EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT  AGREEMENT (this "Agreement"),  made and entered into as of July

1, 2001, by and between Griffon Corporation,  a Delaware  corporation,  with its

principal office located at 100 Jericho Quadrangle, Jericho, New York 11753-2794

(together  with its  successors  and  assigns  permitted  under this  Agreement,

"Griffon") and Harvey R. Blau ("Blau"),  amends and restates in its entirety the

Employment Agreement made and entered into as of October 1, 1998 between Griffon

and Blau (the "Prior Agreement").

 

                                  WITNESSETH:

 

     WHEREAS, Griffon has determined that it is in the best interests of Griffon

and its  stockholders  to  continue  to  employ  Blau  and to set  forth in this

Agreement the obligations and duties of both Griffon and Blau; and

 

     WHEREAS,  Griffon  wishes to assure  itself of the services of Blau for the

period hereinafter  provided,  and Blau is willing to be employed by Griffon for

said period, upon the terms and conditions provided in this Agreement;

 

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants

contained herein and for other good and valuable  consideration,  the receipt of

which is mutually  acknowledged,  Griffon and Blau  (individually  a "Party" and

together the "Parties" ) agree as follows:

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     1. DEFINITIONS.

 

     (a)  "Beneficiary"  shall mean the person or persons named by Blau pursuant

to Section 17 below or, in the event that no such  person is named who  survives

Blau, his estate.

 

     (b) "Board" shall mean the Board of Directors of Griffon.

 

     (c) "Cause" shall mean:

 

     (i) Blau's conviction of a felony involving an act or acts of dishonesty on

his part and resulting in gain or personal enrichment at the expense of Griffon;

 

     (ii) willful and continued failure of Blau to perform his obligations under

this Agreement, resulting in demonstrable material economic harm to Griffon, or

 

     (iii) a willful and material  breach by Blau of the  provisions of Sections

14 or 15 below to the demonstrable and material detriment of Griffon.

 

     Notwithstanding the foregoing,  in no event shall Blau's failure to perform

the  duties  associated  with his  position  caused by his  mental  or  physical

disability constitute Cause for his termination.

 

     For purposes of this Section  1(c), no act or failure to act on the part of

Blau shall be considered  "willful" unless it is done, or omitted to be done, by

him in bad faith or without reasonable belief that his action or omission was in

the best  interests of Griffon.  Any act or failure to act based upon  authority

given pursuant to a resolution  adopted by the Board or based upon the advice of

counsel for Griffon shall be conclusively  presumed to be done, or omitted to be

done, by Blau in good faith and in the best interests of Griffon.

 

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     (d) "Change in Control"  shall mean the  occurrence of any of the following

events:

 

     (i) the acquisition by any individual,  entity or group (within the meaning

of Section  13(d)(3)  or  14(d)(2)  of the  Securities  Exchange  Act of 1934 as

amended (the "Exchange  Act") (a "Person") of beneficial  ownership  (within the

meaning of Rule 13d-3  promulgated  under the Exchange Act) of voting securities

of Griffon  when such  acquisition  causes  such Person to  beneficially  own 20

percent or more of the  combined  voting  power of the then  outstanding  voting

securities  of Griffon  entitled to vote  generally in the election of directors

(the  "Outstanding  Griffon Voting  Securities");  provided,  however,  that for

purposes of this subsection (i), the following  acquisitions shall not be deemed

to result in a Change of Control: (A) any acquisition directly from Griffon, (B)

any acquisition by Griffon, (C) any acquisition by any employee benefit plan (or

related trust) sponsored or maintained by Griffon or any corporation  controlled

by Griffon or (D) any acquisition  pursuant to a transaction  that complies with

clauses (A), (B) and (C) of subsection (iii) below; and provided,  further, that

if  any  Person's  beneficial   ownership  of  the  Outstanding  Griffon  Voting

Securities reaches or exceeds 20 percent as a result of a transaction  described

in clause (A) or (B) above,  and such Person  subsequently  acquires  beneficial

ownership  of  additional   voting   securities  of  Griffon,   such  subsequent

acquisition  shall be treated  as an  acquisition  that  causes  such  Person to

beneficially  own  20  percent  or  more  of  the  Outstanding   Griffon  Voting

Securities; or

 

     (ii)  individuals  who, as of the date  hereof,  constitute  the Board (the

"Incumbent Board") cease for any reason to constitute at least a majority of the

Board; provided,  however, that any individual becoming a director subsequent to

 

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the date  hereof  whose  election,  or  nomination  for  election  by  Griffon's

stockholders,  was  approved by a vote of at least a majority  of the  directors

then  comprising  the  Incumbent  Board  shall  be  considered  as  though  such

individual were a member of the Incumbent  Board, but excluding for this purpose

any such individual whose initial  assumption of office occurs as a result of an

actual or threatened election contest with respect to the election or removal of

directors or other actual or threatened  solicitation  of proxies or consents by

or on behalf of a Person other than the Board; or

 

     (iii) consummation of a reorganization,  merger or consolidation or sale or

other  disposition  of all or  subsequently  all of the assets of Griffon or the

acquisition of assets of another  entity  ("Business  Combination");  excluding,

however,  such a Business Combination pursuant to which (A) all or substantially

all of the  individuals  and  entities  who were the  beneficial  owners  of the

Outstanding  Griffon  Voting  Securities  immediately  prior  to  such  Business

Combination  beneficially own, directly or indirectly,  more than 60 percent of,

respectively,  the then  outstanding  shares  of common  stock and the  combined

voting  power  of the  then  outstanding  voting  securities  entitled  to  vote

generally in the election of directors,  as the case may be, of the  corporation

resulting from such Business  Combination in substantially  the same proportions

as their  ownership,  immediately  prior  to such  Business  Combination  of the

Outstanding  Griffon Voting  Securities,  (B) no Person  (excluding any employee

benefit plan (or related  trust) of Griffon or such  corporation  resulting from

such Business Combination) beneficially owns, directly or indirectly, 20 percent

or more of,  respectively,  the then  outstanding  shares of common stock of the

corporation  resulting  from such Business  Combination  or the combined  voting

power of the then outstanding  voting  securities of such corporation  except to

 

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the extent that such ownership existed prior to the Business Combination and (C)

at least a majority of the members of the board of directors of the  corporation

resulting  from such Business  Combination  (including,  without  limitation,  a

corporation  that  as a  result  of  such  transaction  owns  Griffon  or all or

substantially  all of Griffon's  assets  either  directly or through one or more

subsidiaries)  were members of the Incumbent  Board at the time of the execution

of the  initial  agreement,  or of the action of the Board,  providing  for such

Business Combination; or

 

     (iv) approval by the  stockholders of Griffon of a complete  liquidation or

dissolution of the Company.

