<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
GRIFFON CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
GRIFFON CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 5, 1998
------------------------
To the Stockholders of
GRIFFON CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Griffon
Corporation will be held at the deSeversky Conference Center, Northern
Boulevard, Old Westbury, New York on Thursday, February 5, 1998 at 10:00 a.m.,
or at any adjournment thereof, for the following purposes:
1. To elect four directors.
2. To consider and act upon a proposal to adopt the 1998 Stock Option
Plan, as set forth in Exhibit A.
3. To consider and act upon a proposal to approve the Company's Senior
Management Incentive Compensation Plan, as set forth in Exhibit B.
4. To consider and act upon such other business as may properly come
before this meeting or any adjournment thereof.
The above matters are set forth in the Proxy Statement attached to this
Notice to which your attention is directed.
Only stockholders of record on the books of the Company at the close of
business on December 15, 1997 will be entitled to vote at the Annual Meeting of
Stockholders or at any adjournment thereof. You are requested to sign, date and
return the enclosed Proxy at your earliest convenience in order that your shares
may be voted for you as specified.
By Order of the Board of Directors,
SUSAN E. ROWLAND
Secretary
Dated: Jericho, New York
December 19, 1997
<PAGE> 3
GRIFFON CORPORATION
100 JERICHO QUADRANGLE
JERICHO, NEW YORK 11753
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, FEBRUARY 5, 1998
------------------------
The Annual Meeting of Stockholders of Griffon Corporation (the "Company")
will be held on Thursday, February 5, 1998 at the deSeversky Conference Center,
Northern Boulevard, Old Westbury, New York at 10:00 a.m. for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders. THE ENCLOSED
PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF GRIFFON
CORPORATION FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS. The approximate date
on which this Proxy Statement and the enclosed Proxy are being first mailed to
stockholders is December 19, 1997.
If a proxy in the accompanying form is duly executed and returned, the
shares represented by such proxy will be voted as specified. Any person
executing the Proxy may revoke it prior to its exercise either by letter
directed to the Company or in person at the Annual Meeting.
VOTING RIGHTS
Only stockholders of record on December 15, 1997 (the "Record Date") will
be entitled to vote at the Annual Meeting or any adjournment thereof. As of the
Record Date, the Company had outstanding one class of voting capital stock,
namely, 30,665,712 shares of Common Stock, $.25 par value per share. Each share
of Common Stock issued and outstanding on the Record Date is entitled to one
vote at the Annual Meeting of Stockholders. The affirmative vote of a majority
of the shares voting on the proposal is required for approval of each matter to
be submitted to a vote of the shareholders. For purposes of determining whether
proposals have received a majority vote, abstentions will not be included in the
vote totals and, in instances where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned a proxy (so
called "broker non-votes"), those votes will not be included in the vote totals.
Therefore, abstentions and broker non-votes will have no effect on the vote, but
will be counted in the determination of a quorum.
<PAGE> 4
SECURITY OWNERSHIP
The following table sets forth as of December 15, 1997 certain information
with regard to ownership of the Company's Common Stock by (i) each beneficial
owner of 5% or more of the Company's Common Stock, to the knowledge of the
Company based upon filings with the Securities and Exchange Commission, except
where otherwise indicated; (ii) each director and each executive officer named
in the "Summary Compensation Table"; and (iii) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
COMMON
STOCK
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)
- ----------------------------------------------------------------- ---------------------------
<S> <C> <C>
FMR Corp.(2)..................................................... 3,039,900 (9.9%)
Griffon Corporation Employee Stock Ownership Plan(3)............. 2,564,744 (8.4%)
Patrick L. Alesia................................................ 101,741 (4)
Henry A. Alpert.................................................. 5,506 (5)(6)
Robert Balemian.................................................. 1,286,026 (3.8%)(4)
Bertrand M. Bell................................................. 9,083 (5)
Harvey R. Blau................................................... 1,769,705 (5.3%)(4)(7)(10)
Robert Bradley................................................... 4,683 (5)
Abraham M. Buchman............................................... 8,514 (5)
Rear Admiral Clarence A. Hill, Jr. (Ret.)........................ 10,546 (5)
Edward I. Kramer................................................. 88,012 (4)(10)
Ronald J. Kramer................................................. 23,563 (5)(9)
Lieutenant Gen. James W. Stansberry (Ret.)....................... 16,483 (5)(8)
Martin S. Sussman................................................ 5,083 (5)
William H. Waldorf............................................... 7,280 (5)
Lester L. Wolff.................................................. 5,083 (5)
Directors and executive officers as a group (15 persons)......... 3,356,808 (10.0%)(11)
</TABLE>
- ---------------
(1) No officer or director beneficially owns more than one percent of the
issued and outstanding Common Stock of the Company unless otherwise
indicated. Ownership represents sole voting and investment power, except
where otherwise indicated.
(2) Reflects shares beneficially owned by FMR Corp. ("FMR") according to
information furnished to the Company by FMR. FMR holds sole dispositive
power with respect to 3,039,900 shares and sole voting power with respect
to zero shares. All shares were beneficially owned by FMR's wholly-owned
subsidiary, Fidelity Management and Research Company. The address for FMR
is 82 Devonshire Street, Boston, Massachusetts 02109.
(3) The address for the Griffon Corporation Employee Stock Ownership Plan is
c/o U.S. Trust Company of California N.A., as Trustee, 515 South Flower
Street, Suite 2800, Los Angeles, California 90071. See "Management -- Stock
Plans -- Employee Stock Ownership Plan".
(4) Includes for Messrs. Blau, Balemian, Alesia and Edward I. Kramer,
1,390,000, 1,050,000, 57,500 and 22,000 shares, respectively, issuable with
respect to options currently exercisable and options which become
exercisable within 60 days under the Company's stock option plans. See
"Management -- Stock Plans".
2
<PAGE> 5
(5) Includes shares of Common Stock granted pursuant to the Company's Outside
Director Stock Award Plan. See "Management -- Stock Plans -- Outside
Director Stock Award Plan".
(6) Includes 2,500 shares owned by the Spartan Petroleum Profit Sharing Trust
of which Mr. Alpert is one of two trustees.
(7) Includes 14,191 shares owned by Mr. Blau's wife.
(8) Includes 10,650 shares owned by Lieutenant General Stansberry's wife and
1,750 shares owned by the Stansberry Associates Money Purchase Plan of
which Mr. Stansberry and his wife are the trustees.
(9) Includes 4,100 shares owned by Mr. Ronald J. Kramer's wife and daughters
and 8,000 shares owned by a limited partnership of which Mr. Kramer is a
general partner, as to which Mr. Kramer disclaims beneficial ownership of
such shares which are in excess of his pecuniary interest.
(10) Includes 24,715 shares of Common Stock owned by the Blau, Kramer, Wactlar &
Lieberman, P.C. Profit Sharing Plan of which Mr. Blau and Mr. Edward I.
Kramer are two of three trustees.
(11) Includes 2,535,500 shares issuable with respect to options currently
exercisable and options which become exercisable within 60 days granted to
executive officers under the Company's stock option plans. See
"Management -- Stock Plans".
3
<PAGE> 6
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors consisting of not less than twelve nor more than fourteen directors,
classified into three classes as nearly equal in number as possible, whose terms
of office expire in successive years. The Company's Board of Directors now
consists of twelve directors as set forth below.
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
(TO SERVE UNTIL THE (TO SERVE UNTIL THE (TO SERVE UNTIL THE
ANNUAL MEETING OF ANNUAL MEETING OF ANNUAL MEETING OF
STOCKHOLDERS IN 1999) STOCKHOLDERS IN 2000) STOCKHOLDERS IN 1998)
- ----------------------- -------------------------- -------------------------------
<S> <C> <C>
Bertrand M. Bell (2)(3) Robert Balemian Henry A. Alpert (2)
Robert Bradley (1) Harvey R. Blau Abraham M. Buchman (2)
Martin S. Sussman (1) Ronald J. Kramer (1) Rear Admiral
Lester L. Wolff Lieutenant General Clarence A. Hill, Jr. (Ret.)(2)
James W. Stansberry (Ret.) William H. Waldorf (1)(3)
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Ethics Oversight Committee.
Henry A. Alpert, Abraham M. Buchman, Rear Admiral Clarence A. Hill, Jr. and
William H. Waldorf, directors in Class III, are to be elected to hold office
until the Annual Meeting of Stockholders in 2001 or until their successors are
chosen and qualified. Shares represented by executed proxies in the form
enclosed will be voted, if authority to do so is not withheld, for the election
as directors of the aforesaid nominees unless any such nominee shall be
unavailable, in which case such shares will be voted for a substitute nominee
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will be unavailable or, if elected, will
decline to serve.
Directors who are not employees of the Company receive an annual fee of
$15,000 and a fee of $1,200 for each Board of Directors or Committee meeting
attended. In addition, under the Company's Outside Director Stock Award Plan,
each non-employee director receives at the time of the Annual Meeting of
Stockholders each year, shares of Common Stock of the Company having a market
value of $10,000. All shares awarded under this plan vest over a period of three
years. In 1997, an aggregate of 7,690 shares were granted under this plan.
There were four meetings of the Board of Directors during the fiscal year
ended September 30, 1997. For the fiscal year ended September 30, 1997, there
was one meeting of the Audit Committee, two meetings of the Compensation
Committee and no meeting of the Ethics Oversight Committee, which was formed in
November 1997. The Company's Audit Committee is involved in discussions with the
Company's independent public accountants with respect to the year-end audited
financial statements, the Company's internal accounting controls and the
professional services furnished by the independent public accountants to the
Company, and the Compensation Committee recommends executive compensation and
awards grants of stock options to officers and employees. See "Compensation
Committee Report on Executive Compensation." The Company's Ethics Oversight
Committee is responsible for establishing and maintaining procedures for
receipt, investigating and reporting of information and reports concerning
violations of the Company's Code of Business Ethics and Standards of Conduct.
The Company has no standing nominating committee. Each
4
<PAGE> 7
director attended or participated in at least 75% of the meetings of the Board
of Directors and the committees on which he served.
PRINCIPAL OCCUPATIONS OF DIRECTORS
The following is a brief account of the business experience for the past
five years of the Company's directors:
Mr. Henry A. Alpert (50), a director of the Company since February 1995,
has been President of Spartan Petroleum Corp., a real estate investment firm and
a distributor of petroleum products, for more than the past five years.
Mr. Robert Balemian (58) has been President and a director of the Company
since 1982, was Vice President of the Company from February 1976 through
December 1978 and Vice President of Finance of the Company from December 1978
until March 1982.
Dr. Bertrand M. Bell (68), a director of the Company since 1976, has been
Professor of Medicine at Albert Einstein College of Medicine for more than the
past five years and was appointed Distinguished Professor in September 1992.
Mr. Harvey R. Blau (62) has been Chairman of the Board of the Company since
1983. Mr. Blau also is Chairman of the Board of Aeroflex Incorporated, a
diversified manufacturer of military and industrial products and a director of
Nu Horizons Electronics Corp., a distributor of electronic components, and
Reckson Associates Realty Corp, a real estate investment trust. See
"Management -- Certain Transactions."
Mr. Robert Bradley (78), a director of the Company since 1985, was an
employee and executive of commercial banks for more than 30 years prior to his
retirement in 1979. Mr. Bradley is a director of Aeroflex Incorporated.
Mr. Abraham M. Buchman (81), a director of the Company since 1966, has been
a practicing attorney in the State of New York for more than the past five
years. Mr. Buchman is a partner in the law firm of Buchman & O'Brien.
