Exhibit 99.3




                  DEFEASANCE TRUST AND SECURITY AGREEMENT


         Trust and Security Agreement dated as of June 13, 1997 among
     Talley Industries, Inc., a Delaware Corporation (the "Company"),
     Bank One, N.A. (formerly known as Bank One, Columbus, N.A.), as
     Trustee (the "Trustee"), and Bank One, N.A., as Custodian (the
     "Custodian").
                               WITNESSETH:
                                
         WHEREAS, pursuant to the Indenture (the "Indenture") dated
     as of October 15, 1993 between the Company and the Trustee, the
     Company issued 12 1/4% Senior Discount Debentures Due 2005 (the
     "Debentures") in the aggregate principal amount of $126,555,000,
     $2,239,000 of which remains outstanding, and which Debentures are
     repayable in accordance with Schedule A; and

         WHEREAS, in order to permit the Company to exercise Covenant
     Defeasance (as defined in the Indenture) under and in accordance
     with Section 8.04 of the Indenture, the Company will advance the
     sums required to create an irrevocable trust to acquire and hold
     certain securities which shall be used for the purpose of
     satisfying the Company's obligations in respect of the
     Debentures; and

         WHEREAS, the Trustee has full power and authority to execute
     this Agreement and to accept the trust imposed upon it;

         NOW, THEREFORE, in consideration of the premises and the
     mutual covenants and agreements herein contained, the parties
     hereto agree as follows:


                                ARTICLE 1
              
                   APPOINTMENT OF TRUSTEE AND CUSTODIAN


        Section 1.01.  Appointment of Trustee and Custodian.  The
     Company hereby appoints Bank One, N.A., a national banking
     association, as Trustee hereunder, and the Trustee accepts the
     trust created by this Agreement upon the terms and conditions
     hereof.  The Company hereby appoints Bank One, N.A., a national
     banking association, as Custodian hereunder, and the Custodian
     accepts the custodianship created by this Agreement upon the
     terms and conditions hereof.






 

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                                ARTICLE 2
                        
                             THE TRUST ESTATE


         Section 2.01.  Assignment of Rights and Interests.  There is
     hereby created and established with the Trustee an irrevocable
     trust (the "Trust") to be held by the Trustee separate and apart
     from all other assets of the Company or the Trustee.  The Company
     hereby irrevocably transfers and assigns to the Trustee all the
     Company's right, title and interest in the U.S. Government
     Securities (as defined in Section 2.03) described in Schedule B
     hereto and the right to receive payments of interest thereon and
     payments of the principal thereof at maturity, such transfer to
     be effected by (i) the crediting of such U.S. Government
     Securities to a Participant's Securities Account, within the
     meaning of 31 C.F.R. Section 357.2, of the Custodian maintained
     at a Federal Reserve Bank as part of the Treasury/Reserve
     Automated Debt Entry System and (ii) the crediting by the
     Custodian of such U.S. Government Securities to the Collateral
     Account (as defined below).  The Custodian hereby agrees to
     maintain in a Participant's Securities Account of the Custodian
     maintained at a Federal Reserve Bank a credit of U.S. Government
     Securities corresponding to each of the U.S. Government
     Securities credited from time to time to the Collateral Account
     and to treat the Trustee as entitled to exercise all rights in
     connection with such U.S. Government Securities.  The securities
     held in trust hereunder and said payments as received by the
     Trustee or as thereafter invested by the Trustee are hereinafter
     referred to as the "Trust Estate." 

         Section 2.02.  Purpose of Trust.  The Trust is established
     for the purpose of securing the Company's obligations in respect
     of the Debentures.  The Trust Estate will be used to pay when due
     the principal of, the premium (if any) and interest on all
     outstanding Debentures in accordance with Schedule A hereto. 
     Except as provided in this Article or in Section 4.02, the Trust
     Estate shall not be used for any other purposes.

         Section 2.03.  Administration of Trust Estate.  As part of
     the Trust Estate there shall be established by the Custodian a
     collateral account (the "Collateral Account") in the name of the
     Trustee to which there shall be credited as and when received by
     the Custodian on behalf of the Trustee, U.S. Government
     Securities and interest on the securities in the Trust Estate and
     payments of the principal amount of such securities upon their
     maturity.  Moneys so deposited in the Collateral Account shall be
     applied by the Trustee in the following order:
            
         (a)    Timely transmittal to Bank One, N.A., or its
     successors, as paying agent, of funds in accordance with Schedule
     A hereto.  Said transmittals will be made to the paying agent at
     its office at 100 Broad Street, Columbus, Ohio 43271, in good
     funds on the interest and principal payment dates.