 

     (e) "Code"  shall mean the Internal  Revenue Code of 1986,  as amended from

time to time.

 

     (f) "Committee" shall mean the Compensation Committee of the Board.

 

     (g) "Consulting Period" shall mean the period specified in Section 13 below

during which Blau serves as a consultant to Griffon.

 

     (h)  "Disability"  shall  mean the  illness  or other  mental  or  physical

disability of Blau, as determined by a physician acceptable to Griffon and Blau,

resulting in his failure during the Employment Term or the Consulting Period, as

the case may be, (i) to perform  substantially  his applicable  material  duties

under this Agreement for a period of nine consecutive  months and (ii) to return

to the performance of his duties within 30 days after  receiving  written notice

of termination.

 

     (i)  "Employment  Term"  shall mean the period  specified  in Section  2(b)

below.

 

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        (j) "Fiscal Year" shall mean the 12-month period beginning on October 1

and ending on the next subsequent September 30, or such other 12-month period as

may constitute Griffon's fiscal year at any time hereafter.

 

        (k) "Good Reason" shall mean, at any time during the Employment Term, in

each case (except for clause (vi) below) without Blau's prior written consent or

his acquiescence:

 

     (i) reduction in his then current Salary;

 

     (ii)  diminution,  reduction  or  other  adverse  change  in the  bonus  or

incentive  compensation  opportunities  available  to Blau (with  respect to the

level  of  bonus  or  incentive  compensation   opportunities,   the  applicable

performance  criteria and  otherwise  the manner in which  bonuses and incentive

compensation  are  determined) in the aggregate  from those  available as of the

date hereof in accordance with Section 4(a) below;

 

     (iii) Griffon's  failure to pay Blau any amounts  otherwise  vested and due

him hereunder or under any plan or policy of Griffon;

 

     (iv)    diminution   of   Blau's   titles,    position,    authorities   or

responsibilities, including not serving on the Board;

 

     (v)  assignment to Blau of duties  incompatible  with his position of Chief

Executive Officer;

 

     (vi)  termination  by Blau of his  employment  within one year  following a

Change  in  Control  other  than  (a) for  Cause  or (b) by  reason  of death or

Disability;

 

     (vii)  imposition of a requirement  that Blau report other than directly to

the full Board;

 

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     (viii) a material  breach of the  Agreement  by  Griffon  that is not cured

within 10 business days after written notification by Blau of such breach; or

 

     (ix) relocation of Griffon's corporate headquarters to a location more than

35 miles from the location first above described.

 

     (l) "Retirement" shall mean termination of Blau's employment  subsequent to

the date hereof,  other than (i) due to death or  Disability,  (ii) for Cause or

Good Reason or (iii) without Cause,  with Blau's  entitlement to receive a fully

vested benefit under  Griffon's  Supplemental  Executive  Retirement  Plan as in

effect on the date hereof.

 

     (m) "Salary" shall mean the annual salary  provided for in Section 3 below,

as adjusted from time to time.

 

 

     (n) "Spouse"  shall mean,  during the Term of Employment and the Consulting

Period, the woman who as of any relevant date is legally married to Blau.

 

     (o) "Subsidiary" shall mean any corporation of which Griffon owns, directly

or indirectly, more than 50 percent of its voting stock.

 

 

     2. EMPLOYMENT TERM, POSITIONS AND DUTIES.

 

     (a) Employment of Blau.  Griffon hereby  continues to employ Blau, and Blau

hereby accepts continued  employment with Griffon, in the positions and with the

duties  and  responsibilities  set forth  below and upon  such  other  terms and

conditions  as are  hereinafter  stated.  Blau shall render  services to Griffon

principally at Griffon's corporate headquarters,  but he shall do such traveling

 

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<PAGE>

 

on  behalf of  Griffon  as shall be  reasonably  required  in the  course of the

performance of his duties hereunder.

 

     (b) Employment  Term. The Employment Term shall commence as of July 1, 2001

and shall terminate on December 1, 2006.

 

     (c) Titles and Duties.

 

     (i) Until the date of termination of his employment  hereunder,  Blau shall

be employed as Chief  Executive  Officer,  reporting  to the full Board.  In his

capacity  as Chief  Executive  Officer,  Blau shall have the  customary  powers,

responsibilities  and authorities of chief executive officers of corporations of

the size, type and nature of Griffon including,  without limitation,  authority,

in  conjunction  with the  Board as  appropriate,  to hire and  terminate  other

employees of Griffon.

 

     (ii) During the  Employment  Term,  Griffon  shall uses its best efforts to

secure the election of Blau to the Board and to the chairmanship thereof. During

the Employment Term, if the Board forms an executive or similar committee,  Blau

shall serve thereon.

 

     (d) Time and Effort.

 

     (i) Blau agrees to devote his best efforts and  abilities,  and such of his

business  time and  attention  as is  reasonably  necessary,  to the  affairs of

Griffon  in  order to carry  out his  duties  and  responsibilities  under  this

Agreement.  The Parties hereby acknowledge that Blau is chairman of the board of

Aeroflex Incorporated and senior partner of the law firm, Blau, Kramer,  Wactlar

& Lieberman,  P.C. and that during the Employment  Term he will be devoting time

and attention to those activities.