Rear Admiral Clarence A. Hill, Jr. (Ret.) (77), a director of the Company
since 1982, was an officer in the United States Navy for more than thirty-five
years prior to his retirement in 1973. Since retirement, Rear Admiral Hill has
been acting as an independent consultant with respect to the utilization of
advanced concepts of system modeling and manpower survey techniques. From 1975
to 1991, Rear Admiral Hill was Vice President for Governmental Affairs and an
executive board member of the Association of Naval Aviation.
Mr. Ronald J. Kramer (39), a director of the Company since 1993, has been
Chairman of the Board of Ladenburg, Thalmann Group, Inc., an investment banking
firm, since June 1995. For more than five years prior thereto, Mr. Kramer was a
managing director of Ladenburg, Thalmann Group, Inc. Mr. Kramer is a director of
New Valley Corporation, the parent company of Ladenberg, Thalmann Group, Inc.
and Grand Casinos, Inc., an owner and operator of casinos. Mr. Kramer is the
son-in-law of Mr. Harvey R. Blau.
Lieutenant General James W. Stansberry (Ret.) (70), a director of the
Company since 1991, was an officer in the United States Air Force for
thirty-five years prior to his retirement in 1984. Since 1984, Lieutenant
General Stansberry has been President of Stansberry Associates International,
Inc., an independent consultant specializing in strategic planning for aerospace
and defense firms. In fiscal 1997, Telephonics
5
<PAGE> 8
Corporation, a wholly-owned subsidiary of the Company, paid $42,000 to
Stansberry Associates International, Inc. in consulting fees.
Mr. Martin S. Sussman (60), a director of the Company since 1989, has been
a practicing attorney in the State of New York since 1961, and has been a member
of the law firm of Seltzer, Sussman & Habermann for more than the past five
years. Mr. Sussman is a director of Greenstone Roberts Advertising, Inc., an
advertising agency.
Mr. William H. Waldorf (60), a director of the Company since 1963, has been
President of Landmark Capital, Inc., an investment firm, for more than the past
five years. Mr. Waldorf is a director of Kayne Anderson Mutual Funds.
Lester L. Wolff (77), a director of the Company since 1987, has been
President of Lester Wolff Enterprises Limited, a public relations firm, since
1981. Mr. Wolff served as a member of the U.S. House of Representatives from
1964 to 1981. Mr. Wolff is a director of U.S. Asia International Publications,
Inc., a magazine publisher. In fiscal 1997, Telephonics Corporation, a
wholly-owned subsidiary of the Company, paid $42,000 to Lester Wolff Enterprises
Limited in consulting fees.
MANAGEMENT
OFFICERS OF THE COMPANY
The officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE HELD
------------------------------- --- -------------------------------
<S> <C> <C>
Harvey R. Blau................. 62 Chairman of the Board
Robert Balemian................ 58 President
Patrick L. Alesia.............. 49 Vice President and Treasurer
Edward I. Kramer............... 63 Vice President, Administration
Susan E. Rowland............... 39 Secretary
</TABLE>
Mr. Patrick L. Alesia was appointed Vice President of the Company in May
1990 and has been the Treasurer of the Company since April 1979.
Mr. Edward I. Kramer was appointed Vice President, Administration of the
Company in February 1997. He has been a member of the law firm of Blau, Kramer,
Wactlar & Lieberman, P.C., general counsel to the Company for more than the past
five years. Mr. Kramer is also a member of the Company's Ethics Oversight
Committee.
Mrs. Susan E. Rowland has been Secretary of the Company since September
1983.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation with
respect to the Chairman/Chief Executive Officer and each of the other executive
officers of the Company who earned more than $100,000 for services rendered
during the fiscal years ended September 30, 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
------------------------------------ NUMBER OF LONG-TERM
OTHER ANNUAL SHARES INCENTIVE ALL OTHER
NAME AND FISCAL BONUS COMPENSATION UNDERLYING PLAN COMPENSATION
PRINCIPAL POSITION YEAR SALARY (1) (2) OPTIONS PAYOUTS (3)
- ------------------------------------ ------ -------- ---------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Harvey R. Blau...................... 1997 $679,000 $2,738,000 -- 350,000 -- $ 80,666
Chairman and Chief 1996 662,000 2,366,000 -- 250,000 -- 79,780
Executive Officer 1995 646,000 2,001,000 -- 250,000 -- 79,846
Robert Balemian..................... 1997 $673,000 $2,681,000 -- 250,000 -- $ 44,782
President 1996 657,000 2,308,000 -- 200,000 -- 43,466
1995 640,000 1,944,000 -- 200,000 -- 44,358
Patrick L. Alesia................... 1997 $229,000 $ 90,000 -- 15,000 -- $ 16,800
Vice President 1996 214,000 80,000 -- 10,000 -- 16,853
and Treasurer 1995 199,000 80,000 -- 10,000 -- 18,363
Edward I. Kramer.................... 1997 $100,000 -- -- 25,000 -- $ 6,141
Vice President --
Administration
</TABLE>
- ---------------
(1) Represents for Messrs. Blau and Balemian incentive compensation under
employment agreements. See "Management -- Employment Agreements."
(2) Other Annual Compensation excludes certain perquisites and other non-cash
benefits provided by the Company since such amounts do not exceed the lesser
of $50,000 or 10% of the total annual base salary and bonus disclosed in
this table for the respective officer.
(3) All Other Compensation in fiscal 1997 includes: (a) $61,360, $26,280 and
$7,590 of premiums paid by the Company in respect of certain split-dollar
life insurance policies on the lives of Messrs. Blau, Balemian and Alesia,
respectively. The Company is the beneficiary to the extent of the premiums
paid; (b) $11,716, $10,912, $1,620 and $1,620 paid by the Company for term
life insurance policies on Messrs. Blau, Balemian, Alesia and Kramer,
respectively; (c) Company contributions under the Griffon Corporation 401(k)
Retirement Plan of $6,590 paid by the Company for each of Messrs. Blau,
Balemian and Alesia and $3,521 for Mr. Kramer and (d) $1,000 in Company
contributions allocated under the Company's Employee Stock Ownership Plan on
behalf of each of Messrs. Blau, Balemian, Alesia and Kramer.
EMPLOYMENT AGREEMENTS
Messrs. Blau and Balemian have employment agreements with the Company for
terms ending on December 31, 2000. Pursuant to these agreements, each receives
compensation consisting of salary, cumulative cost of living adjustments, and
under certain conditions, an incentive bonus. Mr. Blau's incentive is 4% of the
Company's consolidated pretax earnings up to $5,000,000, and 5% thereafter, and
Mr. Balemian's
7
<PAGE> 10
incentive is 2 1/2% of the Company's consolidated pretax earnings up to
$3,000,000, 3 1/2% of the consolidated pretax earnings between $3,000,000 and
$5,000,000 and 5% thereafter. The agreements further provide for consulting
payments for five years after termination of employment at annual amounts of
one-half of their last annual salary. The employment agreements make provisions
for life insurance and for the continuation of certain benefits following death
or disability.
The employment agreements further provide that in the event there is a
change in the control of the Company, as defined therein, or in any person
directly or indirectly controlling the Company, also as defined therein, the
employee has the option, exercisable within six months of becoming aware of such
event, to terminate his employment agreement. Upon such termination, he has the
right to receive as a lump sum payment the compensation (including incentive
bonus, if any) remaining to be paid for the balance of the term of the
agreement.
STOCK PLANS
EMPLOYEE STOCK OWNERSHIP PLAN
In May 1983, the Company adopted an Employee Stock Ownership Plan, as
amended, ("ESOP" or "Plan"). Employees of the Company and its subsidiaries are
eligible to participate in the Plan, provided they are not members of a
collective bargaining unit. The ESOP has a Trustee, U.S. Trust Company of
California, N.A. (the "Trustee"), who votes the securities held by the Plan
(other than securities of the Company which have been allocated to employees'
accounts).
The annual contributions to the Plan are to be in such amounts as the Board
of Directors in its sole discretion shall determine. Each employee who
participates in the Plan has a separate account and the annual contribution by
the Company to an employee's account is not permitted to exceed the lesser of
$30,000 (or such other limit as may be the maximum permissible pursuant to the
provisions of Section 415 of the Internal Revenue Code and Regulations issued
thereunder) or 25% of such employee's annual compensation, as defined under the
Plan. No contributions are required of, nor are any accepted from, any employee.
All contributions to the Plan are invested primarily in the Company's
securities. The Trustee has the right to purchase the Company's securities on
behalf of employees. The Trustee is considered the shareholder for the purpose
of exercising all owners' and shareholders' rights, with respect to the
Company's securities held in the Plan, except for voting rights, which inure to
the benefit of each participant who can vote all shares held in his account,
even if said shares are not vested.
The Trustee is empowered to borrow funds for the purpose of purchasing the
Company's securities. The securities so purchased are required to be held in an
acquisition indebtedness account, to be released and made available for
allocation as principal and interest are repaid. In December 1996, the ESOP
entered into a $3,000,000 loan agreement, the proceeds of which were used to
purchase Common Stock of the Company. The loan provides for repayment in
quarterly installments through 2002 and is guaranteed by the Company. As of
December 15, 1997, the Plan had outstanding borrowings of $2,500,000.
1997 STOCK OPTION PLAN
The 1997 Stock Option Plan (the "1997 Plan"), which was adopted by the
Board of Directors in November 1996 and approved by the stockholders in February
1997, covers 1,500,000 shares of the
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<PAGE> 11
Company's Common Stock. Under the terms of the 1997 Plan, the purchase price of
the shares subject to each option granted will not be less than 100% of the fair
market value at the date of grant. The terms of each option shall be determined
at the time of grant by the Board of Directors or its Compensation Committee.
During fiscal 1997, options were granted to purchase 764,500 shares under the
1997 Plan. As of December 15, 1997, no options were exercisable and options to
purchase 500 shares remained available for future grants under the 1997 Plan.
1995 STOCK OPTION PLAN
The 1995 Stock Option Plan (the "1995 Plan"), which was adopted by the
Board of Directors in November 1994 and approved by the stockholders in February
1995, covers 1,000,000 shares of the Company's Common Stock. Under the terms of
the 1995 Plan, the purchase price of the shares subject to each option granted
will not be less than 100% of the fair market value at the date of grant. The
terms of each option shall be determined at the time of grant by the Board of
Directors or its Compensation Committee. During fiscal 1997, options were
granted to purchase 3,000 shares under the 1995 Plan. As of December 15, 1997,
options to purchase 716,500 shares were exercisable at $7.50 to $9.375 per share
and options to purchase 27,000 shares remained available for future grants under
the 1995 Plan.
OUTSIDE DIRECTOR STOCK AWARD PLAN
The Company has an Outside Director Stock Award Plan (the "Outside Director
Plan"), which was approved by the stockholders in 1994, under which 300,000
shares may be issued to non-employee directors. Annually, at the time of each
annual meeting of stockholders, each eligible director is awarded shares of the
Company's Common Stock having a value of $10,000, which shares vest in equal
installments over a three-year period. During fiscal 1997, 7,690 shares were
issued under the Outside Director Plan. As of December 15, 1997, an aggregate of
259,170 shares remained available for future grants under the Outside Director
Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all stock option grants to the executive
officers named in the "Summary Compensation Table" during the fiscal year ended
September 30, 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT ASSUMED
INDIVIDUAL GRANTS(1) ANNUAL RATES OF STOCK PRICE
---------------------------------------------------- APPRECIATION FOR
NUMBER % OF OPTION TERM(5)
OF SHARES TOTAL OPTIONS ----------------------------------------------
UNDERLYING GRANTED TO EXERCISE STOCK STOCK
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRICE DOLLAR PRICE DOLLAR
NAME GRANTED(2) FISCAL YEAR(3) ($/SH) DATE 5%($)(4) GAIN(1) 10%($)(4) GAIN(1)
- ----------------------- ---------- --------------- -------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harvey R. Blau......... 350,000 45.1% $13.50 2-6-07 $21.99 $2,972,000 $ 35.02 $7,532,000
Robert Balemian........ 250,000 32.2% 13.50 2-6-07 21.99 2,123,000 35.02 5,380,000
Patrick L. Alesia...... 15,000 1.9% 13.50 2-6-07 21.99 127,000 35.02 323,000
Edward I. Kramer....... 25,000 3.2% 13.50 2-6-07 21.99 212,000 35.02 538,000
</TABLE>
- ---------------
(1) All grants are under the Company's stock option plans. Dollar gains are
based on the assumed annual rates of appreciation above the exercise price
of each option for the term of the option.
