auction was concluded on October 7,
1998, with the purchase of 1,230,784  shares at a price of $21 per share. At the
January 22, 1999, Board of Directors meeting, the Board approved another 400,000
shares  for  the  stock  repurchase   program.   Utilizing  both  of  the  Board
authorizations,  the Company has purchased an additional  441,959 shares through
the end of the fiscal year with the price per share  ranging from  approximately
$13 to $19. In total, the $33,400,000 on share repurchases.

12.  Business Segments

Effective  for the year ended June 30, 1999,  the Company  adopted SFAS No. 131,
Disclosure  about  Segments  of  an  Enterprise  and  Related  Information.   In
accordance with SFAS No. 131, the Company operates on a worldwide basis within a
single  reportable  segment,  storage  products.  The  nature  of the  products,
production  processes,  types of  customers  and  methods  of  distribution  are
consistent  across the  Company and its  subsidiaries  and  therefore  have been
aggregated  into one r primary  product  categories  include  shelving  systems,
drawer slides and builder's hardware.

Geographic information related to net sales and long-lived assets are summarized
between domestic and foreign locations as follows:

<TABLE>
Year ended June 30,                    1999             1998               1997
------------------------------------------------------------------------------------
<S>                                <C>              <C>                <C>
Net sales:
  United States                     $133,805,266     $158,810,004       $153,032,471
  Canada                               9,919,229       14,868,871         15,859,242
  Other foreign                        6,534,860        7,953,695          7,738,581
Long-lived assets:
  United States                       35,298,940       36,654,720         46,256,302
  Canada                                       -                -          3,771,240
  Other foreign                                -                -                  -
</TABLE>

The Company  does not believe  that it is  dependent  upon any single  customer,
since none  account for more than 10% of  consolidated  net sales and  operating
income.

13.  Supplemental Cash Flow Information

Total  interest  paid during the years ended June 30, 1999,  1998 and 1997,  was
$754,166, $1,310,066 and $2,025,599, respectively.

Total  income  taxes paid during the years ended June 30,  1999,  1998 and 1997,
were $3,912,773, $3,686,753 and $4,324,000, respectively.

                                       30
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements



14. Quarterly Results (Unaudited)

The table below sets forth summary  unaudited  information on a quarterly  basis
for the Company.

<TABLE>

Year ended June 30, 1999                    1st Quarter     2nd Quarter    3rd Quarter   4th Quarter
------------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>            <C>           <C>
Net sales                                   $43,678,644     $36,359,076    $36,038,270   $34,183,365
Gross profit                                  9,893,904       8,653,296      8,945,301     8,599,603
Net income                                    2,521,982       1,025,172      1,565,117     1,049,498
Earnings per share, net-diluted                    0.42            0.21           0.34          0.24
Cash dividend-common stock                        0.165           0.165          0.165         0.165
Cash dividend-Class B common stock          $      0.15     $      0.15    $      0.15          0.15
------------------------------------------------------------------------------------------------------

Year ended June 30, 1998                    1st Quarter     2nd Quarter    3rd Quarter   4th Quarter
------------------------------------------------------------------------------------------------------
Net sales                                   $44,658,302     $42,677,957    $49,469,554   $44,826,757
Gross profit                                 11,503,905      10,243,477     11,554,926     8,997,592
Income (loss) from continuing operations      2,470,026       2,017,210     (1,056,822)  (11,799,596)
Income (loss) from discontinued operation       200,886        (294,525)    (1,274,639)            -
Net income (loss)                             2,670,912       1,722,685     (2,331,461)  (11,799,596)
Earnings (loss) per share from continuing
 operations-diluted                                0.42            0.34          (0.18)        (1.97)
Earnings (loss) per share from
 discontinued operation-diluted                    0.03           (0.05)         (0.21)            -
Earnings (loss) per share, net-diluted             0.45            0.29          (0.39)        (1.97)
Cash dividend-common stock                        0.165           0.165          0.165         0.165
Cash dividend-Class B common stock          $      0.15     $      0.15    $      0.15   $      0.15
-----------------------------------------------------------------------------------------------------
</TABLE>

                                       31
<PAGE>
Independent Auditors' Report


Board of Directors
Knape & Vogt Manufacturing Company
Grand Rapids, Michigan

We have audited the  accompanying  consolidated  balance  sheets of Knape & Vogt
Manufacturing  Company and  subsidiaries  as of June 30, 1999 and 1998,  and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for each of the three  years in the  period  ended  June 30,  1999.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  Knape & Vogt
Manufacturing  Company  and  subsidiaries  at June 30,  1999 and  1998,  and the
results of their  operations and their cash flows for each of the three years in
the period ended June 30, 1999, in conformity with generally accepted accounting
principles.



/s/ BDO Seidman, LLP
Grand Rapids, Michigan
July 30, 1999





                                      -32-

<PAGE>
          ITEM 9--DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     No changes in, or disagreements with, the Company's  accountants  occurred,
requiring disclosure under Item 304 of Regulation S-K.

                                    PART III

           ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


     Directors of  Registrant.  Information  relating to directors  and director
nominees of the Company,  contained in the Company's  definitive Proxy Statement
for its Annual  Meeting of  Shareholders  to be held October 15, 1999, and filed
pursuant to Regulation 14A, is incorporated herein by reference.

     Executive  Officers of  Registrant.  Information  relating to the executive
officers of the Company is included in Part I of this Form 10-K.

                         ITEM 11--EXECUTIVE COMPENSATION

     The information  under the captions "Summary  Compensation  Table," "Option
Grants in Last Fiscal Year," and  "Aggregated  Stock Option  Exercises in Fiscal
1999 and Year End Option Values," is  incorporated  herein by reference from the
Company's  definitive  Proxy  Statement  for the  Company's  Annual  Meeting  of
Shareholders to be held October 15, 1999, filed pursuant to Regulation 14A.

     ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  information  under  the  captions  "Voting  Securities  and  Principal
Shareholders"  and "Directors and Nominees" is incorporated  herein by reference
from the Company's  definitive  Proxy Statement for the Company's Annual Meeting
of Shareholders to be held October 15, 1999, filed pursuant to Regulation 14A.

             ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information under the caption  "Directors and Nominees" is incorporated
herein by  reference  from the  Company's  definitive  Proxy  Statement  for the
Company's  Annual  Meeting of  Shareholders  to be held October 15, 1999,  filed
pursuant to Regulation 14A.


                                      -33-

<PAGE>
                                     PART IV

    ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) (1) Financial Statements

          The following financial statements and schedules, all of which are set
     forth in Item 8, are  filed as part of this  report.

                                                                  Page Number in
                                                                     10-K Report

          Consolidated  Statements of Operations                         14
          Consolidated Balance Sheets                                    15
          Consolidated Statements of Stockholders' Equity                17
          Consolidated Statements of Cash Flows                          18
          Notes to Consolidated Financial Statements                     19
          Independent Auditors'Report                                    32


          (2) Financial Statement Schedule

          The following  financial  statement  schedule and related  Independent
     Auditors'  Report on such  schedule  are  included in this Form 10-K on the
     pages noted.

                                                                  Page Number in
                                                                     10-K Report

         Independent Auditors' Report on Schedule                        35
         Schedule II -- Valuation and Qualifying Accounts and Reserves   36


          All other schedules are not submitted  because they are not applicable
     or not  required,  or because the required  information  is included in the
     financial statements or notes thereto.

               (3) Exhibits

          Reference  is made to the  Exhibit  Index which is found on page 38 of
     this Form 10-K Annual Report.

          (b) Reports on Form 8-K

          No  reports on Form 8-K were  filed  during the fourth  quarter of the
     year ended June 30, 1999.

                                      -34-
<PAGE>
                    Independent Auditors' Report on Schedule



Knape & Vogt Manufacturing Company
Grand Rapids, Michigan

The audits  referred  to in our  report  dated July 30,  1999,  relating  to the
consolidated financial statements of Knape & Vogt Manufacturing Company which is
contained  in Item 8 of this Form  10-K,  included  the  audit of the  financial
statement schedule listed in the accompanying table of contents.  This financial
statement  schedule  is the  responsibility  of the  Company's  management.  Our
responsibility  is to express an opinion on this  financial  statement  schedule
based upon our audits.

In our  opinion,  the  financial  statement  schedule  presents  fairly,  in all
material respects, the information set forth therein.




/s/ BDO Seidman, LLP
Grand Rapids, Michigan
July 30, 1999



                                      -35-
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
          Schedule II - Valuation and Qualifying Accounts and Reserves


<TABLE>
<S>                                     <C>              <C>                <C>                <C>
             Column A                   Column B         Column C            Column D           Column E
----------------------------------------------------------------------------------------------------------
                                        Balance         Charged to                              Balance
                                       beginning        costs and                                end of
Description                            of period       expenses(1)       Deductions(1) (2)       period
----------------------------------------------------------------------------------------------------------
Year ended June 30, 1999:
 Allowances deducted from assets:
    Accounts receivable for:
      Doubtful accounts                 $177,000         $336,000              $ 271,000      $ 242,000
      Cash discounts                     175,000                -                 28,000        147,000
----------------------------------------------------------------------------------------------------------
                                        $352,000         $336,000              $ 299,000      $ 389,000


Year ended June 30, 1998:
 Allowances deducted from
  assets:
    Accounts receivable for:
      Doubtful accounts                $ 268,000        $ 390,000              $ 481,000      $ 177,000
      Cash discounts                     257,000                -                 82,000        175,000
----------------------------------------------------------------------------------------------------------
                                       $ 525,000        $ 390,000              $ 563,000      $ 352,000



Year ended June 30, 1997:
 Allowances deducted from
  assets:
    Accounts receivable for:
      Doubtful accounts                $ 340,000        $ 318,000              $ 390,000       $ 268,000
      Cash discounts                     223,000           34,000                      -         257,000
---------------------------------------------------------------------------------------------------------
                                        $563,000        $ 352,000              $ 390,000       $ 525,000

</TABLE>

  (1)     Write-off of doubtful accounts and collections on accounts  previously
          written off, including reduction in allowance balance.

  (2)     Year ended June 30,  1998  balances  include the  reclassification  of
          allowances recorded for The Hirsh Company to net assets held for sale.


                                      -36-
<PAGE>
                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                 KNAPE & VOGT MANUFACTURING COMPANY


                                 By /s/ William R. Dutmers
                                    William R. Dutmers, Chairman of the Board,
                                    President and Chief Executive Officer


                                By  /s/ Jack D. Poindexter
                                    Jack D. Poindexter, Chief Financial Officer,
                                    Treasurer and Secretary


Date:  September 15, 1999


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below on September 15, 1999, by the following  persons on
behalf of the registrant in the capacities  indicated.  Each director or officer
of the  registrant,  whose  signature  appears  below,  hereby  appoints Jack D.
Poindexter as his  attorney-in-fact  to sign in his name and on his behalf, as a
director or officer of the  registrant,  and to file with the Commission any and
all amendments to this Report on Form 10-K.


/s/ William R. Dutmers                            /s/ Mary Rita Cuddohy
William R. Dutmers, Chairman of the Board,        Mary Rita Cuddohy, Director
Chief Executive Officer and President


/s/ John E. Fallon                                /s/ Michael J. Kregor
John E. Fallon, Director                          Michael J. Kregor, Director


/s/ Raymond E. Knape                              /s/ Richard S. Knape
Raymond E. Knape, Director                        Richard S. Knape, Director


/s/ Robert J. Knape
Robert J. Knape, Director


                                      -37-
<PAGE>
                       KNAPE & VOGT MANUFACTURING COMPANY
                            ANNUAL REPORT - FORM 10-K

                                  EXHIBIT INDEX

3(a)      Certificate  of Amendment to the  Articles of  Incorporation,  and the
          Restated Articles of Incorporation of the Company, which were filed as
          Exhibit  3(a) of the  Registrant's  Form 10-K  Annual  Report  for the
          fiscal year ended June 30, 1987, are incorporated by reference.

3(b)      Bylaws  as  amended  April  23,  1999,  filed  as  Exhibit  3.1 of the
          Registrant's  Form 10-Q Third Quarter  Report for the fiscal year June
          30, 1999, is incorporated by reference.

10(a)     Supplemental  Executive Retirement Plan, which was filed as Exhibit 10
          of the Registrant's  Form 10-K Annual Report for the fiscal year ended
          June 30, 1981, is incorporated by reference.

10(b)     Knape & Vogt Manufacturing  Company 1987 Stock Option Plan,  effective
          October  16,  1987,  which  was  filed as  Exhibit  I to  Registrant's
          definitive  Proxy  Statement dated September 23, 1987, is incorporated
          by reference.

10(c)     Knape & Vogt Manufacturing  Company Employees' Retirement Savings Plan
          (July 1, 1989 Restatement),  as amended, which was filed as Exhibit 99
          to  Registrant's   Registration   Statement  on  Form  S-8  (Reg.  No.
          33-88212), is incorporated by reference.

10(d)     Loan agreement with Old Kent Bank dated June 1, 1999 - filed herewith.

10(e)     Interest  swap  agreement  with  Bank One  dated  June 1, 1999 - filed
          herewith.

10(f)     Knape & Vogt  Manufacturing  Company 1997 Stock Incentive Plan,  which
          was filed as  Appendix A to the  Registrant's  proxy  statement  dated
          September 17, 1997, is incorporated by reference.

10(g)     Management  Continuity  Agreement dated July 1, 1997,  between Knape &
          Vogt  Manufacturing  Company  and Michael G. Van Rooy filed as Exhibit
          10(I) of the Registrant's  Form 10-K annual report for the fiscal year
          ended June 30, 1998, is incorporated by reference.

21        Subsidiaries of Registrant.

23        Consent of BDO Seidman, LLP, independent public accountants.

24        Power of Attorney (Included on page 37).

27        Financial Data Schedule.


                                      -38-
<PAGE>
Exhibit 10(d)
                                 LOAN AGREEMENT


                                     between



                       KNAPE & VOGT MANUFACTURING COMPANY



                                       and



                                  OLD KENT BANK






                            Dated as of June 1, 1999
<PAGE>
                                TABLE OF CONTENTS
                                                                            Page

SECTION 1.  DEFINITIONS......................................................  1

SECTION 2.  WARRANTIES AND REPRESENTATIONS...................................  5

SECTION 3.  REVOLVING LINE OF CREDIT.........................................  8

SECTION 4.  AFFIRMATIVE COVENANTS............................................  9

SECTION 5.  NEGATIVE COVENANTS............................................... 11

SECTION 6.  APPLICATION OF PROCEEDS.......................................... 12

SECTION 7.  EVENTS OF DEFAULT AND REMEDIES................................... 12

SECTION 8.  CONDITIONS PRECEDENT............................................. 14

SECTION 9.  MISCELLANEOUS.................................................... 15




                                    SCHEDULES

SCHEDULE A   PENDING OR THREATENED PROCEEDINGS
SCHEDULE B   INVESTMENTS OF BORROWER IN OTHER CORPORATIONS AND BUSINESS ENTITIES
SCHEDULE C   EMPLOYEE PENSION BENEFIT PLANS
SCHEDULE D   REVOLVING CREDIT NOTE
SCHEDULE E   CERTIFICATION OF FINANCIAL STATEMENTS AND FINANCIAL COVENANTS



#418144v2
                                       -i-
<PAGE>
                                 LOAN AGREEMENT


     THIS LOAN AGREEMENT,  made as of this 1st day of June, 1999, by and between
KNAPE & VOGT  MANUFACTURING  COMPANY, a Michigan  corporation,  of Grand Rapids,
Michigan  ("Borrower"),  and OLD KENT BANK, a Michigan banking  corporation,  of
Grand Rapids, Michigan ("Bank").


                                R E C I T A L S :


     A. Borrower has requested  Bank to extend to it a Revolving  Line of Credit
of up to Forty-five Million Dollars ($45,000,000);

     B. Bank is willing to extend the Revolving  Line of Credit on the terms and
subject to the conditions set forth in this Agreement;


                   ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:


SECTION 1.  DEFINITIONS.

     In this Agreement:

     "Affiliate"  means any person,  firm, or corporation  that now or hereafter
controls,  is controlled by, or is under common  control with the Borrower.  The
term "control"  means the  possession,  directly or indirectly,  of the power to
direct or cause the  direction of the  management or policies of the Borrower or
any such other person, firm, or corporation.

     "Agreement" means this Loan Agreement.

     "Applicable Margin" means that number of percentage points to be taken into
account in  computing  the  interest  rate for  Revolving  Line of  Credit.  The
Applicable  Margin shall be determined in accordance  with the following  table,
based on the ratio of Funded Debt to EBITDA of the Borrower:


#418144v2
<PAGE>
<TABLE>
Funded Debt to
      EBITDA                               Prime Loans           Eurodollar Loans           Fed Fund Loans
<S>                                            <C>                    <C>                        <C>
Greater than 3.0 to 1.0                        .25%                   1.400%                     1.550%
2.99 to 1.0 through 2.50 to 1.0                  0%                   1.150%                     1.300%
2.49 to 1.0 through 2.00 to 1.0                  0%                    .875%                     1.025%
1.99 to 1.0 through 1.50 to 1.0                  0%                    .750%                      .900%
1.49 to 1.0 through 1.25 to 1.0                  0%                    .625%                      .775%
1.24 to 1.0 through 1.00 to 1.0                  0%                    .500%                      .650%
Less than 1.00 to 1.0                            0%                    .400%                      .550%
</TABLE>

     The  Applicable  Margin shall be adjusted as of the first day of each June,
September, December and March based on Borrower's ratio of Funded Debt to EBITDA
at  the  end of  its  last  completed  fiscal  quarter  preceding  the  date  of
adjustment.

     "Bank Indebtedness" means any indebtedness,  obligation,  or liability,  of
whatever type or nature, now or later owing to Bank by the Borrower,  including,
without limitation, all indebtedness and obligations under this Agreement.

     "Capitalized  Lease Obligation" means any obligation of the Borrower to pay
future  rentals under a lease that,  in accordance  with GAAP, is required to be
shown as a liability on the balance sheet of the Borrower.

     "Contamination"  or  "Contaminated"  means, when used with reference to any
real or personal  property,  that a Hazardous  Substance is present on or in the
property in any amount or level excluding Hazardous Substances which are used in
the manufacturing  operations of the Borrower and which are used and disposed of
in accordance with Environmental Laws.

     "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  consolidated
balance sheet of the Borrower.

     "EBITDA" means, for each period of four consecutive  fiscal quarters of the
Borrower,  its  consolidated net income before  interest,  taxes,  depreciation,
amortization and non-cash restructuring charges.

     "ERISA" means the Employee  Retirement  Income Security Act of 1974, as now
and later amended, together with all regulations issued pursuant thereto.

     "Environmental Law" means any applicable law, ordinance,  rule, regulation,
or  order  that  regulates  or is  intended  to  protect  public  health  or the
environment, or that establishes

#418144v2
                                       -2-
<PAGE>
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.

