Exhibit 10.3
GRIFFON CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Amended and Restated as of July 18, 2006)
Effective Date: October 1, 1996
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS......................................................1
ARTICLE II VESTING..........................................................4
ARTICLE III TIMING AND PAYMENT OF BENEFITS...................................5
ARTICLE IV AMOUNT OF RETIREMENT BENEFIT.....................................7
ARTICLE V DEATH BENEFITS...................................................9
ARTICLE VI MISCELLANEOUS...................................................10
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ARTICLE I
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Definitions
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1.1 "Average Base Sa1ary" and "Average Bonus/Incentive Compensation" mean
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the average of the Participant's Base Salary and the Participant's
Bonus/Incentive Compensation during the three (3) calendar years (or portions
thereof) of such Participant's employment with the Employer (or actual calendar
years (or portions thereof) of such employment if less than three), falling
within the last ten (10) calendar years (or portions thereof) of such
Participant's employment with the Employer (or actual calendar years (or
portions thereof) of such employment if less than ten), in which such Base
Salary and Bonus/Incentive Compensation is highest; provided, however, that, in
the event that a Participant's Employment with the Employer terminates after
such Participant's Normal Retirement Date, such Participant's Average Base
Salary and Average Bonus Incentive Compensation for purposes of determining his
benefit shall not be less than it would have been if such Participant had
retired on his Normal Retirement Date, and further provided that for purposes of
computing Average Base Salary and Average Bonus/Incentive Compensation the
amounts paid to the Participant while employed by the Employer for periods prior
to January 1, 1994, shall be disregarded.
1.2 "Base Salary" and "Bonus/Incentive Compensation" mean the total amount
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of (i) salary (reflect ing cost of living and other salary adjustments) and (ii)
bonus and incentive compensation paid by the Employer to the Participant in
respect of services rendered by such Participant during a calendar year (or
portion thereof), and shall include any such amounts that (a) were deferred by
the Participant under a qualified plan described in Sections 401(a) and 401(k)
of the Code or (b) would have been paid by the Employer to such Participant in
respect of services rendered during such calendar year (or portion thereof) but
for an
arrangement under a nonqualified plan applicable to such amounts that results in
the deferred recognition of such amounts for Federal income tax purposes. In the
event that a Participant's employment with the Employer terminates within a
calendar year and, as of the date of such termination, such Participant has
completed at least six (6) months of Service within such calendar year, such
Participant's Base Salary and Bonus/Incentive Compensation for such year of
termination shall be calculated by annualizing the Participant's salary, bonus
and incentive compensation for such year of termination.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
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1.4 "Committee" means the Board of Directors of the Employer (the "Board"),
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or such group of individuals (who may or may not be directors, officers or
employees of the Employer) as may be designated by such Board for this purpose.
1.5 "Early Retirement Date" means the first day of the first month
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following the month in which the Participant attains age fifty-five (55), or any
date thereafter before the Participant's Normal Retirement Date, but only if
such Participant's right to receive a benefit under the Plan is vested on such
date.
1.6 "Effective Date" means October 1, 1996.
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1.7 "Employer" means Griffon Corporation, a Delaware corporation, and any
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successor entity thereto. Prior to March 6, 1995, "Employer" means Instrument
Systems Corporation. Solely for purposes of calculating the Participant's Base
Salary, Bonus/Incentive Compensation, and Service, such term shall also include
any business entity which is an affiliate of the Employer and any successor
entity thereto. Determinations as to whether an entity is an affiliate or
successor entity for purposes of this Agreement shall be made by the Committee
in its sole discretion.
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1.8 "Normal Retirement Date" means the first day of the month coincident
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with or next following the date on which the Participant attains age seventy-two
(72), but only if such Participant's right to receive a benefit under the Plan
is vested on such date; otherwise, the first date thereafter on which such
Participant's right to receive a benefit is vested.
1.9 "Participant" means those officers and former officers of the Employer
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who, while employed by the Employer, have been selected by the Committee to
participate in the Plan and have been so notified in writing.
1.10 "Plan" means this Griffon Corporation Supplemental Executive
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Retirement Plan, as may be amended from time to time.
