<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-12.
</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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
GRIFFON CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 8, 2000
------------------------
To our Stockholders:
An annual meeting of stockholders will be held at the deSeversky Conference
Center, Northern Boulevard, Old Westbury, New York on Tuesday, February 8, 2000
beginning at 10:00 a.m. At the meeting, you will be asked to vote on the
following matters:
1. Election of four directors, each for a term of three years.
2. A shareholder proposal recommending that the Board of Directors
appoint a Special Committee of the Board of Directors to solicit,
review and negotiate offers to acquire the company.
3. Any other matters that properly come before the meeting.
The above matters are set forth in the proxy statement attached to this
notice to which your attention is directed.
If you are a stockholder of record at the close of business on December 24,
1999, you are entitled to vote at the meeting or at any adjournment or
postponement of the meeting. This notice and proxy statement are first being
mailed to stockholders on or about December 28, 1999.
By Order of the Board of Directors,
EDWARD I. KRAMER
Secretary
Dated: December 28, 1999
Jericho, New York
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PRE-ADDRESSED
POSTAGE-PAID ENVELOPE AS DESCRIBED ON THE ENCLOSED PROXY CARD. YOUR PROXY, GIVEN
THROUGH THE RETURN OF THE ENCLOSED PROXY CARD, MAY BE REVOKED PRIOR TO ITS
EXERCISE BY FILING WITH OUR CORPORATE SECRETARY PRIOR TO THE MEETING A WRITTEN
NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY
ATTENDING THE MEETING, FILING A WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY
OF THE MEETING AND VOTING IN PERSON.
<PAGE> 3
GRIFFON CORPORATION
100 JERICHO QUADRANGLE
JERICHO, NEW YORK 11753
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, FEBRUARY 8, 2000
------------------------
Our Annual Meeting of Stockholders will be held on Tuesday, February 8,
2000 at the deSeversky Conference Center, Northern Boulevard, Old Westbury, New
York at 10:00 a.m. This proxy statement contains information about the matters
to be considered at the meeting or any adjournments or postponements of the
meeting.
ABOUT THE MEETING
WHAT IS BEING CONSIDERED AT THE MEETING?
You will be voting on the following:
- election of directors and
- the shareholder proposal.
In addition, our management will report on our performance during fiscal 1999
and respond to your questions.
WHO IS ENTITLED TO VOTE AT THE MEETING?
You may vote if you owned stock as of the close of business on December 24,
1999. Each share of stock is entitled to one vote.
HOW DO I VOTE?
You can vote in two ways:
- by attending the meeting or
- by completing, signing and returning the enclosed proxy card.
CAN I CHANGE MY MIND AFTER I VOTE?
Yes, you may change your mind at any time before the vote is taken at the
meeting. You can do this by (1) signing another proxy with a later date and
returning it to us prior to the meeting or filing with our corporate secretary a
written notice revoking your proxy, or (2) voting again at the meeting.
<PAGE> 4
WHAT IF I RETURN MY PROXY CARD BUT DO NOT INCLUDE VOTING INSTRUCTIONS?
Proxies that are signed and returned but do not include voting instructions
will be voted (1) FOR the election of the nominee directors and (2) AGAINST the
shareholder proposal.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
It means that you have multiple accounts with brokers and/or our transfer
agent. Please vote all of these shares. We recommend that you contact your
broker and/or our transfer agent to consolidate as many accounts as possible
under the same name and address. Our transfer agent is American Stock Transfer &
Trust Company, 212-936-5100.
WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?
If you hold your shares directly in your own name, they will not be voted
if you do not provide a proxy. Your shares may be voted under certain
circumstances if they are held in the name of a brokerage firm. Brokerage firms
generally have the authority to vote customers' unvoted shares on certain
"routine" matters, including the election of directors. When a brokerage firm
votes its customer's unvoted shares, these shares are counted for purposes of
establishing a quorum. At our meeting these shares will be counted as voted by
the brokerage firm in the election of directors, but will not be counted for all
other matters to be voted on because these other matters are not considered
"routine" under the applicable rules.
HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
Your shares are counted as present at the meeting if you attend the meeting
and vote in person or if you properly return a proxy by mail. In order for us to
conduct our meeting, a majority of our outstanding shares as of December 24,
1999 must be present at the meeting. This is referred to as a quorum. On
December 24, 1999, there were 30,318,647 shares outstanding and entitled to
vote.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
For each item, the affirmative vote of the holders of a majority of the
shares represented in person or by proxy and entitled to vote on the item will
be required for approval. A properly executed proxy marked "ABSTAIN" with
respect to any such matter will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly, an abstention
will have the effect of a negative vote.