9
<PAGE> 12
(2) Grants were made at the market value of the Company's Common Stock on the
date of grant. Grants vest 50% one year after date of grant and the
remaining balance two years after the date of grant.
(3) Total options granted to employees in fiscal 1997 were for 776,500 shares of
Common Stock.
(4) The stock price represents the price of the Company's Common Stock if the
assumed annual rates of stock price appreciation are achieved over the term
of each of the options.
(5) The increase in market value of the Company's Common Stock for all
stockholders as of December 15, 1997, assuming annual rates of stock
appreciation from September 30, 1997 (stock price of $16.25 per share) over
the ten year period used in this table, aggregate $313,442,000 at a 5% rate
and $794,319,000 at a 10% rate.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth stock options exercised during fiscal 1997
and all unexercised stock options of the executive officers named in the
"Summary Compensation Table" as of September 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF OUTSTANDING
OUTSTANDING OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harvey R. Blau.......... -- -- 1,090,000 475,000 $10,096,000 $ 1,884,000
Robert Balemian......... -- -- 825,000 350,000 7,533,000 1,425,000
Patrick L. Alesia....... -- -- 55,000 20,000 641,000 81,000
Edward I. Kramer........ -- -- 7,500 27,500 63,000 88,000
</TABLE>
- ---------------
(1) Values are calculated by subtracting the exercise price from the fair market
value of the stock as of September 30, 1997.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective October 1, 1996 the Company adopted the Griffon Corporation
Supplemental Executive Retirement Plan ("SERP") for its officers.
The normal retirement age under the SERP is 72. No benefit is payable
unless a participant is vested at the time of termination of employment. A
participant's right to receive a benefit vests after 20 years of service and one
year of participation in the SERP, or upon a Change of Control as defined in the
SERP.
The SERP provides an annual benefit upon termination equal to the sum of
.25% of Average Base Salary and 1.5% of Average Bonus/Incentive Compensation
multiplied by completed years of service (up to a maximum of 30). "Average"
means the average of the three highest paid years out of the last ten prior to
retirement. The benefit is reduced by any Social Security benefit attributable
to the employment of the participant. Benefits are adjusted for early retirement
and retirement after the normal retirement date. Retirement benefits are payable
for life, with a guarantee of 10 years of payments. In addition, the SERP
provides a pre-retirement death benefit payable for 10 years to the
participant's beneficiary.
A trust will be established to which contributions will be made to provide
for the benefits under the SERP.
10
<PAGE> 13
The following tables show the projected annual benefits payable at age 72
under the SERP before the reduction for Social Security benefits. A
participant's SERP benefit would be the total of the applicable amounts from
each table, minus the Social Security benefit attributable to the participant's
employment. The number of years of service of the participants as of September
30, 1997 are: Mr. Blau, 25; Mr. Balemian, 24; Mr. Alesia, 24; Mrs. Rowland, 15.
<TABLE>
<CAPTION>
BASE SALARY
- --------------------------------------------------------------
YEARS OF SERVICE
WITH THE COMPANY
ASSUMED AVERAGE ------------------------------------
ANNUAL BASE SALARY(1) 20 YEARS 25 YEARS 30 YEARS
- --------------------- -------- -------- ----------
<S> <C> <C> <C>
$ 50,000 $ 2,500 $ 3,125 $ 3,750
100,000 5,000 6,250 7,500
200,000 10,000 12,500 15,000
300,000 15,000 18,750 22,500
400,000 20,000 25,000 30,000
500,000 25,000 31,250 37,500
600,000 30,000 37,500 45,000
700,000 35,000 43,750 52,500
<CAPTION>
BONUS/INCENTIVE COMPENSATION
- --------------------------------------------------------------
YEARS OF SERVICE
ASSUMED AVERAGE WITH THE COMPANY
BONUS/INCENTIVE ------------------------------------
COMPENSATION(2) 20 YEARS 25 YEARS 30 YEARS
- --------------------- -------- -------- ----------
<S> <C> <C> <C>
$ 50,000 $ 15,000 $ 18,750 $ 22,500
100,000 30,000 37,500 45,000
250,000 75,000 93,750 112,500
500,000 150,000 187,500 225,000
1,000,000 300,000 375,000 450,000
1,500,000 450,000 562,500 675,000
2,000,000 600,000 750,000 900,000
2,500,000 750,000 937,500 1,125,000
</TABLE>
- ---------------
(1) Average of a participant's base salary for the highest three years out of
the last ten prior to retirement.
(2) Average of a participant's bonus/incentive compensation for the highest
three years out of the last ten prior to retirement.
CERTAIN TRANSACTIONS
Harvey R. Blau, the Chairman of the Board, and Edward I. Kramer, Vice
President, Administration of the Company are members of the law firm of Blau,
Kramer, Wactlar & Lieberman, P.C., general counsel to the Company. For the
fiscal year ended September 30, 1997, the Company paid $745,000 in legal fees to
Blau, Kramer, Wactlar & Lieberman, P.C. Legal fees paid by the Company to Blau,
Kramer, Wactlar & Lieberman, P.C. are reviewed and approved by a committee of
independent non-employee directors. In addition, Blau, Kramer, Wactlar &
Lieberman, P. C. subleases from the Company approximately 3,700 square feet of
office space at the Company's corporate headquarters. The rental under this
sublease agreement is the same rental per square foot that the Company is paying
on its prime lease, including any escalations, and aggregated approximately
$84,000 in the fiscal year ended September 30, 1997. See "Election of
Directors -- Principal Occupations of Directors."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the Company's Compensation Committee consisted of
Messrs. Henry A. Alpert, Abraham M. Buchman, Bertrand M. Bell and Rear Admiral
Clarence A. Hill, Jr. (Ret.). None of these persons were officers or employees
of the Company during fiscal 1997 nor had any relationship requiring disclosure
in this Proxy Statement.
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Compensation Committee
Report on Executive Compensation" and "Performance Graph" will not be deemed to
be filed or to be proxy soliciting material or incorporated by reference in any
prior or future filings by the Company under the Securities Act of 1933 or the
Securities Exchange Act.
11
<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is generally
determined by the Compensation Committee of the Board of Directors, subject to
applicable employment agreements. Each member of the Compensation Committee is a
director who is not an employee of the Company or any of its affiliates. The
following report with respect to certain compensation paid or awarded to the
Company's executive officers during fiscal 1997 is furnished by the directors
who comprised the Compensation Committee during fiscal 1997.
GENERAL POLICIES
The Company's compensation programs are intended to enable the Company to
attract, motivate, reward and retain the management talent required to achieve
corporate objectives, and thereby increase shareholder value. It is the
Company's policy to provide incentives to its senior management to achieve both
short-term and long-term objectives and to reward exceptional performance and
contributions to the development of the Company's businesses. To attain these
objectives, the Company's executive compensation program includes a competitive
base salary, cash incentive bonuses and stock-based compensation. See
"Management -- Employment Agreements".
Stock options are granted to employees, including the Company's executive
officers, by the Compensation Committee under the Company's stock option plans.
The Committee believes that stock options provide an incentive that focuses the
executive's attention on managing the Company from the perspective of an owner
with an equity stake in the business. Options are awarded with an exercise price
equal to the market value of Common Stock on the date of grant, have a maximum
term of ten years and generally become exercisable for half of the option shares
one year from the date of grant and for all of the option shares two years from
the date of grant. Among the Company's executive officers, the number of shares
subject to options granted to each individual generally depends upon the level
of that officer's responsibility. The largest grants are awarded to the most
senior officers who, in the view of the Compensation Committee, have the
greatest potential impact on the Company's profitability and growth. Previous
grants of stock options are reviewed but are not considered the most important
factor in determining the size of any executive's stock option award in a
particular year.
From time to time, the Compensation Committee utilizes the services of
independent consultants to perform analyses and to make recommendations to the
Committee relative to executive compensation matters. No compensation consultant
is paid on a retainer basis.
RELATIONSHIP OF COMPENSATION TO PERFORMANCE
The Compensation Committee annually establishes, subject to the approval of
the Board of Directors and any applicable employment agreements, the salaries
which will be paid to the Company's executive officers during the coming year.
In setting salaries, the Compensation Committee takes into account several
factors, including competitive compensation data, the extent to which an
individual may participate in the stock plans maintained by the Company, and
qualitative factors bearing on an individual's experience, responsibilities,
management and leadership abilities, and job performance.
12
<PAGE> 15
For fiscal 1997, pursuant to the terms of his employment agreement with the
Company, Mr. Robert Balemian, the Company's President, received a base salary
and a cash incentive bonus based on the Company's consolidated pre-tax income.
See "Management -- Employment Agreements." In light of this employment
agreement, the Compensation Committee was not required to make any decision
regarding the cash compensation of Mr. Balemian. Mr. Balemian was also granted
certain stock options for the same reasons as are set forth under "Compensation
of Chief Executive Officer" below. Mr. Patrick L. Alesia, the Company's Vice
President and Treasurer received a base salary, a cash bonus and a grant of
stock options under the Company's 1997 Stock Option Plan. Mr. Edward I. Kramer,
the Company's Vice President, Administration, also received a base salary and a
grant of stock options under the Company's 1997 Stock Option Plan. The
Compensation Committee determined that the base salaries, bonus and grant of
stock options were appropriate given the Company's financial performance, the
substantial contribution made by Mr. Alesia and Mr. Edward I. Kramer to such
performance and the compensation levels of executives at companies competitive
with the Company.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
For fiscal 1997, pursuant to the terms of his employment agreement with the
Company, Mr. Harvey R. Blau, the Company's Chairman and Chief Executive Officer,
received a base salary and a cash incentive bonus based on the Company's
consolidated pre-tax income. See "Management -- Employment Agreements". In light
of this employment agreement, the Compensation Committee was not required to
make any decision regarding the cash compensation of Mr. Blau. The Compensation
Committee granted to Mr. Blau options to purchase 350,000 shares exercisable at
$13.50 under the Company's 1997 Stock Option Plan. These options were granted at
an exercise price equal to the market value of the Company's Common Stock on the
date of grant. The Compensation Committee believes that these options provide an
incentive for Mr. Blau to maximize long-term shareholder value. The Compensation
Committee also noted that under Mr. Blau's leadership during his tenure as Chief
Executive Officer, the Company's annual revenues, annual earnings, market
capitalization and the market value per share of Common Stock of the Company
have all increased substantially.
The Compensation Committee
Abraham M. Buchman, Chairman
Henry A. Alpert
Bertrand M. Bell
Rear Admiral Clarence A. Hill, Jr.
(Ret.)
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities ("Reporting Persons") to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission (the "SEC") and the New York Stock Exchange (the
"NYSE"). These Reporting Persons are required by SEC regulation to furnish the
Company with copies of all Forms 3, 4 and 5 they file with the SEC and the NYSE.