1.11 "Present Value" means, with respect to an annual benefit, the present
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value of such benefit as determined on the basis of (i) the RP-2000 Combined
Healthy (White Collar) Male Mortality Table mortality assumptions and (ii) a
discount rate equal to the annualized yield (adjusted for constant maturity) on
ten-year U.S. Treasury notes, as reported by the Federal Reserve Board and
reprinted in the Wall Street Journal (or, if not so reprinted, as reprinted in
another publication or in a release of the Federal Reserve Board), for the most
recent week ended prior to the week in which the determination of present value
is made.
1.12 "Service" means the number of years and completed months between the
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Participant's date of hire by the Employer and the termination, for whatever
reason, of his employment with the Employer. If, following such a termination,
the Participant is again hired by the Employer, Service shall be computed by
taking into account the duration of each period of employment of the Participant
by the Employer, computed on the same basis as described in the immediately
preceding sentence.
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1.13 "Surviving Spouse" means the spouse of a Participant who is legally
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married to the Participant on the date of the Participant's death.
ARTICLE II
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Vesting
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2.1 A Participant's right to receive a benefit under this Plan shall be
vested only if such Participant's employment with the Employer terminates on or
after the date the Participant has accumulated twenty (20) years of Service and
participated in the Plan for one (1) year. In determining the period of
participation for purposes of the preceding sentence, the individuals designated
as Participants on or before the Effective Date shall be deemed to have begun to
participate in the Plan on January 1, 1996. The portion of the Participant's
benefit which shall have vested (once the requirements described in the first
sentence of this Section have been met) shall be computed at the time of the
Participant's termination of employment by reference to the sum of the
Participant's age (rounded to the nearest whole year) and completed years of
Service, under the following schedule:
Age plus Service Vesting Percentage
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at least 75, but less than 77 50%
at least 77, but less than 79 60%
at least 79, but less than 81 70%
at least 81, but less than 83 80%
at least 83, but less than 85 90%
85 or more 100%
2.2 To the extent that a Participant's benefit is not vested as of the date
that such Participant's employment with the Employer terminates, neither such
Participant nor such Participant's Surviving Spouse, named beneficiary or
estate, if any, shall be entitled to receive the unvested portion of such
benefit under this Plan.
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2.3 Notwithstanding Sections 2.1 and 2.2, a Participant's right to receive
a benefit hereunder shall become fully vested upon a "Change of Control" as
defined in Section 2.4. The preceding sentence shall also apply if a
Participant's employment is terminated during a period beginning 30 days before
a Change of Control.
2.4 A "Change of Control" shall mean either or both of the following:
(a) if any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act")) other than the
Employer or any "person" who on the date of this Agreement is a director or
officer of the Employer, becomes the "beneficial owner" (as defined in Rule
13(d)-3 under the Exchange Act), directly or indirectly, of securities of the
Employer representing thirty-five (35%) percent of the voting power of the
Employer's then outstanding securities; or
(b) if, during any period of two (2) consecutive years during the term
of this Plan, individuals who at the beginning of such period and any new
director whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of any such period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority of the Board.
ARTICLE III
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Timing and Payment of Benefits
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3.1 Except as otherwise provided in this Article, the payment of a benefit
to a Participant after such Participant's retirement from the Employer or after
the termination of such Participant's employment with the Employer shall
commence (i) on the first day of the first month following the month in which
the Participant attains age fifty-five (55), if the Participant's
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employment by the Employer terminates before such day and such Participant's
right to receive a benefit under the Plan is vested on the date of such
termination; (ii) if applicable, on such Participant's Early Retirement Date; or
(iii) on the first day of the first month following the later of such
Participant's Normal Retirement Date or such retirement, if the Participant
retires on or after his Normal Retirement Date. Notwithstanding the foregoing,
if the Participant is a "specified employee" within the meaning of Section 409A
of the Code for the period in which payments would otherwise commence, and such
payments would otherwise subject the Participant to any tax, interest or penalty
imposed under Section 409A(a)(1)(B) of the Code (or any regulation or any
guidance promulgated thereunder or with respect to) if the payment or benefit
would commence within six months of a termination of the Participant's
employment, then such payments shall not commence until the first day which is
at least six months after the date on which the Participant's employment
terminates. All payments, which would have otherwise been required to be made to
the Participant over such six month period, shall be paid to the Participant in
one lump sum payment, as soon as administratively feasible after the first day
which is at least six months after the date on which the Participant's
employment terminates. Thereafter, payments shall continue as so provided in
this Section 3.1.