2
<PAGE> 5
STOCK OWNERSHIP
The following information, including stock ownership, is submitted with
respect to our directors, each executive officer named in the "Summary
Compensation Table," for all executive officers and directors as a group, and,
based solely on filings with the Securities and Exchange Commission, except as
otherwise indicated, for each holder of more than five percent of our common
stock as of December 24, 1999:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)
- ------------------------ ------------------
<S> <C> <C>
FMR Corp.(2)................................................ 2,672,300 (8.8%)
Reich & Tang Asset Management L.P.(3)....................... 1,941,100 (6.4%)
Patrick L. Alesia(4)........................................ 120,194
Henry A. Alpert(6)(7)....................................... 7,143
Robert Balemian(4)(5)(8).................................... 1,689,930 (4.9%)
Bertrand M. Bell(6)......................................... 10,720
Harvey R. Blau(4)(5)(9)(10)................................. 2,356,663 (6.9%)
Abraham M. Buchman(6)....................................... 10,151
Rear Admiral Clarence A. Hill, Jr. (Ret.)(6)................ 12,183
Edward I. Kramer(4)(10)(11)................................. 103,685
Ronald J. Kramer(6)(12)..................................... 25,300
Lieutenant Gen. James W. Stansberry (Ret.)(6)(13)........... 18,120
Martin S. Sussman(6)........................................ 6,720
William H. Waldorf(6)....................................... 8,917
Lester L. Wolff(6).......................................... 6,720
Directors and executive officers as a group (14
persons)(14).............................................. 4,376,446 (12.7%)
</TABLE>
- ---------------
(1) No officer or director beneficially owns more than one percent of the
issued and outstanding shares of our common stock 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 us by FMR. FMR holds sole dispositive power with
respect to 2,672,300 shares and sole voting power with respect to no
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) Reflects shares beneficially owned by Reich & Tang Asset Management L.P.
("Reich & Tang") according to information furnished to us by Reich & Tang.
Reich & Tang holds shared voting power with respect to 1,941,100 shares and
sole dispositive power with respect to no shares. The address for Reich &
Tang is 600 Fifth Avenue, New York, New York 10020.
(4) Includes for Messrs. Blau, Balemian, Alesia and Edward I. Kramer,
1,750,000, 1,260,000, 67,500 and 57,500 shares, respectively, issuable with
respect to options currently exercisable and options which become
exercisable within 60 days under our stock option plans. See
"Management -- Stock and Compensation Plans."
3
<PAGE> 6
(5) Includes for Messrs. Blau and Balemian, 126,259 shares of common stock
credited to each of them in deferred stock under our Senior Management
Incentive Compensation Plan. See "Management -- Stock and Compensation
Plans."
(6) Includes shares of common stock granted pursuant to our Outside Director
Stock Award Plan. See "Management -- Stock and Compensation
Plans -- Outside Director Stock Award Plan."
(7) Includes 2,500 shares owned by the Spartan Petroleum Profit Sharing Trust
of which Mr. Alpert is one of two trustees.
(8) Includes 3,000 shares owned by Mr. Balemian's son.
(9) Includes 125,551 shares owned by Mr. Blau's wife.
(10) The Blau, Kramer, Wactlar, & Lieberman, P.C. Profit Sharing Plan, of which
Mr. Blau and Mr. Edward I. Kramer are two of three trustees, owns 54,715
shares of common stock of the company. Included in common stock
beneficially owned are 47,556 and 5,388 shares allocated to Mr. Blau and
Mr. Kramer, respectively.
(11) Includes 297 shares owned by Mr. Edward I. Kramer's wife.
(12) 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.
(13) 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.
(14) Includes 3,135,000 shares issuable with respect to options currently
exercisable and options which become exercisable within 60 days granted to
executive officers under our stock option plans. See "Management -- Stock
and Compensation Plans."
ELECTION OF DIRECTORS
Our 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. Our 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 2002) STOCKHOLDERS IN 2000) STOCKHOLDERS IN 2001)
- ----------------------- -------------------------- -------------------------------
<S> <C> <C>
Bertrand M. Bell (2)(3) Robert Balemian Henry A. Alpert (2)
Martin S. Sussman (1) Harvey R. Blau Abraham M. Buchman (1)(2)
Joseph J. Whalen (1) Ronald J. Kramer 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.
Robert Balemian, Harvey R. Blau, Ronald J. Kramer and Lieutenant General
James W. Stansberry, directors in Class II, are to be elected to hold office
until the Annual Meeting of Stockholders in 2003 or until their successors are
chosen and qualified. Shares represented by executed proxies in the form
enclosed will be
4
<PAGE> 7
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' COMPENSATION
Directors who are not our employees 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 our Outside Director Stock Award Plan, each non-employee
director receives at the time of the Annual Meeting of Stockholders each year,
shares of our common stock having a market value of $10,000. All shares awarded
under this plan vest over a period of three years. In 1999, an aggregate of
9,710 shares were granted under this plan.
During the fiscal year ended September 30, 1999 there were
- four meetings of the Board of Directors
- one meeting of the Audit Committee
- four meetings of the Compensation Committee
- one meeting of the Ethics Oversight Committee.
Our Audit Committee is involved in discussions with our independent public
accountants with respect to the year-end audited financial statements, our
internal accounting controls and the professional services furnished by our
independent public accountants. Our Compensation Committee awards stock options
to officers and employees and recommends executive compensation. See
"Compensation Committee Report on Executive Compensation." Our Ethics Oversight
Committee is responsible for establishing and maintaining procedures for
receipt, investigating and reporting of information and reports concerning
alleged violations of our Code of Business Ethics and Standards of Conduct. We
have no standing nominating committee. Each 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 our directors:
Mr. Henry A. Alpert (52) has been a director since February 1995. Mr.
Alpert 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 (60) has been President and a director since 1982. Mr.
Balemian was Vice President from February 1976 through December 1978 and Vice
President of Finance from December 1978 until March 1982.
Dr. Bertrand M. Bell (70) has been a director since 1976. Dr. Bell 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.