Based solely upon the Company's review of the copies of the forms it has
received, the Company believes that all Reporting Persons complied on a timely
basis with all filing requirements applicable to them with respect to
transactions during fiscal 1997.
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph sets forth the cumulative total return to the Company's
stockholders during the five year period ended September 30, 1997 as well as an
overall stock market index (S & P SmallCap 600 Index) and the Company's peer
group index (Dow Jones Industrial-Diversified Index).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG GRIFFON CORPORATION, THE S & P SMALLCAP 600 INDEX,
AND THE DOW JONES INDUSTRIAL-DIVERSIFIED INDEX
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD GRIFFON S & P SMALLCAP INDUSTRIAL -
(FISCAL YEAR COVERED) CORPORATION 600 DIVERSIFIED
<S> <C> <C> <C>
SEP-92 100 100 100
SEP-93 177 137 124
SEP-94 162 136 126
SEP-95 177 171 152
SEP-96 200 198 194
SEP-97 333 271 267
</TABLE>
*$100 INVESTED ON SEPTEMBER 30, 1992 IN STOCK OR INDEX, INCLUDING REINVESTMENT
OF DIVIDENDS.
14
<PAGE> 17
PROPOSAL TO ADOPT THE GRIFFON CORPORATION 1998 STOCK OPTION PLAN
Introduction
At the Annual Meeting there will be presented to stockholders a proposal to
approve the adoption of the Griffon Corporation 1998 Stock Option Plan (the
"1998 Option Plan"), which was adopted by the Board of Directors on November 5,
1997, subject to stockholder approval. The 1998 Option Plan will be terminated
unless approved by stockholders. Eligible participants are officers and other
employees of the Company or any of its subsidiaries or affiliates. Options
granted under the 1998 Option Plan may be incentive stock options qualified
under Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code")
or non-qualified stock options.
Management believes that the Company's long-term success is dependent upon
the ability of the Company to attract and retain qualified officers and
employees and to motivate their best efforts on behalf of the Company's
interests. The Company believes that the 1998 Option Plan will constitute an
important part of the Company's compensation of its officers and other
employees, particularly since as of December 15, 1997, only 34,000 shares of
Common Stock are available for grant under the Company's existing stock option
plans.
The full text of the 1998 Option Plan appears as Exhibit A to this Proxy
Statement. The principal features of the 1998 Option Plan are summarized below,
but such summary is qualified in its entirety by the full text of the 1998
Option Plan.
Stock Subject to the Plan
The stock to be offered under the 1998 Option Plan consists of shares,
whether authorized but unissued or reacquired by the Company, of Common Stock of
the Company. The total number of shares of Common Stock issuable upon the
exercise of all stock options under the 1998 Option Plan may not exceed
1,000,000 shares, subject to adjustments upon the occurrence of certain events,
including stock dividends, stock splits, mergers, consolidations,
reorganizations, recapitalizations, or other capital adjustments. No individual
may be granted options to purchase more than an aggregate of 650,000 shares of
Common Stock pursuant to the 1998 Option Plan.
Administration of the Plan
The 1998 Option Plan is to be administered by the Board of Directors of the
Company; provided, however, that the Board may, in the exercise of its
discretion, designate from among its members a Compensation Committee or a Stock
Option Committee (the "Committee") consisting of no fewer than two Non-Employee
Directors, as defined in the Securities Exchange Act of 1934. The Board intends
that its Compensation Committee will administer the 1998 Option Plan.
Subject to the terms of the 1998 Option Plan, the Board of Directors or the
Committee may determine and designate those officers and employees who are to be
granted stock options under the 1998 Option Plan and the number of shares to be
subject to such options and, as hereinafter described, the nature and terms of
the options to be granted. The Board of Directors or the Committee shall also,
subject to the express provisions of the 1998 Option Plan, have authority to
interpret the 1998 Option Plan and to prescribe, amend and rescind the rules and
regulations relating to the 1998 Option Plan.
15
<PAGE> 18
Grant of Options
Officers and employees of the Company or any of its subsidiaries or
affiliates are eligible to participate in the 1998 Option Plan.
The exercise price for incentive stock options granted under the 1998
Option Plan will be the market value of the Company's Common Stock on the date
of grant of the stock option (or in the case of incentive stock options granted
to any individual who owns stock possessing more than 10% of the total combined
voting power of all voting stock of the Company [a "Principal Stockholder"] ,
110% of such fair market value). The exercise price for Non-Qualified Stock
Options granted under the 1998 Option Plan will be not less than such fair
market value. The option price, as well as the number of shares subject to such
option, shall be appropriately adjusted by the Committee in the event of stock
splits, stock dividends, recapitalizations, and certain other events involving a
change in the Company's capital.
Exercise of Stock Options
Stock options granted under the 1998 Option Plan shall expire not later
than ten years from the date of grant, or in the case of any incentive stock
option granted to a Principal Stockholder, five years from the date of grant or
such shorter period as the Committee may determine.
Stock options granted under the 1998 Option Plan may become exercisable in
one or more installments in the manner and at the time or times specified by the
Committee. Subject to this power of the Committee, and except in the manner
described below upon the death or Total Disability (as defined) of the Optionee,
a stock option may be exercised only in installments as follows: up to one-half
of the subject shares on and after the first anniversary of the date of grant,
and up to all of the subject shares on and after the second such anniversary of
the date of the grant of such Option, but in no event later than the expiration
of the term of the Option.
Upon the exercise of a stock option, Optionees may pay the exercise price
in cash, by certified or bank cashiers check or, at the option of the Company,
in shares of Common Stock of the Company valued at its fair market value on the
date of exercise, or a combination thereof. Withholding and other employment
taxes applicable to the exercise of an option shall be paid by the optionee at
such time as the Board of Directors or the Committee determines that the
optionee has recognized gross income under the Code resulting from such
exercise. These taxes may, at the option of the Company, be paid in shares of
Common Stock.
An Incentive Stock Option shall be exercisable during the Optionee's
lifetime only by the Optionee and shall not be exercisable by the Optionee
unless, at all times since the date of grant and at the time of exercise, such
Optionee is an employee of the Company, or any subsidiary or affiliate, except
that, upon termination of all employment (other than by death or by Total
Disability followed by death in the circumstances provided below or by Total
Disability) with the Company, any subsidiary or any affiliate, the Optionee may
exercise an Incentive Stock Option at any time within three months thereafter
but only to the extent such Option is exercisable on the date of such
termination.
Upon termination of all employment by Total Disability, the Optionee may
exercise such options at any time within three years thereafter (or one year
with respect to the exercise of an Incentive Stock Option), but only to the
extent such option is exerciseable on the date of such termination.
16
<PAGE> 19
In the event of the death of an Optionee (i) while an employee of the
Company, any parent corporation of the Company or any subsidiary, or (ii) within
three months after termination of all employment with the Company, any parent
corporation of the Company and any subsidiary (other than for Total Disability)
or (iii) within three years after termination on account of Total Disability of
all employment with the Company, any subsidiary or any affiliate (or one year
with respect to the exercise of an Incentive Stock Option), such optionee's
estate or any person who acquires the right to exercise such option by bequest
or inheritance or by reason of the death of the optionee may exercise such
Optionee's Option at any time within the period of three years from the date of
death. In the case of clauses (i) and (iii) above, such Option shall be
exercisable in full for all the remaining shares covered thereby, but in the
case of clause (ii) such Option shall be exercisable only to the extent it is
exercisable on the date of such termination.
To the extent the aggregate market value of the Common Stock (determined as
of the date of grant) with respect to which any options granted are intended to
be designated as Incentive Stock Options under the 1998 Option Plan (or any
other incentive stock option plan of the Company or any subsidiary) which may be
exercisable for the first time by the optionee in any calendar year exceeds
$100,000, such options shall not be considered Incentive Stock Options.
Stock options granted under the 1998 Option Plan may not be transferred by
the holder other than by will or the laws of descent and distribution and may be
exercised during the holder's lifetime only by the holder.
Change in Control
In the event of a Change in Control (as defined), (a) all options
outstanding on the date of such Change in Control shall, for a period of sixty
(60) days following such Change in Control, become immediately and fully
exercisable, and (b) an optionee will be permitted to surrender for cancellation
within sixty (60) days after such Change in Control any option or portion of an
option which was granted more than six (6) months prior to the date of such
surrender, to the extent not yet exercised, and to receive a cash payment in an
amount equal to the excess, if any, of the Fair Market Value (on the date of
surrender) of the shares of Common Stock subject to the option or portion
thereof surrendered, over the aggregate purchase price for such Shares under the
option.
Federal Income Tax Consequences
Incentive stock options granted under the 1998 Option Plan are intended to
be qualified incentive stock options in accordance with the provisions of
Section 422 of the Code. All other options granted under the 1998 Option Plan
are nonqualified options not entitled to special tax treatment under Section 422
of the Code. Generally, the grant of an incentive stock option will not result
in taxable income to the recipient at the time of the grant, and the Company
will not be entitled to an income tax deduction at such time. The grant of non-
qualified options will not result in taxable income to the recipient at the time
of the grant. So long as such option does not result in taxable income to the
recipient at the time of the grant, the Company will not be entitled to an
income tax deduction.
Upon the exercise of an incentive stock option granted under the 1998
Option Plan, the recipient will not be treated as receiving any taxable income,
and the Company will not be entitled to an income tax deduction. Upon the
exercise of a non-qualified option, an employee who is not a director or officer
of the Company will be treated as receiving compensation, taxable as ordinary
income, in an amount equal to the excess of the fair
17
<PAGE> 20
market value of the underlying shares of the Company's Common Stock at the time
of exercise, over the exercise price. The date of recognition and determination
of the ordinary compensation income attributable to shares received upon
exercise of an option by an officer of the Company, while he or she is subject
to Section 16(b) of the Securities Exchange Act of 1934, is generally delayed
until six months after such exercise, unless that person elects to be taxed as
of the date of exercise. The Company will receive an income tax deduction for
the amount treated as compensation income to the recipient at the time and in
the amount that the recipient recognizes such income.
Upon subsequent disposition of the shares subject to the option, any
differences between the tax basis of the shares and the amount realized on the
disposition is generally treated as long-term, mid-term or short-term capital
gain or loss, depending on the holding period of the shares of Common Stock;
provided, that if the shares subject to an incentive stock option are disposed
of prior to the expiration of two years from the date of grant and one year from
the date of exercise, the gain realized on the disposition will be treated as
ordinary compensation income to the Optionee.
The tax basis of the shares of Common Stock received by the recipient will
be the market value on the date the recipient is considered to have received
taxable compensation income, and the holding period of the shares will begin the
day after such date.
With respect to incentive stock options, the excess of the fair market
value of the stock obtained upon exercise over the exercise price therefor may
be treated as a tax preference item for alternative minimum tax purposes.
The affirmative vote of a majority of the votes cast on this proposal in
person or by proxy at the Annual Meeting is required for approval of the 1998
Option Plan.
The Board of Directors recommends a vote FOR approval of the adoption of
the 1998 Option Plan.
18
<PAGE> 21
PROPOSAL TO APPROVE THE GRIFFON CORPORATION
SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
On November 5, 1997, the Board of Directors of the Company (the "Board")
adopted the Griffon Corporation Senior Management Incentive Compensation Plan
(the "Incentive Plan"), effective as of October 1, 1997, subject to shareholder
approval. If approved by shareholders, the Incentive Plan will replace an annual
incentive bonus arrangement which has been in effect since 1983 under the terms
of employment agreements with Messrs. Blau and Balemian (the "Current Bonus
Arrangement"). Like the Current Bonus Arrangement, the Incentive Plan provides
for annual bonuses to Messrs. Blau and Balemian based upon Company performance.
