EXHIBIT 4.1
GRIFFON CORPORATION
1998 EMPLOYEE AND DIRECTOR STOCK OPTION PLAN
(AS AMENDED)
SECTION 1. GENERAL PROVISIONS
1.1. NAME AND GENERAL PURPOSE
The name of this plan is the Griffon Corporation 1998
Employee and Director Stock Option Plan (hereinafter called the "Plan"). The
Plan is intended to be a broadly-based incentive plan which enables Griffon
Corporation (the "Company") and its subsidiaries and affiliates to foster and
promote the interests of the Company by attracting and retaining directors,
officers and employees of, and consultants to, the Company who contribute to the
Company's success by their ability, ingenuity and industry, to enable such
directors, officers, employees and consultants 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-(2) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
or
(b) if any "person" (as such term is used in Section
13(d) and 14(d) of the Exchange Act) other than the
Company or any "person" who on the date of this
Agreement is a director or officer of the Company,
becomes the "beneficial owner" (as defined in Rule
13(d)-3 under the Exchange Act) directly or indirectly,
of securities of the Company representing twenty
percent (20%) or more of the voting power of the
Company's then outstanding securities; or
(c) if during any period of two (2) consecutive years
during the term of this Plan, individuals who at the
beginning of such period constitute the Board of
Directors, cease for any reason to constitute at least
a majority thereof.
d. "Committee" means the Committee referred to in Section 1.3 of the Plan.
e. "Common Stock" means shares of the Common Stock, par value $.25 per
share, of the Company.
f. "Company" means Griffon Corporation, a corporation organized under the
laws of the State of Delaware (or any successor corporation).
-1-
g. "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.
h. "Non-Employee Director" shall have the meaning set forth in Rule 16(b)
promulgated by the Securities and Exchange Commission
("Commission").
i. "Option" means any option to purchase Common Stock under Section 2 of
the Plan.
j. "Option Agreement" means the option agreement described in Section 2.4
of the Plan.
k. "Participant" means any director, officer, employee or consultant of the
Company, a Subsidiary or an Affiliate who is selected by the Committee to
participate in the Plan.
l. "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.
m. "Total Disability" means accidental bodily injury or sickness which
wholly and continuously disabled an optionee. The Committee, whose decisions
shall be final, shall make a determination of Total Disability.
1.3 ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee appointed by the
Board consisting of two or more members of the Board all of whom shall be
Non-Employee Directors. The Committee shall serve at the pleasure of the Board
and shall have such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and
complete authority to adopt, alter, amend or revoke such administrative rules,
guidelines and practices governing the operation of the Plan as it shall, from
time to time, deem advisable, and to interpret the terms and provisions of the
Plan.
The Committee shall keep minutes of its meetings and of action
taken by it without a meeting. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by all of the members of
the Committee without a meeting, shall constitute the acts of the Committee.
1.4 ELIGIBILITY
Stock Options may be granted only to directors, officers,
employees or consultants of the Company or a Subsidiary or Affiliate. Subject to
Section 2.3, any person who has been granted any Option may, if he is otherwise
eligible, be granted an additional Option or Options.
1.5 SHARES
The aggregate number of shares reserved for issuance pursuant to
the Plan shall be 2,825,000(1) 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.
_______________________________
(1) After giving effect to the Company's 10% stock dividend in August 2001.
-2-
Such number of shares may be set aside out of the authorized but
unissued shares of Common Stock or out of issued shares of Common Stock acquired
for and held in the Treasury of the Company, not reserved for any other purpose.
Shares subject to, but not sold or issued under, any Option terminating or
expiring for any reason prior to its exercise in full will again be available
for Options thereafter granted during the balance of the term of the Plan.
1.6 ADJUSTMENTS DUE TO STOCK SPLITS,
MERGERS, CONSOLIDATION, ETC.
If, at any time, the Company shall take any action, whether by
stock dividend, stock split, combination of shares or otherwise, which results
in a proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.
Likewise, in the event of any change in the outstanding shares
of Common Stock by reason of any recapitalization, merger, consolidation,
reorganization, combination or exchange of shares or other corporate change, the
Committee shall make such substitution or adjustments, if any, as it deems to be
appropriate, as to the number or kind of shares of Common Stock or other
securities which are reserved for issuance under the Plan and the number of
shares or other securities which, at such time are subject to Options.
In the event of a Change in Control, at the option of the Board
or Committee, (a) all Options outstanding on the date of such Change in Control
shall, for a period of sixty (60) days following such Change in Control, become
immediately and fully exercisable, and (b) an optionee will be permitted to
surrender for cancellation within sixty (60) days after such Change in Control
any Option or portion of an Option which was granted more than six (6) months
prior to the date of such surrender, to the extent not yet exercised, and to
receive a cash payment in an amount equal to the excess, if any, of the Fair
Market Value (on the date of surrender) of the shares of Common Stock subject to
the Option or portion thereof surrendered, over the aggregate purchase price for
such Shares under the Option.