5
<PAGE> 8
Mr. Harvey R. Blau (64) has been Chairman of the Board 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. Abraham M. Buchman (83) has been a director since 1966. Mr. Buchman has
been a practicing attorney in the State of New York for more than the past five
years and is a partner in the law firm of Buchman & O'Brien.
Rear Admiral Clarence A. Hill, Jr. (Ret.) (79) has been a director since
1982. Rear Admiral Hill 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 (41) has been a director since 1993. Since July 1999,
Mr. Kramer has been a Managing Director of Wasserstein Perella & Co., an
investment banking firm. From June 1995 to June 1999, Mr. Kramer was Chairman
and CEO of Ladenburg, Thalmann Group Inc., an investment banking firm, and an
employee thereof for more than five years prior to his holding such office. Mr.
Kramer is the son-in-law of Mr. Harvey R. Blau.
Lieutenant General James W. Stansberry (Ret.) (72) has been a director
since 1991. He 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 1999, Telephonics Corporation, our wholly-owned subsidiary, paid
$42,000 to Stansberry Associates International, Inc. in consulting fees.
Mr. Martin S. Sussman (62) has been a director since 1989. He 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 (62) has been a director since 1963. He 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.
Mr. Joseph J. Whalen (67) has been a director since July 1999. He was a
partner at Arthur Andersen LLP for more than five years prior to his retirement
in 1994.
Mr. Lester L. Wolff (79) has been a director since 1987. He 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 1999, Telephonics Corporation, our
wholly-owned subsidiary, paid $42,000 to Lester Wolff Enterprises Limited in
consulting fees.
6
<PAGE> 9
MANAGEMENT
OUR OFFICERS
Our officers are:
<TABLE>
<CAPTION>
NAME AGE OFFICE HELD
- ------------------------------- --- ------------------------------
<S> <C> <C>
Harvey R. Blau................. 64 Chairman of the Board and
Chief Executive Officer
Robert Balemian................ 60 President
Patrick L. Alesia.............. 51 Vice President and Treasurer
Edward I. Kramer............... 65 Vice President, Administration
and Secretary
</TABLE>
Mr. Patrick L. Alesia has been our Vice President since May 1990 and has
been our Treasurer since April 1979.
Mr. Edward I. Kramer has been our Vice President, Administration since
February 1997 and our Secretary since February 1998. He has been a member of the
law firm of Blau, Kramer, Wactlar & Lieberman, P.C., our general counsel, for
more than the past five years. Mr. Kramer is also a member of our Ethics
Oversight Committee.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation with
respect to the Chairman/ Chief Executive Officer and each of our other executive
officers who earned more than $100,000 for services rendered during the fiscal
years ended September 30, 1999, 1998 and 1997:
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...................... 1999 $789,000 $1,136,000 -- 390,000 -- $82,855
Chairman and Chief 1998 697,000 1,897,000 -- 1,050,000 -- 81,746
Executive Officer 1997 679,000 2,738,000 -- 350,000 -- 80,666
Robert Balemian..................... 1999 713,000 1,078,000 -- 290,000 -- 45,855
President 1998 691,000 1,839,000 -- 650,000 -- 44,024
1997 673,000 2,681,000 -- 250,000 -- 44,782
Patrick L. Alesia................... 1999 258,000 95,000 -- 25,000 -- 16,792
Vice President and Treasurer 1998 243,000 95,000 -- 15,000 -- 16,884
1997 229,000 90,000 -- 15,000 -- 16,800
Edward I. Kramer.................... 1999 125,000 -- -- 15,000 -- 7,691
Vice President, 1998 125,000 -- -- 15,000 -- 7,386
Administration and Secretary 1997 100,000 -- -- 25,000 -- 6,141
</TABLE>
- ---------------
(1) Represents for Messrs. Blau and Balemian cash incentive bonus under our
Senior Management Incentive Compensation Plan. The bonus amount in fiscal
1999 and 1998 for each of Messrs. Blau and Balemian
7
<PAGE> 10
does not include $500,000 which was deferred under such Plan and will be
paid in the form of shares of our common stock. Accordingly, there has been
reserved 68,581 and 57,678 shares of our common stock in respect of each of
Messrs. Blau and Balemian's incentive compensation for fiscal 1999 and 1998,
respectively. See "Management -- Employment Agreements -- and -- Stock and
Compensation Plans."
(2) Other Annual Compensation excludes certain perquisites and other non-cash
benefits provided by us 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 1999 includes: (a) $61,360, $26,280 and
$7,590 of premiums paid by us in respect of certain split-dollar life
insurance policies on the lives of Messrs. Blau, Balemian and Alesia,
respectively. We are the beneficiary to the extent of the premiums paid; (b)
$13,493, $11,573, $1,200 and $1,200 paid by us for term life insurance
policies on Messrs. Blau, Balemian, Alesia and Kramer, respectively; (c) our
contributions under the Griffon Corporation 401(k) Retirement Plan of $7,002
paid by us for each of Messrs. Blau, Balemian and Alesia and $5,491 for Mr.
Kramer and (d) $1,000 in company contributions allocated under our Employee
Stock Ownership Plan on behalf of each of Messrs. Blau, Balemian, Alesia and
Kramer.
