Exhibit 10.2
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement"), made and entered into as of July
18, 2006 ("the Effective Date"), by and between Griffon Corporation, a Delaware
corporation, with its principal office located at 000 Xxxxxxx Xxxxxxxxxx,
Xxxxxxx, Xxx Xxxx 00000 (hereinafter, together with its subsidiaries,
collectively referred to as "the Corporation") and Xxxxxxx Xxxxxx who resides at
000 Xxxxxxx Xxxx Xxxxx, Xxxxxxx, XX 00000 (hereinafter referred to as "the
Executive").
WITNESSETH:
WHEREAS, the Executive has had extensive experience in the business and
affairs of the Corporation and is a valuable member of the management team; and
WHEREAS, the Board of Directors of Griffon Corporation (the "Board")
has determined that it is appropriate to reinforce the continued attention of
certain key management employees, including the Executive, to their assigned
duties without distraction if the possibility should arise of a change in
control of the Corporation;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. During the term of this Agreement, the Executive agrees to
remain in the employ of the Corporation and to continue to perform the
Executive's regular duties as an executive of the Corporation.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a Change in Control of Corporation, as set forth below, and the
Executive's employment by Griffon Corporation shall thereafter have been
terminated in accordance with Section 3 hereof. For purposes of this Agreement,
a "Change in Control" shall mean the occurrence of any of the following events
after the date of this Agreement:
2.1 the acquisition, directly or indirectly, by a "person" (within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto (the "Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than 35% of the combined voting power of the voting securities of Griffon
Corporation entitled to vote generally in the election of directors (the "Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change in Control: (a) any acquisition by or from Griffon
Corporation or any corporation or other entity in which the Griffon Corporation
owns or controls directly or indirectly at least 50 percent of the total
combined voting power represented by all classes of stock issued by such
corporation, or in the case of a noncorporate entity, at least 50% of the
profits or capital interest in such entity (a "Subsidiary,") or by any employee
benefit plan (or related trust) sponsored or maintained by
Griffon Corporation or any Subsidiary, (b) any acquisition by an individual who
as of the effective date of the Plan is a member of the Board, (c) any
acquisition by any underwriter in any firm commitment underwriting of securities
to be issued by Griffon Corporation, or (d) any acquisition by any corporation
(or other entity) if, immediately following such acquisition, 65% or more of the
then outstanding shares of common stock (or other equity unit) of such
corporation (or other entity) and the combined voting power of the then
outstanding voting securities of such corporation (or other entity), are
beneficially owned, directly or indirectly, by all or substantially all of the
individuals or entities who, immediately prior to such acquisition, were the
beneficial owners of the then outstanding Voting Securities in substantially the
same proportions, respectively, as their ownership immediately prior to the
acquisition of the stock and Voting Securities; or
2.2 the following individuals cease for any reason to constitute a
majority of the Board: individuals who, as of the date of the this Agreement,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including, but not limited to, a consent solicitation relating to the
election of directors of Griffon Corporation) whose appointment or election by
the Board or nomination for election by the stockholders of Griffon Corporation
was approved and recommended by a vote of at least two-thirds of the directors
then still in office who either were directors on the effective date of the Plan
or whose appointment, election or nomination for election was previously so
approved or recommended; or
2.3 the consummation of the sale or other disposition of all
or substantially all of the assets of Griffon Corporation, other than to an
entity, at least 65% of the Voting Securities of which are owned by Persons in
substantially the same proportions as their ownership of Griffon Corporation
immediately prior to such sale; or
2.4 the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Corporation or
any of its Subsidiaries that requires the approval of the Corporation's
stockholders, whether for such transaction or the issuance of securities in the
transaction (a "Business Combination"), unless immediately following such
Business Combination: (i) more than 65% of the total voting power of (x) the
corporation resulting from such Business Combination (the "Surviving
Corporation"), or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by Voting Securities that were outstanding
immediately prior to such Business Combination (or, if applicable, is
represented by shares into which such Corporation Voting Securities were
converted pursuant to such Business Combination), and such voting power among
the holders thereof is in substantially the same proportion as the voting power
of such Voting Securities among the holders thereof immediately prior to the
Business Combination; or
2.5 the consummation of a plan of complete liquidation or substantial
dissolution of Griffon Corporation, other than a liquidation or substantial
dissolution, which
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would result in the Voting Securities of the entity after such liquidation or
dissolution, if any, continuing to represent (whether by remaining outstanding
or by being converted to voting securities of the surviving entity) 65% or more
of the Voting Securities or the voting power of the voting securities of such
surviving entity outstanding immediately after such liquidation or dissolution,
and such voting power among the holders thereof is in substantially the same
proportion as the voting power of such Voting Securities among the holders
thereof immediately prior to the such liquidation or dissolution; or
2.6 the sale, transfer, assignment, distribution or other disposition by
Griffon Corporation and/or one of its Subsidiaries, in one transaction, or in a
series of related transactions within any period of 18 consecutive calendar
months (including, without limitation, by means of the sale, transfer,
assignment, distribution or other disposition of the capital stock of any
Subsidiary or Subsidiaries), of assets which account for an aggregate of 50% or
more of the consolidated revenues of Griffon Corporation and the Subsidiaries of
Griffon Corporation, as applicable, as determined in accordance with U.S.