3.2 In the case of a vested Participant who dies, a death benefit, if any,
shall commence and be payable in accordance with the provisions of Article V
hereof.
3.3 If a Change of Control occurs while a Participant is employed by the
Employer (or if the Participant was employed by the Employer thirty days before,
the Change of Control, then, notwithstanding any other provision of this Plan to
the contrary, the Present Value of a benefit computed in the manner described in
Article IV shall be paid to such Participant in a lump sum within thirty days
after such Change of Control (or, if later January 2, 2007), in lieu of
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any annual benefit otherwise payable under this Plan. If the date of such Change
of Control precedes the Participant's Normal Retirement Date, the benefit
referred to in the preceding sentence shall be computed in the manner described
in Section 4.2 as if the date of the Change of Control were the Participant's
Early Retirement Date (regardless of whether the Change of Control occurs on or
before his Early Retirement Date).
3.4 In the case of a Participant whose employment by the Employer
terminates more than thirty days before a Change of Control, then,
notwithstanding any other provision of this Plan to the contrary, the Present
Value of any benefit under this Plan that is payable after such Change of
Control with respect to such Participant shall be paid to or in respect of such
Participant in a lump sum within thirty days after such Change of Control, in
lieu of any benefit otherwise payable under this Plan after such Change of
Control.
ARTICLE IV
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Amount of Retirement Benefit
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4.1 Upon the termination of a Participant's employment with the Employer on
or after such Participant's Normal Retirement Date, the Participant shall be
eligible to receive an annual gross retirement benefit (subject to Section 2.1,
and as adjusted in the manner provided in Section 4.3, if applicable) equal to
the sum of:
(a) one quarter of one percent (0.25%) of the Average Base Salary
multiplied by such completed years of Service, and
(b) one and one-half percent (1.5%) of the Participant's Average
Bonus/Incentive Compensation by such Participant's completed years of Services;
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provided, however, that for purposes of computing the annual gross retirement
benefit the maximum number of the Participant's years of Service that shall be
taken into account is thirty (30).
4.2 Upon the termination of a Participant's employment with the Employer on
his Early Retirement Date, the Participant shall be eligible to receive an
annual gross retirement benefit, based on such Participant's Average Base Salary
and Average Bonus/Incentive Compensation as of his Early Retirement Date and
calculated in the same manner as the normal retirement benefit described in
Section 4.1 hereof (with Service projected, for purposes of Section 4.1 only, to
the date that would have been such Participant's Normal Retirement Date if such
Participant had continued to work for the Employer), but reduced by the product
of (i) such annual benefit, (ii) two percent (2%), and (iii) the number of full
years by which the Participant's Early Retirement Date precedes the date that
would have been the Participant's Normal Retirement Date if the Participant had
continued to work for the Employer. (For example: If a fully vested
Participant's annual benefit upon retirement, based on Service projected to his
Normal Retirement Date, would be $10,000, and the Participant retires two years
before such Participant's Normal Retirement Date, the annual benefit would be
$10,000 - ($10,000 x .02 x 2), or $9,600.)
4.3 In the event that a Participant's employment with the Employer
terminates on or after the first anniversary of such Participant's Normal
Retirement Date, the benefit payable to the Participant shall be the greater of
(a) the benefit determined under Section 4.1 as of the Participant's date of
termination and (b) the benefit determined under Section 4.1 as of the
Participant's Normal Retirement Date, provided that the amount determined under
clauses (a) and (b) shall be increased by the product of (i) such annual
benefit, (ii) two percent (2%), and
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(iii) the number of full years by which the Participant's Normal Retirement Date
precedes the date of such Participant's termination of employment with the
Employer (with the increase being calculated in the same manner as the reduction
under Section 4.2). (For example: If the amount computed with respect to a fully
vested Participant as the greater of clauses (a) and (b) above is $10,000, and
the Participant retires two years after such Participant's Normal Retirement
Date, the annual benefit would be $10,000 + ($10,000 x .02 x 2), or $10,400.)