EMPLOYMENT AGREEMENTS
Effective October 1, 1998, we entered into employment agreements with each
of Messrs. Blau and Balemian. The term of the agreements expires December 1,
2003. Pursuant to these agreements:
- Mr. Blau receives a base salary of $775,000, subject to annual cost of
living adjustments, and an annual bonus calculated in accordance with our
Senior Management Incentive Compensation Plan.
- Mr. Balemian receives a base salary of $700,000, subject to annual cost
of living adjustments, and an annual bonus calculated in accordance with
our Senior Management Incentive Compensation Plan.
The employment agreements further provide for a five year consulting period
after the termination of employment during which each executive will receive
consulting payments in an annual amount equal to two-thirds of his last annual
base salary. The employment agreements also provide 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, each executive has the
option, exercisable within one year after 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. In addition, the
company will provide the executive with a tax gross-up payment to cover any
excise tax due.
STOCK AND COMPENSATION PLANS
EMPLOYEE STOCK OWNERSHIP PLAN
In May 1983, we adopted an Employee Stock Ownership Plan, as amended,
("ESOP" or "Plan"). Our employees and employees of our 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, N.A. (the
8
<PAGE> 11
"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
us 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. As of November 30, 1999, there were
2,469,335 shares in the Plan, of which 2,359,339 were allocated to employees and
109,996 were unallocated.
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 our common stock. The loan provides for repayment in quarterly
installments through 2002 and is guaranteed by us. As of December 24, 1999, the
Plan had outstanding borrowings of $1,500,000.
SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
Our Senior Management Incentive Compensation Plan (the "Incentive Plan"),
which was adopted by the Board of Directors in November 1997 and approved by the
stockholders in February 1998, provides for annual bonuses to Messrs. Blau and
Balemian based upon company performance. Under the Incentive Plan, each of
Messrs. Blau and Balemian is entitled to receive a bonus based upon our
consolidated pretax earnings, as defined, for each fiscal year. 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. The first $500,000 of the
annual bonus payable for any fiscal year to Messrs. Blau and Balemian is payable
in deferred shares of common stock.
The amount of the bonus for each of Messrs. Blau and Balemian for a fiscal
year that is payable in deferred shares of common stock (the "Stock Portion") is
converted to a hypothetical number of shares of common stock and credited to a
bookkeeping account in his name. 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
9
<PAGE> 12
determined in good faith by the committee administering the Incentive Plan. The
deferred stock credited to the accounts of Messrs. Blau and Balemian will be
delivered in the form of shares of common stock when he ceases to be our
employee, either all at once or in up to five annual installments. However, the
committee administering the Incentive Plan has the power, in its discretion, to
accelerate delivery of the deferred stock. 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 our 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).
1998 EMPLOYEE AND DIRECTOR STOCK OPTION PLAN
The 1998 Employee and Director Stock Option Plan (the "Employee and
Director Plan"), which was adopted by the Board of Directors in February 1998
and amended in July and November 1998, covers 1,750,000 shares of our common
stock. The participants in the Employee and Director Plan are all directors,
officers and employees of, and consultants to, us or any of our subsidiaries and
affiliates. Under the terms of the Employee and Director 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 1999, options were granted to purchase 447,500 shares
under the Employee and Director Plan. As of December 24, 1999, 169,750 options
were exercisable at $10.875 to $14.75 per share and options to purchase 534,000
shares remained available for future grants under the Employee and Director
Plan.
1998 STOCK OPTION PLAN
The 1998 Stock Option Plan (the "1998 Plan"), which was adopted by the
Board of Directors in November 1997 and approved by the stockholders in February
1998, covers 1,000,000 shares of our common stock. The participants in the 1998
Plan are all officers and employees of our company or any of our subsidiaries or
affiliates. Under the terms of the 1998 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 1999, no options were granted under the 1998 Plan. As of December 24,
1999, 500,000 options were exercisable at $11.125 per share and no options
remained available for future grants under the 1998 Plan.
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 our common stock. The participants in the 1997
Plan are all officers and employees of our company or any of our subsidiaries or
affiliates. 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 1999, no options were granted under the 1997 Plan. As of December 24,
1999, 1,445,000 options were exercisable at $13.50 to $15.75 per share and
options to purchase 28,500 shares remained available for future grants under the
1997 Plan.
10
<PAGE> 13
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 our common stock. The participants in the 1995
Plan are all officers and employees of our company or any of our subsidiaries or
affiliates. 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 1999, no options were granted under the 1995 Plan. As of December 24,
1999, options to purchase 943,000 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
We have 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 our common
stock having a value of $10,000, which shares vest in equal installments over a
three-year period. During fiscal 1999, 9,710 shares were issued under the
Outside Director Plan. As of December 24, 1999, an aggregate of 242,800 shares
remained available for future grants under the Outside Director Plan.
1992 NON-QUALIFIED STOCK OPTION PLAN
The 1992 Non-Qualified Stock Option Plan (the "1992 Plan"), which was
adopted by the Board of Directors in November 1992 and approved by the
stockholders in February 1993, covers 1,000,000 shares of our common stock.
Under the terms of the 1992 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 1999,
680,000 options were granted. As of December 24, 1999, options to purchase
315,000 shares were exercisable at prices ranging from $6.625 per share to
$9.125 per share and options to purchase 2,000 shares remained available for
future grants under the 1992 Plan.