The formula to determine bonuses under the Incentive Plan is identical to that
under the Current Bonus Arrangement except the Incentive Plan provides that the
first $500,000 of any bonus payable to a participant will be paid in the form of
deferred shares of Common Stock of the Company, rather than in cash as under the
Current Bonus Arrangement, on the terms and conditions and subject to the
limitations described below. Thus, the Incentive Plan will reward the Company's
two most senior executives for their contributions to the Company by providing
for performance-based compensation that also increases the identification of
their interests with those of the Company's shareholders.
The Incentive Plan has been prepared in response to the enactment of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
which denies a corporate tax deduction for annual compensation exceeding $1
million paid to the chief executive officer and the four other most highly
compensated officers of a public company. The Current Bonus Arrangement is not
subject to this deduction limit because the bonuses are paid pursuant to binding
contracts that were in effect before the effective date of Section 162(m).
In order to ensure that future bonuses to Messrs. Blau and Balemian will
not be subject to the deduction limitation of Section 162(m), the Company has
decided to replace the Current Bonus Arrangement with the Incentive Plan, which
provides for the payment of bonuses based upon the same performance goals as the
Current Bonus Arrangement, and incorporates a new deferred stock feature and
certain administrative provisions, all of which are described below. If the
Incentive Plan is approved by shareholders, bonuses paid thereunder will qualify
for the exemption from Section 162(m) for certain performance-based
compensation. Hence, the Incentive Plan is being submitted to shareholders for
approval at the 1998 Annual Meeting. By approving the Incentive Plan, the
shareholders will be approving, among other things, the performance measures and
eligibility requirements contained therein.
Set forth below is a summary of certain important features of the Incentive
Plan, which summary is qualified in its entirety by reference to the actual plan
attached as Exhibit B to this Proxy Statement.
Administration. The Incentive Plan will be administered by the
Compensation Committee or such other committee of the Board as the Board may
from time to time designate. Any such committee shall be composed of not less
than two directors who qualify as "outside directors" for purposes of Section
162(m) of the Code. Such committee will have sole authority to make rules and
regulations relating to the administration of the Incentive Plan, and any
interpretations and decisions of such committee with respect to the Incentive
Plan will be final and binding.
19
<PAGE> 22
Eligibility. Only Messrs. Blau and Balemian are covered by the Current
Bonus Arrangement and they will initially be the only participants in the
Incentive Plan. The Committee may add participants only with the approval of the
Company's stockholders.
Plan Features. Like the Current Bonus Arrangement, the Incentive Plan
provides for the payment of bonuses to participants based upon the Company's
Consolidated Pretax Earnings for each fiscal year, which is defined as the
consolidated income, if any, of the Company and its subsidiaries, as shown in
its audited consolidated financial statements for the relevant fiscal year,
before deductions for income taxes or for the bonuses payable under the
Incentive Plan for the relevant fiscal year. The formula to determine bonuses
under the Incentive Plan is identical to that under the Current Bonus
Arrangement. In the case of Mr. Blau, the annual bonus equals 4% of the first
$5,000,000 of Consolidated Pretax Earnings, plus 5% of the amount of
Consolidated Pretax Earnings in excess of $5,000,000. In the case of Mr.
Balemian, the annual bonus equals 2.5% of the first $3,000,000 of Consolidated
Pretax Earnings, plus 3.5% of the next $2,000,000 of Consolidated Pretax
Earnings, plus 5% of the amount of Consolidated Pretax Earnings in excess of
$5,000,000. However, the Incentive Plan provides that no bonus is payable to a
participant who fails to waive any right he may have to a bonus under the
Current Bonus Arrangement.
After the end of each fiscal year, the Committee will determine and certify
the amounts of the bonuses for each participant for that year. Bonuses under the
Current Bonus Arrangement are payable solely in cash. By contrast, the Incentive
Plan provides that the first $500,000 of the annual bonus payable to a
participant for any fiscal year will not be paid in cash, but will instead be
paid in deferred shares of Common Stock, subject to the maximum number of shares
available for issuance under the Incentive Plan as described below. The
remainder, if any, of the bonus to each participant in a fiscal year, will be
paid in cash not more than 120 days after the end of the fiscal year.
The amount of the bonus for each participant for a fiscal year that is
payable in deferred shares of Common Stock (the "Stock Portion") will be
converted to a hypothetical number of shares of Common Stock and credited to a
bookkeeping account for the participant. The number of shares will equal (i) the
amount of the Stock Portion divided by (ii) the "Value" of a share of Common
Stock as of the last day of the fiscal year for which the bonus is paid. The
"Value" of a share of Common Stock as of a given date is defined as the average
of the closing prices of a share of Common Stock on the New York Stock Exchange
composite tape (or, if the Common Stock is not listed on such exchange, on any
other national securities exchange on which the Common Stock is listed) for each
trading day during the period of 20 trading days ending with such date. If the
Common Stock is not traded on any national securities exchange, the Value of the
Common Stock is to be determined by the Committee in good faith. As and when
regular cash dividends are paid with respect to the Common Stock, the
participants' accounts will also be credited with additional shares of Common
Stock having a Value equal to the amount of the dividends that would have been
paid on the hypothetical shares credited to their accounts. Their accounts will
also be adjusted as appropriate to reflect any change in the Common Stock by
reason of any stock dividend, stock split, combination of shares, exchange of
shares, warrants or rights offering to purchase Common Stock at a price below
its fair market value, reclassification, recapitalization, merger,
consolidation, spinoff or other change in capitalization of the Company. The
deferred stock credited to a participant's account will be delivered in the form
of shares of Common Stock when the participant ceases to be an employee of the
Company, either all at once or in up to five annual installments. However, the
Committee has the power, in its discretion, to accelerate delivery of the
deferred stock.
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<PAGE> 23
Maximum Available Shares. The maximum number of shares of Common Stock
which may be credited to participants' accounts under the Incentive Plan is
500,000. This number is, however, subject to adjustment as appropriate to
reflect any change in the Common Stock by reason of any stock dividend, stock
split, combination of shares, exchange of shares, warrants or rights offering to
purchase Common Stock at a price below its fair market value, reclassification,
recapitalization, merger, consolidation, spinoff or other change in
capitalization of the Company. Shares of Common Stock issuable under the
Incentive Plan may be taken from authorized but unissued or treasury shares of
the Company or purchased on the open market.
Change in Control. Upon a Change in Control of the Company (as defined in
the Incentive Plan), bonuses will be paid, entirely in cash, with respect to the
portion of the Company's then-current fiscal year before the Change in Control,
based upon performance for that portion of the year, and the deferred stock
credited to participants' accounts will be paid to them in the form of cash
based upon the Change in Control Consideration (as defined in the Incentive
Plan). However, if necessary in a transaction intended to be accounted for as a
pooling of interests, payments may be made in Common Stock rather than cash. The
Incentive Plan will continue after the Change in Control, and bonuses for the
portion of the current fiscal year that follows the Change in Control will be
paid in cash based upon performance for the entire year, less the amounts paid
upon the Change of Control.
Amendments. The Board has the right to terminate or modify the Incentive
Plan from time to time, but shareholder approval is required to (i) alter the
manner in which bonuses are determined or (ii) add participants in the Incentive
Plan. No amendment may, without the consent of the participant affected, impair
or adversely affect any bonus with respect to a fiscal year that begins before
the date the modification is approved by the Board.
New Incentive Plan Benefits. The actual amounts of benefits to be received
by Messrs. Blau and Balemian (the "Incentive Bonus") pursuant to the Incentive
Plan is not currently determinable, as the amount of such benefits is linked to
the Company's earnings before income taxes as defined in the Section
Consolidated Pre-Tax Earnings ("Earnings") of the Incentive Plan during each
fiscal year in which the
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<PAGE> 24
Incentive Plan is in effect. The amount of compensation awardable under the
Incentive Plan is not subject to any maximum limitation. Each fiscal year's
performance goals and Incentive Bonus are as follows:
<TABLE>
<CAPTION>
PERFORMANCE GOALS
(EARNINGS FOR THE FISCAL
YEAR) INCENTIVE BONUS DOLLAR VALUE($)
- ---------------------------- --------------------------------------------------- --------------------
<S> <C> <C>
MR. BLAU
Loss........................ None $0
$1 to $5,000,000............ 4% $0 to $200,000
Over $5,000,000............. 5% of Earnings in this range plus Incentive Bonus $200,000 and up
from lower range
MR. BALEMIAN
Loss........................ None $0
$1 to $3,000,000............ 2.5% of Earnings in this range $0 to $75,000
$3,000,000 to $5,000,000.... 3.5% of Earnings in this range plus Incentive Bonus $75,000 to $145,000
from lower range
Over $5,000,000............. 5.0% of Earnings in this range plus Incentive Bonus $145,000 and up
from lower ranges
</TABLE>
If the Incentive Plan had been in effect during the fiscal year ended
September 30, 1997, Mr. Blau would have received $2,238,000 and 33,340 shares of
Common Stock and Mr. Balemian would have received $2,181,000 and 33,340 shares
of Common Stock as an Incentive Bonus for the fiscal year. The amounts of the
actual Incentive Bonuses paid to Messrs. Blau and Balemian for the fiscal year
ended September 30, 1997 were $2,738,000 and $2,681,000, respectively.
The affirmative vote of a majority of the shares voting, in person or by
proxy, on the proposal at the Annual Meeting is required to approve the
Incentive Plan.
The Board of Directors recommends a vote FOR approval of the Company's
Senior Management Incentive Compensation Plan.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP acted as the Company's independent public accountants
for the fiscal year ended September 30, 1997 and has been selected by the Board
of Directors, upon the recommendation of the Audit Committee, to continue to act
as the Company's independent public accountants for the Company's 1998 fiscal
year.
A representative of Arthur Andersen LLP plans to be present at the Annual
Meeting with the opportunity to make a statement if he desires to do so, and
will be available to respond to appropriate questions.
FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended September 30, 1997 has been provided to all stockholders as of the Record
Date. Stockholders are referred to the report for financial and other
information about the Company, but such report is not incorporated in this proxy
statement and is not a part of the proxy soliciting material.
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<PAGE> 25
MISCELLANEOUS INFORMATION
As of the date of this Proxy Statement, the Board of Directors does not
know of any business other than that specified above to come before the meeting,
but, if any other business does lawfully come before the meeting, it is the
intention of the persons named in the enclosed Proxy to vote in regard thereto,
in accordance with their judgment.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by use of the mails, certain officers and
employees of the Company may solicit proxies by telephone, telegraph or personal
interview. The Company may also request brokerage houses and other custodians,
and, nominees and fiduciaries, to forward soliciting material to the beneficial
owners of stock held of record by such persons, and may make reimbursement for
payments made for their expense in forwarding soliciting material to the
beneficial owners of the stock held of record by such persons.
Stockholder proposals with respect to the Company's next Annual Meeting of
Stockholders must be received by the Company no later than October 8, 1998 to be
considered for inclusion in the Company's next Proxy Statement.
By Order of the Board of Directors,
SUSAN E. ROWLAND
Secretary
Dated: Jericho, New York
December 19, 1997
23
<PAGE> 26
EXHIBIT A
GRIFFON CORPORATION
1998 STOCK OPTION PLAN
SECTION 1. GENERAL PROVISIONS
1.1 NAME AND GENERAL PURPOSE
The name of this plan is the Griffon Corporation 1998 Stock Option Plan
(hereinafter called the "Plan"). The purpose of the Plan is to enable Griffon
Corporation (the "Company") and its subsidiaries and affiliates to foster and
promote the interests of the Company by attracting and retaining officers and
employees of the Company who contribute to the Company's success by their
ability, ingenuity and industry, to enable such officers and employees of the
Company to participate in the long-term success and growth of the Company by
giving them a proprietary interest in the Company and to provide incentive
compensation opportunities competitive with those of competing corporations.