     "Funded  Debt" means all  interest  bearing  Indebtedness  of the  Borrower
(including,  but  not  limited  to,  Bank  Indebtedness  and  Capitalized  Lease
Obligations).

     "GAAP"  means  generally  accepted  accounting   principles,   consistently
applied.

     "Hazardous  Substance"  means  any  product  or waste  that is now or later
regulated  by or  subject  to any  Environmental  Law and any  other  pollutant,
contaminant,   or   waste,   including,   without   limitation,   asbestos   and
polychlorinated biphenyls.

     "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),  any obligation under a note payable or draft accepted representing
an  extension  of credit,  indebtedness  (whether or not  assumed)  secured by a
mortgage,  security  interest,  or other lien on property,  and any  Capitalized
Lease Obligation.

     "Liabilities"  means all  liabilities  that, in accordance  with GAAP,  are
required to be classified as liabilities on a consolidated  balance sheet of the
Borrower.

     "Loan Document" means this Agreement, each Note, and any other agreement or
document  that has been or in the future is signed or  delivered  in  connection
with this Agreement or in connection with any Bank Indebtedness.

     "Material  Adverse  Effect" means any material  adverse effect upon (a) the
validity,   performance,  or  enforceability  of  any  Loan  Document,  (b)  the
properties,  contracts,  business operations,  prospects,  profits, or condition
(financial  or otherwise) of the Borrower on a  consolidated  basis,  or (c) the
ability  of the  Borrower  to fulfill  any  material  obligation  under any Loan
Document.

     "Note" means the Revolving Credit Note and any other promissory note signed
and  delivered  by  Borrower  that  now  or in the  future  evidences  any  Bank
Indebtedness, together with any renewals, extensions, or modifications of it.

     "Permitted Lien" means (a) a security interest,  mortgage, or other lien in
favor of Bank; (b) a lien for taxes not  delinquent or, being  contested in good
faith by  appropriate  proceedings,  if adequate  reserves  for it have been set
aside on its books;  (c) an  inchoate  material  men's,  mechanics',  workmen's,
repairmen's, or other like lien arising in the ordinary course of

#418144v2
                                       -3-
<PAGE>
business,  if the obligation  secured is not delinquent;  and (d) liens securing
Indebtedness not exceeding $1,000,000.

     "Plan" means an employee pension benefit plan or other plan with respect to
which  Borrower or any  Affiliate is an  "employer"  or "party in  interest," as
those terms are defined in ERISA.

     "Revolving Credit  Commitment"  means at any given time Forty-five  Million
Dollars ($45,000,000).

     "Revolving Credit Loans" shall have the meaning set forth in Section 3.1 of
this Agreement.

     "Revolving  Credit Note" shall have the meaning set forth in Section 3.3 of
this Agreement.

     "Stockholders'  Equity"  means,  at any  time,  the  sum  of the  following
accounts set forth in a consolidated balance sheet of the Borrower,  prepared in
accordance  with GAAP:  (a) the par or stated value of all  outstanding  capital
stock; (b) capital surplus; and (c) retained earnings.

     "Tangible Net Worth" means, at any time, Stockholders' Equity, less the sum
of: (a) goodwill,  including any amounts,  however  designated on a consolidated
balance sheet of the  Borrower,  representing  the excess of the purchase  price
paid for assets or stock acquired over the value assigned to the stock or assets
on the books of the Borrower;  (b) treasury stock; and (c) loans and advances to
stockholders, directors, officers, or employees.

     "Working  Capital"  means,  at any time, the amount by which Current Assets
exceed Current Liabilities.


               [the balance of this page intentionally left blank]



#418144v2
                                       -4-
<PAGE>
SECTION 2.  WARRANTIES AND REPRESENTATIONS.

     Borrower represents and warrants to Bank and agrees as follows:

     2.1 The Borrower is a corporation  duly organized,  validly existing and in
good  standing  under the laws of the State of  Michigan.  The  Borrower is duly
qualified and  authorized  to do business,  and is in good standing as a foreign
corporation,  in each  jurisdiction  in which the failure to be so  qualified or
authorized to do business could have a Material Adverse Effect.

     2.2 The Borrower has all  requisite  corporate  power and authority and all
necessary licenses and permits to own and operate its properties and to carry on
its  business  as now  conducted  and as it  contemplates  that  business  to be
conducted in the future.  The Borrower is in compliance in all material respects
with all laws,  rules and regulations that are applicable to it, its operations,
or its  properties,  the  failure  to comply  with  which  would have a Material
Adverse Effect.

     2.3 The balance sheets of Borrower as of June 30, 1998, and March 31, 1999,
and the related  statements  of income,  of retained  earnings and of changes in
financial position for the periods then ended,  copies of all of which have been
delivered to Bank, have been prepared in accordance with GAAP and present fairly
the  financial  position of Borrower as of those  dates,  and the results of its
operations  for those  periods.  Since  the date of the most  recent of those fi
nancial  statements,  no change  has  occurred  in the  financial  condition  or
operations of the Borrower that could have a Material Adverse Effect.

     2.4 Neither  this  Agreement  nor any  financial  statement  referred to in
Section 2.3 above nor any other written  statement  furnished by the Borrower to
Bank in  connection  with the  negotiation  of the  loans  provided  for in this
Agreement,  contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained in this Agreement, the financial
statement or other written  statement not misleading.  There is no fact that the
Borrower  has not  disclosed to Bank in writing that has, or, to the best of the
knowledge of the officers of the Borrower,  in the future could have, a Material
Adverse Effect.

     2.5 Except as identified on Schedule A attached to this Agreement, there is
no  proceeding  pending,  or to the  knowledge  of the  officers of the Borrower
threatened,  before any court,  governmental  authority or arbitration  board or
tribunal,  against or affecting the Borrower,  that, if determined  adversely to
the Borrower,  could  reasonably be expected to have a Material  Adverse Effect.
The Borrower is not in default with respect to any order, judgment, or decree of
any court, governmental authority or arbitration board or tribunal.

     2.6 The Borrower has good and marketable title to all of the assets that it
purports to own,  including  the assets  described in the  financial  statements
referred  to in Section  2.3 of this  Agreement,  free and clear from all liens,
encumbrances,  security interests,  claims,  charges,  and restrictions,  except
Permitted Liens.

#418144v2
                                       -5-
<PAGE>
     2.7 The Borrower owns and controls all of the patents, trademarks,  service
marks, trade names,  copyrights,  licenses, and rights necessary for the present
and planned  future  conduct of its business and, to the best of its  knowledge,
without any conflict with the right of any other person,  firm, or  corporation,
the failure of which to own or control could have a Material Adverse Effect.

     2.8 The  Borrower  has full  corporate  power  and  authority  to  execute,
deliver,  and  perform  the  Loan  Documents;   the  execution,   delivery,  and
performance  of the Loan  Documents  given by the  Borrower  (a) have  been duly
authorized by appropriate corporate action of the Borrower, (b) will not violate
the provisions of the articles of  incorporation or bylaws of the Borrower or of
any law, rule, judgment,  order,  agreement, or instrument to which the Borrower
is a party or by which it is  bound,  and (c) do not  require  any  approval  or
consent of any public  authority  or other third party;  and the Loan  Documents
have been  properly  signed  and  delivered  by,  and are the valid and  binding
obligations of, the parties to them and are enforceable in accordance with their
terms,  subject  to  bankruptcy,   insolvency  or  similar  laws  affecting  the
enforcement of creditors' rights generally and to general principles of equity.

     2.9  All  tax  returns  required  to  be  filed  by  the  Borrower  in  any
jurisdiction  have  been  filed,  and  each  tax,  assessment,   fee  and  other
governmental  charge upon it or upon its assets,  in come or franchises has been
paid before the time when its nonpayment could give rise to a lien. The officers
of the Borrower know of no proposed additional tax assessment against it.

     2.10  Except as  identified  on  Schedule  B  attached  to this  Agreement,
Borrower  has no  investments  in the  securities  of any other  corporation  or
business  entity.  Borrower  does not 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.

     2.11  Attached to this  Agreement as Schedule C is a list of all Plans.  No
Plan has  been  terminated  since  the  effective  date of  ERISA.  No Plan is a
"multi-employer  plan"  within  the  meaning of Section  3(37)(A)  of ERISA.  No
"accumulated  deficiency"  (within  the  meaning  of  Section  412 of  ERISA) or
"reportable  event" (as defined in Title IV of ERISA) has occurred  with respect
to any Plan.  Neither the Borrower nor any  Affiliate  has incurred any material
liability  to the Pension  Benefit  Guaranty  Corporation  ("PBGC") or otherwise
under  ERISA.  The PBGC has not  started  or  threatened  to start a  proceeding
against the Borrower or any Affiliate under ERISA.

     2.12  The  Borrower  is not,  and no  person,  firm or  corporation  having
"control" of the Borrower is, an "executive  officer," "director" or "person who
directly or indirectly, or in concert with one or more persons owns, controls or
has the power to vote more than 10  percent  of any class of voting  securities"
(within the meaning of 12 U.S.C.  ss. 375(b) and  regulations  issued under that
section),  of Bank, Old Kent Financial Corporation ("OKFC") or any subsidiary of
OKFC.

#418144v2
                                       -6-
<PAGE>
     2.13  All of the  real  and  personal  property  of the  Borrower,  and all
operations and activities on it, are in compliance in all material respects with
all  Environmental  Laws;  and  none of the  real or  personal  property  of the
Borrower  is (a)  Contaminated  or the site of the  disposal  or  release of any
Hazardous  Substance;  (b)  the  source  of any  Contamination  of any  adjacent
property or of any  groundwater or surface  water;  or (c) the source of any air
emissions  in excess of any legal  limit now or later in  effect,  the effect of
which in the case of (a), (b) and (c) could result in a Material Adverse Effect.


               [the balance of this page intentionally left blank]










#418144v2
                                       -7-
<PAGE>
SECTION 3.  REVOLVING LINE OF CREDIT.

     3.1  Subject  to  satisfaction  of the  conditions  precedent  set forth in
Section 8 of this  Agreement,  and so long as there shall not have  occurred any
event of default as  defined in Section 7 of this  Agreement,  or any event that
with the  giving  of  notice  or lapse  of time,  or both,  would be an event of
default,  Bank shall  extend to Borrower  loans  ("Revolving  Credit  Loans") in
amounts that shall not at any time in the aggregate  exceed the Revolving Credit
Commitment.

     3.2  If the  aggregate  principal  amount  of the  Revolving  Credit  Loans
outstanding should at any time exceed the Revolving Credit Commitment,  Borrower
shall immediately repay a sufficient amount of the Loans as shall be required to
eliminate the excess.

     3.3 All  Revolving  Credit  Loans shall be  evidenced  by and payable  with
interest  in  accordance  with  the  terms  of the  promissory  note in the form
attached  to this  Agreement  as Schedule D  ("Revolving  Credit  Note"),  which
Borrower shall sign and deliver to Bank.

     3.4 As provided in the Revolving Credit Note, Borrower shall have the right
to prepay all Revolving Credit Loans, subject to the provisions of the Revolving
Credit Note.

     3.5 In the event that after the date of this Agreement the Revolving Credit
Loans  hereunder  are  classified  on  Bank's  books  as  a  "highly   leveraged
transaction" (an "HLT  Classification")  by Bank or any governmental  authority,
central bank or comparable  agency  having  jurisdiction  over Bank,  Bank shall
promptly give notice of that HLT  Classification to Borrower  whereupon Bank and
Borrower shall commence  negotiations in good faith to agree on revised interest
rates and/or margins hereunder reflecting that HLT Classification.  In the event
that Borrower and Bank fail to agree on revised  interest  rates and/or  margins
within 90 days of the notice given by Bank referred to above,  then Bank may (i)
by five Banking Days' notice to Borrower  terminate  the unused  portions of the
Revolving Credit Commitment and they shall thereupon terminate, and (ii) by five
Banking Days' notice to the Borrower declare all amounts  outstanding  under the
Revolving  Credit 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.  Borrower  hereby  absolutely and
unconditionally  agrees to pay to Bank on the date of any such  acceleration all
amounts  payable  hereunder and under the Note.  Bank  acknowledges  that an HLT
Classification  (including any election to accelerate  amounts payable hereunder
and under the  Revolving  Credit  Note,  as provided  herein) is not an event of
default under this  Agreement.  Bank  represents to Borrower that it has, on the
date of this  Agreement,  no basis to believe  that the  Revolving  Credit Loans
should be classified as a "highly leveraged transaction."


               [the balance of this page intentionally left blank]

#418144v2
                                       -8-
<PAGE>
SECTION 4.  AFFIRMATIVE COVENANTS.

     From the date of this  Agreement and until all Bank  Indebtedness  is fully
paid  and  Bank has no  further  obligation  to  extend  loans  or other  credit
facilities to Borrower, Borrower shall:

     4.1  Furnish to Bank,  within 100 days after the end of each of  Borrower's
fiscal  years,  beginning  with its fiscal year ending June 30, 1999, an audited
consolidated  financial report of the Borrower  prepared in accordance with GAAP
by independent certified public accountants satisfactory to Bank, containing its
consolidated  and  consolidating  balance sheets as of the end of that year, its
consolidated and  consolidating  related profit and loss and  reconciliation  of
retained  earnings for that year,  their  statement of cash flows for that year,
together  with  any  management   letter  prepared  by  those  certified  public
accountants, and such comments and financial details as are customarily included
in reports of that type and the  unqualified  opinion  of the  certified  public
accountants as to the fairness of the statements contained in the report.

     4.2 Furnish to Bank  within 45 days after the end of each  fiscal  quarter,
beginning with the quarter ending June 30, 1999,  consolidated and consolidating
financial  reports,  the accuracy of which are  certified to by the President or
the Chief  Financial  Officer of  Borrower,  prepared in  accordance  with GAAP,
containing  balance  sheet of the  Borrower  as of the end of the period and its
income  statement  showing the results of its  operations for the portion of its
fiscal year then elapsed,  which shall be  accompanied  by a properly  completed
Certification  of Financial  Statements  and Financial  Covenants in the form of
Schedule E attached to this Agreement,  signed by Borrower's  President or Chief
Financial Officer.

     4.3 Promptly  inform Bank of any occurrence  that is an event of default as
defined in Section 7 of this Agreement or that, with the giving of notice or the
lapse of time, or both, would be an event of default and of any other occurrence
that has, or could  reasonably be expected to have, a Material  Adverse  Effect;
grant to or cause to be  granted  to Bank or its  representatives  the  right to
examine the books and records of the Borrower at any  reasonable  time or times;
maintain  complete and  accurate  books and records of the  transactions  of the
Borrower in accordance with good accounting  practices;  and furnish to Bank any
information that it may reasonably request  concerning  financial affairs of the
Borrower within 10 days after Bank requests that information.

     4.4 Maintain  insurance,  including,  but not limited to, fire and extended
coverage insurance,  workers' compensation insurance, and casualty and liability
insurance with responsible  insurance companies on such of the properties of the
Borrower and against such risks and in such amounts as is customarily maintained
by  similar  businesses;  furnish  to Bank  the  details  with  respect  to that
insurance and satisfactory  evidence of that insurance coverage;  and, within 30
days  after  Bank  requests,  obtain  any  additional  insurance  that  Bank may
reasonably request.

     4.5 Pay and  discharge,  as often as they may become due and  payable,  all
taxes and assessments of whatever nature that may be levied or assessed  against
the Borrower or any of its

#418144v2
                                       -9-
<PAGE>
properties,  unless and to the extent only that (a) those  taxes or  assessments
shall be contested in good faith by appropriate proceedings and (b) the Borrower
shall have set aside on its books adequate  reserves with respect to those taxes
and assessments.

     4.6 Maintain the  corporate  existence of the Borrower in good  standing in
the State of  Michigan  and its  qualification  in good  standing in every other
jurisdiction  in which  the  failure  to be so  qualified  or  authorized  to do
business could have a Material  Adverse Effect;  continue to conduct and operate
the  businesses  of  the  Borrower  substantially  as  presently  conducted  and
operated; and comply with all governmental laws, rules, regulations,  and orders
applicable  to the  Borrower,  the  failure to comply  with  which  could have a
Material Adverse Effect.

     4.7 Maintain a ratio of Funded Debt to EBITDA of not more than 3.25 to 1.0.

     4.8 Maintain consolidated Working Capital of not less than $15,000,000.

     4.9 Maintain a consolidated Tangible Net Worth of not less than $29,000,000
on and after June 30,  1999,  increasing  on each June 30  thereafter  by 50% of
Borrower's  consolidated  net income,  computed in accordance with GAAP, for the
Borrower's fiscal year ending on that June 30.

     4.10 Maintain the  principal  commercial  deposit  accounts of the Borrower
with Bank.

     4.11  Comply  in all  material  respects  with the  requirements  of ERISA,
including,   without  limitation,   all  provisions  regarding  minimum  funding
requirements and requirements as to plan termination  insurance;  within 30 days
after it is filed,  furnish  to Bank a copy of each  annual  report  and  annual
return, with all schedules and attachments, required to be filed with the Depart
ment of Labor or the Internal  Revenue  Service  pursuant to ERISA in connection
with  each Plan for each  Plan  year;  notify  Bank  immediately  of any fact or
circumstance,  including, but not limited to, any "reportable event" (as defined
in Title IV of ERISA),  that might be grounds for ter  mination of a Plan by the
Pension Benefit  Guaranty  Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer the Plan,  together with
a statement, if requested by Bank, as to the reason the fact or circumstance has
occurred  and the  action,  if any,  that  Borrower  proposes  to take to  avoid
termination of the plan; and furnish to Bank,  upon its request,  any additional
information concerning any Plan that Bank may reasonably request.

     4.12  Notify Bank in writing  within 10 days after  Borrower  receives  any
notice of the  commencement of (a) any proceeding or  investigation by a federal
or state  environmental  agency against the Borrower regarding the compliance of
the  Borrower  with   Environmental   Laws,   or  (b)  any  other   judicial  or
administrative proceeding or litigation by or against the Borrower, where in the
case of (a) and (b) the cost thereof or amount sought exceeds $500,000.


#418144v2
                                      -10-
<PAGE>
SECTION 5.  NEGATIVE COVENANTS.

     From the date of this  Agreement and until all Bank  Indebtedness  is fully
paid  and  Bank has no  further  obligation  to  extend  loans  or other  credit
facilities  to Borrower,  Borrower  agrees that it will not, and will not permit
any of its subsidiaries to, without the prior written consent of Bank:

     5.1  Create or permit to exist  any  lien,  mortgage,  pledge,  attachment,
garnishment,  execution,  or other legal process, or encumbrance,  on any of its
assets, other than Permitted Liens.

     5.2 Sell,  lease, or otherwise  dispose of any of its assets except for (a)
the sale of inventory in the ordinary course of business (as Borrower's business
is  conducted  on the  date of this  Agreement);  (b)  the  disposition,  in the
ordinary  course of business,  of machinery and equipment that shall have become
obsolete,  damaged,  unsuitable,  or  unnecessary  for its business,  if the net
proceeds  of sale or  disposition  are  promptly  paid to Bank to the extent not
applied to acquire additional or substitute machinery and equipment; and (c) the
sale of Borrower's Cambridge building and/or its Feeny buildings.