1988 NON-QUALIFIED STOCK OPTION PLAN
The 1988 Non-Qualified Stock Option Plan (the "1988 Plan") which was
adopted by the Board of Directors in May 1988 and amended in November 1992,
covered 1,000,000 shares of the Company's common stock. Under the terms of the
1988 Plan, the purchase price of the shares subject to each option granted were
not less than 100% of the fair market value at the date of grant. The terms of
each option were determined at the time of grant by the Board of Directors or
its Compensation Committee. The 1988 Plan terminated in May 1998 and no further
options are available for grant. As of December 24, 1999, options to purchase
149,000 shares were exercisable at prices ranging from $7.50 per share to $9.375
per share.
11
<PAGE> 14
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all stock option grants to the executive
officers named in the "Summary Compensation Table" during the fiscal year ended
September 30, 1999:
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT ASSUMED
INDIVIDUAL GRANTS(1) ANNUAL RATES OF STOCK PRICE
---------------------------------------------------- APPRECIATION FOR
NUMBER % OF OPTION TERMS(5)
OF SHARES TOTAL OPTIONS ----------------------------------------------
UNDERLYING GRANTED TO EXERCISE STOCK STOCK
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRICE DOLLAR PRICE DOLLAR
NAME GRANTED(2) FISCAL YEAR(3) ($/SH) DATE 5%($)(4) GAIN(1) 10%($)(4) GAIN(1)
- ---- ---------- --------------- -------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harvey R. Blau......... 390,000 34.59% $ 7.25 07-28-09 $11.81 $1,778,000 $18.81 $4,508,000
Robert Balemian........ 290,000 25.72 7.25 07-28-09 11.81 1,322,000 18.81 3,352,000
Patrick L. Alesia...... 25,000 2.22 10.00 02-04-09 16.29 157,000 25.94 399,000
Edward I. Kramer....... 15,000 1.33 10.00 02-04-09 16.29 94,000 25.94 239,000
</TABLE>
- ---------------
(1) All grants are under our 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.
(2) Grants were made at the market value of our 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 1999 were for 1,127,500 shares
of Common Stock.
(4) The stock price represents the price of our 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 our common stock for all stockholders as of
December 24, 1999, assuming annual rates of stock appreciation from
September 30, 1999 (stock price of $8.00 per share) over the ten year period
used in this table, aggregate $152,600,000 at a 5% rate and $386,700,000 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 1999
and all unexercised stock options of the executive officers named in the
"Summary Compensation Table" as of September 30, 1999:
<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......... -- -- 1,550,000 915,000 $137,500 $292,500
Robert Balemian........ -- -- 1,110,000 615,000 103,125 217,500
Patrick L. Alesia...... -- -- 47,500 32,500 5,000 --
Edward I. Kramer....... -- -- 42,500 22,500 2,500 --
</TABLE>
- ---------------
(1) Values are calculated by subtracting the exercise price from the fair market
value of the stock as of September 30, 1999.
12
<PAGE> 15
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective October 1, 1996 we adopted the Griffon Corporation Supplemental
Executive Retirement Plan ("SERP") for our 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.
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, 1999 are: Mr. Blau, 27; Mr. Balemian, 26; and Mr. Alesia, 26.
<TABLE>
<CAPTION>
BASE SALARY BONUS/INCENTIVE COMPENSATION
- ------------------------------------------- ---------------------------------------
YEARS OF SERVICE YEARS OF SERVICE
WITH THE COMPANY ASSUMED AVERAGE WITH THE COMPANY
ASSUMED AVERAGE ------------------- BONUS/INCENTIVE ---------------------
ANNUAL BASE SALARY(1) 25 YEARS 30 YEARS COMPENSATION(2) 25 YEARS 30 YEARS
- --------------------- -------- -------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C>
$200,000 $12,500 $15,000 $ 100,000 $ 37,500 $ 45,000
300,000 18,750 22,500 250,000 93,750 112,500
400,000 25,000 30,000 500,000 187,500 225,000
500,000 31,250 37,500 1,000,000 375,000 450,000
600,000 37,500 45,000 1,500,000 562,500 675,000
700,000 43,750 52,500 2,000,000 750,000 900,000
800,000 50,000 60,000 2,500,000 937,500 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, our Chairman of the Board, and Edward I. Kramer, our Vice
President, Administration and Secretary are members of the law firm of Blau,
Kramer, Wactlar & Lieberman, P.C., our general counsel. For the fiscal year
ended September 30, 1999, we paid $731,000 in legal fees to Blau, Kramer,
Wactlar &
13
<PAGE> 16
Lieberman, P.C. Legal fees paid by us 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 us
approximately 3,700 square feet of office space at our corporate headquarters.
The rental under this sublease agreement is the same rental per square foot that
we are paying on our prime lease, including any escalations, and aggregated
approximately $91,000 in the fiscal year ended September 30, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, our 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 our officers or employees during
fiscal 1999 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 us under the Securities Act of 1933 or the Securities
Exchange Act.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of our executive officers is generally determined by the
Compensation Committee of the Board of Directors, subject to applicable
employment agreements and incentive plans. Each member of the Compensation
Committee is a director who is not employed by us or any of our affiliates. The
following report with respect to certain compensation paid or awarded to our
executive officers during fiscal 1999 is furnished by the directors who
comprised the Compensation Committee during fiscal 1999.