 

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<PAGE>

 

 

     (ii)  Notwithstanding  the foregoing,  nothing shall preclude Blau from (A)

serving on the boards of a reasonable number of trade  associations,  charitable

organizations and/or businesses not in competition with Griffon, (B) engaging in

charitable  activities  and  community  affairs and (C)  managing  his  personal

investments  and  affairs;  provided,  however,  that,  such  activities  do not

materially   interfere   with  the   proper   performance   of  his  duties  and

responsibilities specified in Section 2 (c) above.

 

     3. SALARY.

 

     (a) Initial  Salary.  Blau shall receive from Griffon a Salary,  payable in

accordance with the regular payroll practices of Griffon, in a minimum amount of

$775,000.

 

     (b) Cost-of-Living Increase. During the Employment Term Blau's Salary shall

be  increased  semiannually  by an amount  equal to the  increase in the cost of

living for the  immediately  preceding  calendar  half-year,  as reported in the

"Consumer  Price  Index,  New York and  Northeastern  New  Jersey,  All  Items,"

published by the United States  Department of Labor,  Bureau of Labor Statistics

(or, if such index is no longer published,  a successor or comparable index that

is published).  Such amount shall be calculated and paid to Blau in a single sum

on or before the first day of the second month following the applicable calendar

half year,  and  thereafter  his Salary shall be deemed to include the amount of

any such increase.  The first calculation and payment shall be made with respect

to the six month period from and after July 1, 2001. If Blau's  employment shall

 

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<PAGE>

 

terminate during any such six-month period, the cost-of-living increase provided

in this Section 3(b) shall be prorated  accordingly.

 

     (c) Salary  Increase.  Any amount to which Blau's Salary is  increased,  as

provided in Section 3(b) above or  otherwise,  shall not  thereafter  be reduced

without his consent, and the term "Salary" as used in this Agreement shall refer

to his Salary as thus increased.

 

     4. BONUSES.

 

     (a) Annual  Bonus.  Blau shall be eligible  to receive an annual  bonus for

each Fiscal Year or portion  thereof  during the  Employment  Term in accordance

with Griffon's Senior Management Incentive  Compensation Plan or another plan or

plans  providing  him annual award  opportunities  (with respect to their level,

applicable  performance criteria and the manner in which bonuses are determined)

that in the  aggregate  are not less than those in effect as of the date hereof.

Blau  shall be  entitled  to elect  to  defer,  under  the  terms of the  Senior

Management Incentive Compensation Plan or any successor plan, any portion of his

annual bonus that is not already subject to deferral thereunder.

 

     (b) Special  Bonus.  Blau shall be eligible to receive  additional  bonuses

during the Employment  Term. The Committee shall  determine,  in its discretion,

the occasion for payment, and the amount, of any such bonus.

 

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<PAGE>

 

 

     5. LONG-TERM INCENTIVE.

 

     During the Employment  Term,  Blau shall be eligible for an award under any

long-term incentive  compensation plan established by Griffon for the benefit of

Blau or, in the absence thereof, under any such plan established for the benefit

of members of the senior management of Griffon.

 

     6. EQUITY OPPORTUNITY.

 

     During the  Employment  Term,  Blau shall be eligible to receive  grants of

options to purchase  shares of Griffon's stock and awards of shares of Griffon's

stock,  either or both as determined by the  Committee,  under and in accordance

with the terms of  applicable  plans of  Griffon  and  related  option and award

agreements. It is the intention of Griffon to grant stock options to Blau during

the Employment  Term. Also, to the extent permitted by any such plan, Blau shall

be eligible during any Consulting Period to receive grants of options and awards

of shares of Griffon's stock in the same manner.

 

     7. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.

 

     During  the  Employment  Term  and any  Consulting  Period,  Blau  shall be

entitled to prompt  reimbursement  by Griffon for all  reasonable  out-of-pocket

expenses incurred by him in performing  services under this Agreement,  upon his

submission  of such  accounts  and  records  as may be  reasonably  required  by

Griffon.  In  addition,  Blau  shall be  entitled  to  payment by Griffon of all

 

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<PAGE>

 

reasonable costs and expenses,  including  attorneys' and consultants'  fees and

disbursements, incurred by him in connection with adoption of this Agreement and

any  related  compensatory  arrangements  that  Griffon  adopts  solely  for his

benefit.

 

     8. PERQUISITES.

 

     During the Employment  Term and, and any Consulting  Period,  Griffon shall

provide Blau with the following perquisites:

 

     (a) an office of a size and with  furnishings and other  appointments,  and

exclusive  personal  secretarial  and other  assistance,  at least equal to that

provided to Blau by Griffon as of the date hereof; and

 

     (b)  payment  of club  dues and the use of an  automobile  and  payment  of

related  expenses  on the same terms as in effect on the date hereof or, if more

favorable to Blau, as made available  generally to other  executive  officers of

Griffon and its affiliates at any time thereafter.

 

     9. EMPLOYEE BENEFIT PLANS.

 

     (a)  General.  During  the  Employment  Term,  Blau  shall be  entitled  to

participate  in all  employee  benefit  plans and  programs  made  available  to

Griffon's  senior  executives  or to its employees  generally,  as such plans or

programs  may be in effect  from time to time,  including,  without  limitation,

pension and other retirement plans,  profit-sharing plans,  savings and  similar

 

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<PAGE>

 

plans,  group life  insurance,  accidental  death and  dismemberment  insurance,

travel accident insurance,  hospitalization insurance, surgical insurance, major

and excess major medical insurance,  dental insurance,  short-term and long-term

disability insurance,  sick leave (including salary continuation  arrangements),

holidays, vacation (not less than four weeks in any calendar year) and any other

employee benefit plans or programs that may be sponsored by Griffon from time to

time,  including plans that supplement the above-listed types of plans,  whether

funded or unfunded.