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         (b)    At any time during the existence of the Trust created
     hereby, such part of the property held hereunder which is cash
     and which is not at the time needed for the making of any
     payments in accordance with this Agreement shall, to the extent
     practicable, be invested by the Trustee in U.S. Government
     Securities as directed in writing by the Company which provide
     for payments in respect of interest thereon and the principal
     thereof at such times and in such amounts as, together with the
     scheduled payments of interest on and principal of any other
     property held by the Trustee hereunder, will enable the Trustee
     to make the payments to be made by the Trustee in accordance with
     this Agreement; provided that, if the Trustee is unable to make
     any such investment, the Trustee may hold such property in the
     form of cash until needed for the making of payments hereunder. 
     The Trustee shall have no liability with respect to any loss
     arising from investments made in accordance with this Section
     2.03(b).

         "U.S. Government Securities" means non-redeemable Treasury
     bonds, bills and notes (including without limitation, STRIPS), or
     securities entitlements in respect thereof, that are book-entry
     securities, within the meaning of 31 C.F.R. Section 357.2, and
     are credited to a Participant's Security Account (as defined in
     31 C.F.R. Section 357.2) of the Custodian at a Federal Reserve
     Bank, which Participant's Security Account is part of the
     Treasury/Reserve Automated Debt Entry System.
 
         Section 2.04.  Securities Intermediary's Jurisdiction.   The
     Company, the Custodian and the Trustee hereby agree that for all
     purposes hereof (including for purposes of 31 C.F.R. Section
     357.11(b) and Section 8-110(e) of Revised Article 8 (as defined
     in 31 C.F.R. Section 357.2) the "securities intermediary's
     jurisdiction" (within the meaning of such Section 8-110(e)) in
     respect of the Collateral Account is the State of New York.  The
     Trustee and the Custodian each hereby represents that it has not
     entered into, and hereby agrees that it will not enter into, any
     agreement specifying any jurisdiction other than the State of New
     York as its jurisdiction for purposes of 31 C.F.R. Section 357.11
     or Revised Article 8 (as defined in 31 C.F.R. Section 357.2) in
     connection with the Collateral Account.

         Section 2.05.  Transfer for Value.   The parties hereto
     intend that the transfer of the U.S. Government Securities by the
     Company to the Trustee contemplated by Section 2.01 constitutes a
     completed transfer for value and, accordingly, that the
     transferred U.S Government Securities are intended no longer to
     be an asset of the Company.  In case, however, it should be
     determined that such an outright transfer is not effected, the
     Company hereby assigns and pledges to the Trustee for the benefit
     of the holders from time to time of the Debentures, and grants to
     the Trustee for the benefit of the holders from time to time of
     the Debentures, security interests in the U.S. Government
     Securities transferred by the Company to the Trustee pursuant to
     Section 2.01, all other U.S. Government Securities transferred to or


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     acquired by the Trustee hereunder, all cash, securities or other
     property from time to time held in the Collateral Account and all
     of its rights and privileges with respect thereto, and all income
     and profits thereon, and all interest, dividends and other
     distributions with respect thereto, and all proceeds of the
     foregoing.


                                ARTICLE 3
                  
                      THE TRUSTEE AND THE CUSTODIAN


         Section 3.01.  Limitations on Liability.  (a) The duties and
     obligations of the Trustee and the Custodian shall be determined
     solely by the express provisions of this Agreement, and neither
     the Trustee nor the Custodian shall be liable except for the
     performance of such duties and obligations as are specifically
     set forth in this Agreement.  The liability of the Trustee for
     the payment of the principal of and interest on the Debentures
     shall be limited to the application of the securities (including
     the interest thereon), cash and other property in the Trust
     Estate.  This Agreement does not substitute the Trustee as the
     obligor on the Debentures.

         (b)    Each of the Trustee and the Custodian may rely, and
     shall be protected in acting or refraining from acting in
     reliance, upon any direction, certificate, statement or other
     paper or document believed by it to be genuine and to have been
     signed or presented by the proper person or persons.
                  
         (c)    Each of the Trustee and the Custodian may consult with
     counsel or other experts and any opinion of such counsel or other
     experts shall be full and complete authorization and protection
     with respect to any action taken or suffered or omitted by it
     hereunder in good faith and in accordance with such opinion of
     counsel or other experts.
                  
         (d)    Neither the Trustee nor the Custodian shall be liable
     for any actions taken, suffered or omitted by it and believed by
     it to be authorized or within its duties or powers conferred upon
     it by this Agreement so long as the Trustee or the Custodian, as
     the case may be, is not acting in bad faith or with gross
     negligence.  The Company agrees to indemnify the Trustee and the
     Custodian and hold them  harmless from and against any and all
     costs, expenses or liabilities (including, without limitation,
     reasonable counsel fees and settlement costs) they may suffer or
     incur in connection with this Agreement, except for those caused
     by its own gross negligence or bad faith.  The obligations of the
     Company to indemnify the Trustee and the Custodian pursuant to
     this paragraph shall survive the termination of this Agreement.