GENERAL POLICIES
Our compensation programs are intended to enable us to attract, motivate,
reward and retain the management talent required to achieve corporate
objectives, and thereby increase shareholder value. It is our policy to provide
incentives to our senior management to achieve both short-term and long-term
objectives and to reward exceptional performance and contributions to the
development of our businesses. To attain these objectives, our executive
compensation program includes a competitive base salary, cash incentive bonuses
and stock-based compensation. See "Management -- Employment
Agreements -- and -- Senior Management Incentive Compensation Plan."
Stock options are granted to employees, including our executive officers,
by the Compensation Committee under our stock option plans. The Committee
believes that stock options provide an incentive that focuses the executive's
attention on managing our 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 our 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 our profitability and growth.
14
<PAGE> 17
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 and our Senior
Management Incentive Plan ("Incentive Plan"), the salaries which will be paid to
our 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 us, and qualitative factors bearing on an individual's
experience, responsibilities, management and leadership abilities, and job
performance.
For fiscal 1999, pursuant to the terms of his employment agreement with us
and the Incentive Plan, Mr. Robert Balemian, our President, received a base
salary and an incentive bonus based on our Consolidated Pretax Earnings. See
"Management -- Employment Agreements -- and -- Senior Management Incentive
Compensation Plan." In light of this employment agreement and the Incentive
Plan, the Compensation Committee was not required to make any decision regarding
the 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, our Vice President and
Treasurer received a base salary, a cash bonus and a grant of stock options
under our 1998 Employee and Director Stock Option Plan. Mr. Edward I. Kramer,
our Vice President, Administration and Secretary, also received a base salary
and a grant of stock options under our 1998 Employee and Director Stock Option
Plan. The Compensation Committee determined that the base salaries, bonus and
grant of stock options were appropriate given our financial performance, the
substantial contributions made by Mr. Alesia and Mr. Edward I. Kramer to such
performance and the compensation levels of executives at companies competitive
with us.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
For fiscal 1999, pursuant to the terms of his employment agreement with us
and the Incentive Plan, Mr. Harvey R. Blau, our Chairman and Chief Executive
Officer, received a base salary and an incentive bonus based on our Consolidated
Pretax Earnings. See "Management -- Employment Agreements -- and -- Senior
Management Incentive Compensation Plan." In light of this employment agreement
and the Incentive Plan, the Compensation Committee was not required to make any
decision regarding the compensation of Mr. Blau. The Compensation Committee
granted to Mr. Blau options to purchase common stock under the 1992 Plan. The
Compensation Committee believes that stock options provide an incentive for Mr.
Blau to maximize long-term shareholder value.
The Compensation Committee
Abraham M. Buchman, Chairman
Henry A. Alpert
Bertrand M. Bell
Rear Admiral Clarence A. Hill, Jr.
(Ret.)
15
<PAGE> 18
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers,
directors and persons who own more than ten percent of a registered class of our
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 regulations to furnish us with copies of all Forms
3, 4 and 5 they file with the SEC and the NYSE. Based solely upon our review of
the copies of the forms we have received, we believe that all Reporting Persons
complied on a timely basis with all filing requirements applicable to them with
respect to transactions during fiscal 1999.
16
<PAGE> 19
PERFORMANCE GRAPH
The following graph sets forth the cumulative total return to our
stockholders during the five year period ended September 30, 1999 as well as an
overall stock market index (S & P SmallCap 600 Index) and our 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
LOGO
* $100 INVESTED ON SEPTEMBER 30, 1994 IN STOCK OR INDEX, INCLUDING REINVESTMENT
OF DIVIDENDS.
17
<PAGE> 20
SHAREHOLDER PROPOSAL
Set forth below is a shareholder proposal received from the Schwartz Value
Fund. This proposal is included in the Proxy Statement in accordance with the
rules of the Securities and Exchange Commission and is not endorsed by the Board
of Directors. This proposal and the statement of the Schwartz Value Fund in
support of the proposal are quoted below. The Company assumes no responsibility
for the content of these materials. The name and address of the proponent and
the number of shares which it holds will be promptly furnished to any
shareholder upon request by mail or telephone to the Corporate Secretary at 100
Jericho Quadrangle, Jericho, New York 11753, telephone number 516-938-5544. The
Board of Directors recommends that shareholders vote AGAINST approval of this
proposal.
"RESOLVED, that the shareholders of Griffon Corporation (the
"Company") hereby recommend that the Board of Directors appoint a Special
Committee, consisting of all Directors except those who are current or
former officers of the Company, for the purpose of soliciting, reviewing
and negotiating offers to acquire the Company on terms that are fair and in
the best interests of all shareholders of the Company. If the Committee
determines that an offer is financially fair and in the best interest of
all shareholders of the Company, the Committee shall recommend to the Board
of Directors that it consider and act on the offer in accordance with
applicable law.
RESOLVED FURTHER, that these resolutions shall not be altered,
amended, modified or repealed except by the shareholders of the Company."
Statement Of Schwartz Value Fund In Support Of Proposal
Proponent believes that senior management's divided and sometimes
conflicting interests, and the Board's focus on management compensation rather
than shareholder return, have greatly contributed to the poor performance of the
Company's shares. Accordingly, proponent believes the shareholders would best be
served by the sale of the Company.
The ineffectiveness and inattention of management is reflected in the
dismal shareholder returns over the last five years. Earnings per share for the
current year are below those of five years ago. This poor performance is
reflected in the Company's stock price, which as of August 31, 1999 was below
what it was five years earlier. And during that same period, no dividends have
been paid.