4.4 Upon the termination of a Participant's employment with the Employer
prior to his Early Retirement Date but after becoming vested, the Participant
shall be eligible to receive an annual gross retirement benefit, commencing on
the first day of the first month following the month in which the Participant
attains age fifty-five (55), based on such Participant's Average Base Salary and
Average Bonus/Incentive Compensation as of such Participant's date of
termination and calculated in the same manner as the normal retirement benefit
described in Section 4.1 hereof, reduced in the manner described in Section 4.2
(with the reduction being computed by reference to the number of full years by
which the commencement of payment of the benefit precedes what would have been
the Participant's Normal Retirement Date if the Participant had continued to
work for the Employer).
4.5 Any benefit otherwise payable under this Article IV shall be reduced by
any benefit payable to the Participant under (i) any defined benefit retirement
plan that is qualified under Section 401(a) of the Code and sponsored by the
Employer and (ii) any Social Security benefit attributable to the employment of
the Participant.
4.6 One-twelfth (1/12) of the applicable annual benefit determined under
this Article IV shall be paid each month, beginning on the Participant's
applicable benefit
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commencement date as determined under Article III hereof, and, subject to
Section 5.2, shall continue so long as such Participant shall live.
ARTICLE V
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Death Benefits
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5.1 In the event that a vested Participant dies while an active employee of
the Employer, then, upon the death of such Participant, a benefit shall be
payable to such Participant's Surviving Spouse, named beneficiary or estate,
computed in the manner provided in Article IV. If the date of death precedes the
Participant's Normal Retirement Date, the benefit shall be computed in the
manner described in Section 4.2 as if the date of death were the Participant's
Early Retirement Date (regardless of whether the Participant dies on or before
his Early Retirement Date); if such Participant dies at least one year after the
Participant's Normal Retirement Date, the benefit shall be computed in
accordance with Section 4.3. Such benefit shall be payable for a period of ten
(10) years beginning as soon as practicable after the death of the Participant;
provided, however, that the Committee may determine in its sole discretion, by
reason of financial hardship of the Surviving Spouse or other beneficiary, to
pay the Present Value of such benefit in a lump sum as soon as practicable after
the death of the Participant (in lieu of payment over a ten-year period).
5.2 In the event that a vested Participant dies after the termination of
the Participant's employment by the Employer, but before benefit payments to the
Participant under this Plan have been paid for a period of ten (10) years, the
benefit otherwise payable to the Participant under Article IV shall be paid to
the Participant's Surviving Spouse, named beneficiary or estate, beginning as
soon as practicable after the death of the Participant, for a
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period equal to ten (10) years minus the duration of the period over which
benefits were paid to the Participant.
ARTICLE VI
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Miscellaneous
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6.1 Nothing contained herein shall confer upon any Participant the right to
be retained in the service of the Employer, nor will it interfere with the right
of the Employer to discharge or otherwise deal with any Participant without
regard to the existence of this Plan.
6.2 (a) The Employer shall establish and make contributions to a trust (the
"Trust") in such amounts as are determined by the Committee to be necessary to
provide for the payment to the Participants of the benefits provided for
hereunder. The Trust is intended to be a grantor trust, of which the Employer is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Code, and shall be construed accordingly.
(b) In the event of a Change of Control as defined in Section 2.4 or
upon a change in "control," as such term is presently defined in Regulation 240.
12b-2 under the Exchange Act, with respect to the Employer, then the Employer
shall within ten (10) days after either such event make such contributions to
the Trust as are necessary to cause the Trust to have sufficient funds to pay
all benefits then accrued under the Plan, to the extent such benefits have not
already been paid, in the manner provided for in Articles III through V.