 

     (b) Medical Care  Reimbursement  and Insurance.  During the Employment Term

and  Consulting  Period,  Griffon  shall  reimburse  Blau for 100 percent of any

medical  expenses  incurred  by him for  himself  and his  Spouse  that  are not

reimbursed  by  insurance  or   otherwise,   offset  by  any  amounts  that  are

reimbursable  by  Medicare if Blau and his Spouse,  when  eligible,  elect to be

covered by  Medicare.  Griffon  shall  provide  Blau and his  Spouse  during his

lifetime with hospitalization  insurance,  surgical insurance,  major and excess

major  medical  insurance  and  dental  insurance  in  accordance  with the most

favorable   plans,   policies,   programs  and  practices  of  Griffon  and  its

Subsidiaries  made  available  generally to other senior  executive  officers of

Griffon and its Subsidiaries as in effect from time to time.

 

     (c) Life  Insurance  Benefit.  In  addition  to the  group  life  insurance

available to employees generally,  Griffon shall provide Blau with an individual

permanent  life  insurance  benefit  in an  initial  amount  of  not  less  than

approximately  $5 million,  the terms and  conditions of such benefit to be more

fully described in an insurance ownership agreement between Blau and Griffon.

 

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<PAGE>

 

     (d) Disability  Benefit. In consideration of the benefit payable to Blau in

the event of termination  of his  employment  due to Disability,  as provided in

Section 10(e) below,  or, if  applicable,  in the event of termination of Blau's

consulting  services due to Disability during the Consulting Period, as provided

in Section  13(d)  below,  Griffon  shall not be  obligated to provide Blau with

long-term  disability  insurance.  If Griffon  elects to provide  Blau with such

insurance,  he shall be the owner of any individual  policies obtained and shall

pay the premiums thereon;  provided,  however, that Griffon shall reimburse Blau

for any premiums that he pays.

 

     (e)  Retirement  Benefit.  Blau shall be entitled to the benefits  provided

under Griffon's Supplemental  Executive Retirement Plan (the "SERP");  provided,

however,  that if Griffon fails to maintain the SERP, Blau's retirement  benefit

shall be determined as if the SERP had remained in effect until  termination  of

his employment with Griffon by retirement. These benefits are in addition to the

benefits  provided  under this  Agreement,  and no  modification,  amendment  or

termination  of this  Agreement  shall affect Blau's rights under the SERP as in

effect on the date  hereof or, if more  favorable  to Blau,  as in effect at any

time thereafter.

 

     10. TERMINATION OF EMPLOYMENT.

 

     (a) Voluntary  Termination  and Termination by Mutual  Agreement.  Blau may

terminate  his  employment  voluntarily  at any time after  December 31, 2001 in

accordance  with the provisions of Section 10(h). If he does so, except for Good

Reason,  his  entitlement  shall be the same as if Griffon  had  terminated  his

 

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employment  for Cause.  The  Parties  may  terminate  this  Agreement  by mutual

agreement  at any  time.  If they do so,  Blau's  entitlements  shall  be as the

Parties mutually agree.

 

     (b) General.  Notwithstanding anything to the contrary herein, in the event

of termination of Blau's employment under this Agreement, he or his Beneficiary,

as the case may be,  shall be entitled to receive (in  addition to payments  and

benefits under, and except as specifically  provided in, subsections (c) through

(i) below, as applicable):

 

     (i) his Salary through the date of termination;

 

     (ii) any unused vacation from prior years;

 

     (iii) any annual or special bonus awarded but not yet paid to him;

 

     (iv) any  deferred  compensation  under  the  Senior  Management  Incentive

Compensation Plan or any other deferred compensation plan of Griffon;

 

     (v) any  other  compensation  or  benefits,  including  without  limitation

long-term incentive  compensation  described in Section 5 above,  benefits under

equity  grants and awards  described  in Section 6 above and  employee  benefits

under plans  described in Section 9 above,  that have vested through the date of

termination  or to  which  he may  then  be  entitled  in  accordance  with  the

applicable terms and conditions of each grant, award or plan; and

 

     (vi)  reimbursement  in accordance  with Sections 9(a) and (b) above of any

business and medical  expenses  incurred by Blau or his Spouse,  as  applicable,

through the date of termination but not yet paid to him.

 

     (c) Termination due to Retirement.  In the event that Blau's  employment is

terminated  due to his  Retirement,  he shall be  entitled,  in  addition to the

 

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compensation and benefits  specified in Section 10(b), to the benefits  provided

under the SERP, as provided in Section 9(e) above.

 

     (d)  Termination  due to Death.  In the event  that  Blau's  employment  is

terminated due to his death, his Beneficiary  shall be entitled,  in addition to

the compensation and benefits  specified in Section 10(b), to his Salary payable

for the  remainder  of the  Employment  Term at the rate in  effect  immediately

before such termination.

 

     (e) Termination due to Disability.  In the event of Disability,  Griffon or

Blau may terminate Blau's employment.  If Blau's employment is terminated due to

Disability,  he shall be entitled,  in addition to the compensation and benefits

specified  in Section  10(b),  to his Salary  payable for the  remainder  of the

Employment  Term at the rate in  effect  immediately  before  such  termination,

offset by any  long-term  disability  insurance  benefit  that  Griffon may have

elected to provide for him.

 

     (f)  Termination  by  Griffon  for  Cause.  Griffon  may  terminate  Blau's

employment hereunder for Cause only upon written notice to Blau not less than 30

days prior to any intended  termination,  which notice shall specify the grounds

for such termination in reasonable detail.  Cause shall in no event be deemed to

exist except upon a finding  reflected  in a  resolution  approved by a majority

(excluding  Blau) of the  members  of the  Board  (whose  findings  shall not be

binding  upon or entitled to any  deference  by any court,  arbitrator  or other

decision-maker  ruling on this  Agreement) at a meeting of which Blau shall have

been  given  proper  notice  and at which  Blau (and his  counsel)  shall have a

 

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reasonable  opportunity to present his case. In the event that Blau's employment

is  terminated  for Cause,  he shall be entitled  only to the  compensation  and

benefits specified in Section 10(b).