generally accepted accounting principles, for the fiscal year most recently
ended prior to the date of such transaction (or, in the case of a series of
transactions as described above, the first such transaction); provided, however,
that no such transaction shall be taken into account if substantially all the
proceeds thereof (whether in cash or in kind) are used after such transaction in
the ongoing conduct by Griffon Corporation and/or its Subsidiaries) of the
business conducted by Griffon Corporation and/or its Subsidiaries prior to such
transaction.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL. If any of the events
described in Section 2 hereof constituting a Change in Control of Griffon
Corporation shall have occurred, the Executive, if terminated during the twenty
four (24) months following such Change in Control, shall be entitled to the
benefits provided in Section 4 hereof, unless such termination is due to the
Executive's death or Disability, or is by Griffon Corporation for Cause, or is
by the Executive for other than Good Reason. In the event that, upon the
occurrence of a Change in Control, the Executive is eligible for retirement in
accordance with the terms and conditions of any applicable corporate retirement
plan or program in effect immediately preceding such Change in Control, the
Executive's eligibility for immediate retirement benefits, and any request
therefor, shall not preclude the Executive's receipt of severance benefits under
Section 4 hereof as a result of any termination without Cause or for Good
Reason. For purposes of this Agreement, the following definitions shall apply:
3.1 "Cause" shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties (other than any such
failure resulting from incapacity due to physical or mental illness); or (ii)
conviction of a felony or acts of dishonesty resulting in gain or personal
enrichment at the expense of the Corporation; or (iii) the Executive's willful
misconduct or insubordination which is materially injurious to the Corporation.
With respect to (i) and (iii) "Cause" shall only be determined to exist until
Griffon Corporation presents written notice to the Executive specifically
identifying the alleged circumstances or actions giving rise to Cause (a "Cause
Notice"), and the Executive fails to correct such action or circumstances within
20 days of receiving the Cause Notice. For purposes
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of this paragraph, no act or failure to act on the Executive's part shall be
considered as willful unless done, or omitted to be done, by the Executive not
in good faith and without reasonable belief that the action or omission was in
the best interests of the Corporation.
3.2 "Disability" shall mean the illness or other mental or physical
disability of the Executive, as determined by a physician reasonably acceptable
to the Corporation and the Executive, resulting in the Executive's failure to
perform substantially all of his applicable material duties for a period of six
consecutive months and to return to the performance of such duties within 30
days after receiving written notice of termination.
3.3 "Good Reason" shall mean (i) reduction in the Executive's (then)
current base salary immediately preceding the Change in Control; (ii)
diminution, reduction or other adverse change in the annual bonus opportunity or
other incentive compensation opportunities available to the Executive
immediately preceding the Change in Control; (iii) the Corporation's failure to
pay the Executive any amounts otherwise earned, vested or due under any
compensation plan or human resources policy of the Corporation immediately
preceding the Change in Control; (iv) diminution of the Executive's title,
position, authority or responsibility; (v) assignment to the Executive of duties
incompatible with the position occupied by the Executive immediately preceding
the Change in Control; (vi) a change in the organizational position to which the
Executive directly reports; or (vii) relocation of the Executive's position to a
location more than 35 miles from the location to which the Executive was
assigned immediately preceding the Change in Control.
4. CERTAIN SEVERANCE BENEFITS ON TERMINATION. If, after any Change in
Control (as defined herein) shall have occurred, the Executive's employment
shall be terminated during the twenty-four (24) months following the date of
such Change in Control (i) by the Corporation other than for death, Disability
or Cause or (ii) by the Executive for Good Reason, the Executive shall be
entitled to certain severance benefits (hereinafter "the Severance Benefits") as
provided below:
4.1 The Corporation shall pay the Executive's full base salary through the
date of termination at the rate which is the higher of the (then) current annual
rate or the annual rate in effect immediately prior to the date of any Change in
Control. The Corporation shall also pay the Executive the amount, if any, of any
unpaid earned annual bonus for the preceding fiscal year, as well as a pro rata
portion of the higher of (i) the earned annual bonus for the preceding fiscal
year or (ii) the target or projected annual bonus for the fiscal year in which
the termination of employment occurs. In addition, the Corporation shall
continue in full force and effect through the date of termination the
Executive's participation in all stock ownership, stock purchase or stock option
plans, all health and welfare benefit plans, and all insurance and disability
plans as may be in effect at the date of the Change in Control.