     5.3 Make loans or advances to any person, firm, or corporation in excess of
$1,000,000 in the aggregate.

     5.4 Guarantee,  endorse,  assume, or otherwise incur or suffer to exist any
contingent liability in respect of, any obligation of any other person, firm, or
corporation (other than subsidiaries of the Borrower), except by the endorsement
of negotiable  instruments  for deposit or collection in the ordinary  course of
business.

     5.5   Enter   into   any   merger,   consolidation,    reorganization,   or
recapitalization, or purchase or otherwise acquire all, or substantially all, of
the assets,  obligations, or capital stock of or any other interest in any other
person,  firm, or corporation where the total  consideration paid or contributed
by Borrower exceeds $15,000,000.

     5.6  Subordinate  any  indebtedness  owing to it by any  person,  firm,  or
corporation to  indebtedness of that person,  firm, or corporation  owing to any
other person, firm, or corporation.

     5.7 Engage in any transaction with any Affiliate on terms less favorable to
it than would be obtainable at the time in a comparable  transaction of it in an
arm's-length  dealing with a person other than an Affiliate (except for sales of
product between Borrower and its subsidiaries).

     5.8  Become  a  contributing  employer  with  respect  to a  multi-employer
employee benefit plan within the meaning of Section 3(37)(A) of ERISA (29 U.S.C.
1002), as amended by Section 302 of the  Multi-Employer  Pension Plan Amendments
Act of 1980  (other  than the plans  described  on  Schedule B attached  to this
Agreement); or establish for any of its employees any employee benefit plan that
has, or may in the future incur, any unfunded past service liability.


#418144v2
                                      -11-
<PAGE>
SECTION 6.  APPLICATION OF PROCEEDS.

     The proceeds of the Revolving Line of Credit provided for in this Agreement
shall be applied to working capital, acquisitions, stock redemptions,  equipment
purchases or any other purposes agreed to by Bank.


SECTION 7.  EVENTS OF DEFAULT AND REMEDIES.

     7.1  Each  of the  following  shall  be an  event  of  default  under  this
Agreement:

          A. If (i) Borrower  shall fail to pay the payment of the  principal or
     interest of any loan provided for under this  Agreement or the principal or
     interest  of any other Bank  Indebtedness,  when and as it shall be due and
     payable,  whether by  acceleration or otherwise and (ii) that failure shall
     continue unremedied for 10 days.

          B. If  Borrower  shall  fail to perform  any of its other  obligations
     under,  or to comply  with any of the  terms,  conditions,  and  covenants,
     contained in, this  Agreement and that failure shall continue for more than
     30 days  after  Bank has given  Borrower  written  notice  of that  failure
     (provided  that no written  notice  need be given with  respect to Sections
     4.7, 4.8, 4.9, 5.1, 5.2, 5.5 or 5.6); or if an event of default shall occur
     any other Loan Document or other  agreement,  document,  or instrument that
     has been or later is given to Bank by  Borrower  or by any  third  party to
     secure any Bank Indebtedness.

          C. If Borrower shall default in the payment of any  Indebtedness  that
     exceeds $1,000,000 owing to any other firm, person, or corporation and that
     default shall  continue for a period that exceeds any  applicable  grace or
     notice period.

          D. If any  warranty or  representation  made in this  Agreement or any
     statement,  warranty,  or representation  that has been or in the future is
     made in any other Loan Document,  certificate,  report,  or other document,
     instrument  or agreement  delivered  under this  Agreement or in connection
     with any Bank  Indebtedness,  shall be false or  inaccurate in any material
     respect when made.

          E. If Borrower shall (i) apply for or consent to the  appointment  of,
     or the  taking  of  possession  by,  a  receiver,  custodian,  trustee,  or
     liquidator of itself or of all or a substantial part of its property;  (ii)
     be  generally  unable to pay its debts as they  become  due;  (iii)  make a
     general assignment for the benefit of its creditors; (iv) start a voluntary
     case under the federal  Bankruptcy  Code (as now or later in  effect);  (v)
     file a petition seeking to take advantage of any other law providing for

#418144v2
                                      -12-
<PAGE>
     the relief of debtors;  (vi) fail to controvert in a timely or  appropriate
     manner,  or acquiesce in writing to, any petition filed against Borrower in
     any  involuntary  case under the Bankruptcy  Code; or (vii) take any action
     for the purpose of effecting any of the foregoing.

          F. If a proceeding  or case shall be started in any court of competent
     jurisdiction  and  is  not  dismissed  within  60  days,  seeking  (i)  the
     liquidation,  reorganization,  dissolution,  winding up, or  composition or
     readjustment  of  Borrower or its assets or the  appointment  of a trustee,
     receiver,  custodian, liqui dator, or the like of Borrower or of all or any
     substantial  part of the  assets of  Borrower;  or (ii)  similar  relief in
     respect of Borrower  under any law providing for the relief of debtors;  or
     if an order for relief against  Borrower shall be entered in an involuntary
     case under the Bankruptcy Code.

     7.2 Upon the  occurrence  of any event of default set forth in  subsections
7.1A through 7.1D above,  at the option of Bank,  Bank's  obligation  to make or
renew  the  Revolving  Credit  Loans  and the  Revolving  Line of  Credit  shall
terminate,  and all or any part of the unpaid  principal  balance of and accrued
interest on all Bank  Indebtedness  shall become  immediately  due and pay able,
without  presentment,  demand, or notice of any kind, all of which are waived by
Borrower.

     7.3 Upon the  occurrence  of any event of default set forth in  subsections
7.1E or 7.1F above,  Bank's  obligation to make or renew Revolving  Credit Loans
and the Revolving  Line of Credit shall  immediately  terminate,  and the entire
unpaid principal balance of and accrued interest on all Bank Indebtedness  shall
automatically become due and payable without  presentment,  demand, or notice of
any kind, all of which are waived by Borrower.

     7.4 After the occurrence of an event of default under this Agreement,  Bank
shall,  notwithstanding  any contrary  instructions  received by Bank,  have the
right to apply any payments  made by Borrower in any order and in any amounts as
Bank in its sole and unrestricted discretion shall determine.



               [the balance of this page intentionally left blank]

#418144v2
                                      -13-
<PAGE>
SECTION 8.  CONDITIONS PRECEDENT.

     The obligation of Bank to make the Revolving  Credit Loans shall be subject
to the following conditions precedent:

     8.1 Bank  shall  have  received  copies  of  resolutions  of the  Boards of
Directors of the  Borrower,  certified by the Secretary of the Borrower as being
in full  force and  effect  on the date of making  the  loans,  authorizing  the
signing,  delivery,  and performance by Borrower of this Agreement and all other
Loan Documents.

     8.2 Bank shall have  received  all reports,  certificates,  and opinions of
attorneys and  accountants  that Bank may have requested in connection  with the
Loan Documents,  and all legal matters incident to them shall be satisfactory to
Bank's attorneys.

     8.3  Bank  shall  have  received  copies  of the  Bylaws  of the  Borrower,
including all amendments to them,  certified by the Secretary of the Borrower as
being in full force and effect on the date of making the loans.

     8.4 Bank shall have received a copy of the Articles of Incorporation of the
Borrower,  including  all  amendments  to  them,  certified  by the  appropriate
department of Borrower's state of incorporation not more than 30 days before the
initial extension of loans under this Agreement.

     8.5 Bank shall have received good standing  certificate with respect to the
Borrower from the Michigan  Department of Consumer and Industry  Services  dated
not  more  than 30 days  before  the  initial  extension  of  loans  under  this
Agreement.

     8.6  The  Borrower  shall  have  signed  and  delivered  to Bank  all  Loan
Documents.


               [the balance of this page intentionally left blank]


#418144v2
                                      -14-
<PAGE>
SECTION 9.  MISCELLANEOUS.

     9.1 Borrower shall pay, or reimburse Bank for, all  out-of-pocket  expenses
incurred by Bank  (including,  but not limited to,  recording  and filing  fees,
search  fees and  reasonable  expenses  of  legal  counsel,  other  professional
advisers,  consultants  and  experts) in  connection  with (a) the  negotiation,
preparation and execution of the Loan  Documents,  any amendments to, or waivers
of any provisions of, the Loan Documents and any refinancing or restructuring of
any Bank  Indebtedness,  (b) the  administration of this Agreement and the other
Loan  Documents,  including,  without  limitation,   obtaining  title  searches,
financing  statement searches,  tax lien searches and appraisals,  (c) obtaining
advice of  counsel  or other  professional  advisers,  consultants  and  experts
regarding  any aspect of the Loan  Documents or any Bank  Indebtedness,  (d) the
enforcement  of  any of the  provisions  of the  Loan  Documents,  and  (e)  the
collection of any Bank Indebtedness.

     9.2 This  Agreement  replaces  in its  entirety  all prior loan  agreements
between Borrower and Bank.

     9.3 As long as  Bank  is  obligated  to  extend  Revolving  Credit  Loan to
Borrower,  Borrower shall pay to Bank revolving line of credit  facility fees on
the daily average unused amount of the maximum Revolving Credit Commitment which
is $45,000,000,  at a rate equal to the applicable percent per year stated below
(based on the Borrower's  consolidated  ratio of Funded Debt to EBITDA) computed
on the basis of a 360-day year for the actual number of days elapsed:
<TABLE>
         Funded Debt to EBITDA                               Non-Use Fee
         <S>                                                    <C>
         Greater than 3.0 to 1.0                                .250%
         2.99 to 1.0 through 2.50 to 1.0                        .225%
         2.49 to 1.0 through 2.00 to 1.0                        .200%
         1.99 to 1.0 through 1.50 to 1.0                        .175%
         1.49 to 1.0 through 1.25 to 1.0                        .150%
         1.24 to 1.0 through 1.00 to 1.0                        .125%
         Less than 1.00 to 1.0                                  .100%
</TABLE>
Accrued  revolving  line of credit  facility  fees  shall be paid  quarterly  in
arrears on the 1st day of each September,  December,  March, and June, beginning
September 1, 1999. The applicable  nonuse fee shall be adjusted on the first day
of each fiscal quarter of the Borrower based on Borrower's consolidated ratio of
Funded Debt to EBITDA at the end of the fiscal quarter immediately preceding the
fiscal quarter most recently ended.

     9.4 On  and  after  the  occurrence  of an  event  of  default  under  this
Agreement,  Borrower  acknowledges that Bank has and shall have the right to set
off any indebtedness from time to time owing to the Borrower by Bank, including,
without limitation, any indebtedness

#418144v2
                                      -15-
<PAGE>
represented  by any account  maintained  with Bank by the Borrower,  against any
Bank Indebtedness.

     9.5 Each right and remedy granted to Bank in this Agreement or in any other
Loan Document or allowed to Bank by law shall be cumulative and may be exercised
from time to time.  No failure on the part of Bank to exercise,  and no delay in
exercising,  any right or remedy  shall be a waiver of that right or remedy or a
waiver of any other right or remedy.  This  Agreement  may not be amended and no
provision of it may be waived except by a writing signed by Bank.

     9.6 The relationship between the Borrower and Bank under this Agreement and
the other Loan  Documents  is solely  that of debtor and  creditor.  Bank has no
fiduciary responsibilities to the Borrower. Bank does not and shall not have any
responsibility  to review,  or inform Borrower of any matter in connection with,
any  aspect  of the  businesses,  operations,  or  properties  of the  Borrower.
Borrower  shall rely entirely upon its own judgment with respect to its business
and properties.  Any review, appraisal,  audit, survey,  inspection,  report, or
other  information  obtained  by Bank,  whether or not paid for by  Borrower  or
furnished to it ("Bank Information"), is solely for the benefit of Bank. Neither
Borrower nor any third party is entitled to rely on any Bank  Information.  Bank
has no duty to Borrower with respect to any Bank Information, including, without
limitation,  any duty to assure that any review, audit, survey,  inspection,  or
appraisal is  performed  properly or any duty to disclose to any of the Borrower
any facts,  information,  opinions,  conclusions or statements  contained in any
review, audit, survey, inspection, appraisal, or other Bank Information.

     9.7 Bank may, after  consulting with Borrower,  sell or otherwise grant any
participation  in Bank's rights under this  Agreement and the Loan  Documents to
one or more financial institutions without the prior written consent of Borrower
and in  connection  with that grant or transfer  may  distribute  the  financial
statements of the Borrower to those financial institutions.

     9.8 Borrower  shall make or cause to be made each payment due to Bank under
this  Agreement and the Notes in immediately  available  funds at Bank's address
set forth in Section  9.10 prior to 3:00 p.m.  Grand Rapids time on the due date
of that payment.  Each payment  received after 3:00 p.m. Grand Rapids time shall
be deemed to be a payment made prior to 3:00 p.m.  Grand Rapids time on the next
Business  Day.  As used  herein,  "Business  Day"  means  any day  other  than a
Saturday,  Sunday or other day on which Bank is not open for the  transaction of
substantially all of its banking functions.

     9.9 This  Agreement and the rights and  obligations of the parties under it
shall be governed and  interpreted  in accordance  with the laws of the State of
Michigan.

#418144v2
                                      -16-
<PAGE>
         9.10 Any notice or other communication required or permitted under this
Agreement  shall be in  writing  and shall be  served  either  personally  or by
certified United States mail with postage fully prepaid, or by overnight express
courier, addressed to Borrower as:

                      Knape & Vogt Manufacturing Company
                      2700 Oak Industrial Drive, N.E.
                      Grand Rapids, Michigan 49505

                      Attention: Jack D. Poindexter, Chief Financial Officer

                If to the Bank:

                      Old Kent Bank
                      111 Lyon Street, N.W.
                      Grand Rapids, Michigan 49503

                      Attention:  Bryce E. Tallant, Corporate Banking Department

or to such other place as either party shall  designate by written notice served
upon the other party.

     9.11 This Agreement shall be binding upon and shall inure to the benefit of
Borrower and Bank and their respective successors and assigns.

     9.12 BORROWER AND BANK,  AFTER  CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, HEREBY KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS AGREEMENT,  THE NOTES OR ANY RELATED INSTRUMENT OR AGREEMENT
OR ANY OF THE  TRANSACTIONS  CONTEMPLATED  BY THIS  AGREEMENT  OR ANY  COURSE OF
CONDUCT,  DEALING,  STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER OF
THEM.  NEITHER  BORROWER NOR BANK SHALL SEEK TO CONSOLIDATE (BY  COUNTERCLAIM OR
OTHERWISE)  ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

     IN WITNESS  WHEREOF,  the parties have signed this Agreement as of the date
stated on the first page of this Agreement.

                                  KNAPE & VOGT MANUFACTURING COMPANY

                                  By /s/ Jack D. Poindexter
                                     Jack D. Poindexter, Chief Financial Officer



                                  OLD KENT BANK

                                  By _______________________________________
                                     Bryce E. Tallant, Vice President

#418144v2
                                      -17-
<PAGE>
                                   SCHEDULE B
                                   ----------

                           INVESTMENTS OF BORROWER IN
                           --------------------------
                    OTHER CORPORATIONS AND BUSINESS ENTITIES
                    ----------------------------------------
<TABLE>
                                                             State in which
                                   State of                   Business is          Stock Owned
      Company                    Incorporation                 Conducted           by Borrower
      -------                    -------------                 ---------           -----------
<S>                                <C>                      <C>                 <C>
Feeny Manufacturing Co.            Michigan                 Michigan, Indiana         100%


Knape & Vogt Canada, Inc.          Ontario, Canada             Canada                 100%
</TABLE>



#418144v2
                                       -1-
<PAGE>
                                   SCHEDULE C
                                   ----------

                         EMPLOYEE PENSION BENEFIT PLANS
                         ------------------------------
<TABLE>
     Name of Plan                          Date Adopted               Administrator             Trustee
     ------------                          ------------               -------------             --------
<S>                                        <C>                        <C>                       <C>
Knape & Vogt Manufacturing
Company Pension Plan                       July 1, 1955               Knape & Vogt              Comerica Bank


Knape & Vogt Manufacturing
Company Profit Sharing Plan                June 30, 1953              Knape & Vogt              Comerica Bank


Knape & Vogt Manufacturing
Company Employee's Retirement
Savings Plan                               July 1, 1987               Knape & Vogt              Old Kent Bank
</TABLE>




#418144v2
                                       -1-
<PAGE>
                                   SCHEDULE D
                                   ----------

                              REVOLVING CREDIT NOTE

$45,000,000                                               Grand Rapids, Michigan
                                                                    June 1, 1999


     FOR VALUE RECEIVED, the undersigned,  KNAPE & VOGT MANUFACTURING COMPANY, a
Michigan corporation ("Company"), promises to pay to the order of OLD KENT BANK,
a Michigan banking corporation ("Bank"), whose address is 111 Lyon Street, N.W.,
Grand Rapids, Michigan 49503, in lawful currency of the United States of America
and in  immediately  available  funds,  the principal sum of Forty-five  Million
Dollars  ($45,000,000)  or such lesser amount as may have been loaned by Bank to
Company  pursuant to this Revolving  Credit Note ("Note") and to pay interest on
the unpaid principal  balance from time to time  outstanding,  in like money and
funds,  for the period  from the date of this Note until the  principal  balance
shall be paid in full, at the rates and on the dates provided for below.

     1.  Loans.  As long as no Event of  Default or  Unmatured  Event of Default
exists under this Note,  Bank agrees that Company  may,  before the  Termination
Date,  borrow,  repay and reborrow the principal of this Note in accordance with
the terms and conditions of this Note and the Loan Agreement.

     2. Definitions. In this Note:

          "Applicable  Margin"  shall have the meaning  provided for in the Loan
     Agreement.

          "Available Interest Rate" means the Prime Rate, the Eurodollar Rate or
     the Fed Funds Rate.

          "Banking Day" means any day, other than a Saturday or Sunday, on which
     Bank is open  for  the  transaction  of  substantially  all of its  banking
     functions and, with respect to Eurodollar Loan Segments,  on which dealings
     in  foreign  exchange  and  currencies  may be  carried  on by  Bank in the
     interbank eurodollar market.

          "Dollars"  and the sign "$" mean lawful money of the United  States of
     America.

          "Effective  Date"  has the  meaning  given to it in  Section 3 of this
     Note.

          "Eurodollar  Loan Segment" means a Loan Segment that bears interest at
     the Eurodollar Rate.