In contrast, the compensation and other payments received by senior
management during the last five years has increased significantly. During the
five years ended September 15, 1998, the Company's CEO, Harvey Blau, was paid
salary, bonus and other compensation exceeding $15 million and options covering
more than two million shares. And for Mr. Blau this is only a part time job; he
is also Chairman and CEO of another corporation which paid him compensation of
$2.2 million plus options on 990,000 shares during the same period. He is also a
senior member of the Company's law firm to which the Company paid approximately
$3 million over the four years ended September 30, 1998.
The Company's President, Robert Balemian, has fared almost as well as the
CEO. During the same five year period he received salary, bonus and other
compensation totaling $14,829,675, plus options on 1,650,000 shares.
The comparison of the lackluster results of shareholders and the increased
compensation to senior management over the last five years is startling and
disturbing to proponent.
18
<PAGE> 21
Enough is enough! Proponent believes it is time to turn over control of the
Company to a Board and management team more interested in shareholder value.
Proponent believes the best way to accomplish this is through a sale of the
Company, and urges you to vote in favor of the proposal.
Statement of the Company Regarding Proposal
The Board of Directors recommends that shareholders vote AGAINST approval
of this proposal. The Board of Directors opposes this proposal because it
believes that the proposal is based on the faulty premise that it is in the best
interests of the Company and its shareholders that the Company be promptly sold
to realize a premium over the current market price of its common stock. The
Board believes that this premise does not properly take into account the current
position and prospects of the Company and therefore is not in the best interests
of the Company and its shareholders.
A decision as to whether or when to sell any company involves a complex
balancing of a variety of factors. It involves estimating and comparing short
term returns that might be achieved if a company were sold in the current market
with those returns which may be achieved beyond the near term as an independent
company through its business plan and under different market conditions which
would substantially enhance the financial, business and valuation posture of the
company. Moreover, it involves considering the adverse effect of a decision to
sell the company on its employees and customer base which may impair the
inherent value of the company. It also involves an intimate knowledge of the
company's markets, customers and business cycles and an evaluation of these in
light of current financial and product market conditions.
Because the making of such decisions requires detailed knowledge of the
company's business, plans, prospects and the markets in which it operates, the
law places the responsibility for making decisions as to whether, when and how
to sell a company in the Board of Directors, subject to the ultimate control of
the shareholders through their power to elect the members of the Board.
Obviously, the expertise of company employees is an invaluable part of this
process. The statutes also place upon the Board of Directors the fiduciary duty
to make such decisions only in the manner that it believes in good faith, with
sufficient information after a proper investigation, to be in the best interests
of the company and its shareholders.
The Company has invested in, expanded and developed its operations during
the past three years and believes it is poised to enjoy the rewards of these
actions. While each of the Company's divisions has continued to experience sales
growth throughout this period, competitive pricing pressures, delays in
increasing production capacity and the introduction of new programs have
adversely impacted net income during the last two years. The Company believes
recent developments will impact favorably on operating results as follows:
- The Company's garage door division, the nation's largest manufacturer and
distributor of residential garage doors, has consolidated manufacturing
operations, resulting in production efficiencies and reduced costs, and
is in the process of adding additional production capacity. The Company
recently announced that it was selected to be the exclusive supplier of
garage doors to The Home Depot, Inc. throughout the United States and
Canada. This program is expected to be an important factor in the growth
of this business over the next several years.
- The Company's specialty plastic films operations in the expanding
European market have recently begun to reflect operating improvement due
to investments, sales growth and increased efficiencies.
19
<PAGE> 22
The Company expects this improvement to continue, and believes that it is
well positioned to capitalize on new opportunities afforded as a
respected global supplier to Procter & Gamble.
In addition, the Company has experienced continued success in its other business
segments:
- The Company's installation services unit, created just seven years ago,
has increased profits and sales in each year, providing a unique array of
specialty building products to the residential construction market with
an expanding sales volume now exceeding $240 million.
- The Company's electronic information and communication systems subsidiary
finished the year with solid operating profits and a $170 million
backlog.
The Board of Directors believes that, on the basis of these events and
considerations, the current level of the Company's stock price does not reflect
the value and growth prospects of the Company. The Board of Directors,
therefore, does not believe that a sale of the Company in the current stock
market environment and based on the Company's current position in its business
markets would be in the best interests of the Company or its shareholders.
In addition, the Board of Directors believes that the supporting statement,
insofar as it discusses management compensation arrangements, does not address
the fundamental issues presented by the proposal, which concern the long-term
strategy of the Company. The statement concerning compensation arrangements also
does not properly take into account the major accomplishments achieved by the
Company under its current management, including the substantial growth and
development of each of its divisions into major factors in their respective
businesses. It should be noted that the shareholders overwhelmingly supported
the Senior Management Incentive Compensation Plan currently in effect which was
submitted for shareholder vote at the Company's 1998 shareholders meeting.
For the reasons indicated above, the Board of Directors unanimously
recommends that the stockholders vote AGAINST approval of the Shareholder
Proposal.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP acted as our independent public accountants for the
fiscal year ended September 30, 1999 and has been selected by the Board of
Directors, upon the recommendation of the Audit Committee, to continue to act as
our independent public accountants for the 2000 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 our Annual Report to Stockholders for the fiscal year ended
September 30, 1999 has been provided to all stockholders as of the Record Date.