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         (e)    The Trustee may execute any of the trusts or powers
     hereunder and perform any duty hereunder and exercise any right
     hereunder either directly or by or through its agents or
     attorneys.  The Custodian may execute any of the powers hereunder
     and perform any duty hereunder and exercise any right hereunder
     either directly or by or through its agents or attorneys.
                   
         (f)    Neither the Trustee nor the Custodian shall have any
     duty with respect to amounts payable to it in respect of the
     Trust Estate other than to receive them and to apply the amounts
     actually received in accordance with this Agreement.  Neither the
     Trustee nor the Custodian shall be obliged to take legal action
     to enforce the payment obligations of the issuers of the
     securities in the Trust Estate or of the obligors in respect of
     any investment made by the Trustee in accordance with Section
     2.03.  Neither the Trustee nor the Custodian shall be liable for
     any loss resulting from any investment made pursuant to this
     Agreement in compliance with the provisions hereof.  Neither the
     Trustee nor the Custodian shall be liable for the accuracy of the
     calculations as to the sufficiency of the Trust Estate to pay the
     Debentures or for any resulting deficiencies in the amounts
     available in the Trust Estate to pay the Debentures.
                  
         (g)    It shall be no part of the duty of the Trustee or the
     Custodian to see to any filing, recording or registration of this
     Agreement or of any agreement amendatory or supplemental hereto
     or of any instrument of assignment, conveyance or further
     assurance, or to the payment of any taxes, fees or charges in
     connection therewith, or to give any notice with respect thereto
     or to inquire or see to the payment of, or be under any duty in
     respect of, any tax or assessment or other governmental charge
     which may be levied or assessed on the Trust Estate or any part
     thereof or against the Company.
                  
         (h)    Neither the Trustee nor the Custodian shall be required
     to post any bond or other security in connection with its duties
     hereunder.

         Section 3.02.  Resignation of Trustee and Custodian.  Each of
     the Trustee and the Custodian may at any time resign and be
     discharged from the trust hereby created by giving notice to the
     Company and the Company shall upon receipt of such notice of
     resignation promptly appoint a successor trustee or custodian, as
     the case may be.  Each of the Trustee's and Custodian's
     resignation shall take effect 30 days after the mailing of the
     notice of resignation, unless previously a successor trustee or
     custodian, as the case may be, shall have been appointed and
     shall have accepted such appointment, in which event such
     resignation shall take effect immediately upon the acceptance by
     such successor trustee or custodian, as the case may be.  Any
     successor trustee or custodian appointed as provided in this
     Section 3.02 shall execute, acknowledge and deliver to the
     Company an instrument accepting such appointment hereunder, and 



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     thereupon such successor trustee or custodian shall
     become vested with all the trusts, rights, titles, interests,
     powers, duties and obligations with respect to the Trust Estate
     of its predecessor hereunder, with like effect as if originally
     named as trustee or custodian, as the case may be, herein; and
     the trustee or custodian so ceasing to act shall duly assign,
     convey and deliver to such successor trustee or custodian, as the
     case may be, all of the Trust Estate held by the Trustee or the
     Custodian so ceasing to act.

         Section 3.03.  Compensation of the Trustee and the Custodian. 
     In consideration of the services rendered by the Trustee under
     this Agreement, the Company agrees to and shall pay to the
     Trustee compensation as agreed from time to time between the
     Trustee and the Company.  In consideration of the services
     rendered by the Custodian under this Agreement, the Company
     agrees to and shall pay to the Custodian compensation as agreed
     from time to time between the Custodian and the Company.


                                ARTICLE 4
                         
                              MISCELLANEOUS


         Section 4.01.  Representations and Warranties.  (a)  The
     Company represents and warrants that the execution and
     consummation of this Agreement are within its corporate authority
     and have been duly authorized by proper corporate proceedings,
     and the compliance by the Company with all of the provisions of
     this Agreement will not conflict with or violate any laws or
     regulations to which the Company is subject or which apply to it,
     or any agreement or instrument to which the Company is a party
     (including, without limitation, the Indenture), or result in the
     creation of imposition of any lien, charge or encumbrance upon
     any of the assets of the Company other than the lien created
     hereby, or result in the acceleration of maturity of any
     obligation of the Company; and no consent, authorization or order
     of any court or governmental agency (other than credits to a
     Participant's Securities Account of the Custodian to be made by a
     Federal Reserve Bank in connection with the transfer of U.S.
     Government Securities and securities entitlements in respect
     thereof) is required for the consummation of the transactions
     contemplated hereby.
            