#418144v2
                                       -1-
<PAGE>
          "Eurodollar  Rate" means,  with respect to any Eurodollar Loan Segment
     and the related Interest  Period,  an annual interest rate that is equal to
     the sum of (a) Applicable Margin (Eurodollar Loans), and (b) the arithmetic
     mean, truncated to the nearest one one-hundredth of a percent, of interbank
     interest rates offered by major banks in the London,  United Kingdom market
     at 11:00 a.m. London Time, for U.S. dollar denominated  deposits on deposit
     for a period  of time  equal to the  Interest  Period  elected  by and made
     available to Company under this Note,  as  referenced  and reported two (2)
     Banking  Days  prior  to the  Effective  Date  of  that  rate by one of the
     following sources,  selected by Bank on an availability basis in descending
     order of  priority:  (i) the  Telerate  System  "Page 3750" report of those
     interest rates as determined by the British Bankers  Association;  (ii) the
     Telerate Systems "LIBO Page" report of such interest rates as determined by
     Reuter's  News Service;  (iii) the Wall Street  Journal,  Midwest  Edition,
     report  of  that  interest  rate;  or (iv)  any  other  generally  accepted
     authoritative source as Bank may reference.

          "Event of Default" has the meaning specified in Section 10 of the Loan
     Agreement.

          "Fed Funds Loan Segment"  means a Loan Segment that bears  interest at
     the Fed Funds Rate.

          "Fed Funds Rate"  means,  with  respect to any Fed Funds  Segment,  an
     annual rate that is equal to (a) 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 the "average federal funds rate," plus (b) the Applicable Margin.

          "Interest  Period" means, with respect to any Eurodollar Loan Segment,
     the period  beginning on the Effective Date of that Eurodollar Loan Segment
     and ending on the date 30, 60 or 90 days after that date, as Company elects
     under Section 3 of this Note,  except that each Interest  Period that would
     otherwise  end on a day that 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.

          "Loan Agreement" means the Loan Agreement, dated June 1, 1999, between
     Company and Bank.

          "Loan Segment" means each portion of the unpaid  principal  balance of
     this Note as to which  Company has elected or in the future  elects,  under
     Section 3, an Available Interest Rate to apply.

          "Material  Adverse Effect" means any material  adverse effect upon (i)
     the  validity,  performance,  or  enforceability  of this  Note or the Loan
     Agreement, (ii) the properties,  contracts, business operations, prospects,
     profits, or condition (financial or otherwise) of

#418144v2
                                       -2-
<PAGE>
     Company, or (iii) the ability of Company to fulfill any material obligation
     under this Note or the Loan Agreement.

          "Maturity"  means the time when the entire  remaining unpaid principal
     balance  of this Note  shall be or shall  become  due and  payable  for any
     reason, including acceleration under Section 7 of the Loan Agreement.

          "Overdue  Rate" means (i) in respect of  principal  of any  Eurodollar
     Loan Segment, a rate per annum that is equal to the sum of two percent (2%)
     per annum plus the per annum rate in effect with respect to the  Eurodollar
     Loan  Segment  until  the end of the  then-current  Interest  Period of the
     Eurodollar  Loan  Segment  and after that a rate per annum that is equal to
     the sum of two percent (2%) per annum plus the Prime Rate,  (ii) in respect
     of principal of any Prime Loan  Segment or Fed Funds Loan  Segment,  a rate
     per annum that is equal to the sum of two  percent  (2%) per annum plus the
     Prime Rate,  and (iii) in respect of every other amount  payable by Company
     under this Note  (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"  means (i) as to any Prime  Loan  Segment or Fed Funds
     Loan  Segment,  the first day of each  month and (ii) as to any  Eurodollar
     Loan Segment,  the last day of the Interest  Period for the Eurodollar Loan
     Segment, except that, if the Interest Period exceeds three months, the term
     Payment Date shall also mean the day in the third month following the month
     during which the Interest Period began that numerically  corresponds to the
     first  day  of  the  Interest   Period  or,  if  there  is  no  numerically
     corresponding day, the last Banking Day of that third month.

          "Prime Loan Segment"  means a Loan Segment that bears  interest at the
     Prime Rate.

          "Prime Rate" means, with respect to any Prime Loan Segment,  an annual
     interest  rate that is equal to the sum of (i) the rate of interest then in
     effect as Bank's  announced  "prime  rate,"  which is not  necessarily  the
     lowest rate of interest charged by Bank to its customers,  which Prime Rate
     shall  change  simultaneously  with any change in Bank's  announced  "prime
     rate", and (ii) plus the Applicable Margin (Prime Loans).

          "Revolving  Credit  Commitment"  shall have the  meaning  provided  in
     Section 1 of the Loan Agreement.

          "Termination Date" means November 1, 2004.

          "Unmatured Event of Default" means an event, condition or circumstance
     that with the lapse of time or the  giving of notice to  Company,  or both,
     would be an Event of Default.

#418144v2
                                       -3-
<PAGE>
     3. Interest Rates. Until Maturity the unpaid principal balance of this Note
shall  bear  interest  at one or more of the  Available  Interest  Rates.  After
Maturity,  the unpaid principal  balance of this Note shall bear interest at the
Overdue Rate. Company may elect from time to time to divide the unpaid principal
balance  of this  Note  into two or more Loan  Segments  and to cause  each Loan
Segment to bear  interest at an  Available  Interest  Rate  selected by Company,
subject to the following terms and conditions and other applicable provisions of
this Note:

          (a) Each  Eurodollar  Loan Segment must be in the amount of $1,000,000
     or an integral  multiple of $100,000 in excess of that  amount.  Each Prime
     Loan  Segment or Fed Funds Loan Segment must be in the amount of $50,000 or
     an integral multiple of $10,000 in excess of that amount.

          (b) To make an election  under this Section 3, Company shall give Bank
     written  notice (on Bank's  standard  loan request form, a copy of which is
     attached to this Note as Exhibit A) which must be received by Bank no later
     than (i) if Company requests a Eurodollar Loan Segment,  the second Banking
     Day  before  the  Banking  Day on which  the  election  is to be  effective
     ("Effective  Date") or (ii) if Company  requests a Prime Loan  Segment or a
     Fed Funds Loan Segment,  by 12:00 p.m. on the Effective  Date. The election
     shall  specify  (i) the amount of each Loan  Segment  into which the unpaid
     principal  balance  of  this  Note is to be  divided,  (ii)  the  Available
     Interest  Rate that  will  apply to each  Loan  Segment  from and after the
     Effective  Date and  (iii) if a Loan  Segment  is to be a  Eurodollar  Loan
     Segment, the Interest Period applicable to that Eurodollar Loan Segment.

          (c) After expiration of the Interest Period applicable to a Eurodollar
     Loan Segment, that Loan Segment shall automatically convert to a Prime Loan
     Segment unless Company shall have elected differently under Section 3(b).

          (d)  During  the  Interest  Period  applicable  to a  Eurodollar  Loan
     Segment,  Company may not elect to change all or any part of the Eurodollar
     Loan Segment to a different  type of Loan  Segment,  unless the election is
     effective after expiration of the Interest Period.

          (e) Company may not elect to have a Loan Segment bear  interest at the
     Eurodollar  Rate if the Interest  Period for that Loan Segment would extend
     past the Termination Date.

          (f)  Company  may not make an election  under this  Section  after the
     occurrence  and  during  the  continuance  of an  Event  of  Default  or an
     Unmatured Event of Default.

          (g) If Company  attempts to make an election  that it is not permitted
     to make under this Section, the election shall not be effective.


#418144v2
                                       -4-
<PAGE>
     4. Payments of Principal and Interest.  Company shall pay the principal and
interest of this Note as follows:

          (a) Prior to  Maturity,  Company  shall pay the  interest of each Loan
     Segment on the Payment  Date for that Loan  Segment.  After  Maturity,  the
     accrued interest of all Loan Segments shall be payable immediately.

          (b) Unless  earlier  payment is required  under  Section 7 of the Loan
     Agreement,  Company shall pay the entire  unpaid  principal of this Note on
     the Termination Date.

          (c) If the  unpaid  principal  of this  Note at any time  exceeds  the
     Revolving Credit  Commitment,  Company shall immediately repay a sufficient
     amount as shall be required to eliminate the excess, which prepayment shall
     be applied first to Fed Funds Loan Segments,  second to Prime Loan Segments
     and third to Eurodollar Loan Segments.

          (d) Company may from time to time prepay the principal of this Note in
     whole  or in  part  without  premium,  but (i) any  partial  prepayment  of
     principal  must be in the  amount of  $10,000 or an  integral  multiple  of
     $10,000 in excess  thereof  and (ii)  Company  may make a  prepayment  of a
     Eurodollar  Loan  Segment  only  on the  last  day of the  Interest  Period
     applicable to that Eurodollar Loan Segment.

     5. Method of Calculating Interest.  Interest on this Note and other amounts
due under this Note 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 first day of the Interest  Period but excluding the last
day of the Interest Period.

     6.  Additional  Costs. If any applicable  law,  treaty,  rule or regulation
(whether  domestic or foreign) now or in the future in effect and whether or not
presently  applicable to Bank, or any  interpretation or administration of it by
any governmental authority charged with its interpretation or administration, or
compliance by Bank with any request or directive of that  authority  (whether or
not having the force of law), shall (i) affect the basis of taxation of payments
to Bank of any  amounts  payable by Company  under this Note  (other  than taxes
imposed on the  overall  net  income of Bank),  or (ii)  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 Bank, or (iii)
impose any other  condition with respect to this Note, or any Loan Segment,  and
the result is to increase the cost to Bank of  establishing  or maintaining  any
Eurodollar  Loan Segment or to reduce the amount of any sum  receivable  by Bank
with respect to any  Eurodollar  Loan  Segment,  then Company shall pay to Bank,
from time to time,  upon  request  by Bank,  additional  amounts  sufficient  to
compensate  Bank for the increased  cost or reduced sum  receivable.  A detailed
statement  as to the amount of the  increased  cost or reduced  sum  receivable,
prepared in good faith and submitted by Bank to Company, shall be conclusive and
binding for all purposes absent  manifest error in computation.  Bank represents
to Company that

#418144v2
                                       -5-
<PAGE>
on the date of this Note it has no  knowledge  of any cost or reduced sum within
the meaning of this Section 6.

     7.  Limitation  of  Requests  and  Elections.   Notwithstanding  any  other
provision  of this Note to the  contrary,  if,  upon  receiving  an  election by
Company to establish a Eurodollar  Loan  Segment  under  Section 3 of this Note,
Bank  determines  that (i)  deposits in Dollars for  periods  comparable  to the
Interest  Period  elected by Company are not  available  to Bank in the relevant
interbank or secondary market or otherwise, or (ii) the Eurodollar Rate will not
adequately  and fairly reflect the cost to Bank of  establishing  or maintaining
the  related  Eurodollar  Loan  Segment,  or  (iii) by  reason  of  national  or
international financial, political or economic conditions or any applicable law,
treaty, rule or regulation (whether domestic or foreign) now or in the future in
effect,  or the  interpretation  or  administration  of it by  any  governmental
authority charged with its  interpretation or  administration,  or compliance by
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 Bank to establish the Eurodollar Loan
Segment,  then  Company  shall  not be  entitled,  as long as that  circumstance
continues, to elect to establish a Eurodollar Loan Segment under Section 3.

     8. Illegality and Impossibility. If Bank determines that (i) any applicable
law,  treaty,  rule or  regulation  (whether  domestic or foreign) now or in the
future  in  effect,  (ii)  any  interpretation  or  administration  of it by any
governmental  authority charged with its  interpretation or  administration,  or
(iii)  compliance  by Bank  with any  request  or  directive  of that  authority
(whether or not having the force of law),  including without limitation exchange
controls, makes it unlawful or impossible for Bank to maintain a Eurodollar Loan
Segment  under  this Note,  then  Company  shall upon  receipt of notice of that
determination  from Bank,  either convert the Eurodollar Loan Segment to a Prime
Loan  Segment  or repay in full the  then-outstanding  principal  amount  of the
Eurodollar  Loan  Segment  together  with all  accrued  interest  to the date of
payment and all amounts due to Bank under Section 9 of this Note.  Company shall
do so  either  (a) on the  last day of the  Interest  Period  applicable  to the
Eurodollar Loan Segment if Bank may lawfully continue to maintain the Eurodollar
Loan  Segment  until that day, or (b)  immediately  if Bank may not  continue to
maintain the Eurodollar Loan Segment until that day.

     9. Indemnification.  If Company makes any payment of principal with respect
to a Eurodollar  Loan Segment on any day other than the last day of the Interest
Period applicable to the Eurodollar Loan Segment (except for any prepayment made
under  Section  8 of this  Note) or if  Company  fails to make  any  payment  of
principal or interest  when due under  Section 1, then Company  shall  reimburse
Bank on demand for any  resulting  loss or expense  incurred by Bank,  including
without  limitation  any loss  incurred in obtaining,  liquidating  or employing
deposits from third parties.  A detailed  statement as to the amount of the loss
or expense,  prepared in good faith and  submitted by Bank to Company,  shall be
conclusive and binding for all purposes absent manifest error in computation.


#418144v2
                                       -6-
<PAGE>
     10. Late Charge. If any payment of principal or interest under this Note is
not paid within ten days after it is due, Company shall  immediately pay to Bank
a late charge in an amount  equal to the greater of (a) $50.00 or (b) the lesser
of $2,500 or one-tenth of one percent (.1%) of the unpaid  principal  balance as
of the date the payment was due. This late charge is in addition to Bank's other
rights and  remedies  for default in payment of an  installment  of principal or
interest when due.

     11. Place and Application of Payments. Each payment upon this Note shall be
made at Bank's  address set forth above or at any other place that the holder of
this Note shall  direct in writing.  Company  authorizes  Bank to debit  deposit
account No. 2056612,  which is maintained with Bank by Company,  for any payment
due to Bank under this Note.  Any payment upon this Note shall be applied  first
to any expenses  (including expenses of collection) then due and payable to Bank
under this Note,  then to late charges due and payable,  then to any accrued and
unpaid interest under this Note and then to the unpaid principal balance, except
that after Maturity Bank may apply any payment or collection to those amounts in
any manner that Bank shall determine in its sole  discretion.  If Company at any
time owes Bank any  indebtedness  or obligation in addition to the  indebtedness
evidenced by this Note, and if any indebtedness  owed by Company to Bank is then
in default, Company shall not have, and waives, any right to direct or designate
the  particular  indebtedness  or obligation  upon which any payment made by, or
collected  from,  Company  shall be applied.  The manner of  application  of the
payment,  as  between  or among  such  indebtedness  and  obligations,  shall be
determined by Bank in its sole discretion.

     12. Eurodollar Loan Segments.  Notwithstanding  any other provision of this
Note, Bank shall be entitled to fund and maintain its funding of all or any part
of any Eurodollar Loan Segment in any manner it sees fit; but all determinations
under this Note shall be made as if Bank had actually funded and maintained each
Eurodollar Loan Segment during each related Interest Period through the purchase
of a deposit 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.

     13. Remedies.  Bank shall have all rights and remedies  provided by law and
by agree ment of Company,  including,  but not  limited to, the Loan  Agreement.
Bank shall have the right at any time,  afer and  during the  continuance  of an
Event of  Default,  to set off any  indebtedness  that Bank then owes to Company
against any indebtedness evidenced by this Note that is then due and payable.

     14.  Expenses.  Company  shall pay, or  reimburse  Bank for,  all  expenses
incurred  by Bank  (including,  but not  limited  to,  search  fees and fees and
reasonable expenses of legal counsel, other professional  advisers,  consultants
and experts) in connection with (i) the  negotiation,  preparation and execution
of this  Note and the Loan  Agreement,  each  amendment  to,  or  waiver  of any
provision  of,  this  Note  and the Loan  Agreement,  and  each  refinancing  or
restructuring of this Note and the Loan Agreement,  (ii) the  administration  of
this Note and the Loan  Agreement,  (iii)  obtaining  advice of counsel or other
professional advisers, consultants and experts regarding any

#418144v2
                                       -7-
<PAGE>
aspect  of this  Note  and the  Loan  Agreement,  (iv)  the  enforcement  of any
provision of this Note and the Loan  Agreement,  and (v) the  collection  of any
amount  at any  time  owing  to Bank by  Company  under  this  Note and the Loan
Agreement.

     15. Relationship. The relationship between Company and Bank under this Note
is solely that of debtor and creditor. Bank has no fiduciary responsibilities to
Company.  Bank does not and shall not have any  responsibility  to review, or to
inform  Company  of any  matter in  connection  with,  any  aspect of  Company's
business,  operations  or  properties.  Company shall rely entirely upon its own
judgment with respect to its business, operations and properties.

     16. Waivers.  No delay by Bank in the exercise of any right or remedy shall
be a waiver of that right or remedy.  No single or partial  exercise  by Bank of
any right or remedy shall  preclude any other or future  exercise of that or any
other right or remedy.  No waiver by Bank of any default or of any  provision of
this Note  shall be  effective  unless it is in writing  and signed by Bank.  No
waiver of any right or remedy on one occasion shall be a waiver of that right or
remedy on any future occasion.  Company waives demand for payment,  presentment,
notice of dishonor,  and protest of this Note and  consents to any  extension or
postponement of time of its payment.

     17. Notices.  Each notice required or permitted under this Note shall be in
writing and shall be personally  delivered,  sent by facsimile  transmission  or
sent  by  first-class  mail,  postage  prepaid,  or  by a  nationally-recognized
overnight courier service. The following addresses (and facsimile numbers) shall
be used for notices  unless and until a party  notifies the other of a change in
its address or facsimile number:

                  Bank

                           OLD KENT BANK
                           Corporate Banking Department
                           111 Lyon Street, N.W.
                           Grand Rapids, Michigan 49503
                           Fax:   (616) - 771 - 4641

                  Company

                           Knape & Vogt Manufacturing Company
                           2700 Oak Industrial Drive, N.E.
                           Grand Rapids, Michigan 49505
                           Fax:   (616) - 459-3957
                           Telephone:  (616) 459-3311

Notwithstanding the foregoing, all loan requests made by Company under Section 3
of this Note shall be sent by facsimile  transmission  to the  facsimile  number
listed on Exhibit A attached to this Note.

#418144v2
                                       -8-
<PAGE>
     18.  Applicable  Law and  Jurisdiction.  This Note shall be governed by and
interpreted  according  to the laws of the  State of  Michigan,  without  giving
effect to  principles  of  conflict  of laws.  Company  irrevocably  agrees  and
consents that any action  against  Company for collection or enforcement of this
Note may be  brought  in any state or  federal  court  that has  subject  matter
jurisdiction  and is  located  in,  or whose  district  includes,  Kent  County,
Michigan,  and that any such court shall have personal jurisdiction over Company
for purposes of the action.

                                 KNAPE & VOGT MANUFACTURING COMPANY


                                 By ____________________________________________
                                    Jack D. Poindexter, Chief Financial Officer



                                 Accepted by:

                                 OLD KENT BANK

                                 By ____________________________________________
                                    Bryce E. Tallant, Vice President






#418144v2
                                       -9-
<PAGE>
(Multicurrency-Cross Border)


                                      ISDA

                  International Swap Dealers Association. Inc.



                                MASTER AGREEMENT
                            dated as of______________


                        and _____________________________

have entered and/or anticipate  entering into one or more  transactions  (each a
"Transaction")  that are or will be  governed by this  Master  Agreement,  which
includes the schedule (the  "Schedule"),  and the documents and other confirming
evidence (each a "Confirmation")  exchanged between the parties confirming those
Transactions.