1.2 DEFINITIONS
a. "Affiliate" means any person or entity controlled by or under common
control with the Company, by virtue of the ownership of voting securities, by
contract or otherwise.
b. "Board" means the Board of Directors of the Company.
c. "Change in Control" means a change of control of the Company, or in any
person directly or indirectly controlling the Company, which shall mean:
(a) a change in control as such term is presently defined in
Regulation 240.12b-(f) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); or
(b) if any "person" (as such term is used in Section 13(d) and 14(d)
of the Exchange Act) other than the Company or any "person" who on the date
of this Agreement is a director or officer of the Company, becomes the
"beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act)
directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of the voting power of the Company's then outstanding
securities; or
(c) if during any period of two (2) consecutive years during the term
of this Plan, individuals who at the beginning of such period constitute
the Board of Directors, cease for any reason to constitute at least a
majority thereof.
d. "Code" means the Internal Revenue Code of 1986, as amended.
e. "Committee" means the Committee referred to in Section 1.3 of the Plan.
f. "Common Stock" means shares of the Common Stock, par value $.25 per
share, of the Company.
g. "Company" means Griffon Corporation, a corporation organized under the
laws of the State of Delaware (or any successor corporation).
h. "Fair Market Value" means the market price of the Common Stock on the
New York Stock Exchange consolidated reporting system on the date of the grant
or on any other date on which the Common
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Stock is to be valued hereunder. If no sale shall have been reported on the New
York Stock Exchange consolidated reporting system on such date, Fair Market
Value shall be determined by the Committee in accordance with the Treasury
Regulations applicable to incentive stock options under Section 422 of the Code.
i "Incentive Stock Option" means an Incentive Stock Option as described in
Section 2.1 of the Plan.
j. "Non-Employee Director" shall have the meaning set forth in Rule 16b-3
promulgated by the Securities and Exchange Commission ("Commission"); provided,
that such person is also an "outside director" as set forth in Section 162(m) of
the Code and the regulations promulgated thereunder.
k. "Non-Qualified Stock Option" means a Non-Qualified Stock Option as
described in Section 2.1 of the Plan.
l. "Option" means any option to purchase Common Stock under Section 2 of
the Plan.
m. "Participant" means any officer or employee of the Company, a Subsidiary
or an Affiliate who is selected by the Committee to participate in the Plan.
n. "Subsidiary" means any corporation in which the Company possesses
directly or indirectly 50% or more of the combined voting power of all classes
of stock of such corporation.
o. "Total Disability" means accidental bodily injury or sickness which
wholly and continuously disabled an optionee. The Committee, whose decisions
shall be final, shall make a determination of Total Disability.
1.3 ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee appointed by the Board
consisting of two or more members of the Board all of whom shall be Non-Employee
Directors. The Committee shall serve at the pleasure of the Board and shall have
such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it shall, from time to
time, deem advisable, and to interpret the terms and provisions of the Plan.
The Committee shall keep minutes of its meetings and of action taken by it
without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.
1.4 ELIGIBILITY
Stock options may be granted only to officers or employees of the Company
or a Subsidiary or Affiliate. Subject to Section 2.3, any person who has been
granted any Option may, if he is otherwise eligible, be granted an additional
Option or Options.
1.5 SHARES
The aggregate number of shares reserved for issuance pursuant to the Plan
shall be 1,000,000 shares of Common Stock, or the number and kind of shares of
stock or other securities which shall be substituted for
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<PAGE> 28
such shares or to which such shares shall be adjusted as provided in Section
1.6. No individual may be granted options to purchase more than an aggregate of
650,000 shares of Common Stock pursuant to the Plan.
Such number of shares may be set aside out of the authorized but unissued
shares of Common Stock or out of issued shares of Common Stock acquired for and
held in the Treasury of the Company, not reserved for any other purpose. Shares
subject to, but not sold or issued under, any Option terminating or expiring for
any reason prior to its exercise in full will again be available for Options
thereafter granted during the balance of the term of the Plan.
1.6 ADJUSTMENTS DUE TO STOCK SPLITS, MERGERS, CONSOLIDATION, ETC.
If, at any time, the Company shall take any action, whether by stock
dividend, stock split, combination of shares or otherwise, which results in a
proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.
Likewise, in the event of any change in the outstanding shares of Common
Stock by reason of any recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other corporate change, the Committee shall
make such substitution or adjustments, if any, as it deems to be appropriate, as
to the number or kind of shares of Common Stock or other securities which are
reserved for issuance under the Plan and the number of shares or other
securities which, at such time are subject to Options.
In the event of a Change in Control, at the option of the Board or
Committee, (a) all options outstanding on the date of such Change in Control
shall, for a period of sixty (60) days following such Change in Control, become
immediately and fully exercisable, and (b) an optionee will be permitted to
surrender for cancellation within sixty (60) days after such Change in Control
any option or portion of an option which was granted more than six (6) months
prior to the date of such surrender, to the extent not yet exercised, and to
receive a cash payment in an amount equal to the excess, if any, of the Fair
Market Value (on the date of surrender) of the shares of Common Stock subject to
the option or portion thereof surrendered, over the aggregate purchase price for
such Shares under the option.
1.7 NON-ALIENATION OF BENEFITS
Except as herein specifically provided, no right or unpaid benefit under
the Plan shall be subject to alienation, assignment, pledge or charge and any
attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant or other person entitled to benefits hereunder should attempt to
alienate, assign, pledge or charge any benefit hereunder, then such benefit
shall, in the discretion of the Committee, cease.
1.8 WITHHOLDING OR DEDUCTION FOR TAXES
If, at any time, the Company or any Subsidiary or Affiliate is required,
under applicable laws and regulations, to withhold, or to make any deduction for
any taxes, or take any other action in connection with any Option exercise, the
Participant shall be required to pay to the Company or such Subsidiary or
Affiliate, the amount of any taxes required to be withheld, or, in lieu thereof,
at the option of the Company, the
A-3
<PAGE> 29
Company or such Subsidiary or Affiliate may accept a sufficient number of shares
of Common Stock to cover the amount required to be withheld.
1.9 ADMINISTRATIVE EXPENSES
The entire expense of administering the Plan shall be borne by the Company.
1.10 GENERAL CONDITIONS
a. The Board or the Committee may, from time to time, amend, suspend or
terminate any or all of the provisions of the Plan, provided that, without the
Participant's approval, no change may be made which would prevent an Incentive
Stock Option granted under the Plan from qualifying as an Incentive Stock Option
under Section 422 of the Code or result in a "modification" of the Incentive
Stock Option under Section 424(h) of the Code or otherwise alter or impair any
right theretofore granted to any Participant; and further provided that, without
the consent and approval of the holders of a majority of the outstanding shares
of Common Stock of the Company present at a meeting at which a quorum exists,
neither the Board nor the Committee may make any amendment which (i) changes the
class of persons eligible for options; (ii) increases (except as provided under
Section 1.6 above) the total number of shares or other securities reserved for
issuance under the Plan; (iii) decreases the minimum option prices stated in
Section 2.2 hereof (other than to change the manner of determining Fair Market
Value to conform to any then applicable provision of the Code or any regulation
thereunder); (iv) extends the expiration date of the Plan, or the limit on the
maximum term of Options; or (v) withdraws the administration of the Plan from a
committee consisting of two or more members, each of whom is a non-employee
director.
b. With the consent of the Participant affected thereby, the Committee may
amend or modify any outstanding Option in any manner not inconsistent with the
terms of the Plan, including, without limitation, and irrespective of the
provisions of Sections 2.3(c) and 2.4(b) below, to accelerate the date or dates
as of which an installment of an Option becomes exercisable.
c. Nothing contained in the Plan shall prohibit the Company or any
Subsidiary or Affiliate from establishing other additional incentive
compensation arrangements for employees of the Company or such Subsidiary or
Affiliate.
d. Nothing in the Plan shall be deemed to limit, in any way, the right of
the Company or any Subsidiary or Affiliate to terminate a Participant's
employment with the Company (or such Subsidiary or Affiliate) at any time.
e. Any decision or action taken by the Board or the Committee arising out
of or in connection with the construction, administration, interpretation and
effect of the Plan shall be conclusive and binding upon all Participants and any
person claiming under or through any Participant.
f. No member of the Board or of the Committee shall be liable for any act
or action, whether of commission or omission, (i) by such member except in
circumstances involving actual bad faith, nor (ii) by any other member or by any
officer, agent or employee.
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1.11 COMPLIANCE WITH APPLICABLE LAW
Notwithstanding any other provision of the Plan, the Company shall not be
obligated to issue any shares of Common Stock, or grant any Option with respect
thereto, unless it is advised by counsel of its selection that it may do so
without violation of the applicable Federal and State laws pertaining to the
issuance of securities and the Company may require any stock certificate so
issued to bear a legend, may give its transfer agent instructions limiting the
transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.
1.12 EFFECTIVE DATES
The Plan was adopted by the Board on November 5, 1997, subject to approval
by the stockholders of the Company. The Plan shall terminate on November 4,
2007.
SECTION 2. OPTION GRANTS
2.1 AUTHORITY OF COMMITTEE
Subject to the provisions of the Plan, the Committee shall have the sole
and complete authority to determine (i) the Participants to whom Options shall
be granted; (ii) the number of shares to be covered by each Option; and (iii)
the conditions and limitations, if any, in addition to those set forth in
Sections 2 and 3 hereof, applicable to the exercise of an Option, including
without limitation, the nature and duration of the restrictions, if any, to be
imposed upon the sale or other disposition of shares acquired upon exercise of
an Option.
Stock options granted under the Plan may be of two types: an incentive
stock option ("Incentive Stock Option"); and a non-qualified stock option
("Non-Qualified Stock Option").
It is intended that the Incentive Stock Options granted hereunder shall
constitute incentive stock options within the meaning of Section 422 of the Code
and shall be subject to the tax treatment described in Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no provision of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or, without the consent of the
optionee, any Incentive Stock Option under Section 422 of the Code.
The Committee shall have the authority to grant Incentive Stock Options, or
to grant Non-Qualified Stock Options, or to grant both types of Options. To the
extent that any Option does not qualify as an Incentive Stock Option, in whole
or in part, it shall constitute a separate Non-Qualified Stock Option to the
extent of such disqualification.
2.2 OPTION EXERCISE PRICE
The price of stock purchased upon the exercise of Options granted pursuant
to the Plan shall be the Fair Market Value thereof at the time that the Option
is granted.
If an employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of the stock of the Company
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<PAGE> 31
or any parent corporation of the Company or Subsidiary and an Option granted to
such employee is intended to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Code, the exercise price shall be no less than
110% of the Fair Market Value of the Common Stock on the date the Option is
granted. The purchase price is to be paid in full in cash, certified or bank
cashier's check or, at the option of the Company, Common Stock valued at its
Fair Market Value on the date of exercise, or a combination thereof, when the
Option is exercised and stock certificates will be delivered only against such
payment.