4.2 Subject to Section 4.4 and 4.5 hereof, the Corporation shall pay as
Severance Benefits to the Executive on or before the fifth (5th) day following
the date of termination of employment, a lump sum payment ("the lump sum
payment") equal to two and fifty one hundredths (2.50) times the sum of (i) the
Executive's base salary at the rate which is
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the higher of the (then) current annual rate or the annual rate in effect
immediately prior to the date of any Change in Control and (ii) the average of
the annual bonuses received by the Executive for each of the last three fiscal
years of the Corporation. Such lump sum payment shall be subject to all
applicable Federal, state and local income and FICA taxes including all required
withholding amounts.
4.3 For the continued benefit of the Executive and the Executive's
eligible dependents, the Corporation shall maintain in full force and effect
until the earlier of (i) December 31 of the second calendar year following the
calendar year of termination or (ii) the Executive's commencement of full-time
employment with a new employer, at the same cost as is paid by
similarly-situated continuing employees all medical and health plans and
programs for which the Executive was eligible immediately prior to the date of
termination, provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs, and subject
further to such periodic changes in such plans and programs as are generally
applicable to all participants in such plans and programs. The Executive will be
responsible for any income tax liability arising out of any continued
participation in such health and medical plans and programs, and notwithstanding
the provision of this Section 4.3, no additional employment service credits
shall be given for the period of such continued participation.
4.4 The Severance Benefits to be provided to the Executive hereunder
and all other payments or benefits which are "parachute payments" (as defined in
Section 280(G)(b)(2)(A) of the Code) payable to the Executive under other
arrangements or agreements (the "Total Payments") shall be adjusted as set forth
in this Section 4.4. If the Total Payments as a result of any Change in Control
would (in the aggregate) result in an amount not being deductible under Code
Section 280G or an excise tax under Section 4999, the Total Payments shall be
reduced to the extent necessary so that the deductibility of the full amount of
such reduced Total Payments is not limited by Code Section 280G or such Total
Payment is not subject to an excise tax under Section 4999.
4.5 Notwithstanding anything herein to the contrary, if any payments
due under this Agreement would subject Executive to any tax imposed under
Section 409A of the "Code" if such payments were made at the time otherwise
provided herein, then the payments that cause such taxation shall be payable in
a single lump sum on the first day which is at least six months after the date
of the Executive's "separation of service" as set forth in Code Section 409A and
the regulations issued thereunder.
4.6 The Executive shall not be required to mitigate or offset the amount
of any Severance Benefits or other benefits provided under this Section 4 by
seeking employment or otherwise, nor shall the amount of any payment provided
under this Section 4 be reduced by any compensation earned by the Executive as
the result of employment by another employer after the date of termination from
the Corporation.
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5. RESTRICTIVE COVENANTS.
5.1 Executive agrees at all times during Executive's employment with the
Corporation and at all times thereafter (except as otherwise required by
applicable law, regulation or legal process) that Executive shall hold in
strictest confidence and not to use for his own benefit or the benefit of any
other person, or to disclose to any person without authorization from the
Corporation, any Confidential Information. "Confidential Information" means any
and all confidential or proprietary business information of the Corporation or
its affiliates, including, without limitation, information relating to the
Corporation's or its affiliates' trade secrets, software and technology
architecture, networks, business methodologies, facilities, financial and
operational information, contracts, customer lists, marketing or sales prospect
lists, "know how", and all copies, reproductions, notes, analyses, compilations,
studies, interpretations, summaries and other documents in connection with the
foregoing. Confidential Information does not include any information which (i)
is or becomes publicly known or available other than as a result of wrongful
disclosure by Executive, (ii) becomes available to Executive on a
non-confidential basis from a source which, to Executive's knowledge, is not
prohibited from disclosing such Confidential Information to Executive, or (iii)
is generally known in the industry in which the Corporation or its affiliates
operate and pertains to activities or business not specific to the Corporation
or its affiliates.