Accordingly, the parties agree as follows:

     Interpretation

(a)  Definitions.  The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.

(b) Inconsistency.  In the event of any inconsistency  between the provisions of
the Schedule and the other  provisions  of this Master  Agreement,  the Schedule
will prevail.  In the event of any  inconsistency  between the provisions of any
Confirmation   and  this  Master  Agreement   (including  the  Schedule),   such
Confirmation will prevail for the purpose of the relevant Transaction.

(c) Single Agreement.  All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement") and the parties would
not otherwise enter into any Transactions.

2. Obligations

(a) General Conditions.

     (i) Each  party  will make  each  payment  or  delivery  specified  in each
     Confirmation  to be made by it,  subject  to the other  provisions  of this
     Agreement.

     (ii) Payments  under this  Agreement will be made on the due date for value
     on  that  date  in the  place  of the  account  specified  in the  relevant
     Confirmation or otherwise pursuant to
<PAGE>
     this Agreement,  in freely  transferable  funds and in the manner customary
     for  payments in the required  currency.  Where  settlement  is by delivery
     (that is, other than by payment), such delivery will be made for receipt on
     the due date in the manner  customary  for the relevant  obligation  unless
     otherwise  specified  in the  relevant  Confirmation  or  elsewhere in this
     Agreement.

     (iii) Each obligation of each party under Section 2(a)(i) is subject to (l)
     the  condition  precedent  that no Event of Default or  Potential  Event of
     Default with respect to the other party has occurred and is continuing, (2)
     the condition  precedent that no Early  Termination  Date in respect of the
     relevant  Transaction has occurred or been  effectively  designated and (3)
     each other applicable condition precedent specified in this Agreement.

(b) Change of  Account.  Either  party may change its  account  for  receiving a
payment  or  delivery  by giving  notice to the other  party at least five Local
Business Days prior to the  scheduled  date for the payment or delivery to which
such change  applies unless such other party gives timely notice of a reasonable
objection to such change.

(c) Netting. If on any date amounts would otherwise be payable:-

     (i) in the same currency; and

     (ii) in respect of the same Transaction,

by each party to the other,  then, on such date, each party's obligation to make
payment of any such amount will be  automatically  satisfied and discharged and,
if the  aggregate  amount that would  otherwise  have been  payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party,  replaced by an  obligation  upon the party by whom the larger  aggregate
amount  would  have been  payable  to pay to the other  party the  excess of the
larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more  Transactions  that a net amount
will be  determined  in respect of all  amounts  payable on the same date in the
same  currency  in  respect of such  Transactions,  regardless  of whether  such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation  by specifying  that  subparagraph  (ii) above
will not apply to the Transactions  identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such  Transactions from such date). This election may
be  made  separately  for  different  groups  of  Transactions  and  will  apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.

                                       2
<PAGE>
(d) Deduction or Withholding/or Tax.

     (i) Gross-Up.  All payments  under this  Agreement will be made without any
     deduction or withholding for or on account of any Tax unless such deduction
     or  withholding  is  required  by any  applicable  law,  as modified by the
     practice of any relevant governmental revenue authority, then in effect. If
     a party is so required to deduct or withhold, then that party ("X") will:

          (l) promptly notify the other party ("Y") of such requirement;

          (2) pay to the  relevant  authorities  the full amount  required to be
          deducted  or  withheld  (including  the  full  amount  required  to be
          deducted or withheld from any  additional  amount paid by X to Y under
          this Section 2(d)) promptly upon the earlier of determining  that such
          deduction or  withholding  is required or  receiving  notice that such
          amount has been assessed against Y;

          (3) promptly  forward to Y an official  receipt (or a certified copy),
          or other  documentation  reasonably  acceptable to Y,  evidencing such
          payment to such authorities; and

          (4) if such Tax is an Indemnifiable  Tax, pay to Y, in addition to the
          payment to which Y is otherwise  entitled under this  Agreement,  such
          additional  amount  as is  necessary  to  ensure  that the net  amount
          actually received by Y (free and clear of Indemnifiable Taxes, whether
          assessed  against  X or Y) will  equal  the full  amount Y would  have
          received had no such deduction or withholding been required.  However,
          X will not be required to pay any additional amount to Y to the extent
          that it would not be required to be paid but for:

               (A) the  failure  by Y to comply  with or perform  any  agreement
               contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

               (B) the failure of a representation made by Y pursuant to Section
               3(f) to be accurate and true unless such  failure  would not have
               occurred but for (I) any action taken by a taxing  authority,  or
               brought  in a court of  competent  jurisdiction,  on or after the
               date on  which a  Transaction  is  entered  into  (regardless  of
               whether  such action is taken or brought  with respect to a party
               to this Agreement) or (II) a Change in Tax Law.

                                       3
<PAGE>
     (ii) Liability. If:

          (I) X is required by any  applicable  law, as modified by the practice
          of any relevant governmental revenue authority,  to make any deduction
          or  withholding  in respect of which X would not be required to pay an
          additional amount to Y under Section 2(d)(i)(4);

          (2) X does not so deduct or withhold; and

          (3) a liability  resulting from such Tax is assessed  directly against
          X,

     then,  except to the extent Y has satisfied or then satisfies the liability
     resulting  from  such  Tax,  Y will  promptly  pay to X the  amount of such
     liability (including any related liability for interest,  but including any
     related  liability  for  penalties  only if Y has failed to comply  with or
     perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).

(e) Default  Interest;  Other  Amounts.  Prior to the  occurrence  or  effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment  obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after  judgment) on the overdue  amount to the other party on
demand in the same  currency as such  overdue  amount,  for the period from (and
including)  the  original  due date for payment to (but  excluding)  the date of
actual  payment,  at the Default  Rate.  Such interest will be calculated on the
basis of daily  compounding and the actual number of days elapsed.  If, prior to
the occurrence or effective  designation of an Early Termination Date in respect
of  the  relevant  Transaction,  a  party  defaults  in the  performance  of any
obligation  required to be settled by  delivery,  it will  compensate  the other
party on demand if and to the extent  provided for in the relevant  Confirmation
or elsewhere in this Agreement.

3. Representations

Each party represents to the other party (which  representations  will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the  representations in Section 3(f), at all times until the
termination of this Agreement) that:

(a) Basic Representations.

     (i) Status. It is duly organised and validly existing under the laws of the
     jurisdiction of its  organisation or  incorporation  and, if relevant under
     such laws, in good standing;

                                       4
<PAGE>
     (ii)  Powers.  It has the power to  execute  this  Agreement  and any other
     documentation relating to this Agreement to which it is a party, to deliver
     this Agreement and any other documentation  relating to this Agreement that
     it is required by this Agreement to deliver and to perform its  obligations
     under this  Agreement and any  obligations  it has under any Credit Support
     Document  to which it is a party  and has  taken  all  necessary  action to
     authorize such execution, delivery and performance;

     (iii) No Violation or Conflict. Such execution, delivery and performance do
     not violate or conflict with any law applicable to it, any provision of its
     constitutional  documents,  any  order or  judgment  of any  court or other
     agency  of  government  applicable  to it or  any  of  its  assets  or  any
     contractual restriction binding on or affecting it or any of its assets;

     (iv)  Consents.  All  governmental  and other consents that are required to
     have been  obtained  by it with  respect  to this  Agreement  or any Credit
     Support  Document to which it is a party have been obtained and are in full
     force and effect and all conditions of any such consents have been complied
     with; and

     (v)  Obligations  Binding.  Its  obligations  under this  Agreement and any
     Credit Support Document to which it is a party constitute its legal,  valid
     and binding  obligations,  enforceable in accordance with their  respective
     terms  (subject  to  applicable  bankruptcy,  reorganisation,   insolvency,
     moratorium  or similar  laws  affecting  creditors'  rights  generally  and
     subject,  as  to  enforceability,   to  equitable   principles  of  general
     application (regardless of whether enforcement is sought in a proceeding in
     equity or at law)).

(b) Absence of Certain Events. No Event of Default or Potential Event of Default
or, to its knowledge,  Termination  Event with respect to it has occurred and is
continuing  and no such  event or  circumstance  would  occur as a result of its
entering into or performing its  obligations  under this Agreement or any Credit
Support Document to which it is a party.

(c) Absence of Litigation. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action,  suit or proceeding at law or in
equity or before any court,  tribunal,  governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this  Agreement  or any Credit  Support  Document to which it is a
party or its ability to perform its  obligations  under this  Agreement  or such
Credit Support Document.

(d)  Accuracy of  Specified  Information.  All  applicable  information  that is
furnished in writing by or on behalf of it to the other party and is  identified
for the purpose of this  Section  3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material

                                       5
<PAGE>
respect.

(e) Payer Tax Representation.  Each representation  specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.

(f) Payee Tax Representations.  Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.

4. Agreements

Each party  agrees with the other that,  so long as either party has or may have
any  obligation  under this  Agreement or under any Credit  Support  Document to
which it is a party:

(a) Furnish  Specified  Information.  It will  deliver to the other party or, in
certain  cases under  subparagraph  (iii) below,  to such  government  or taxing
authority as the other party reasonably directs:

     (i) any forms,  documents or certificates relating to taxation specified in
     the Schedule or any Confirmation;

     (ii) any other documents specified in the Schedule or any Confirmation; and

     (iii) upon reasonable demand by such other party, any form or document that
     may be required or  reasonably  requested in writing in order to allow such
     other party or its Credit  Support  Provider  to make a payment  under this
     Agreement or any applicable  Credit Support  Document without any deduction
     or  withholding  for or on  account  of any Tax or with such  deduction  or
     withholding  at a reduced  rate (so long as the  completion,  execution  or
     submission  of such form or document  would not  materially  prejudice  the
     legal or commercial position of the party in receipt of such demand),  with
     any  such  form or  document  to be  accurate  and  completed  in a  manner
     reasonably  satisfactory  to such other party and to be executed  and to be
     delivered with any reasonably required certification,

in each case by the date specified in the Schedule or such  Confirmation  or, if
none is specified, as soon as reasonably practicable.

(b) Maintain  Authorizations.  It will use all reasonable efforts to maintain in
full force and effect all consents of any  governmental  or other authority that
are required to be obtained by it with  respect to this  Agreement or any Credit
Support  Document to which it is a party and will use all reasonable  efforts to
obtain any that may become necessary in the future.

                                       6
<PAGE>
(c)  Comply  with  Laws.  It will  comply  in all  material  respects  with  all
applicable  laws and  orders to which it may be  subject if failure so to comply
would  materially  impair  its  ability to perform  its  obligations  under this
Agreement or any Credit Support Document to which it is a party.

(d) Tax Agreement.  It will give notice of any failure of a representation  made
by it under  Section 3(f) to be accurate and true promptly upon learning of such
failure.

(e)  Payment  of Stamp Tax.  Subject  to  Section  11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or  performance of this
Agreement by a jurisdiction in which it is incorporated,  organised, managed and
controlled,  or  considered  to have its  seat,  or in which a branch  or office
through which it is acting for the purpose of this Agreement is located  ("Stamp
Tax  Jurisdiction")  and will  indemnify  the other party  against any Stamp Tax
levied  or  imposed  upon the other  party or in  respect  of the other  party's
execution or performance  of this  Agreement by any such Stamp Tax  Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.

5. Events of Default and Termination Events

(a) Events of Default. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following  events  constitutes  an event of default (an
"Event of Default") with respect to such party:

     (i) Failure to Pay or Deliver.  Failure by the party to make, when due, any
     payment  under this  Agreement or delivery  under  Section  2(a)(i) or 2(c)
     required to be made by it if such  failure is not remedied on or before the
     third  Local  Business  Day after  notice of such  failure  is given to the
     party;

     (ii)  Breach of  Agreement.  Failure by the party to comply with or perform
     any agreement or  obligation  (other than an obligation to make any payment
     under this Agreement or delivery  under Section  2(a)(i) or 2(e) or to give
     notice of a Termination  Event or any agreement or obligation under Section
     4(a)(i),  4(a)(iii) or 4(d)) to be complied  with or performed by the party
     in  accordance  with this  Agreement  if such failure is not remedied on or
     before  the  thirtieth  day after  notice of such  failure  is given to the
     party;

                                       7
<PAGE>
     (iii) Credit Support Default.

          (l) Failure by the party or any Credit Support  Provider of such party
          to comply with or perform any  agreement or  obligation to be complied
          with or performed by it in accordance with any Credit Support Document
          if such failure is continuing  after any  applicable  grace period has
          elapsed;

          (2) the expiration or  termination of such Credit Support  Document or
          the failing or ceasing of such Credit  Support  Document to be in full
          force and effect for the  purpose of this  Agreement  (in either  case
          other than in accordance with its terms) prior to the  satisfaction of
          all  obligations  of such party under each  Transaction  to which such
          Credit Support  Document  relates  without the written  consent of the
          other party; or

          (3) the party or such Credit Support Provider  disaffirms,  disclaims,
          repudiates or rejects, in whole or in part, or challenges the validity
          of, such Credit Support Document;

     (iv) Misrepresentation. A representation (other than a representation under
     Section  3(e) or (f))  made or  repeated  or  deemed  to have  been made or
     repeated by the party or any Credit Support  Provider of such party in this
     Agreement or any Credit Support  Document  proves to have been incorrect or
     misleading in any material  respect when made or repeated or deemed to have
     been made or repeated;

     (v) Default under  Specified  Transaction.  The party,  any Credit  Support
     Provider of such party or any applicable Specified Entity of such party (l)
     defaults  under a Specified  Transaction  and,  after giving  effect to any
     applicable notice  requirement or grace period,  there occurs a liquidation
     of, an acceleration of obligations  under, or an early termination of, that
     Specified Transaction,  (2) defaults, after giving effect to any applicable
     notice  requirement or grace period,  in making any payment or delivery due
     on the last payment,  delivery or exchange date of, or any payment on early
     termination of, a Specified  Transaction (or such default  continues for at
     least  three  Local  Business  Days  if  there  is  no  applicable   notice
     requirement or grace period) or (3)  disaffirms,  disclaims,  repudiates or
     rejects,  in whole or in part, a Specified  Transaction  (or such action is
     taken by any person or entity  appointed  or empowered to operate it or act
     on its behalf);

     (vi) Cross  Default.  If "Cross  Default" is  specified  in the Schedule as
     applying to the party, the occurrence or existence of ( l) a default, event
     of default or other  similar  condition  or event  (however  described)  in
     respect of such party, any Credit Support

                                       8
<PAGE>
     Provider  of such party or any  applicable  Specified  Entity of such party
     under  one  or  more  agreements  or  instruments   relating  to  Specified
     Indebtedness of any of them  (individually or collectively) in an aggregate
     amount of not less than the  applicable  Threshold  Amount (as specified in
     the Schedule) which has resulted in such Specified  Indebtedness  becoming,
     or becoming  capable at such time of being declared,  due and payable under
     such agreements or instruments, before it would otherwise have been due and
     payable or (2) a default by such  party,  such Credit  Support  Provider or
     such Specified Entity  (individually or collectively) in making one or more
     payments on the due date  thereof in an  aggregate  amount of not less than
     the applicable Threshold Amount under such agreements or instruments (after
     giving effect to any applicable notice requirement or grace period);

     (vii)  Bankruptcy.  The party, any Credit Support Provider of such party or
     any applicable Specified Entity of such party:

          (l) is dissolved (other than pursuant to a consolidation, amalgamation
          or  merger);  (2) becomes  insolvent  or is unable to pay its debts or
          fails or admits in writing its inability generally to pay its debts as
          they  become  due;  (3) makes a  general  assignment,  arrangement  or
          composition  with or for the benefit of its creditors;  (4) institutes
          or has  instituted  against  it a  proceeding  seeking a  judgment  of
          insolvency or  bankruptcy or any other relief under any  bankruptcy or
          insolvency law or other similar law affecting  creditors' rights, or a
          petition is presented for its winding-up or  liquidation,  and, in the
          case of any  such  proceeding  or  petition  instituted  or  presented
          against it, such  proceeding  or petition (A) results in a judgment of
          insolvency  or  bankruptcy  or the entry of an order for relief or the
          making of an order for its  winding-up  or  liquidation  or (B) is not
          dismissed,  discharged,  stayed or  restrained  in each case within 30
          days of the institution or presentation  thereof; (5) has a resolution
          passed for its winding-up,  official  management or liquidation (other
          than pursuant to a consolidation,  amalgamation or merger);  (6) seeks
          or becomes subject to the appointment of an administrator, provisional
          liquidator, conservator, receiver, trustee, custodian or other similar
          official for it or for all or substantially all its assets;  (7) has a
          secured party take possession of all or  substantially  all its assets
          or has a distress, execution, attachment, sequestration or other legal
          process  levied,  enforced or sued on or against all or  substantially
          all its assets and such secured  party  maintains  possession,  or any
          such process is not dismissed,  discharged,  stayed or restrained,  in
          each case within 30 days  thereafter;  (8) causes or is subject to any
          event  with  respect  to it which,  under the  applicable  laws of any
          jurisdiction,  has an analogous  effect to any of the events specified
          in  clauses  (l) to  (7)  (inclusive);  or (9)  takes  any  action  in
          furtherance  of,  or  indicating  its  consent  to,  approval  of,  or
          acquiescence in, any of the foregoing acts; or

                                       9
<PAGE>
     (viii) Merger Without Assumption.  The party or any Credit Support Provider
     of such party  consolidates or amalgamates with, or merges with or into, or
     transfers all or  substantially  all its assets to,  another entity and, at
     the time of such consolidation, amalgamation, merger or transfer:

          (l) the resulting,  surviving or transferee entity fails to assume all
          the  obligations of such party or such Credit  Support  Provider under
          this  Agreement  or any  Credit  Support  Document  to which it or its
          predecessor  was a  party  by  operation  of  law  or  pursuant  to an
          agreement   reasonably   satisfactory  to  the  other  party  to  this
          Agreement; or

          (2) the  benefits  of any  Credit  Support  Document  fail  to  extend
          (without  the consent of the other party) to the  performance  by such
          resulting,  surviving or transferee  entity of its  obligations  under
          this Agreement.