 

     (g) Termination Without Cause or by Blau for Good Reason.

 

     (i) Termination  without Cause shall mean termination of Blau's  employment

by Griffon and shall exclude termination (A) due to death,  Disability or Cause,

(B) by Blau voluntarily or (C) by mutual written  agreement of Blau and Griffon.

Griffon shall provide Blau 15 days' prior written  notice of  termination  by it

without Cause,  and Blau shall provide  Griffon 15 days' prior written notice of

his termination for Good Reason.

 

     (ii) In the event of  termination by Griffon of Blau's  employment  without

Cause or of termination  by Blau of his employment for Good Reason,  he shall be

entitled,  in addition to the  compensation  and  benefits  specified in Section

10(b), to:

 

     (A) a lump-sum payment equal to the Salary payable to him for the remainder

of  the  Employment  Term  at  the  rate  in  effect   immediately  before  such

termination;

 

     (B) a lump sum payment equal to the annual bonuses for the remainder of the

Employment  Term  (including a prorated bonus for any partial Fiscal Year) equal

to the average of the three highest annual bonuses awarded to him during the ten

Fiscal Years preceding the Fiscal Year of termination;

 

     (C) continued  medical  reimbursement  for the remainder of the  Employment

Term and  thereafter  the lifetime  medical  benefits  described in Section 9(b)

above;

 

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     (D) a lump-sum  payment equal to the then present  value of the excess,  if

any, of (x) the retirement  benefit to which Blau would have been entitled if he

had remained  employed under this Agreement until age 72 (calculated and payable

as provided in the SERP) over (y) the early retirement  benefit actually payable

to him; and

 

     (E)  continued  participation  in all  employee  benefit  plans or programs

available to Griffon employees  generally in which Blau was participating on the

date of  termination of his  employment  until the end of the  Employment  Term;

provided;   however,   that  (x)  if  Blau  is  precluded  from  continuing  his

participation in any employee benefit plan or program as provided in this clause

(E), he shall be entitled to the after-tax  economic  equivalent of the benefits

under the plan or program in which he is unable to participate  until the end of

the  Employment  Term, and (y) the economic  equivalent of any benefit  foregone

shall be deemed to be the lowest  cost that Blau would incur in  obtaining  such

benefit on an individual basis; and

 

     (F) other benefits in accordance with applicable  plans and programs of the

Company.

 

     (iii)  Prior  written  consent  by Blau to any of the events  described  in

Section 1(k) above shall be deemed a waiver by him of his right to terminate for

Good Reason under this Section 10(g) solely by reason of the events set forth in

such waiver.

 

     (h) Voluntary  Termination  by Blau.  At any time after  December 31, 2001,

Blau shall have the right,  upon 60 days' prior written  notice,  voluntarily to

terminate  his  employment  without Good Reason,  in which event his  employment

shall cease and the  Employment  Term shall  terminate  as of the date stated in

such  notice, and  the  Consulting Period  shall  begin on  the  next succeeding

 

                                       18

<PAGE>

 

business day, and he shall be entitled to receive  compensation  and benefits as

if Griffon  had  terminated  his  employment  for Cause,  as provided in Section

10(f).

 

     (i) Change in Control.  Notwithstanding  anything  to the  contrary in this

Section  10,  termination  of  Blau's  employment  within  the  one-year  period

following  a Change  in  Control  for any  reason  other  than  Cause,  death or

Disability,  shall  be  governed  by  Section  10(g).  In the  event of any such

termination,  Blau shall be entitled to compensation  and benefits in accordance

with the provisions of Section 10(g)(ii).

 

     11. NO DUTY TO MITIGATE.

 

     Blau shall not be required to mitigate damages or the amount of any payment

provided for under this Agreement by seeking other employment or otherwise,  nor

will any payment  hereunder  be subject to offset in the event Blau does receive

compensation for services from any other source.

 

     12. PARACHUTES.

 

     (a)  Application.  If all, or any portion,  of the payments  provided under

this Agreement,  and/or any other payments and benefits that Blau receives or is

entitled to receive from Griffon,  a Subsidiary or any other person,  whether or

not under an existing  plan,  arrangement  or other  agreement,  constitutes  an

excess  "parachute  payment"  within the meaning of Section  280G(b) of the Code

(each such  parachute  payment,  a "Parachute  Payment")  and will result in the

imposition  on Blau of an excise tax under  Section 4999 of the Code,  then,  in

 

                                       19

<PAGE>

 

addition to any other benefits to which Blau is entitled  under this  Agreement,

Griffon  shall pay him an amount in cash  equal to the sum of the  excise  taxes

payable  by him by reason  of  receiving  Parachute  Payments,  plus the  amount

necessary to put him in the same after-tax position (taking into account any and

all  applicable  federal,  state and local excise,  income or other taxes at the

highest possible  applicable rates on such Parachute Payments (including without

limitation  any  payments  under this Section 12) as if no excise taxes had been

imposed with respect to Parachute Payments (the "Parachute Gross-up").

 

     (b)  Computation.  The amount of any payment under this Section 12 shall be

computed by a certified public accounting firm of national  reputation  selected

by Griffon and  acceptable to Blau. If Griffon or Blau disputes the  computation

rendered by such accounting firm, Griffon shall select an alternative  certified

public  accounting  firm  of  national  reputation  to  perform  the  applicable

computation.  If the two  accounting  firms cannot agree upon the  computations,

Blau and Griffon shall jointly appoint a third certified public  accounting firm

of  national  reputation  within 10  calendar  days  after  the two  conflicting

computations  have been rendered.  Such third  accounting firm shall be asked to

determine  within 30 calendar days the computation of the Parachute  Gross-up to

be paid to Blau, and payments shall be made accordingly.