5.2 From the Effective Date through the date that is twenty-four (24)
months following the Executive's termination of employment (the "Restriction
Period"), Executive will not, without the prior written consent of the Board,
engage in "Competition" (as defined below) with the Corporation. For purposes of
this Agreement, if Executive takes any of the following actions Executive will
be engaged in "Competition": if Executive is engaging in or carrying on,
directly or indirectly, any enterprise, whether as an advisor, principal, agent,
partner, officer, director, employee, stockholder, associate or consultant to
any person, partnership, corporation or any other business entity, that is
engaged in a business that is a competitive with any material business that the
Corporation is engaged in at the time of the Executive's termination of
employment. Notwithstanding anything herein to the contrary, "Competition" will
not include the ownership of less than a one percent equity interest in a
publicly held company and exercise of rights appurtenant thereto.
5.3 If a court or arbitrator holds that the duration, scope, area or
other restrictions stated herein are unreasonable under circumstances then
existing, the Corporation, and Executive agree that the maximum duration, scope,
area or other restrictions reasonable under such circumstances will be
substituted for the stated duration, scope, area or other restrictions.
5.4 The existence of any claim or cause of action of Executive against
the Corporation, whether or not predicated upon the terms of this Agreement,
will not constitute a defense to the enforcement of the provisions of this
Section 5.
5.5 The parties acknowledge that any violation of this Section 5 can
cause substantial and irreparable harm to the Corporation. Therefore, the
Corporation will be entitled to pursue any and all legal and equitable remedies,
including but not limited to any injunctions.
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6. PROPRIETARY INFORMATION. Upon termination, except to the extent required
to render services to or on behalf of the Corporation, Executive will deliver to
the Corporation any documents, files, copies which constitute Proprietary
Information (whether in written, printed, electronic or other form).
"Proprietary Information" means all information or data with respect to the
conduct or details of the businesses of the Corporation, and its affiliates
(whether constituting a trade secret or not) including, without limitation,
methods of operation, customers and customer lists, supplier lists, sales data,
details of contracts with customers, consultants, suppliers or employees,
products, proposed products, former products, proposed, pending or completed
acquisitions of any company, division, product line or other business unit,
prices and pricing policies, fees, costs, plans, designs, technology,
inventions, trade secrets, know how, software, marketing methods, policies,
plans, personnel, suppliers, competitors, markets or other specialized
information or proprietary matters of the Corporation or any of its affiliates.
7. TERM OF AGREEMENT. This Agreement shall have an original term expiring
on the second anniversary of Effective Date, and shall thereafter be
automatically renewed for successive one-year terms unless the Corporation has
notified the Executive of its election not to renew the term of this Agreement
not less than 120 days before the expiration of the (then) current term.
Notwithstanding anything in this Agreement to the contrary, this Agreement shall
not terminate in the event that a Change in Control (as defined herein) shall
have occurred.
8. SUCCESSORS; BINDING AGREEMENT. The Corporation shall require any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all or substantially all of the business, equity and/or assets of
the Corporation to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Corporation would be required to
perform if no such succession had taken place. Failure of the Corporation to
obtain such agreement prior to the effective date of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Corporation in the same amount and on the same terms as that which the
Executive would be entitled to hereunder as if the Executive's employment by the
Corporation were immediately terminated without Cause or for Good Reason. As
referred to in this Agreement, "Corporation" shall mean the Corporation as
herein defined and any successor to its business, equity and/or assets which
becomes bound by the terms and conditions of this Agreement by operation of law.
This Agreement shall inure to the benefit and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amount would still be payable hereunder, all such amounts shall be paid in
accordance with the terms of this Agreement to the Executive's estate.
9. NOTICES. Any and all notices which may be given hereunder by either
party to the other shall be sufficient if in writing and sent by registered mail
to the respective party at its or their last known address.
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10. MODIFICATIONS AND WAIVERS; ENTIRE AGREEMENT. No agreements or
representations, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. No provisions of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in writing signed by
the Executive and the Chief Executive Officer of the Corporation. No waiver by
either party hereto at any time of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or any prior or subsequent time. This Agreement shall not supercede or
in any way limit the rights, duties or obligations the Executive may have under
any other written agreement with the Corporation including, without limitation,
any employment agreement now in effect or subsequently entered into by and
between the Executive and the Corporation.
11. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York without
reference to principles of conflict of laws thereof.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
13. DISPUTES. Any dispute or controversy arising under, our of or in
connection with this Agreement may be resolved in any court of competent
jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as the
day and year first written above.
GRIFFON CORPORATION:
By: /s/Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx
Chairman and Chief Executive Officer
EXECUTIVE:
Signature: /s/Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
WITNESS:
Signature:/s/Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
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