2.3 INCENTIVE STOCK OPTION GRANTS
Each Incentive Stock Option will be subject to the following provisions:
a. Term of Option
An Incentive Stock Option will be for a term of not more than ten
years from the date of grant, except in the case of an employee described
in the second paragraph of Section 2.2 above in which case an Incentive
Stock Option will be for a term of not more than five years from the date
of the grant.
b. Annual Limit
To the extent the aggregate Fair Market Value of the Common Stock
(determined as of the date of grant) with respect to which any options
granted hereunder are intended to be designated as Incentive Stock Options
under the Plan (or any other incentive stock option plan of the Company or
any Subsidiary) which may be exercisable for the first time by the optionee
in any calendar year exceeds $100,000, such options shall not be considered
incentive stock options.
c. Exercise
Subject to the power of the Committee under Section 1.10(b) above and
except in the manner described below upon the death of the optionee, an
Incentive Stock Option may be exercised only in installments as follows: up
to one-half of the subject shares on and after the first anniversary of the
date of grant, up to all of the subject shares on and after the second such
anniversary of the date of the grant of such Option but in no event later
than the expiration of the term of the Option.
An Incentive Stock Option shall be exercisable during the optionee's
lifetime only by the optionee and shall not be exercisable by the optionee
unless, at all times since the date of grant and at the time of exercise,
such optionee is an employee of the Company, any parent corporation of the
Company or any Subsidiary, except that, upon termination of all employment
(other than by death, Total Disability, or by Total Disability followed by
death in the circumstances provided below) with the Company, any parent
corporation of the Company and any Subsidiary or Affiliate, the optionee
may exercise an Incentive Stock Option at any time within three months
thereafter but only to the extent such Option is exercisable on the date of
such termination.
Upon termination of all employment by Total Disability, the Optionee
may exercise such options at any time within one year thereafter, but only
to the extent such option is exercisable on the date of such termination.
In the event of the death of an optionee (i) while an employee of the
Company, any parent corporation of the Company or any Subsidiary or
Affiliate, or (ii) within three months after termination of all employment
with the Company, any parent corporation of the Company and any Subsidiary
or
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<PAGE> 32
Affiliate (other than for Total Disability) or (iii) within one year after
termination on account of Total Disability of all employment with the
Company, any parent corporation of the Company and any Subsidiary or
Affiliate, such optionee's estate or any person who acquires the right to
exercise such option by bequest or inheritance or by reason of the death of
the optionee may exercise such optionee's Option at any time within the
period of three years from the date of death. In the case of clauses (i)
and (iii) above, such Option shall be exercisable in full for all the
remaining shares covered thereby, but in the case of clause (ii) such
Option shall be exercisable only to the extent it was exercisable on the
date of such termination.
Notwithstanding the foregoing provisions regarding the exercise of an
Option in the event of death, Total Disability or other termination of
employment, in no event shall an Option be exercisable in whole or in part
after the termination date provided in the Option.
d. Transferability
An Incentive Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent and
distribution.
2.4 NON-QUALIFIED STOCK OPTION GRANTS
Each Non-Qualified Stock Option will be subject to the following
provisions:
a. Term of Option
A Non-Qualified Stock Option will be for a term of not more than ten
years from the date of grant.
b. Exercise
The exercise of a Non-Qualified Stock Option shall be subject to the
same terms and conditions as provided under Section 2.3(c) above except
that (i) upon termination of all employment by Total Disability, the
Optionee may exercise such options at any time within three years
thereafter and (ii) in the event of the death of an Optionee within three
years after termination on account of Total Disability of all employment
with the Company, or any subsidiary or affiliate, such Optionee's estate or
any person who acquires the right to exercise such option by bequest or
inheritance or by reason of the death of the Optionee may exercise such
Optionee's option at any time within a period of three years from the date
of death.
c. Transferability
A Non-Qualified Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent and
distribution, except as may be permitted by the Board or the Committee.
2.5 AGREEMENTS
In consideration of any Options granted to a Participant under the Plan,
each such Participant shall enter into an Option Agreement with the Company
providing, consistent with the Plan, such terms as the Committee may deem
advisable.
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<PAGE> 33
EXHIBIT B
GRIFFON CORPORATION
SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
I. EFFECTIVE DATE, PURPOSE
This Griffon Corporation Senior Management Incentive Compensation Plan is
adopted by the Board on November 5, 1997, subject to approval by the Company's
stockholders, and if so approved shall be effective as of October 1, 1997. The
Plan is designed to provide a significant and variable economic opportunity to
the two most senior officers of the Company as a reflection of their
contributions to the success of the Company. Payments pursuant to the Plan are
intended to qualify for exclusion from the term "applicable employee
remuneration" under Section 162(m)(4)(C) of the Internal Revenue Code of 1986,
as amended.
II. DEFINITIONS
"Applicable Delivery Period" shall have the meaning given in Section IV.C.
below.
"Board" shall mean the Board of Directors of the Company.
"Bonus" shall mean a cash or stock award payable to a Participant pursuant
to the terms of the Plan.
"Certification" shall have the meaning given in Section III.B.
"Change of Control" shall mean the occurrence of any of the following
events:
(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of the Company where such acquisition causes such Person
to own 20 percent or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not be deemed to result in a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition pursuant to a transaction that complies
with clauses (i), (ii) and (iii) of subsection (c) below; and provide,
further, that if any Person's beneficial ownership of the Outstanding
Company Voting Securities reaches or exceeds twenty percent as a result of
a transaction described in clause (i) or (ii) above, and such Person
subsequently acquires beneficial ownership of additional voting securities
of the Company, such subsequent acquisition shall be treated as an
acquisition that causes such Person to own 20 percent or more of the
Outstanding Company Voting Securities; or
(b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
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<PAGE> 34
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
(c) the approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or subsequently all of the assets of the Company or the acquisition of
assets of another entity ("Business Combination") or, if consummation of
such Business Combination is subject, at the time of such approval by
shareholders, to the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a Business Combination pursuant to
which (i) all or substantially all of the individuals and entities who were
the beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 60 percent of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation that as
a result of such transaction owns the Company or all or substantially all
of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Voting Securities, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20 percent
or more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
"Change of Control Consideration" shall mean, with respect to each share of
Common Stock credited to a Deferred Stock Account, (i) the amount of any cash,
plus the value of any securities and other noncash consideration, constituting
the most valuable consideration per share of Common Stock, paid to any
shareholder in the transaction or series of transactions that results in a
Change of Control or (ii) if no consideration per share of Common Stock is paid
to any shareholder in the transaction or series of transactions that results in
a Change of Control, the highest reported sales price, regular way, of a share
of Common Stock in any transaction reported on the New York Stock Exchange
Composite Tape or other national exchange on which such shares are listed or on
NASDAQ during the 60-day period prior to and including the date of a Change of
Control. To the extent that such consideration consists all or in part of
securities or other noncash consideration, the value of such securities or other
noncash consideration shall be determined by the Committee in good faith.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
B-2
<PAGE> 35
"Committee" shall mean the Compensation Committee of the Board or such
other committee of the Board which is composed of not less than two
Disinterested Persons, each of whom shall be appointed by and serve at the
pleasure of the Board.
"Common Stock" means the common stock of the Company, par value $0.25 per
share.
"Company" shall mean Griffon Corporation, a Delaware corporation.
"Consolidated Pretax Earnings" of the Company shall mean, with respect to
any fiscal year, the consolidated income, if any, of the Company for such fiscal
year as set forth in the audited consolidated financial statements of the
Company and its subsidiaries included in its annual report to stockholders for
such fiscal year, before deduction of taxes based on income or of the Bonus to
be paid to the participant under the Plan for such Fiscal Year.
"Delivery Date" shall have the meaning given in Section IV.B below.
"Disinterested Person" shall mean a member of the Board who qualifies as an
"outside director" for purposes of Section 162(m) of the Code.
"Initial Percentage" shall mean, for a particular Participant, the
percentage indicated under the heading "Initial Percentage" opposite such
Participant's name of Schedule I to the Plan.
"Installment Delivery Election" shall have the meaning given in Section
IV.C. below.
"Participant" shall mean an individual named on Schedule I hereto as a
participant in the Plan.
"Plan" shall mean this Griffon Corporation Senior Management Incentive
Compensation Plan.
"Secondary Percentage" shall mean, for a particular Participant, the
percentage indicated under the heading "Secondary Percentage" opposite such
Participant's name on Schedule I to the Plan.
"Stock Portion" of a Bonus shall have the meaning given in Section III.B.
below.
"Tertiary Percentage" shall mean, for a particular Participant, the
percentage indicated under the heading "Tertiary Percentage" opposite such
Participant's name on Schedule I to the Plan.
"Value" of a share of Common Stock as of a particular date shall mean the
average of the closing sale prices of a share of Common Stock on the New York
Stock Exchange composite tape (or, if the Common Stock is not listed on such
exchange, on any other national securities exchange on which the Common Stock is
listed) for each trading day during the period of 20 trading days ending with
such date. If the Common Stock is not traded on any national securities
exchange, the Value of the Common Stock shall be determined by the Committee in
good faith.
III. DETERMINATION AND PAYMENT OF BONUSES
A. Eligibility; Amount. Each Participant shall be entitled to receive a
Bonus for each fiscal year or portion thereof of the Company during which period
such Participant is employed by the Company based upon the Company's
Consolidated Pretax Earnings for such fiscal year. The Bonus shall in each case
equal the Initial Percentage of the first $3,000,000 in Consolidated Pretax
Earnings, the Secondary Percentage of Consolidated Pretax Earnings between
$3,000,000 and $5,000,000, and the Tertiary Percentage of Consolidated Pretax
Earnings in excess of $5,000,000. Notwithstanding any other provision of the
Plan, a Participant
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<PAGE> 36
shall not be entitled to a Bonus for any fiscal year in which he has the right,
which he fails to waive, to receive a bonus based upon Consolidated Pretax
Earnings under an employment agreement with the Company.
B. Certification; Payment. Each Bonus for a fiscal year shall be computed
and shall become payable upon the certification by the Committee of the amount
of Consolidated Pretax Earnings for the fiscal year (the "Certification"). The
Certification for each fiscal year shall be made as soon as practicable but in
no event more than 120 days after the end of the fiscal year. The first $500,000
of any Bonus (or, if such Bonus is less than $500,000, the entire amount of such
Bonus) shall not be paid in cash, but shall be credited to the Participant in
the form of deferred stock, as more fully set forth in Section IV below, but
only to the extent there are sufficient shares of Common Stock remaining
available for such crediting (the amount so credited, the "Stock Portion" of
such Bonus). The excess, if any, of the amount of any Bonus over the Stock
Portion thereof shall be paid to the Participant in cash as soon as practicable
after the date of the relevant Certification.
IV. DEFERRED STOCK ACCOUNTS
A. Crediting of Deferred Stock Accounts. The Company shall maintain a
Deferred Stock Account for each Participant, to be credited with shares of
Common Stock as set forth in this Section IV. As of the date of the
Certification for a fiscal year, the Deferred Stock Account of each Participant
shall be credited with a number of shares of Common Stock having a Value, as of
the last day of the fiscal year for which the Bonus is paid, equal to the Stock
Portion of such Participant's Bonus (if any) for the fiscal year. In addition,
as of the payment date for each regular cash dividend that is declared with
respect to the Common Stock, the Deferred Stock Account of each Participant
shall be credited with a number of shares of Common Stock equal to (i) the
number of shares of Common Stock in such Deferred Stock Account as of the record
date for such dividend multiplied by (ii) the per-share amount of such dividend
divided by (iii) the Value of a share of Common Stock on such payment date.