(c) A Participant shall have no preferred claim on, or any beneficial
interest in, any assets of the Trust. Any rights created under this Plan with
respect to a Participant shall be mere unsecured contractual rights of the
Participant against the Employer. Any assets held by the Trust shall be subject
to the claims of general creditors of the Employer under federal and state law
in the event of "insolvency," i.e., that the Employer is unable to pay
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its debts as they become due or is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
(d) It is intended that this Plan be an unfunded arrangement for the
purposes of providing deferred compensation for a select group of management or
highly compensated employees for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974.
6.3 Except as otherwise provided by applicable law, no benefits payable
under this Plan shall be assignable (either at law or in equity) or subject in
any manner to alienation, sale, transfer, claims of creditors, pledge,
attachment, garnishment, levy, execution or encumbrances of any kind.
6.4 This Plan shall be administered by the Committee, which may adopt such
rules and regulations as the Committee, in its sole discretion, believes to be
necessary to assist it in such administration. The Committee shall interpret the
Plan and shall have sole authority and discretion to determine all questions
arising in the administration, interpretation and application of the Plan, and
all such determinations by the Committee shall be conclusive and binding on all
persons. The Committee may employ or engage accountants, legal counsel,
actuaries, custodians, agents or other persons to render advice or perform
ministerial duties with regard to any responsibility or duty which the Committee
has under the Plan.
6.5 The claim of any person (hereinafter referred to as the "Claimant")
with respect to any benefits to which such Claimant may be entitled under the
Plan shall be considered in accordance with the following procedure:
(a) Claimant may make written application to the Committee for benefits
to which the Claimant believes he is entitled, at the time the application is
made, under
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the Plan. Such application shall set forth all information necessary to
determine whether the claim should be approved or denied.
(b) The Committee shall either approve the claim and take any
appropriate action, or deny the claim. Such approval or denial shall be
accomplished within an initial period of thirty days after receipt of the claim
by the Committee unless special circumstances require an extension of time for
processing the claim. If such an extension is required, written notice of the
extension shall be furnished to the Claimant prior to the termination of the
initial thirty-day period. Any such extension shall expire no later than thirty
days after the end of the initial period. The extension notice shall describe
the special circumstances requiring the extension of time and the expected date
of decision.
(c) If a claim is denied, the Committee shall furnish a written
notice of such action to the Claimant within the applicable time limit described
in paragraph (b). Such notice shall include specific reasons for the denial of
the claim.
(d) A Claimant whose claim has been denied (or to whom no written
notice of denial has been furnished within the applicable time limit described
in paragraph (b)) may appeal by written notice to the Committee requesting a
review of the denial. The Claimant must submit such request for review to the
Committee within thirty days after the Claimant's receipt of the notice of the
denial.
(e) The Committee shall render the decision on review within an initial
period of thirty days after receipt of the Claimant's written request for
review, unless special circumstances require an extension of time. Any such
extension shall expire no later than thirty days after the end of the initial
period. If such an extension is required, written notice
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thereof shall be furnished to the Claimant before the end of the initial period.
The decision on review shall be in writing and shall include specific reasons
for the decision.
(f) Any claim, request for review or other action which may be
made or taken by the Claimant under this Section may be made or taken by the
Claimant's duly authorized representative.
6.6 The singular, where appearing in this Plan, may include the plural and
the masculine gender, where appearing in this Plan, may include the feminine
gender, unless the context clearly indicates the contrary.
6.7 The section headings used in this Plan are placed herein for
convenience of reference only and, in case of any conflict, the text of this
Plan rather than such headings shall control.
6.8 This Plan is established under and will be construed according to the
laws of the State of New York, except that state's laws as to choice of law.
6.9 This Plan may be amended or terminated by the Employer at any time;
provided, however, that no such amendment or termination shall diminish any
rights of a Participant or other person to whom amounts are payable pursuant to
Articles III through V to receive payments under the Plan as of the day
immediately prior to the date of such amendment or termination. In the event of
any termination of the Plan, distributions of benefits payable hereunder shall
comply with Section 409A of the Code and the regulations thereunder.
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