(b) Termination  Events.  The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event  specified  below  constitutes  an  Illegality if the
event is specified  in (i) below,  a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below,  and,
if  specified  to be  applicable,  a Credit  Event.  Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below:

     (i)  Illegality.  Due to the adoption of, or any change in, any  applicable
     law after the date on which a  Transaction  is entered  into, or due to the
     promulgation  of,  or any  change  in,  the  interpretation  by any  court,
     tribunal  or  regulatory  authority  with  competent  jurisdiction  of  any
     applicable law after such date, it becomes unlawful (other than as a result
     of a breach by the party of Section 4(b)) for such party (which will be the
     Affected Party):

          (l) to perform any absolute or contingent obligation to make a payment
          or  delivery  or to receive a payment or  delivery  in respect of such
          Transaction  or to comply with any other  material  provision  of this
          Agreement relating to such Transaction; or

          (2) to perform,  or for any Credit  Support  Provider of such party to
          perform,  any contingent or other  obligation which the party (or such
          Credit  Support  Provider)  has  under  any  Credit  Support  Document
          relating to such Transaction;

                                       10
<PAGE>
     (ii) Tax  Event.  Due to (x) any  action  taken by a taxing  authority,  or
     brought in a court of competent jurisdiction, on or after the date on which
     a Transaction  is entered into  (regardless of whether such action is taken
     or brought  with respect to a party to this  Agreement)  or (y) a Change in
     Tax Law, the party (which will be the Affected  Party) will,  or there is a
     substantial  likelihood  that it  will,  on the next  succeeding  Scheduled
     Payment Date (l) be required to pay to the other party an additional amount
     in respect of an  Indemnifiable  Tax under  Section  2(d)(i)(4)  (except in
     respect of interest under Section 2(e),  6(d)(ii) or 6(e)) or (2) receive a
     payment  from which an amount is required to be deducted or withheld for or
     on account of a Tax  (except in respect of  interest  under  Section  2(e),
     6(d)(ii)  or 6(e))  and no  additional  amount  is  required  to be paid in
     respect  of such Tax  under  Section  2(d)(i)(4)  (other  than by reason of
     Section 2(d)(i)(4)(A) or (B));

     (iii) Tax Event Upon Merger.  The party (the "Burdened  Party") on the next
     succeeding  Scheduled  Payment  Date will  either (I) be required to pay an
     additional  amount  in  respect  of  an  Indemnifiable  Tax  under  Section
     2(d)(i)(4)  (except in respect of interest under Section 2(e),  6(d)(ii) or
     6(e)) or (2)  receive a payment  from which an amount has been  deducted or
     withheld for or on account of any Indemnifiable Tax in respect of which the
     other party is not  required  to pay an  additional  amount  (other than by
     reason of Section  2(d)(i)(4)(A)  or (B)),  in either case as a result of a
     party  consolidating  or  amalgamating  with,  or merging with or into,  or
     transferring all or substantially  all its assets to, another entity (which
     will be the Affected  Party) where such action does not constitute an event
     described in Section 5(a)(viii);

     (iv) Credit Event Upon Merger. If"Credit Event Upon Merger" is specified in
     the Schedule as applying to the party, such party ("X"), any Credit Support
     Provider  of X or any  applicable  Specified  Entity of X  consolidates  or
     amalgamates with, or merges with or into, or transfers all or substantially
     all its assets to,  another  entity and such action does not  constitute an
     event  described  in Section  5(a)(viii)  but the  creditworthiness  of the
     resulting, surviving or transferee entity is materially weaker than that of
     X, such Credit Support Provider or such Specified  Entity,  as the case may
     be,  immediately  prior  to  such  action  (and,  in such  event,  X or its
     successor or transferee, as appropriate, will be the Affected Party); or

     (v) Additional Termination Event. If any "Additional  Termination Event" is
     specified in the Schedule or any  Confirmation as applying,  the occurrence
     of such event (and, in such event,  the Affected Party or Affected  Parties
     shall be as specified for such Additional Termination Event in the Schedule
     or such Confirmation).

(c) Event of Default and  Illegality.  If an event or  circumstance  which would
otherwise

                                       11
<PAGE>
constitute or give rise to an Event of Default also  constitutes  an Illegality,
it will be treated as an Illegality and will not constitute an Event of Default.

6. Early Termination

(a) Right to Terminate  Following  Event of Default.  If at any time an Event of
Default  with  respect to a party (the  'Defaulting  Party") has occurred and is
then continuing,  the other party (the "Non-defaulting  Party") may, by not more
than 20 days notice to the  Defaulting  Party  specifying  the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions.  If, however,
"Automatic  Early  Termination"  is  specified  in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur  immediately  upon the  occurrence  with  respect to such party of an
Event of Default  specified in Section  5(a)(vii)(l),  (3),  (5), (6) or, to the
extent  analogous  thereto,  (8), and as of the time  immediately  preceding the
institution  of the  relevant  proceeding  or the  presentation  of the relevant
petition upon the  occurrence  with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).

(b) Right to Terminate Following Termination Event.

     (i) Notice. If a Termination Event occurs, an Affected Party will, promptly
     upon becoming aware of it notify the other party,  specifying the nature of
     that  Termination  Event and each Affected  Transaction  and will also give
     such other  information about that Termination Event as the other party may
     reasonably require.

     (ii) Transfer to Avoid  Termination  Event.  If either an Illegality  under
     Section  5(b)(i)(I)  or a Tax Event  occurs and there is only one  Affected
     Party,  or if a Tax Event Upon Merger occurs and the Burdened  Party is the
     Affected  Party,  the Affected  Party will,  as a condition to its right to
     designate  an  Early  Termination  Date  under  Section  6(b)(iv),  use all
     reasonable  efforts  (which  will not  require  such party to incur a loss,
     excluding immaterial, incidental expenses) to transfer within 20 days after
     it gives notice under Section 6(b)(i) all its rights and obligations  under
     this  Agreement in respect of the Affected  Transactions  to another of its
     Offices or Affiliates so that such Termination Event ceases to exist.

     If the  Affected  Party is not able to make  such a  transfer  it will give
     notice  to the  other  party  to that  effect  within  such 20 day  period,
     whereupon  the other party may effect such a transfer  within 30 days after
     the notice is given under Section 6(b)(i).

     Any such transfer by a party under this Section 6(b)(ii) will be subject to
     and conditional

                                       12
<PAGE>
     upon the prior written  consent of the other party.  which consent will not
     be  withheld  if such other  party's  policies in effect at such time would
     permit  it to enter  into  transactions  with the  transferee  on the terms
     proposed.


                                       13
<PAGE>
     (iii) Two Affected Parties.  If an Illegality under Section 5(b)(i)(l) or a
     Tax Event  occurs and there are two Affected  Parties,  each party will use
     all  reasonable  efforts to reach  agreement  within 30 days  after  notice
     thereof is given under Section 6(b)(i) on action to avoid that  Termination
     Event.

     (iv) Right to Terminate. If:

          (l) a transfer  under Section  6(b)(ii) or an agreement  under Section
          6(b)(iii),  as the case may be, has not been  effected with respect to
          all Affected Transactions within 30 days after an Affected Party gives
          notice under Section 6(b)(i); or

          (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger
          or an Additional  Termination Event occurs, or a Tax Event Upon Merger
          occurs and the Burdened Party is not the Affected Party,  either party
          in the case of an Illegality,  the Burdened Party in the case of a Tax
          Event Upon Merger, any Affected Party in the case of a Tax Event or an
          Additional Termination Event if there is more than one Affected Party,
          or the party which is not the  Affected  Party in the case of a Credit
          Event Upon Merger or an Additional  Termination Event if there is only
          one  Affected  Party may, by not more than 20 days notice to the other
          party  and  provided  that  the  relevant  Termination  Event  is then
          continuing,  designate a day not  earlier  than the day such notice is
          effective  as an Early  Termination  Date in respect  of all  Affected
          Transactions.

(c) Effect of Designation.

     (i) If notice  designating an Early Termination Date is given under Section
     6(a)  or  (b),  the  Early  Termination  Date  will  occur  on the  date so
     designated,  whether or not the  relevant  Event of Default or  Termination
     Event is then continuing.

     (ii) Upon the occurrence or effective  designation of an Early  Termination
     Date, no further  payments or deliveries  under Section  2(a)(i) or 2(e) in
     respect of the  Terminated  Transactions  will be required to be made,  but
     without prejudice to the other provisions of this Agreement. The amount, if
     any,  payable in respect of an Early  Termination  Date shall be determined
     pursuant to Section 6(e).

                                       14
<PAGE>
(d) Calculations.

     (i)  Statement.  On or as  soon as  reasonably  practicable  following  the
     occurrence  of  an  Early  Termination  Date,  each  party  will  make  the
     calculations  on its part if any,  contemplated  by  Section  6(e) and will
     provide to the other party a statement (l) showing,  in reasonable  detail,
     such  calculations  (including  all relevant  quotations and specifying any
     amount  payable under Section 6(e)) and (2) giving  details of the relevant
     account to which any amount  payable to it is to be paid. In the absence of
     written confirmation from the source of a quotation obtained in determining
     a Market Quotation,  the records of the party obtaining such quotation will
     be conclusive evidence of the existence and accuracy of such quotation.

     (ii)  Payment  Date.  An amount  calculated  as being due in respect of any
     Early  Termination  Date under Section 6(e) will be payable on the day that
     notice  of the  amount  payable  is  effective  (in the  case  of an  Early
     Termination  Date which is  designated or occurs as a result of an Event of
     Default) and on the day which is two Local  Business  Days after the day on
     which notice of the amount  payable is  effective  (in the case of an Early
     Termination  Date which is designated as a result of a Termination  Event).
     Such  amount  will be paid  together  with (to the extent  permitted  under
     applicable law) interest  thereon (before as well as after judgment) in the
     Termination  Currency,  from (and including) the relevant Early Termination
     Date to (but  excluding)  the date such amount is paid,  at the  Applicable
     Rate.  Such interest  will be calculated on the basis of daily  compounding
     and the actual number of days elapsed.

(e) Payments on Early  Termination.  If an Early  Termination  Date occurs,  the
following  provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the  "First  Method"  or the  "Second  Method".  If the  parties  fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The  amount,  if any,  payable  in  respect  of an  Early  Termination  Date and
determined pursuant to this Section will be subject to any Set-off.

     (i) Events of Default.  If the Early Termination Date results from an Event
     of Default:

          (l) First Method and Market  Quotations If the First Method and Market
          Quotation apply,  the Defaulting Party will pay to the  Non-defaulting
          Party  the  excess,  if a  positive  number,  of  (A)  the  sum of the
          Settlement Amount (determined by the Non-defaulting  Party) in respect
          of the Terminated Transactions and the Termination Currency Equivalent
          of the Unpaid Amounts owing to the Non- defaulting  Party over (B) the
          Termination  Currency  Equivalent  of the Unpaid  Amounts owing to the
          Defaulting Party.

                                       15
<PAGE>
          (2) First  Method and Loss.  If the First  Method and Loss apply,  the
          Defaulting Party will pay to the  Non-defaulting  Party, if a positive
          number, the Non- defaulting Party's Loss in respect of this Agreement.

          (3)  Second  Method  and Market  Quotation.  If the Second  Method and
          Market Quotation apply, an amount will be payable equal to (A) the sum
          of the Settlement Amount (determined by the  Non-defaulting  Party) in
          respect of the Terminated  Transactions  and the Termination  Currency
          Equivalent  of the Unpaid  Amounts owing to the  Non-defaulting  Party
          less (B) the  Termination  Currency  Equivalent of the Unpaid  Amounts
          owing to the Defaulting  Party.  If that amount is a positive  number,
          the Defaulting Party will pay it to the Non-defaulting Party; if it is
          a negative  number,  the  Non-defaulting  Party will pay the  absolute
          value of that amount to the Defaulting Party.

          (4) Second Method and Loss.  If the Second  Method and Loss apply,  an
          amount will be payable  equal to the  Non-defaulting  Party's  Loss in
          respect of this Agreement.  If that amount is a positive  number,  the
          Defaulting Party will pay it to the  Non-defaulting  Party; if it is a
          negative number, the Non-defaulting  Party will pay the absolute value
          of that amount to the Defaulting Party.

     (ii)  Termination  Events.  If the Early  Termination  Date  results from a
     Termination Event:

          (l) One Affected  Party.  If there is one Affected  Party,  the amount
          payable will be determined in accordance with Section  6(e)(i)(3),  if
          Market  Quotation  applies,  or Section  6(e)(i)(4),  if Loss applies,
          except that, in either case, references to the Defaulting Party and to
          the  Non-defaulting  Party  will be  deemed  to be  references  to the
          Affected  Party  and  the  party  which  is not  the  Affected  Party,
          respectively, and, if Loss applies and fewer than all the Transactions
          are being  terminated,  Loss  shall be  calculated  in  respect of all
          Terminated Transactions.

          (2) Two Affected Parties. If there are two Affected Parties:

               (A) if Market  Quotation  applies,  each party will  determine  a
               Settlement Amount in respect of the Terminated Transactions,  and
               an amount will be payable  equal to (D the sum of (a) one-half of
               the difference  between the  Settlement  Amount of the party with
               the higher  Settlement  Amount ("X") and the Settlement Amount of
               the

                                       16
<PAGE>
               party  with  the  lower  Settlement  Amount  ("Y")  and  (b)  the
               Termination  Currency Equivalent of the Unpaid Amounts owing to X
               less  (II) the  Termination  Currency  Equivalent  of the  Unpaid
               Amounts owing to Y; and

               (B) if Loss  applies,  each  party  will  determine  its  Loss in
               respect of this Agreement (or, if fewer than all the Transactions
               are being terminated,  in respect of all Terminated Transactions)
               and an amount will be payable equal to one-half of the difference
               between  the Loss of the party with the higher Loss ("X") and the
               Loss of the party with the lower Loss ("Y").

     If the amount payable is a positive  number, Y will pay it to X; if it is a
     negative number, X will pay the absolute value of that amount to Y.

     (iii)  Adjustment  for  Bankruptcy.   In   circumstances   where  an  Early
     Termination Date occurs because  "Automatic Early  Termination"  applies in
     respect of a party,  the amount  determined under this Section 6(e) will be
     subject to such  adjustments  as are  appropriate  and  permitted by law to
     reflect  any  payments or  deliveries  made by one party to the other under
     this  Agreement  (and  retained by such other party) during the period from
     the  relevant  Early  Termination  Date to the date for payment  determined
     under Section 6(d)(ii).

     (iv)  Pre-Estimate.  The parties agree that if Market Quotation  applies an
     amount recoverable under this Section 6(e) is a reasonable  pre-estimate of
     loss and not a penalty.  Such amount is payable for the loss of bargain and
     the loss of  protection  against  future  risks  and  except  as  otherwise
     provided in this  Agreement  neither  party will be entitled to recover any
     additional damages as a consequence of such losses.

7. Transfer

Subject  to  Section  6(b)(ii),  neither  this  Agreement  nor any  interest  or
obligation  in or under this  Agreement  may be  transferred  (whether by way of
security or otherwise) by either party without the prior written  consent of the
other party, except that:

(a)  a  party  may  make  such  a  transfer  of  this  Agreement  pursuant  to a
consolidation  or amalgamation  with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and

(b) a party may make such a transfer  of all or any part of its  interest in any
amount payable to it from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be void.

                                       17
<PAGE>
8. Contractual Currency

(a) Payment in the Contractual Currency.  Each payment under this Agreement will
be made in the relevant  currency  specified in this  Agreement for that payment
(the  'Contractual  Currency").  To the extent  permitted by applicable law, any
obligation to make payments  under this  Agreement in the  Contractual  Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual  Currency,  except to the extent such  tender  results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in  converting  the  currency  so  tendered  into the  Contractual
Currency,  of the full amount in the Contractual Currency of all amounts payable
in respect of this  Agreement.  If for any reason the amount in the  Contractual
Currency  so  received  falls  short of the amount in the  Contractual  Currency
payable in respect of this  Agreement,  the party  required  to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the  Contractual  Currency as may be necessary to  compensate  for the
shortfall.  If for any reason the amount in the Contractual Currency so received
exceeds  the  amount in the  Contractual  Currency  payable  in  respect of this
Agreement,  the party  receiving the payment will refund  promptly the amount of
such excess.

(b)  Judgments.  To the extent  permitted by applicable  law, if any judgment or
order  expressed in a currency other than the  Contractual  Currency is rendered
(i) for the payment of any amount  owing in respect of this  Agreement  (ii) for
the payment of any amount  relating to any early  termination in respect of this
Agreement  or (iii) in respect of a judgment  or order of another  court for the
payment  of any  amount  described  in (i) or  (ii)  above,  the  party  seeking
recovery,  after recovery in full of the aggregate amount to which such party is
entitled  pursuant  to the  judgment  or  order,  will be  entitled  to  receive
immediately  from the other party the amount of any shortfall of the Contractual
Currency  received  by such  party as a  consequence  of sums paid in such other
currency  and  will  refund  promptly  to the  other  party  any  excess  of the
Contractual  Currency  received by such party as a  consequence  of sums paid in
such other  currency if such shortfall or such excess arises or results from any
variation  between  the rate of exchange  at which the  Contractual  Currency is
converted  into the  currency of the  judgment or order for the purposes of such
judgment or order and the rate of  exchange at which such party is able,  acting
in a reasonable  manner and in good faith in  converting  the currency  received
into the Contractual  Currency,  to purchase the  Contractual  Currency with the
amount of the currency of the judgment or order actually received by such party.
The term rate of exchange" includes,  without limitation, any premiums and costs
of exchange  payable in connection  with the purchase of or conversion  into the
Contractual Currency.

                                       18
<PAGE>
(c) Separate  Indemnities.  To the extent  permitted by  applicable  law,  these
indemnities  constitute  separate  and  independent  obligations  from the other
obligations in this  Agreement,  will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof  being  made for any other  sums  payable  in  respect of this
Agreement.

(d) Evidence of Loss.  For the purpose of this Section 8, it will be  sufficient
for a party to  demonstrate  that it would  have  suffered  a loss had an actual
exchange or purchase been made.

9. Miscellaneous

(a) Entire  Agreement.  This  Agreement  constitutes  the entire  agreement  and
understanding  of the parties with respect to its subject  matter and supersedes
all oral communication and prior writings with respect thereto.

(b)  Amendments.  No  amendment,  modification  or  waiver  in  respect  of this
Agreement will be effective unless in writing  (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.

(c)  Survival  of  Obligations.  Without  prejudice  to Sections  2(a)(iii)  and
6(c)(ii),  the  obligations of the parties under this Agreement will survive the
termination of any Transaction.

(d)  Remedies  Cumulative.  Except as  provided in this  Agreement,  the rights,
powers,  remedies and  privileges  provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.

(e) Counterparts and Confirmations.

     (i) This Agreement (and each amendment,  modification and waiver in respect
     of it)  may  be  executed  and  delivered  in  counterparts  (including  by
     facsimile transmission), each of which will be deemed an original.

                                       19
<PAGE>
     (ii) The parties  intend  that they are legally  bound by the terms of each
     Transaction  from the moment they agree to those terms  (whether  orally or
     otherwise). A Confirmation shall be entered into as soon as practicable and
     may be executed  and  delivered  in  counterparts  (including  by facsimile
     transmission)  or be created by an exchange of telexes or by an exchange of
     electronic messages on an electronic  messaging system,  which in each case
     will be  sufficient  for all purposes to evidence a binding  supplement  to
     this  Agreement.  The  parties  will  specify  therein or  through  another
     effective  means that any such  counterpart,  telex or  electronic  message
     constitutes a Confirmation.