 

 

     (c) Payment.  In any event,  Griffon shall pay to Blau or pay on his behalf

the Parachute  Gross-up as computed by the accounting firm initially selected by

Blau by the time any taxes payable by him as a result of the Parachute  Payments

become due,  with Blau agreeing to return the excess amount of such payment over

the final computation rendered from the process described in Section 12(b). Blau

 

                                       20

<PAGE>

 

and Griffon shall provide the accounting  firms with all information that any of

them reasonably deems necessary in order to compute the Parachute Gross-up.  The

cost  and  expenses  of  all  the  accounting  firms  retained  to  perform  the

computations described above shall be borne by Griffon.

 

     In the event that the Internal  Revenue  Service  ("IRS") or the accounting

firm  computing the Parachute  Gross-up  finally  determines  that the amount of

excise taxes thereon  initially paid was insufficient to discharge Blau's excise

tax liability, Griffon shall make additional payments to him as may be necessary

to reimburse him for discharging the full liability.

 

     Blau shall apply to the IRS for a refund of any excise taxes paid and remit

to  Griffon  the  amount of any such  refund  that he  receives.  Griffon  shall

reimburse  Blau for his expenses in seeking a refund of excise taxes and for any

interest and penalties imposed on excise taxes that he is required to pay.

 

     13. CONSULTING PERIOD.

 

     (a) General. Effective upon the end of the Employment Term (but only if the

Employment  Term  ends  by  reason  of  its  expiration  or,  if  earlier,  upon

termination of Blau's  employment (i)  voluntarily,  (ii) by mutual agreement or

(iii) by Retirement),  Blau shall become a consultant to Griffon, in recognition

of the  continued  value to Griffon of his extensive  knowledge  and  expertise.

Unless earlier  terminated,  as provided in Section 13(e), the Consulting Period

shall continue for five years.

 

 

                                       21

<PAGE>

 

     (b) Duties and Extent of Services.

 

     (i) During the Consulting  Period,  Blau shall consult with Griffon and its

senior executive  officers  regarding its respective  businesses and operations.

Such  consulting  services  shall not require  more than 50 days in any calendar

year,  nor more than one day in any week,  it being  understood  and agreed that

during the  Consulting  Period  Blau shall have the right,  consistent  with the

prohibitions  of Sections 14 and 15 below,  to engage in  full-time or part-time

employment with any business enterprise that is not a competitor of Griffon.

 

     (ii) Blau's  service as a  consultant  shall only be required at such times

and such  places  as shall  not  result in  unreasonable  inconvenience  to him,

recognizing his other business  commitments  that he may have to accord priority

over the performance of services for Griffon. In order to minimize  interference

with  Blau's  other  commitments,  his  consulting  services  may be rendered by

personal  consultation  at his residence or office  wherever  maintained,  or by

correspondence   through  mail,   telephone,   fax  or  other  similar  mode  of

communication at times, including weekends and evenings, most convenient to him.

 

     (iii) During the Consulting Period, Blau shall not be obligated to serve as

a member of the Board or to occupy any office on behalf of Griffon or any of its

Subsidiaries.

 

     (c)  Compensation.  During the Consulting  Period,  Blau shall receive from

Griffon each year an amount equivalent to two-thirds of his Salary at the end of

the  Employment  Term,  payable  and  subject to annual  increase as provided in

Section 3 above.

 

                                       22

<PAGE>

 

     (d) Disability.  In the event of Disability  during the Consulting  Period,

Griffon or Blau may terminate Blau's consulting  services.  If Blau's consulting

services are terminated due to Disability, he shall be entitled to compensation,

in accordance with Section 13(c), for the remainder of the Consulting Period.

 

     (e) Termination. The Consulting Period shall terminate after five years or,

if earlier, upon Blau's death or upon his failure to perform consulting services

as provided in Section 13(b),  pursuant to 30 days' written notice by Griffon to

Blau  of the  grounds  constituting  such  failure  and  reasonable  opportunity

afforded Blau to cure the alleged failure. Upon any such termination, payment of

consulting  fees and benefits (with the exception of lifetime  medical  benefits

under Section 9(b) above) shall cease.

 

     (f) Other.  During the Consulting Period, Blau shall be entitled to expense

reimbursement  (including  secretarial,  telephone and similar support services)

and perquisites and medical benefits, pursuant to the terms of Sections 7, 8 and

9(b), respectively.

 

     14. CONFIDENTIAL INFORMATION.

 

     (a) General.

 

     (i) Blau  understands  and  hereby  acknowledges  that as a  result  of his

employment with Griffon he will  necessarily  become informed of and have access

to certain  valuable  and  confidential  information  of Griffon  and any of its

Subsidiaries,  joint ventures and  affiliates,  including,  without  limitation,

inventions,   trade  secrets,  technical  information,   computer  software  and

 

                                       23

<PAGE>

 

programs,  know-how and plans  ("Confidential  Information"),  and that any such

Confidential Information,  even though it may be developed or otherwise acquired

by Blau, is the exclusive  property of Griffon to be held by him in trust solely

for Griffon's benefit.

 

     (ii)  Accordingly,  Blau hereby agrees that, during the Employment Term and

the Consulting  Period and subsequent to both, he shall not, and shall not cause

others to, use, reveal, report,  publish,  transfer or otherwise disclose to any

person,  corporation or other entity any Confidential  Information without prior

written consent of the Board,  except to (A) responsible  officers and employees

of Griffon or (B)  responsible  persons who are in a  contractual  or  fiduciary

relationship  with  Griffon or who need such  information  for  purposes  in the

interest of Griffon.  Notwithstanding,  the foregoing,  the prohibitions of this

clause  (ii) shall not apply to any  Confidential  Information  that  becomes of

general public  knowledge  other than from Blau or is required to be divulged by

court order or administrative process.