         (b)    Each of the Trustee and the Custodian represents and
     warrants that the execution and consummation of this Agreement
     are within its corporate authority and have been duly authorized
     by proper corporate proceedings, and the compliance by the
     Trustee or the Custodian, as the case may be, with all of the
     provisions of this Agreement will not conflict with or violate
     any laws or regulations to which the Trustee or the Custodian, as
     the case may be, is subject or which apply to it, or any agreement 
 


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     or instrument to which the Trustee or the Custodian, as the case 
     may be, is a party (including, without limitation, the Indenture), 
     or result in the creation of imposition of any lien, charge or 
     encumbrance upon any of the assets of the Trustee or the Custodian, 
     as the case may be, or result in the acceleration of maturity of any
     obligation of the Trustee or the Custodian, as the case may be;
     and no consent, authorization or order of any court or
     governmental agency (other than credits to a Participant's
     Securities Account of the Custodian to be made by a Federal
     Reserve Bank in connection with the transfer of U.S. Government
     Securities and securities entitlements in respect thereof) is
     required for the consummation of the transactions contemplated
     hereby.

         (c)    The Custodian further represents and warrants that 
     (i) it is (A) a Participant (as defined in 31 C.F.R. Section 357.2) 
     in respect of Book-entry Securities (as so defined) held through the 
     Treasury/Reserve Automated Debt Entry System ("TRADES") (as so defined) 
     with a Participant's Securities Account (as so defined) at a Federal
     Reserve Bank (the "FRB") and (B) a "securities intermediary" within the 
     meaning of 31 C.F.R. Section 357.2 and Revised Article 8 (as defined in 
     31 C.F.R. Section 357.2), and (ii) the Collateral Account is a 
     "securities account" within the meaning of Section 8-501(a) of Revised
     Article 8.

         Section 4.02.  Termination.  This Agreement shall terminate
     upon receipt by the Trustee of evidence satisfactory to it that
     the Company has discharged its obligations under the Indenture,
     whether by payment in full of all of the Debentures or otherwise. 
     Upon termination of this Agreement, any securities or funds
     remaining in the Trust Estate shall be promptly transferred to
     the Company.

         Section 4.03.  Governing Law.  This Agreement shall be
     governed by and construed in accordance with the laws of the
     State of New York.

         Section 4.04.  Notices.  (a) All instructions, notices or
     other communications shall be given by mail, addressed as
     follows:
                     In the case of the Trustee:
                
                     Bank One, N.A.
                     100 Broad Street
                     Columbus, Ohio  43271-0181
                     Attention: Corporate Trust Administration










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                     In the case of the Custodian:
            
                     Bank One, N.A.
                     100 Broad Street
                     Columbus, Ohio 43271-0181
                     Attention: Corporate Trust Administration

                     In the case of the Company:
            
                     Talley Industries, Inc.
                     2702 North 44th Street
                     Phoenix, Arizona 85008
                     Attention: Daniel R. Mullen, Treasurer

         (b) At least 30 days but not more than 60 days prior to
     October 15, 1998, the Trustee shall mail by first class mail to
     each holder of the Debentures, at the Company's expense, a notice
     of redemption pursuant to Section 3.03 of the Indenture.




























                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
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         IN WITNESS WHEREOF, the parties hereto have each caused
     this Agreement to be executed by their duly authorized officers
     as of the date first above written.
                           
                                TALLEY INDUSTRIES, INC.


                                By: s/s  Daniel R. Mullen
                                   ---------------------------------
                                Name:  Daniel R. Mullen
                                Title: Vice President and Treasurer


                                BANK ONE, N.A., A NATIONAL BANKING
                                  ASSOCIATION, as      
                                  Trustee


                                By: s/s  Jeffery L. Eubank
                                   ---------------------------------
                                Name:  Jeffery L. Eubank
                                Title: Authorized Signatory


                                BANK ONE, N.A., A NATIONAL BANKING
                                  ASSOCIATION, as      
                                  Custodian


                                By: s/s  Jeffery L. Eubank
                                   ---------------------------------
                                Name:  Jeffery L. Eubank
                                Title: Authorized Signatory
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
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                                                          Schedule A
                                




     Remit to: Bank One, N.A., or its successors, as paying agent

                    Ref: Talley Industries, Inc.
                         12-1/4% Senior Discount Debentures due 2005
                         Principal and Interest

     Remit in "fed funds" the following amounts on October 15, 1998:

                   Face Amount                $2,239,000.00
                   Redemption Premium            137,138.75
                                              -------------
                   Total                      $2,376,138.75
                                              =============




































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                                                            Schedule B

                 
                 
                 
                 
                      Treasury Securities Purchased


     

               Type:               U.S. Treasury Coupon STRIPS

               Maturity:           8/15/98

               Face Amount:        $2.4 million

               Cusip #:            912833BY5