(f) No Waiver of Rights.  A failure or delay in exercising  any right,  power or
privilege  in respect of this  Agreement  will not be  presumed  to operate as a
waiver,  and a single or partial exercise of any right,  power or privilege will
not be presumed to preclude any subsequent or further  exercise,  of that right,
power or privilege or the exercise of any other right, power or privilege.

(g)  Headings.  The  headings  used in this  Agreement  are for  convenience  of
reference  only and are not to affect  the  construction  of or to be taken into
consideration in interpreting this Agreement.

10. Offices; Multibranch Parties

(a) If Section  10(a) is specified in the Schedule as applying,  each party that
enters into a  Transaction  through an Office other than its head or home office
represents to the other party that,  notwithstanding the place of booking office
or jurisdiction of  incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office.  This  representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.

(b)  Neither  party may change the Office  through  which it makes and  receives
payments  or  deliveries  for the  purpose of a  Transaction  without  the prior
written consent of the other party.

(c) If a party  is  specified  as a  Multibranch  Party  in the  Schedule,  such
Multibranch  Party  may  make and  receive  payments  or  deliveries  under  any
Transaction  through any Office listed in the Schedule,  and the Office  through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.

                                       20
<PAGE>
11. Expenses

A Defaulting Party will, on demand,  indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses,  including legal fees and
Stamp  Tax,  incurred  by such  other  party by  reason of the  enforcement  and
protection of its rights under this Agreement or any Credit Support  Document to
which the Defaulting  Party is a party or by reason of the early  termination of
any Transaction, including, but not limited to, costs of collection.

12. Notices

(a)  Effectiveness.  Any  notice  or  other  communication  in  respect  of this
Agreement  may be given in any manner set forth below  (except  that a notice or
other  communication  under  Section  5 or 6  may  not  be  given  by  facsimile
transmission  or  electronic  messaging  system) to the  address or number or in
accordance  with the  electronic  messaging  system  details  provided  (see the
Schedule) and will be deemed effective as indicated:-

     (i) if in writing and delivered in person or by courier,  on the date it is
     delivered;

     (ii) if sent by telex, on the date the recipient's answerback is received;

     (iii) if sent by facsimile  transmission,  on the date that transmission is
     received by a  responsible  employee of the  recipient  in legible form (it
     being  agreed that the burden of proving  receipt will be on the sender and
     will  not  be met  by a  transmission  report  generated  by  the  sender's
     facsimile machine);

     (iv) if sent by certified or registered mail (airmail,  if overseas) or the
     equivalent (return receipt  requested),  on the date that mail is delivered
     or its delivery is attempted; or

     (v) if sent by electronic  messaging  system,  on the date that  electronic
     message is received,

unless the date of that  delivery (or attempted  delivery) or that  receipt,  as
applicable,  is not a Local Business Day or that  communication is delivered (or
attempted) or received,  as  applicable,  after the close of business on a Local
Business  Day,  in which  case  that  communication  shall be  deemed  given and
effective on the first following day that is a Local Business Day.

(b)  Change of  Addresses.  Either  party may by notice to the other  change the
address,  telex or facsimile  number or electronic  messaging  system details at
which notices or other communications are to be given to it.

                                       21
<PAGE>
13. Governing Law and Jurisdiction

(a)  Governing  law.  This  Agreement  will  be  governed  by and  construed  in
accordance with the law specified in the Schedule.

(h) Jurisdiction.  With respect to any suit,  action or proceedings  relating to
this Agreement ("Proceedings") each party irrevocably:

     (i) submits to the jurisdiction of the English courts, if this Agreement is
     expressed  to  be  governed  by  English  law,  or  to  the   non-exclusive
     jurisdiction  of the courts of the State of New York and the United  States
     District  Court  located in the Borough of Manhattan  in New York City,  if
     this  Agreement is expressed to be governed by the laws of the State of New
     York; and

     (ii)  waives any  objection  which it may have at any time to the laying of
     venue of any Proceedings  brought in any such court,  waives any claim that
     such  Proceedings  have been brought in an  inconvenient  forum and further
     waives the right to object,  with  respect to such  Proceedings,  that such
     court does not have any jurisdiction over such party.

Nothing in this Agreement  precludes  either party from bringing  Proceedings in
any other jurisdiction  (outside,  if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the. Civil
Jurisdiction  and  Judgments  Act  1982  or  any   modification,   extension  or
re-enactment  thereof  for the time  being in force)  nor will the  bringing  of
Proceedings  in  any  one  or  more  jurisdictions   preclude  the  bringing  of
Proceedings in any other jurisdiction.

(c) Service of Process.  Each party  irrevocably  appoints the Process Agent (if
any) specified  opposite its name in the Schedule to receive,  for it and on its
behalf,  service of process in any  proceedings.  If for any reason any  party's
Process  Agent is unable to act as such,  such  party will  promptly  notify the
other party and within 30 days appoint a substitute  process agent acceptable to
the other party. The parties irrevocably &consent to service of process given in
the manner  provided for notices in Section 12.  Nothing in this  Agreement will
affect the right of either party to serve process in any other manner  permitted
by law.

                                       22
<PAGE>
(d) Waiver of Immunities.  Each party irrevocably  waives, to the fullest extent
permitted by applicable  law, with respect to itself and its revenues and assets
(irrespective  of their use or  intended  use),  all  immunity on the grounds of
sovereignty or other similar  grounds from (i) suit,  (ii)  jurisdiction  of any
court, (iii) relief by way of injunction,  order for specific performance or for
recovery of property,  (iv)  attachment of its assets  (whether  before or after
judgment)  and (v) execution or  enforcement  of any judgment to which it or its
revenues or assets might  otherwise be entitled in any Proceedings in the courts
of  any  jurisdiction  and  irrevocably  agrees,  to  the  extent  permitted  by
applicable law, that it will not claim any such immunity in any Proceedings.

14. Definitions

As used in this Agreement:--

"Additional Termination Event" has the meaning specified in Section 5(b).

"Affected Party" has the meaning specified in Section 5(b).

"Affected  Transactions"  means  (a)  with  respect  to  any  Termination  Event
consisting  of  an  Illegality,   Tax  Event  or  Tax  Event  Upon  Merger,  all
Transactions  affected by the occurrence of such Termination  Event and (b) with
respect to any other Termination Event, all Transactions.

"Affiliate"  means,  subject to the  Schedule,  in relation  to any person,  any
entity  controlled,  directly  or  indirectly,  by the  person,  any entity that
controls,  directly  or  indirectly,  the  person  or  any  entity  directly  or
indirectly under common control with the person. For this purpose,  "control" of
any entity or person  means  ownership  of a majority of the voting power of the
entity or person.

"Applicable Rate" means:

(a) in respect of obligations  payable or deliverable  (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;

(b) in respect of an  obligation  to pay an amount under  Section 6(e) of either
party from and after the date  (determined in accordance with Section  6(d)(ii))
on which that amount is payable, the Default Rate;

(c) in respect of all other  obligations  payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting  Party, the Non-default
Rate; and

(d) in all other cases, the Termination Rate.

                                       23
<PAGE>
"Burdened Party" has the meaning specified in Section 5(b).

"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation  of any  law)  that  occurs  on or after  the  date on which  the
relevant Transaction is entered into.

"consent"  includes  a  consent,  approval,  action,  authorization,  exemption,
notice, filing, registration or exchange control consent.

"Credit Event Upon Merger" has the meaning specified in Section 5(b).

"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.  "Credit Support  Provider" has the meaning specified in
the Schedule.  "Default  Rate" means a rate per annum equal to the cost (without
proof or evidence of any actual cost) to the relevant payee (as certified by it)
if it were to fund or of funding the relevant amount plus l % per annum.

"Defaulting Party" has the meaning specified in Section 6(a).

"Early  Termination  Date" means the date  determined in accordance with Section
6(a) or 6(b)(iv).

"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.

"Illegality" has the meaning specified in Section 5(b).

"Indemnifiable  Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation  authority  imposing such
Tax and the  recipient  of such  payment or a person  related to such  recipient
(including,  without  limitation,  a connection  arising from such  recipient or
related person being or having been a citizen or resident of such  jurisdiction,
or being or having been organised,  present or engaged in a trade or business in
such  jurisdiction,  or having or having had a permanent  establishment or fixed
place of business in such  jurisdiction,  but  excluding  a  connection  arising
solely  from such  recipient  or  related  person  having  executed,  delivered,
performed  its  obligations  or  received a payment  under,  or  enforced,  this
Agreement or a Credit Support Document).

                                       24
<PAGE>
"Law" includes any treaty, law, rule or regulation (as modified,  in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.

"Local Business Day" means,  subject to the Schedule,  a day on which commercial
banks are open for business  (including dealings in foreign exchange and foreign
currency  deposits) (a) in relation to any obligation under Section 2(a)(i),  in
the place(s) specified in the relevant Confirmation or, if not so specified,  as
otherwise agreed by the parties in writing or determined  pursuant to provisions
contained, or incorporated by reference,  in this Agreement,  (b) in relation to
any other  payment,  in the place where the relevant  account is located and, if
different,  in the principal  financial  centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication,  including notice
contemplated  under Section  5(a)(i),  in the city  specified in the address for
notice  provided by the recipient and, in the case of a notice  contemplated  by
Section  2(b),  in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.

"Loss"  means,  with  respect  to  this  Agreement  or  one or  more  Terminated
Transactions,  as the  case  may  be,  and a  party,  the  Termination  Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case  expressed as a negative  number)
in connection  with this  Agreement or that  Terminated  Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the  election of such party but without  duplication,  loss or
cost  incurred  as a  result  of  its  terminating,  liquidating,  obtaining  or
reestablishing any hedge or related trading position (or any gain resulting from
any of them).  Loss  includes  losses  and costs (or  gains) in  respect  of any
payment or delivery  required to have been made (assuming  satisfaction  of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except so as to avoid duplication, if Section 6(e)(i)(I) or (3) or
6(e)(ii)(2)(A)  applies.  Loss  does  not  include  a  party's  legal  fees  and
out-of-pocket  expenses referred to under Section Il. A party will determine its
Loss as of the relevant  Early  Termination  Date, or, if that is not reasonably
practicable,  as of the earliest date thereafter as is reasonably practicable. A
party  may (but need not)  determine  its Loss by  reference  to  quotations  of
relevant  rates or  prices  from one or more  leading  dealers  in the  relevant
markets.

"Market  Quotation" means,  with respect to one or more Terminated  Transactions
and a party  making  the  determination,  an amount  determined  on the basis of
quotations from Reference  Market-makers.  Each quotation will be for an amount,
if any, that would be paid to such party  (expressed as a negative number) or by
such party  (expressed as a positive  number) in  consideration  of an agreement
between such party  (taking into account any existing  Credit  Support  Document
with  respect  to the  obligations  of such  party)  and the  quoting  Reference
Market-maker

                                       25
<PAGE>
to enter into a transaction (the "Replacement  Transaction") that would have the
effect of  preserving  for such party the economic  equivalent of any payment or
delivery  (whether the  underlying  obligation  was absolute or  contingent  and
assuming the satisfaction of each applicable condition precedent) by the parties
under  Section  2(a)(i) in respect of such  Terminated  Transaction  or group of
Terminated Transactions that would, but for the occurrence of the relevant Early
Termination  Date, have been required after that date. For this purpose,  Unpaid
Amounts  in  respect  of the  Terminated  Transaction  or  group  of  Terminated
Transactions are to be excluded but, without limitation, any payment or delivery
that would,  but for the relevant  Early  Termination  Date,  have been required
(assuming  satisfaction of each applicable condition precedent) after that Early
Termination Date is to be included. The Replacement Transaction would be subject
to such documentation as such party and the Reference  Market-maker may, in good
faith,  agree.  The party making the  determination  (or its agent) will request
each Reference  Market-maker  to provide its quotation to the extent  reasonably
practicable as of the same day and time (without regard to different time zones)
on or as soon as reasonably  practicable  after the relevant  Early  Termination
Date.  The day and time as of which those  quotations are to be obtained will be
selected  in good  faith by the  party  obliged  to make a  determination  under
Section  6(e),  and, if each party is so obliged,  after  consultation  with the
other. If more than three quotations are provided,  the Market Quotation will be
the arithmetic mean of the quotations,  without regard to the quotations  having
the highest and lowest  values.  If exactly three such  quotations are provided,
the Market  Quotation will be the quotation  remaining  after  disregarding  the
highest and lowest quotations.  For this purpose, if more than one quotation has
the same highest value or lowest  value,  then one of such  quotations  shall be
disregarded. If fewer than three quotations are provided, it will be deemed that
the  Market  Quotation  in respect of such  Terminated  Transaction  or group of
Terminated Transactions cannot be determined.

"Non-default  Rate" means a rate per annum equal to the cost  (without  proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.

"Non-defaulting Party" has the meaning specified in Section 6(a).

"Office" means a branch or office of a party,  which may be such party's head or
home office.

"Potential  Event of Default " means any event which,  with the giving of notice
or the lapse of time or both, would constitute an Event of Default.

"Reference  Market-makers"  means four leading  dealers in the  relevant  market
selected  by the party  determining  a Market  Quotation  in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an  extension  of credit  and (b) to the  extent  practicable,  from  among such
dealers having an office in the same city.

                                       26
<PAGE>
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated,  organised managed and controlled or considered
to have its  seat,  (b) where an Office  through  which the party is acting  for
purposes of this  Agreement  is located,  (c) in which the party  executes  this
Agreement and (d) in relation to any payment, from or through which such payment
is made.

"Scheduled  Payment  Date"  means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.

"Set-off" means set-off, offset,  combination of accounts, right of retention or
withholding  or  similar  right or  requirement  to which the payer of an amount
under Section 6 is entitled or subject  (whether  arising under this  Agreement,
another contract,  applicable law or otherwise) that is exercised by, or imposed
on, such payer.

"Settlement  Amount"  means,  with respect to a party and any Early  Termination
Date, the sum of:- -

(a) the  Termination  Currency  Equivalent  of the  Market  Quotations  (whether
positive or negative)  for each  Terminated  Transaction  or group of Terminated
Transactions for which a Market Quotation is determined; and

(h) such party's Loss (whether positive or negative and without reference to any
Unpaid  Amounts)  for  each  Terminated   Transaction  or  group  of  Terminated
Transactions  for which a Market Quotation cannot be determined or would not (in
the  reasonable  belief  of  the  party  making  the  determination)  produce  a
commercially reasonable result.

"Specified Entity" has the meaning specified in the Schedule.

"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.

"Specified  Transaction"  means,  subject to the Schedule,  (a) any  transaction
(including an agreement with respect thereto) now existing or hereafter  entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable  Specified  Entity of such party) and the other party to
this  Agreement  (or any Credit  Support  Provider  of such  other  patty or any
applicable  Specified  Entity  of  such  other  parry)  which  is  a  rate  swap
transaction,  basis swap,  forward rate transaction,  commodity swap,  commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange

                                       27
<PAGE>
transaction, cap transaction,  floor transaction,  collar transaction,  currency
swap transaction,  cross-currency rate swap transaction,  currency option or any
other  similar  transaction  (including  any option with respect to any of these
transactions),  (b) any  combination  of these  transactions  and (c) any  other
transaction  identified  as a Specified  Transaction"  in this  Agreement or the
relevant confirmation.

"Stamp Tax" means any stamp, registration, documentation or similar tax.

"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest,  penalties and additions thereto) that is
imposed by any  government  or other taxing  authority in respect of any payment
under this Agreement other than a stamp, registration,  documentation or similar
tax.

"Tax Event" has the meaning specified in Section 5(b).

"Tax Event Upon Merger" has the meaning specified in Section 5(b).

"Terminated  Transactions"  means with respect to any Early Termination Date (a)
if resulting  from a Termination  Event,  all Affected  Transactions  and (b) if
resulting from an Event of Default,  all Transactions (in either case) in effect
immediately  before  the  effectiveness  of the  notice  designating  that Early
Termination  Date (or, if "Automatic  Early  Termination"  applies,  immediately
before that Early Termination Date).

"Termination Currency" has the meaning specified in the Schedule.

"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination  Currency,  such Termination  Currency amount and, in respect of
any amount  denominated in a currency other than the  Termination  Currency (the
"Other  Currency"),  the amount in the  Termination  Currency  determined by the
party  making the  relevant  determination  as being  required to purchase  such
amount of such Other Currency as at the relevant Early  Termination Date, or, if
the relevant Market  Quotation or Loss (as the case may be), is determined as of
a later date, that later date,  with the Termination  Currency at the rate equal
to the spot exchange rate of the foreign  exchange  agent  (selected as provided
below) for the purchase of such Other Currency with the Termination  Currency at
or about 11:00 am. (in the city in which such foreign exchange agent is located)
on such date as would be customary for the  determination of such a rate for the
purchase of such Other Currency for value on the relevant Early Termination Date
or that later  date.  The  foreign  exchange  agent  will,  if only one party is
obliged to make a determination under Section 6(e), be selected in good faith by
that party and otherwise will be agreed by the parties.

                                       28
<PAGE>
"Termination Event" means an Illegality,  a Tax Event or a Tax Event Upon Merger
or, if specified to be  applicable,  a Credit Event Upon Merger or an Additional
Termination Event.

"Termination  Rate" means a rate per annum equal to the  arithmetic  mean of the
cost (without  proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.

"Unpaid Amounts" owing to any party means,  with respect to an Early Termination
Date,  the  aggregate  of (a) in respect  of all  Terminated  Transactions,  the
amounts that became  payable (or that would have become  payable but for Section
2(a)(iii))  to such  party  under  Section  2(a)(i)  on or prior  to such  Early
Termination  Date and which remain unpaid as at such Early  Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii))  required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market  value of that which was (or would have been)  required to be
delivered  as of the  originally  scheduled  date  for  delivery,  in each  case
together with (to the extent  permitted under  applicable law) interest,  in the
currency  of such  amounts,  from  (and  including)  the date  such  amounts  or
obligations  were or would have been  required to have been paid or performed to
(but  excluding)  such Early  Termination  Date, at the  Applicable  Rate.  Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.  The fair market value of any obligation referred
to in clause (b) above shall be  reasonably  determined  by the party obliged to
make the  determination  under Section 6(e) or, if each party is so obliged,  it
shall be the average of the Termination  Currency Equivalents of the fair market
values reasonably determined by both parties.

IN WITNESS  WHEREOF the parties have executed  this  document on the  respective
dates  specified  below with effect from the date specified on the first page of
this document.