 

     (b) Return of Documents.  Upon  termination of his employment  with Griffon

for any reason or, if applicable, upon expiration of the Consulting Period, Blau

shall promptly deliver to Griffon all plans, drawings,  manuals, letters, notes,

notebooks,   reports,  computer  programs  and  copies  thereof  and  all  other

materials,  including  without  limitation  those  of a secret  or  confidential

nature,  relating  to  Griffon's  business  that are then in his  possession  or

control.

 

     (c)  Remedies  and  Sanctions.  In the  event  that  Blau is found to be in

violation of Section 14(a) or (b) above,  Griffon shall be entitled to relief as

provided in Section 16 below.

 

                                      24

<PAGE>

 

     15. NONCOMPETITION/NONSOLICITATION.

 

     (a)  Prohibitions.  During the  Employment  Term and,  if  applicable,  the

Consulting  Period,  Blau shall not, without prior written  authorization of the

Board, directly or indirectly, through any other individual or entity:

 

     (i) become on officer or employee  of, or render any service to, any direct

competitor of Griffon;

 

     (ii) solicit or induce any customer of Griffon to cease purchasing goods or

services from Griffon or to become a customer of any competitor of Griffon; or

 

     (iii)  solicit or induce any employee of Griffon to become  employed by any

competitor of Griffon.

 

     (b)  Remedies  and  Sanctions.  In the  event  that  Blau is found to be in

violation  of  Section  15(a)  above,  Griffon  shall be  entitled  to relief as

provided in Section 16 below.

 

     (c) Exceptions.  Notwithstanding  anything to the contrary in Section 15(a)

above, its provisions shall not:

 

     (i) apply if Griffon  terminates  Blau's  employment  without Cause or Blau

terminates  his  employment  for Good Reason,  each as provided in Section 10(g)

above;

 

     (ii) be  construed  as  preventing  Blau from  investing  his assets in any

business that is not a direct competitor of Griffon; or

 

     (iii) be construed as preventing  Blau from  maintaining  the same level of

involvement  in the affairs of Aeroflex  Corporation  that he has as of the date

thereof.

 

                                       25

<PAGE>

 

     16. REMEDIES/SANCTIONS.

 

     Blau  acknowledges  that the services he is to render under this  Agreement

are of a unique and  special  nature,  the loss of which  cannot  reasonably  or

adequately be compensated for in monetary damages,  and that irreparable  injury

and damage may result to Griffon in the event of any breach of this Agreement or

default by Blau.  Because of the unique nature of the  Confidential  Information

and the importance of the  prohibitions  against  competition and  solicitation,

Blau further  acknowledges and agrees that Griffon will suffer  irreparable harm

if he fails to comply with his  obligations  under Section 14(a) or (b) above or

Section 15(a) above and that monetary  damages would be inadequate to compensate

Griffon for any such breach.  Accordingly,  Blau agrees that, in addition to any

other remedies available to either Party at law, in equity or otherwise, Griffon

will be entitled to seek  injunctive  relief or specific  performance to enforce

the  terms,  or  prevent  or remedy the  violation,  of any  provisions  of this

Agreement.

 

     17. BENEFICIARIES/REFERENCES.

 

     Blau shall be entitled to select (and change, to the extent permitted under

any applicable law) a beneficiary or  beneficiaries  to receive any compensation

or benefit  payable under this  Agreement  following his death by giving Griffon

written  notice  thereof.  In  the  event  of  Blau's  death,  or of a  judicial

 

                                       26

<PAGE>

 

determination of his incompetence,  reference in this Agreement to Blau shall be

deemed to refer,  as  appropriate,  to his  beneficiary,  estate or other  legal

representative.

 

     18. WITHHOLDING TAXES.

 

     All  payments  to Blau or his  Beneficiary  under this  Agreement  shall be

subject to withholding on account of federal,  state and local taxes as required

by law.

 

     19. INDEMNIFICATION AND LIABILITY INSURANCE.

 

     Nothing herein is intended to limit Griffon's  indemnification of Blau, and

Griffon shall  indemnify him to the fullest  extent  permitted by applicable law

consistent with Griffon's  Certificate of Incorporation and By-Laws as in effect

at the beginning of the Employment  Term,  with respect to any action or failure

to act on his part while he is an  officer,  director  or employee of Griffon or

any  Subsidiary.  Griffon  shall  cause  Blau  to be  covered  at all  times  by

directors' and officers' liability insurance on terms no less favorable than the

directors' and officers' liability insurance  maintained by Griffon in effect on

the date hereof in terms of coverage  and  amounts.  Griffon  shall  continue to

indemnify Blau as provided above and maintain such liability  insurance coverage

for him after the Employment Term and, if applicable,  the Consulting Period for

any  claims  that may be made  against  him with  respect  to his  service  as a

director or officer of Griffon or a consultant to Griffon.

 

                                       27

<PAGE>

 

     20. EFFECT OF AGREEMENT ON OTHER BENEFITS.

 

     The  existence  of this  Agreement  shall not  prohibit or restrict  Blau's

entitlement to participate  fully in  compensation,  employee  benefit and other

plans of Griffon in which senior executives are eligible to participate.

 

     21. ASSIGNABILITY; BINDING NATURE.

 

     This  Agreement  shall be  binding  upon and  inure to the  benefit  of the

Parties  and  their  respective  successors,  heirs  (in the case of  Blau)  and

assigns.  No rights or  obligations  of  Griffon  under  this  Agreement  may be

assigned  or  transferred  by  Griffon  except  pursuant  to  (a)  a  merger  or

consolidation  in which  Griffon  is not the  continuing  entity  or (b) sale or

liquidation of all or substantially all of the assets of Griffon,  provided that

the  surviving  entity or  assignee or  transferee  is the  successor  to all or

substantially all of the assets of Griffon and such surviving entity or assignee

or transferee  assumes the liabilities,  obligations and duties of Griffon under

this Agreement, either contractually or as a matter of law.

