EXHIBIT 4.1
Griffon Corporation
2001 Stock Option Plan
SECTION 1. GENERAL PROVISIONS
------------------
1.1 Name and General Purpose
------------------------
The name of this plan is the Griffon Corporation 2001 Stock Option Plan
(hereinafter called the "Plan"). The Plan is intended 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 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 Plan 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 ten
percent (10%) or more of the voting power of the Company's then
outstanding securities; or
(c) if during the term of the Plan, individuals who at the effective
date of the Plan constitute the board of directors, cease for any
reason to constitute at least a majority of the board of directors.
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.
1
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 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. "Option Agreement" means the option agreement described in Section 2.5
of the Plan.
n. "Participant" means any officer or employee of the Company, a
Subsidiary or an Affiliate on the date of grant who is selected by the
Committee to participate in the Plan.
o. "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.
p. "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 Board or 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.
2
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. All employees are eligible to receive Options
under the Plan. 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 1,250,000 shares of Common Stock, or the number and kind of shares of
stock or other securities which shall be substituted for 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 500,000 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.
3
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 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 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)
4
withdraws the administration of the Plan from the 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, provided that the
Committee shall not have the right to reprice any outstanding options,
either by lowering the exercise price or by cancelling and regranting.
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.
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 Date
--------------
The Plan will be adopted on February 7, 2001 if approved by stockholders
and shall terminate on February 6, 2011.
5
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
Section 2 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 or any parent
corporation of the Company or any Subsidiary or Affiliate 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
--------------
6
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 or Affiliate) 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 or Affiliate, 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 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 one year from
the date of death. In the case of clauses (i) and (iii) above, such
7
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 of an optionee with
the Company or any Subsidiary or Affiliate, such optionee may exercise
such options at any time within two years thereafter, and (ii) upon
termination of all employment by Total Disability, the optionee may
exercise such options at any time within five years thereafter, and
(iii) in the event of the death of an optionee within five 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 five years from
the date of death.
c. Transferability
---------------
A Non-Qualified Stock Option granted under the Plan shall be
transferable in the discretion of the committee, including transfers
to (1) members of the optionee's family, (2) a trust, (3) a family
limited partnership, or (4) an estate planning vehicle primarily for
the optionee's family.
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.
8