1.7 NON-ALIENATION OF BENEFITS
Except as herein specifically provided, no right or unpaid
benefit under the Plan shall be subject to alienation, assignment, pledge or
charge and any attempt to alienate, assign, pledge or charge the same shall be
void. If any Participant or other person entitled to benefits hereunder should
attempt to alienate, assign, pledge or charge any benefit hereunder, then such
benefit shall, in the discretion of the Committee, cease.
1.8 WITHHOLDING OR DEDUCTION FOR TAXES
If, at any time, the Company or any Subsidiary or Affiliate is
required, under applicable laws and regulations, to withhold, or to make any
deduction for any taxes, or take any other action in connection with any Option
exercise, the Participant shall be required to pay to the Company or such
Subsidiary or Affiliate, the amount of any taxes required to be withheld, or, in
lieu thereof, at the option of the Company, the 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.
-3-
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 alter or impair any right theretofore granted to
any Participant.
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 Section 2.3(c) below,
to accelerate the date or dates as of which an
installment of an Option becomes exercisable.
c. Nothing contained in the Plan shall prohibit the
Company or any Subsidiary or Affiliate from
establishing other additional incentive compensation
arrangements for employees of the Company or such
Subsidiary or Affiliate.
d. Nothing in the Plan shall be deemed to limit, in any
way, the right of the Company or any Subsidiary or
Affiliate to terminate a Participant's employment with
the Company (or such Subsidiary or Affiliate) at any
time.
e. Any decision or action taken by the Board or the
Committee arising out of or in connection with the
construction, administration, interpretation and effect
of the Plan shall be conclusive and binding upon all
Participants and any person claiming under or through
any Participant.
f. No member of the Board or of the Committee shall be
liable for any act or action, whether of commission or
omission, (i) by such member except in circumstances
involving actual bad faith, nor (ii) by any other
member or by any officer, agent or employee.
1.11 COMPLIANCE WITH APPLICABLE LAW
Notwithstanding any other provision of the Plan, the Company
shall not be obligated to issue any shares of Common Stock, or grant any Option
with respect thereto, unless it is advised by counsel of its selection that it
may do so without violation of the applicable Federal and State laws pertaining
to the issuance of securities and the Company may require any stock certificate
so issued to bear a legend, may give its transfer agent instructions limiting
the transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.
1.12 EFFECTIVE DATES
The Plan was adopted by the Board on February 5, 1998 and
amended on July 30, 1998, November 5, 1998, February 6, 2002 and January 23,
2003. The Plan shall terminate on February 4, 2008.
SECTION 2. OPTION GRANTS
2.1 AUTHORITY OF COMMITTEE
Subject to the provisions of the Plan, the Committee shall have
the sole and complete authority to determine (i) the Participants to whom
Options shall be granted; (ii) the number of shares to be covered by each
Option; and (iii) the conditions and limitations, if any, in addition to those
set forth in Sections 2 and 3
-4-
hereof, applicable to the exercise of an Option, including without limitation,
the nature and duration of the restrictions, if any, to be imposed upon the sale
or other disposition of shares acquired upon exercise of an Option.
Stock Options granted under the Plan shall be non-qualified
stock options.
The Committee shall have the authority to grant Options.
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.
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 OPTION GRANTS
Each Option will be subject to the following provisions:
a. Term of Option
An Option will be for a term of not more than ten years
from the date of grant.
b. Exercise
(i) By an Employee:
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 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 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 or providing services to the
Company, any parent corporation of the Company or any
Subsidiary or Affiliate, except that, upon termination
of all such employment or provision of services (other
than by death, Total Disability, or by Total Disability
followed by death in the circumstances provided below),
the optionee may exercise an 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 such employment by Total
Disability, the optionee may exercise such Options at
any time within three years 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 or providing services to the Company, any
parent corporation of the Company or any Subsidiary or
Affiliate, or (ii) within three months after
termination of all such employment or provision of
-5-
services (other than for Total Disability) or (iii)
within three years after termination on account of
Total Disability of all such employment or provision of
services, such optionee's estate or any person who
acquires the right to exercise such option by bequest
or inheritance or by reason of the death of the
optionee may exercise such optionee's Option at any
time within the period of three years from the date of
death. In the case of clauses (i) and (iii) above, such
Option shall be exercisable in full for all the
remaining shares covered thereby, but in the case of
clause (ii) such Option shall be exercisable only to
the extent it was exercisable on the date of such
termination.
(ii) By Persons other than Employees:
If the optionee is not an employee of the Company or
the parent corporation of the Company or any Subsidiary
or Affiliate, expiration of such optionee's right to
exercise his Options shall be established and
determined by the Committee in the Option Agreement
covering the Options granted to such optionee.
Notwithstanding the foregoing provisions regarding the
exercise of an Option in the event of death, Total
Disability, other termination of employment or
provision of services or otherwise, in no event shall
an Option be exercisable in whole or in part after the
termination date provided in the Option Agreement.
c. Transferability
An Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of
descent and distribution, except as may be permitted by
the Board or the Committee.
2.4 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.
-6-