 

     Griffon  further  agrees  that,  in  the  event  of a  sale  of  assets  or

liquidation  as  described  in the  preceding  sentence,  it shall  use its best

efforts  to have such  assignee  or  transferee  expressly  agree to assume  the

liabilities,  obligations and duties of Griffon  hereunder;  provided,  however,

that   notwithstanding   such  assumption,   Griffon  shall  remain  liable  and

responsible for  fulfillment of the terms and conditions of this Agreement;  and

provided, further, that in no event shall such assignment and assumption of this

 

                                       28

<PAGE>

 

Agreement adversely affect Blau's right upon a Change in Control, as provided in

Section 10(i) above.  No rights or  obligations of Blau under this Agreement may

be assigned or transferred by him.

 

     22. REPRESENTATIONS.

 

     The  Parties  respectively   represent  and  warrant  that  each  is  fully

authorized and empowered to enter into this  Agreement and that the  performance

of its or his  obligations,  as the case may be, under this  Agreement  will not

violate  any  agreement  between  such  Party  and  any  other  person,  firm or

organization.  Griffon represents and warrants that this Agreement has been duly

authorized  by  all  necessary  corporate  action  and  is  valid,  binding  and

enforceable in accordance with its terms.

 

     23. ENTIRE AGREEMENT.

 

     Except to the extent otherwise provided herein, this Agreement contains the

entire  understanding and agreement  between the Parties  concerning the subject

matter hereof and  supersedes  any prior  agreements,  whether  written or oral,

between the Parties  concerning  the subject matter  hereof,  including  without

limitation  the Prior  Agreement.  Payments  and  benefits  provided  under this

Agreement  are in lieu of any  payments or other  benefits  under any  severance

program or policy of Griffon to which Blau would otherwise be entitled.

 

                                       29

<PAGE>

 

     24. AMENDMENT OR WAIVER.

 

     No  provision in this  Agreement  may be amended  unless such  amendment is

agreed  to in  writing  and  signed by both Blau and an  authorized  officer  of

Griffon.  No  waiver  by either  Party of any  breach by the other  Party of any

condition or provision contained in this Agreement to be performed by such other

Party shall be deemed a waiver of a similar or dissimilar condition or provision

at the same or any prior or subsequent  time.  Any waiver must be in writing and

signed by the Party to be charged  with the waiver.  No delay by either Party in

exercising  any right,  power or privilege  hereunder  shall operate as a waiver

thereof.

 

     25. SEVERABILITY.

 

     In the event  that any  provision  or portion  of this  Agreement  shall be

determined to be invalid or unenforceable  for any reason,  in whole or in part,

the remaining provisions of this Agreement shall be unaffected thereby and shall

remain in full force and effect to the fullest extent permitted by law.

 

     26. SURVIVAL.

 

     The respective  rights and  obligations of the Parties under this Agreement

shall survive any termination of Blau's employment with Griffon.

 

                                       30

<PAGE>

 

     27. GOVERNING LAW/JURISDICTION.

 

     This  Agreement  shall be  governed by and  construed  and  interpreted  in

accordance  with  the laws of New  York,  without  reference  to  principles  of

conflict of laws.

 

     28. COSTS OF DISPUTES.

 

     Griffon  shall pay, at least  monthly,  all costs and  expenses,  including

attorneys'  fees and  disbursements,  of Blau in connection with any proceeding,

whether or not instituted by Griffon or Blau,  relating to any provision of this

Agreement,  including  but not  limited to the  interpretation,  enforcement  or

reasonableness  thereof;  provided,   however,  that,  if  Blau  instituted  the

proceeding and the judge or other  decision-maker  presiding over the proceeding

affirmatively finds that his claims were frivolous or were made in bad faith, he

shall pay his own costs and  expenses  and,  if  applicable,  return any amounts

theretofore  paid to him or on his behalf  under this  Section  28.  Pending the

outcome of any proceeding, Griffon shall pay Blau all amounts due to him without

regard  to  the  dispute;  provided,  however,  that  if  Griffon  shall  be the

prevailing  party in such a proceeding,  Blau shall  promptly  repay all amounts

that he received during pendency of the proceeding  (other than amounts received

pursuant to this Section 28).

 

     29. NOTICES.

 

     Any notice given to either Party shall be in writing and shall be deemed to

have been given when delivered either personally,  by fax, by overnight delivery

 

                                       31

<PAGE>

 

service  (such as Federal  Express)  or sent by  certified  or  registered  mail

postage prepaid, return receipt requested, duly addressed to the Party concerned

at the  address  indicated  below or to such  changed  address  as the Party may

subsequently give notice of.

 

If to Griffon or the Board:

 

        Griffon Corporation

        100 Jericho Quadrangle

        Jericho, NY  11753-2794

        Attention: Patrick Alesia

 

FAX:  (516) 938-5644

 

With a copy to:

 Blau, Kramer, Wactlar & Lieberman, P.C.

 100 Jericho Quadrangle

 Jericho, NY  11753

 

 

If to Blau:

 125 Wheatley Road

 Old Westbury, NY  11568

 

 

With a copy to:

 Harvey R. Blau

 c/o Griffon Corporation

 100 Jericho Quadrangle

 Jericho, NY  11753

 

     30. HEADINGS.

 

     The  headings  of  the  sections   contained  in  this  Agreement  are  for

convenience  only and shall not be deemed to control  or affect  the  meaning or

construction of any provision of this Agreement.

 

                                       32

<PAGE>

 

     31. COUNTERPARTS.

 

     This  Agreement  may be  executed  in  counterparts,  each of which when so

executed and delivered shall be an original,  but all such counterparts together

shall constitute one and the same instrument.

 

     IN WITNESS WHEREOF,  the undersigned have executed this Agreement as of May

2, 2001.

 

                                                Griffon Corporation

 

 

         /s/ Dina Bottari                             /s/ Robert Balemian

Attest:  ___________________________            By: _________________________

 

 

 

 

        /s/ Frances L. Stelz                          /s/ Harvey R. Blau

Witness: ___________________________                _________________________

                                                          Harvey R. Blau

 

 

 

 

 

 

                                       33

 

</TEXT>

</DOCUMENT>