B. Delivery of Deferred Stock. The shares of Common Stock in a
Participant's Deferred Stock Account as of the date the Participant ceases to be
employed by the Company for any reason (the "Delivery Date") shall be delivered
or begin to be delivered in accordance with this Section IV.B. as soon as
practicable after the Delivery Date. Such shares shall be delivered at one time;
provided, that if the number of shares so credited includes a fractional share,
such number shall be rounded to the nearest whole number of shares; and
provided, further, that if the Participant has in effect a valid Installment
Delivery Election pursuant to Section IV.C. below, then such shares shall be
delivered in equal yearly installments over the Applicable Delivery Period, with
the first such installment being delivered on the first anniversary of the
Delivery Date (and if, in order to equalize such installments, fractional shares
would have to be delivered, such installments shall be adjusted by rounding to
the nearest whole share). If any such shares are to be delivered after the
Participant has died or become legally incompetent, they shall be delivered to
the Participant's estate or legal guardian, as the case may be, in accordance
with the foregoing; provided, that if the Participant dies with a valid
Installment Delivery Election in effect, all remaining undelivered shares shall
be delivered to the Participant's estate immediately. References to a
Participant in this Plan shall be deemed to refer to the Participant's estate or
legal guardian, where appropriate.
C. Installment Delivery. An "Installment Delivery Election" shall mean a
written election by a Participant, on such form as may be prescribed by the
Committee, to receive delivery of shares of Common Stock in installments over a
period of up to five years (the "Applicable Delivery Period"), as more fully
B-4
<PAGE> 37
described in paragraph IV.B. above. Once made, an Installment Delivery Election
may be superseded by another Installment Delivery Election or revoked in writing
by the Participant. However, in order for any initial or superseding Installment
Delivery Election or revocation thereof to be valid, it must be received by the
Committee at least one year before the Participant ceases to be any employee of
the Company. In the case of multiple Installment Delivery Elections and/or
revocations by any Participant, the most recent valid Installment Delivery
Election or revocation in effect as of the Delivery Date shall be controlling.
In addition, the effectiveness of any Installment Delivery Election shall be
subject to the approval of the Board or a committee thereof if the Committee, in
its absolute discretion after receiving the advice of counsel, determines such
approval to be necessary or advisable in order to avoid having the delivery of
shares pursuant thereto or any other event occurring in connection therewith
constitute a nonexempt purchase or sale, as applicable, under Rule 16b-3 under
the Securities Exchange Act of 1934.
D. Discretionary Acceleration. Notwithstanding any other provision of the
Plan, the Committee may decide, in its sole discretion, to deliver some or all
of the shares in a Participant's Deferred Stock Account to the Participant
before the time(s) prescribed by Sections IV.B. and C. above.
E. Stock Certificates.
1. The certificates for shares delivered to a Participant as set forth
above shall be issued in the name of the Participant, and from and after such
issuance, the Participant shall be entitled to all rights of a shareholder with
respect to Common Stock for all such shares issued in his name, including the
right to vote the shares, and the Participant shall receive all dividends and
other distributions paid or made with respect thereto.
2. Notwithstanding any other provision of the Plan, the Company shall not
be required to issue or deliver any certificate or certificates for shares of
Common Stock under the Plan prior to fulfillment of all of the following
conditions:
(a) listing or approval for listing upon official notice of issuance
of such shares on the New York Stock Exchange, Inc., or such other
securities exchange as may at the time be a market for the Common Stock;
(b) any registration or other qualification of such shares under any
state or federal law or regulation, or the maintaining in effect of any
such registration or other qualification which the Committee shall, in its
absolute discretion upon the advice of counsel, deem necessary or
advisable;
(c) obtaining any other consent, approval, or permit from any state or
federal governmental agency which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine to be necessary
or advisable; and
(d) obtaining any approval of the Board or a committee thereof that
the Committee, in its absolute discretion after receiving the advice of
counsel, determines to be necessary or advisable in order to avoid having
such delivery or any other event occurring in connection therewith
constitute a nonexempt purchase or sale, as applicable, under Rule 16b-3
under the Securities Exchange Act of 1934;
provided, that the Company shall use reasonable best efforts to ensure that all
shares of Common Stock delivered under the Plan are freely transferable by the
recipient thereof following such delivery.
B-5
<PAGE> 38
F. Shares Available.
1. Subject to Section IV.F.2, the maximum number of shares of Common Stock
which may be credited to Deferred Stock Accounts pursuant to the Plan is
500,000. Shares of Common Stock issuable under the Plan may be taken from
authorized but unissued or treasury shares of the Company or purchased on the
open market.
2. In the event that there is, at any time after the Board adopts the Plan,
any change in the Common Stock by reason of any stock dividend, stock split,
combination of shares, exchange of shares, warrants or rights offering to
purchase Common Stock at a price below its fair market value, reclassification,
recapitalization, merger, consolidation, spinoff or other change in
capitalization of the Company, appropriate adjustment shall be made in the
number and kind of shares or other property subject to the Plan and the number
and kind of shares or other property held in the Deferred Stock Accounts, and
any other relevant provisions of the Plan by the Committee, whose determination
shall be binding and conclusive on all persons. If the shares of Common Stock
credited to the Deferred Stock Accounts are converted pursuant to this Section
IV.F.2. into another form of property, references in the Plan to the Common
Stock shall be deemed, where appropriate, to refer to such other form of
property, with such other modifications as may be required for the Plan to
operate in accordance with its purposes. Without limiting the generality of the
foregoing, references to delivery of certificates for shares of Common Shares
shall be deemed to refer to delivery of cash and the incidents of ownership of
any other property held in the Deferred Stock Accounts.
V. CHANGE OF CONTROL
Notwithstanding any other provision of this Plan, in the event of a Change
of Control; (i) the Committee shall determine the amount of the Consolidated
Pretax Earnings of the Company for the portion of the then-current fiscal year
(such fiscal year, the "Change-of-Control Year") that ends immediately before
the Change of Control and each Participant shall be paid a Bonus (the "Change of
Control Bonus"), entirely in cash, on the basis thereof as soon as practicable
after the date of the Change of Control; and (ii) the Company shall immediately
pay to each Participant in a lump sum the Change of Control Consideration
multiplied by the number of shares of Common Stock held in each Participant's
Deferred Stock Account immediately before such Change of Control; provided, that
if the delivery of cash pursuant to the foregoing would make a Change in Control
transaction ineligible for pooling-of-interests accounting under APB No. 16 that
would otherwise be eligible for such accounting treatment, the Committee shall
have the ability to deliver, instead of such cash, Common Stock having a Value
as of the date of such delivery equal to the cash that would otherwise be so
payable. Subject to Section VI, the Plan shall continue after a Change of
Control; provided, that for the portion of the Change-of-Control Year that
follows the Change of Control, each Participant shall be entitled to receive a
Bonus payable entirely in cash (the "Short-Year Bonus") equal to the excess, if
any, of (i) the Bonus for the Change-of-Control Year calculated in accordance
with Section III.A. based upon Consolidated Pretax Earnings for the entire
Change-of-Control Year, over (ii) the amount of the Change-of-Control Bonus paid
to such Participant.
VI. AMENDMENT AND TERMINATION
The Board shall have the right to terminate or modify the Plan from time to
time, but (i) no such modification shall, without prior approval of the
Company's stockholders, alter the manner in which the Bonuses are determined or
add Participants to the Plan, (ii) no such termination or modification shall,
without
B-6
<PAGE> 39
the consent of the Participant affected, impair or adversely affect the Bonus
payable for any fiscal year that begins before the date the termination or
modification is approved by the Board, and (iii) Section V hereof shall not be
amended, in any manner adverse to a Participant, at the request of a party
seeking to effect, or otherwise in connection with or in anticipation of, a
Change of Control, without the consent of the affected Participant.
VII. MISCELLANEOUS
Payments of the cash portion of Bonuses shall be made from the general
funds of the Company and no special or separate fund shall be required to be
established or other segregation of assets made to assure payment. No
Participant or other person shall have under any circumstances any interest in
any particular property or assets of the Company. The Plan shall be governed by
and construed in accordance with the laws of the State of Delaware, without
regard to its principle of conflict of laws.
B-7
<PAGE> 40
GRIFFON CORPORATION
SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
SCHEDULE I
<TABLE>
<CAPTION>
INITIAL SECONDARY TERTIARY
PARTICIPANT PERCENTAGE PERCENTAGE PERCENTAGE
------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Harvey R. Blau............................. 4% 4% 5%
Robert Balemian............................ 2.5% 3.5% 5%
</TABLE>
B-8
<PAGE> 41
GRIFFON CORPORATION
BOARD OF DIRECTORS PROXY FOR ANNUAL MEETING
FEBRUARY 5, 1998
The undersigned hereby appoints Harvey R. Blau and Robert Balemian, or either of
them, attorneys and Proxies with full power of substitution in each of them,
in the name and stead of the undersigned to vote as Proxy all the stock of the
undersigned in GRIFFON CORPORATION, a Delaware corporation, at the Annual
Meeting of Stockholders scheduled to be held on February 5, 1998 and any
adjournments thereof.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED BY PROXIES, AND EACH OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING. STOCKHOLDERS MAY WITHHOLD THE VOTE FOR ONE OR MORE
NOMINEE(S) BY WRITING THE NOMINEE(S) NAME(S) IN THE BLANK SPACE PROVIDED ON THE
REVERSE HEREOF. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR
PROPOSALS AS SET FORTH ON THE REVERSE HEREOF.
The Board of Directors recommends a vote FOR the following proposals:
(Continued and to be signed on reverse side)
SEE REVERSE SIDE
<PAGE> 42
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
1. Election of the following nominees, as set forth in the proxy statement:
FOR WITHHOLD
[ ] [ ]
NOMINEES: Henry A. Alpert, Abraham M. Buchman, Rear Admiral Clarence A. Hill,
Jr. and William H. Waldorf.
(Instruction: To withhold authority to vote for any individual nominee, print
the nominee's name on the line provided below)
_______________________________
2. Proposal to adopt the 1998 Stock Option Plan, as set forth as Exhibit A.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve the Company's Senior Management Incentive Compensation
Plan, as set forth in Exhibit B.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Upon such other business as may properly come before the meeting or any
adjournment thereof.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
SIGNATURE(S): _________________________________ DATED: _______________, 1998
<PAGE> 43
VOTING INSTRUCTIONS TO
U.S. TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE
UNDER THE GRIFFON CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
I hereby direct that at the Annual Meeting of Stockholders of Griffon
Corporation on February 5, 1998 and at any adjournments thereof, the voting
rights pertaining to the shares of Griffon Corporation Common Stock deemed
allocated to my account under the Griffon Corporation Employee Stock Ownership
Plan solely for the purpose of voting at the Annual Meeting shall be exercised
as checked on this card, or if not checked, shall be voted in the discretion of
the Trustee.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED BY PROXIES, AND EACH OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING. STOCKHOLDERS MAY WITHHOLD THE VOTE FOR ONE OR MORE
NOMINEE(S) BY WRITING THE NOMINEE(S) NAME(S) IN THE BLANK SPACE PROVIDED ON THE
REVERSE HEREOF. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR
PROPOSALS AS SET FORTH ON THE REVERSE HEREOF.
The Board of Directors recommends a vote FOR the following proposals:
(Continued and to be signed on other side)
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 44
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
1. Election of the following nominees, as set forth in the proxy statement:
FOR WITHHOLD
[ ] [ ]
NOMINEES: Henry A. Alpert, Abraham M. Buchman, Rear Admiral Clarence A. Hill,
Jr. and William H. Waldorf.
(Instruction: To withhold authority to vote for any individual nominee, print
the nominee's name on the line provided below)
_______________________________
2. Proposal to adopt the 1998 Stock Option Plan, as set forth as Exhibit A.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve the Company's Senior Management Incentive Compensation
Plan, as set forth in Exhibit B.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Upon such other business as may properly come before the meeting or any
adjournment thereof.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
SIGNATURE(S): _________________________________ DATED: _______________, 1998
Please sign and date and return this voting instruction card in our attached
envelope. This card must be received by 5:00 p.m. Eastern Time on January 29,
1998.