________________________                             __________________________
(Name of Party)                                      (Name of Party)



By:_____________________                        By:___________________

Name:                                           Name:
Title:                                          Title:
Date:                                           Date:


                                       29

s:\oper\tal\isda.agr
<PAGE>
                                    SCHEDULE
                                     to the
                                MASTER AGREEMENT

                            dated as of May 21, 1999

                                     between

                         KNAPE & VOGT MANUFACTURING CO.,
                                  a corporation
           organized or formed under the laws of the State of Michigan
                                   ("Party A")

                                       and

                      BANK ONE, MICHIGAN (fka, NBD Bank), a
            banking corporation organized under the laws of the State
                                   of Michigan
                with its main office located in Detroit, Michigan
                                   ("Party B")


Part 1.  Termination Provisions and Certain Other Matters

In this Agreement:

(a)  "Specified  Entity"  will apply to Party A and will mean,  for  purposes of
     Sections 5(a)(v), 5(a)(vi),  5(a)(vii) and 5 (b)(ii) of this Agreement, any
     Affiliate of Party A and will not apply to Party B.

(b)  "Specified  Transaction"  includes  (solely  with  Party  A as a  potential
     Defaulting  Party) with respect to Party A, in addition to the transactions
     specified in Section 12 of this Agreement,  any transaction between Party A
     (or any  Affiliate  of  Party  A),  on the one  hand,  and  Party B (or any
     Affiliate of Party B), on the other, and with respect to Party B shall have
     the meaning specified in Section 12 of this Agreement.

(c)  "Cross  Default"  will  apply to Party A and shall not have its  meaning as
     defined in Section  5(a)(vi) of this  Agreement  but shall instead mean any
     default  (however  described)  under  the  Credit  Agreement   (hereinafter
     defined).

(d)  The "Credit Event upon Merger" provisions of Section 5(b)(ii) will apply to
     Party A and will not apply to Party B.

(e)  The "Automatic Early Termination"  provision of Section 6(a) will not apply
     to Party A or Party B.

(f)  Payments on Early Termination. For the purpose of Section 6(e):

     "Market  Quotation"  and  the  "Second  Method"  will  apply  if the  Early
     Termination  Date results from a Termination  Event,  provided that "Market
     Quotation" in respect of any Terminated  Transaction that is, or is subject
     to, an  unexercised  option  shall be  determined  such that the  quotation
     obtained from Reference

                                       S-1
<PAGE>
     Market-makers for a Replacement  Transaction takes into account, or is made
     in  respect  of, the  economic  equivalent  of the right or rights  granted
     pursuant to such option.

     "Loss" and the "Second  Method"  will apply if the Early  Termination  Date
     results from an Event of Default.


Part 2. Agreement to Deliver Documents

Documents to be delivered by Party A:

(a)  upon execution of this Agreement:

     (i)  evidence reasonably  satisfactory to Party B of Party A's authority to
          execute, deliver and perform under this Agreement;

    (ii)  evidence  reasonably  satisfactory  to  Party B of the  authority  and
          genuine  signature of the  individual(s)  executing  this Agreement on
          behalf of Party A; and

   (iii)  upon  demand by Party B, an  opinion of  counsel  in  relation  to the
          representations  made by  Party  A under  Section  3(a),  in form  and
          substance reasonably satisfactory to Party B.

(b)  within thirty days after demand by Party B:

     (i)  evidence  reasonably  satisfactory  to  Party B of the  authority  and
          genuine  signature of the  individual(s)  executing any  Confirmations
          entered into from time to time hereunder on behalf of Party A; and

    (ii)  copies of audited,  publicly  available  financial  statements or call
          reports  (1) of Party A or,  as  appropriate,  (2) in which  Party A's
          financial  position is consolidated and reported together with that of
          certain of its Affiliates.


Part 3. Miscellaneous

(a)  Addresses for Notices. For the purpose of Section 10(a) of this Agreement:

     Address for notices or communications to Party A:

               KNAPE & VOGT MANUFACTURING CO.
               2700 Oak Industrial Dr.
               Grand Rapids, MI 49505-6083
               Attention: Mr. Jack Poindexter, Chief Financial Officer
               Telephone No.: (616) 459-3311
               Facsimile No.: (616) 459-3467

     Address for notices or communications to Party B:

               BANK ONE, MICHIGAN (fka, NBD Bank)
               c/o The First National Bank of Chicago
               One First National Plaza
               Chicago, Illinois 60670
               Attention: Risk Insurance Division
               Suite 0045
               Facsimile No.: (312) 732-5645


                                      S-2
<PAGE>
(b)  Calculation  Agent.  The  Calculation  Agent is Party B,  unless  otherwise
     specified in a Confirmation in relation to the relevant Transaction.

(c)  Credit  Support  Document.   means,  in  relation  to  either  party:  none
     specified.

(d)  Credit  Support  Provider.   means,  in  relation  to  either  party:  none
     specified.

(e)  Governing  Law.  This  Agreement  will  be  governed  by and  construed  in
     accordance  with the laws of the State of New York  (without  reference  to
     choice of law doctrine).

(f)  Waiver of Jury Trial.  EACH PARTY  IRREVOCABLY  WAIVES ANY AND ALL RIGHT TO
     TRIAL BY JURY IN ANY LEGAL  PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR
     ANY TRANSACTION.

(g)  Netting of Payments.  Section  2(c)(ii)  shall apply;  provided that either
     party may cause payments due on the same day in the same currency  (between
     the same Offices) but under  different  Transactions  to be discharged  and
     replaced with a single,  netted  payment  obligation by providing the other
     party with a written statement detailing the calculation of such net amount
     payable not later than two Business Days prior to the relevant due date.

(h)  "Affiliate" means, with respect to each party, any entity that, directly or
     indirectly,  controls,  is controlled  by, or is under common  control with
     such party.  For this  purpose,  a person shall be deemed to "control"  any
     entity if such person, directly or indirectly or acting through one or more
     other persons,  (a) owns,  controls or has the power to vote 50% or more of
     any class of voting securities of such entity,  (b) is a general partner of
     such  entity,  (c) controls in any manner the election of a majority of the
     directors,  trustees or other  similar  officials  of such  entity,  or (d)
     otherwise exercises a controlling influence over the management or policies
     of such entity.


Part 4. Other Provisions

(a)  Additional  Representations.  In  addition to the  representations  made in
     Section 3 of the  Agreement,  each party hereby  represents and warrants to
     the other  party  (which  representations  will be deemed to be repeated by
     each party on each date on which a Transaction is entered into) as follows:

     (i)  It qualifies as an "eligible  swap  participant"  under 17 C.F.R.  ss.
          35.1;

    (ii)  It is not relying (for purposes of making any  investment  decision or
          otherwise)  upon  any  advice,  counsel  or  representations  (whether
          written or oral) of the other party to this Agreement,  other than the
          representations  expressly  set forth in this  Agreement,  each Credit
          Support Document and in any Confirmation;

   (iii)  It has  consulted  with  its own  legal,  regulatory,  tax,  business,
          investment,  financial  and  accounting  advisors to the extent it has
          deemed necessary, and has made its own investment, hedging and trading
          decisions  (including  decisions  regarding  the  suitability  of  any
          Transaction  pursuant to this  Agreement)  based upon its own judgment
          and upon any advice from such advisors as it has deemed  necessary and
          not upon any view expressed by the other party to this Agreement;

                                      S-3
<PAGE>
    (iv)  It has a full  understanding  of all the terms,  conditions  and risks
          (economic  and  otherwise)  of this  Agreement,  each  Credit  Support
          Document and each Transaction,  and is capable of assuming and willing
          to assume (financially and otherwise) such risks;

     (v)  It is entering into this Agreement,  each Credit Support  Document and
          each  Transaction  for the  purposes of  managing  its  borrowings  or
          investments,  hedging  its  underlying  assets  or  liabilities  or in
          connection  with  a  line  of  business,   and  not  for  purposes  of
          speculation; and

    (vi)  It  is  entering   into  this   Agreement  and  will  enter  into  all
          Transactions  as principal and in connection  with its business or the
          management of its business, and not as agent or in any other capacity,
          fiduciary or otherwise.

(b)  Set-Off.

     (i)  Any amount (the "Early Termination  Amount") payable to one party (the
          "Payee") by the other  party (the  "Payer")  under  Section  6(e),  in
          circumstances  where there is a Defaulting Party or one Affected Party
          in the case where a  Termination  Event  under  Section  5(b)(ii)  has
          occurred,  will,  at the  option of the  party  ("X")  other  than the
          Defaulting  Party or the Affected  Party (and without  prior notice to
          the Defaulting Party or the Affected Party), be reduced by its set-off
          against an amount(s) (the "Other  Agreement  Amount") payable (whether
          at such time or in the future or upon the occurrence of a contingency)
          by  the  Payee  to  the  Payer  or  any  of  the  Payer's   Affiliates
          (irrespective  of the currency,  place of payment or booking office of
          the  obligation,  the  "Other  Payee")  under any  other  agreement(s)
          between   the  Payee  and  the  Other   Payee  or   instrument(s)   or
          undertaking(s)  issued or  executed by one such entity to, or in favor
          of,  the  other  (and the Other  Agreement  Amoun  will be  discharged
          promptly and in all  respects to the extent it is so set-off).  X will
          give notice to the other party of any set-off effected under this Part
          4 (b).

    (ii)  If an obligation is  unascertained,  X may in good faith estimate that
          obligation  and  set-off  in respect  of an  estimate,  subject to the
          relevant  party  accounting  to  the  other  when  the  obligation  is
          ascertained.

   (iii)  Nothing  in this Part 4 (b) shall be  effective  to create a  security
          interest.  This Part 4 (b) shall be without  prejudice and in addition
          to any right of set-off,  combination of accounts, lien or other right
          to which  any  party is at any time  otherwise  entitled  (whether  by
          operation of law, contract or otherwise).

    (iv)  If the Payer is a  Non-defaulting  Party and the Payee is a Defaulting
          Party,  then  it  shall  be  a  condition  precedent  to  the  Payer's
          obligation to pay the Early  Termination  Amount to the Payee that all
          Other Agreement  Amounts have been paid in full or satisfied by offset
          as set forth above.

(c)  Recorded  Conversations.  Each party may electronically  record any and all
     telephone  conversations  between  itself and the other party in connection
     with this Agreement  (including any  Transaction)  and agrees that any such
     recordings  may be submitted in evidence to any court or in any  proceeding
     for the purpose of establishing any matters pertinent thereto.

                                      S-4
<PAGE>
(d)  Incorporation.  Each Transaction  entered into under this Agreement will be
     subject to, and governed by the  provisions  of, the 1991 ISDA  Definitions
     (as published by the International Swaps and Derivatives Association, Inc.,
     and as  supplemented by the 1998 Supplement  thereto,  the  "Definitions"),
     without regard to any amendments to the Definitions  subsequent to the date
     hereof.

(e)  Inconsistency.  In the event of any inconsistency between the provisions of
     this Schedule and the  Definitions,  this Schedule  shall  prevail.  In the
     event of any inconsistency between the provisions of a Confirmation and the
     Definitions, the Confirmation shall prevail for purposes of the Transaction
     evidenced thereby.


Part 5.  Additional Terms

Credit  Agreement.  Until  all of Party A's  obligations  (whether  absolute  or
contingent)  under this Agreement  have been satisfied in full,  Party A will at
all times  perform,  comply with and observe all covenants and agreements of the
Credit Agreement applicable to it, which covenants and agreements, together with
related  definitions  and  ancillary  provisions,  are  hereby  incorporated  by
reference and, for the avoidance of doubt, shall be construed to apply hereunder
for the benefit of Party B as though (i) all references  therein to the party or
parties  making  loans,   extensions  of  credit  or  financial   accommodations
thereunder or commitments  therefor  ("Financings")  were to Party B and (ii) to
the extent that such covenants and  agreements  are  conditioned on or relate to
the existence of such Financings or Party A having any  obligations  arising out
of or in connection therewith,  all references to such Financings or obligations
were to Party A's obligations under this Agreement.

"Credit  Agreement"  means that certain Loan  Agreement,  dated as June 1, 1999,
among  Party A, as the  Borrower,  and Old Kent Bank,  as the Bank,  as the same
exists on the date of execution of this  Agreement and without regard to (i) any
termination  or  cancellation  thereof,  whether  by  reason of  payment  of all
indebtedness  incurred  thereunder or otherwise,  or (ii) unless consented to in
writing by Party B, any  amendment,  modification,  addition,  waiver or consent
thereto or thereof.


IN WITNESS  WHEREOF,  the  parties  have  executed  this  Schedule by their duly
authorized officers as of the date hereof.



KNAPE & VOGT MANUFACTURING CO.                BANK ONE, MICHIGAN (fka, NBD Bank)



By: _______________________                   By: ____________________________
Name: _____________________                   Name: __________________________
Title: ____________________                   Title: _________________________



                                      S-5
<PAGE>


TO:                  KNAPE & VOGT MANUFACTURING CO.

ATTN:                Swaps Administration

FAX NO.:             616-459-3467

FROM:                BANK ONE, MI

DATE:                21 May 1999

RE. OUR REF:         21377



The purpose of this letter  agreement is to confirm the terms and  conditions of
the Transaction entered into between KNAPE & VOGT MANUFACTURING CO and BANK ONE,
MI on the Trade Date specified below.  This Transaction shall be governed by the
International Swaps and Derivatives  Association Inc. ((a)ISDA) Master Agreement
((a)Master Agreement) with a first draft of a Schedule thereto to be provided by
BANK ONE, MI. This letter shall evidence a binding Agreement between the parties
until such time as the Master  Agreement  is  executed,  and upon its  execution
shall become a  Confirmation  thereunder.  Terms used and not otherwise  defined
herein  shall  have  their  meaning  defined  in the 1991 ISDA  Definitions  (as
supplemented by the 1998 Supplement and further amended and  supplemented by the
1998  ISDA  Euro   Definitions)  (the   "Definitions"),   as  published  by  the
International  Swaps  and  Derivatives  Association  Inc.  The  definitions  and
provisions  contained in the 1991 ISDA  Definitions are  incorporated  into this
Confirmation.  In the event of any  inconsistency  between the  Definitions  and
provisions and this Confirmation, this Confirmation will govern.

If you and we are not  parties to a Master  Agreement,  then you and we agree to
use our best  efforts  to  negotiate  promptly,  execute  and  deliver  a Master
Agreement including a standard form of Schedule attached thereto and made a part
thereof,  with such  modifications as you and we shall in good faith agree. Upon
execution and delivery by you and us of a Master  Agreement,  this  Confirmation
shall supplement,  form a part of and be subject to such Master Agreement. Until
you and we execute  and  deliver a Master  Agreement,  this  Confirmation  shall
supplement, form part of and be subject to the Master Agreement published by the
International  Swap  and  Derivatives  Association  Inc.,  as if you  and we had
executed  that   Agreement   (but  without  any  Schedule   thereto).   However,
notwithstanding  the  foregoing,  until such Master  Agreement is executed,  the
Termination  Currency shall be United States Dollars and the Governing Law shall
be the laws of England.  After such Master Agreement is executed the Termination
Currency  and  Governing  Law shall be those  stated  within the Schedule to the
Master Agreement.
<PAGE>
TERM
----

TRADE DATE:                21 May 1999

EFFECTIVE DATE:            1 June 1999

TERMINATION DATE:          1 June 2006,  subject  to  adjustment  in  accordance
                           with the Modified Following  Business Day Convention.

NOTIONAL AMOUNT:           The  following amounts corresponding to the following
                           respective periods (dates subject to the Business Day
                           Convention specified below):

<TABLE>
Period(from and including to but excluding)                Amount
<S>                          <C>                           <C>
1 June 1999                  1 September 1999              USD     17,000,000.00
1 September 1999             1 June 2006                   USD     20,000,000.00
</TABLE>


FIXED AMOUNTS
-------------

FIXED RATE PAYER:        KNAPE & VOGT MANUFACTURING CO


FIXED RATE PAYER
PAYMENT DATES:           Each 1 March,  1 June,  1 September,  1  December  from
                         and including 1 September 1999, to and including 1 June
                         2006,  subject  to  adjustment  in accordance  with the
                         Modified Following Business Day Convention.

FIXED RATE:              6.25%

FIXED RATE DAY
COUNT FRACTION:          Actual/360

ROUNDING CONVENTION:     As per ISDA
<PAGE>
FLOATING AMOUNTS
----------------

FLOATING RATE PAYER:               BANK ONE, MI

FLOATING RATE PAYER
PAYMENT DATES:                     Each 1 March, 1 June, 1 September, 1 December
                                   from and  including 1 September 1999,  to and
                                   including 1 June 2006,  subject to adjustment
                                   in  accordance  with  the Modified  Following
                                   Business Day Convention.

FLOATING RATE FOR INITIAL
CALCULATION PERIOD:                5.05125%



FLOATING RATE OPTION:              USD-LIBOR-BBA


DESIGNATED MATURITY:               3 Months






FLOATING RATE DAY COUNT
FRACTION:                          Actual/360


RESET DATES:                       The first day of each Calculation Period


ROUNDING CONVENTION:               As per ISDA

BUSINESS DAYS:                     London, New York



ADDITIONAL PROVISIONS
---------------------

NEGATIVE INTEREST RATES:           Applicable
<PAGE>
ACCOUNT DETAILS
---------------

Payments to KNAPE & VOGT MANUFACTURING CO in USD:
    ***TO BE ADVISED***

Payments to BANK ONE, MI in USD:



PAY TO:                             BANK ONE, DETROIT
ABA NUMBER:                         072000326
FOR THE ACCOUNT OF:                 BANK ONE
ACCOUNT NUMBER:                     1059907270
ATTN OR REF:


OFFICES
-------

(a)      The Office of BANK ONE in Detroit

(b)      The Office of KNAPE & VOGT MANUFACTURING CO  in

Dealing with Confirmations on our behalf:
         Kevin Doyle  312-732-2148

Dealing with Settlements on our behalf:
         Matt Ruona  312-732-4333


Please  confirm  that  the  foregoing  correctly  sets  forth  the  terms of our
agreement  by  executing   this  letter  and   returning  it  via  facsimile  to
312-336-4403.

                                              Yours sincerely,
                                              BANK ONE, MI

                                              By: __________________________
                                              Name: Dianne Schuyler
                                              Title:    Assistant Vice President

                                              By: __________________________

                                              Name: ________________________
                                              Title: _______________________

Confirmed as of the date first above written:


KNAPE & VOGT MANUFACTURING CO
By: _______________________________

Name: _____________________________
Title: ____________________________
                                     <PAGE>
                                   EXHIBIT 21

         SCHEDULE OF SUBSIDIARIES OF KNAPE & VOGT MANUFACTURING COMPANY


Knape & Vogt Canada, Inc. (organized under the laws of Ontario, Canada)

Feeny Manufacturing Company (organized under the laws of Michigan)
<PAGE>
                                   EXHIBIT 23


         Consent of Independent Certified Public Accountants



We hereby  consent to the  incorporation  by reference of our reports dated July
30, 1999,  relating to the  consolidated  financial  statements  and schedule of
Knape & Vogt  Manufacturing  Company,  appearing  in that  Corporation's  annual
report on Form 10-K for the year  ended  June 30,  1999,  in that  corporation's
previously  filed  Form S-8  Registration  Statements  (file  numbers  33-20227,
33-43704, 33-88206 and 33-88212).




BDO Seidman, LLP
Grand Rapids, Michigan
September 15, 1999