Stockholders are referred to the report for financial and other information
about us, but such report is not incorporated in this proxy statement and is not
a part of the proxy soliciting material.
20
<PAGE> 23
FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact included in this
proxy statement are forward-looking statements. When used in this proxy
statement, words such as "anticipate," "believe," "estimate," "expect," "intend"
and similar expressions, as they relate to the Company or its management, as
well as assumptions made by and information currently available to the Company's
management, identify forward-looking statements. Actual results could differ
materially from those contemplated by the forward-looking statements as a result
of certain factors including, but not limited to, the effect of business and
economic conditions; the impact of competitive products and pricing; and
capacity and supply constraints or difficulties. Such statements reflect the
current views of the Company with respect to future events and are subject to
these and other risks, uncertainties and assumptions relating to the operations,
results of operations, growth strategy and liquidity of the Company.
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.
We will pay the cost of soliciting proxies in the accompanying form. In
addition to solicitation by use of the mails, certain of our officers and
employees may solicit proxies by telephone, telegraph or personal interview. We
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. We have also retained the firm of
MacKenzie Partners, Inc. to assist in soliciting proxies on our behalf at an
estimated fee of $10,000, plus out-of-pocket expenses.
We must receive stockholder proposals with respect to our next annual
meeting of stockholders no later than October 2, 2000 to be considered for
inclusion in our next Proxy Statement.
By Order of the Board of Directors,
EDWARD I. KRAMER
Secretary
Dated: December 28, 1999
Jericho, New York
21
<PAGE> 24
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
- --------------------------------------------------------------------------------
GRIFFON CORPORATION
BOARD OF DIRECTORS PROXY FOR ANNUAL MEETING
FEBRUARY 8, 2000
The undersigned hereby appoints HENRY A. ALPERT and MARTIN S. SUSSMAN, 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 8, 2000 and any
postponements or 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
THE ELECTION OF DIRECTORS AND AGAINST THE SHAREHOLDER PROPOSAL AS SET FORTH ON
THE REVERSE HEREOF.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
<PAGE> 25
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
GRIFFON CORPORATION
FEBRUARY 8, 2000
<TABLE>
<CAPTION>
\/ Please Detach and Mail in the Envelope Provided \/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
|
--- |
A [X] PLEASE MARK YOUR | |_____
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD THE BOARD OF DIRECTORS RECOMMENDS
listed at right (except AUTHORITY A VOTE FOR THE ELECTION OF DIRECTORS.
as marked to the to vote for all
contrary below) nominees listed at right
1. Election of the
nominees listed [ ] [ ] NOMINEES: THE BOARD OF DIRECTORS RECOMMENDS A
at right, as set Robert Balemian VOTE AGAINST THE SHAREHOLDER PROPOSAL:
forth in the proxy statement: Harvey R. Blau
Ronald J. Kramer FOR AGAINST ABSTAIN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY Lieutenant General 2. Shareholder proposal, [ ] [ ] [ ]
INDIVIDUAL NOMINEE, PRINT THE NOMINEE'S NAME ON THE James W. Stansberry (Ret.) as set forth in the
LINE PROVIDED BELOW.) proxy statement.
3. 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:________, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 26
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
- --------------------------------------------------------------------------------
VOTING INSTRUCTIONS TO
U.S. TRUST COMPANY, 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 8, 2000 and at any postponements or 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. PARTICIPANTS 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.
PARTICIPANTS ARE STRONGLY ENCOURAGED TO READ THE ENCLOSED PROXY STATEMENT
CAREFULLY. YOUR VOTING INSTRUCTIONS TO U.S. TRUST ARE STRICTLY CONFIDENTIAL AND
WILL NOT BE DISCLOSED UNLESS REQUIRED BY LAW.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
-----------
SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
<PAGE> 27
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
PLEASE DATE, SIGN AND MAIL YOUR
VOTING INSTRUCTION CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
GRIFFON CORPORATION
FEBRUARY 8, 2000
<TABLE>
<CAPTION>
\/ Please Detach and Mail in the Envelope Provided \/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
|
--- |
A [X] PLEASE MARK YOUR | |_____
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD THE BOARD OF DIRECTORS RECOMMENDS
listed at right (except AUTHORITY A VOTE FOR THE ELECTION OF DIRECTORS.
as marked to the to vote for all
contrary below) nominees listed at right
1. Election of the
nominees listed [ ] [ ] NOMINEES: THE BOARD OF DIRECTORS RECOMMENDS A
at right, as set Robert Balemian VOTE AGAINST THE SHAREHOLDER PROPOSAL:
forth in the proxy statement: Harvey R. Blau
Ronald J. Kramer FOR AGAINST ABSTAIN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY Lieutenant General 2. Shareholder proposal, [ ] [ ] [ ]
INDIVIDUAL NOMINEE, PRINT THE NOMINEE'S NAME ON THE James W. Stansberry (Ret.) as set forth in the
LINE PROVIDED BELOW.) proxy statement.
--------------------------------------------------- PLEASE DATE, SIGN AND RETURN THIS VOTING
INSTRUCTION CARD PROXY IN THE ENCLOSED
ENVELOPE.
SIGNATURE(S)__________________________________________ ____________________________________________________ DATED:________, 2000
NOTE: 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 February 1, 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
