Document:

EXHIBIT
4.3

AMENDMENT
NO. 1 TO

AMENDED
AND RESTATED PREFERRED STOCK RIGHTS AGREEMENT

THIS AMENDMENT NO.
1, dated as of December 14, 2006 (this “Amendment”),
amends that certain Amended and Restated Preferred Stock Rights Agreement dated
as of November 22, 2004 (the “Rights Agreement”),
by and between Catalytica Energy Systems, Inc., a Delaware corporation (the “Company”), and Mellon Investor
Services LLC, a New Jersey limited liability company (the “Rights
Agent”).  Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Rights Agreement.

RECITALS

A.            At a special telephonic meeting of
the Board of Directors of the Company (the “Board”),
the Board resolved to amend the definition of “Acquiring Person” set forth in
Section 1(a) of the Rights Agreement, as set forth below.

B.            Section 27 of the Rights Agreement
provides in pertinent part that prior to the occurrence of a Distribution Date,
the Company may amend the Rights Agreement in any respect without the approval
of any holders of Rights and that upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed amendment is
in compliance with the terms of such Section 27, and provided such amendment
does not change or increase the Rights Agent’s rights, duties or obligations,
the Rights Agent shall execute such amendment.

C.            Concurrently with the execution
hereof, the Company is delivering such a certificate from an appropriate
officer of the Company, certifying that this Amendment is in compliance with
the terms of such Section 27.

In consideration
of the foregoing, the parties hereto agree as follows:

AGREEMENT

1.             Section 1(a) of the Rights is
hereby amended and restated in its entirety to read as follows:

(a) “Acquiring Person” shall mean any
Person, who or which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 20% or more of the Common Shares then
outstanding, but shall not include the Company, any Subsidiary of the Company
or any employee benefit plan of the Company or of any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the terms of
any such plan; provided, however, that Morgan Stanley Capital Partners III,
L.P. (“MSCP”) shall not be deemed an
“Acquiring Person” until such time as MSCP shall be the Beneficial Owner of
21.5% or more of the Company’s Common Shares then outstanding (not including
any Common Shares held by any MSCP affiliate for market-making purposes or in
the ordinary 

 

course of such MSCP affiliate’s asset management operations) or
announces a tender offer to acquire 21.5% or more of the Company’s Common
Shares then outstanding (collectively, the “Limitations”).  Notwithstanding the foregoing, no Person
shall be deemed to be an Acquiring Person as the result of an acquisition of
Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to 20% or more of the Common Shares of the Company then outstanding
(or with respect to MSCP, increases such number of shares to 21.5% or more of
the Common Shares of the Company then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of 20% or more of the Common Shares of
the Company then outstanding (or with respect to MSCP, shall become the
Beneficial Owner of 21.5% or more of the Common Shares of the Company then
outstanding) by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
Common Shares of the Company (other than pursuant to a dividend or distribution
paid or made by the Company on the outstanding Common Shares in Common Shares
or pursuant to a split or subdivision of the outstanding Common Shares), then
such Person shall be deemed to be an Acquiring Person unless upon becoming the
Beneficial Owner of such additional Common Shares of the Company such Person
does not beneficially own 20% or more of the Common Shares of the Company then outstanding
(or with respect to MSCP, does not beneficially own 21.5% or more of the Common
Shares of the Company then outstanding). 
Notwithstanding the foregoing, (i) if the Company’s Board of Directors
determines in good faith that a Person who would otherwise be an “Acquiring
Person,” as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of the Common Shares
that would otherwise cause such Person to be an “Acquiring Person,” as defined
pursuant to the foregoing provisions of this paragraph (a), or (B) such Person
was aware of the extent of the Common Shares it beneficially owned but had no
actual knowledge of the consequences of such beneficial ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, and if such Person divested or divests with reasonable promptness (as
determined in the discretion of the Board of Directors of the Company) a
sufficient number of Common Shares so that such Person would no longer be an “Acquiring
Person,” as defined pursuant to the foregoing provisions of this paragraph (a),
then such Person shall not be deemed to be or to have become an “Acquiring
Person” for any purposes of this Agreement; and (ii) if, as of the date hereof,
any Person is the Beneficial Owner of 20% or more of the Common Shares
outstanding (or with respect to MSCP, is the Beneficial Owner of 21.5% or more
of the Common Shares outstanding), such Person shall not be or become an “Acquiring
Person,” as defined pursuant to the foregoing provisions of this paragraph (a),
unless and until such time as such Person shall become the Beneficial Owner of
additional Common Shares (other than pursuant to a dividend or distribution
paid or made by the Company on the outstanding Common Shares in Common Shares
or pursuant to a split or subdivision of the outstanding Common Shares),
unless, upon becoming the Beneficial Owner of such additional Common Shares,
such Person is not then the Beneficial Owner of 20% or more of the Common
Shares then outstanding (or with respect to MSCP, is not then the Beneficial
Owner of 21.5% or more of the Common Shares then outstanding).

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In its determination of whether a Person has divested or shall divest
with reasonable promptness in accordance with this paragraph (a), the Board of
Directors of the Company may take into account such factors as it deems
relevant, which may in the discretion of the Board of Directors include the
potential impact of the divestiture by such Person on the Company’s stock
price, any liability of such Person which may result from such divestment
arising in connection with Section 16 of the Exchange Act and any undertakings
by such Person, which the Board of Directors of the Company deems reasonably
necessary to ensure compliance with this paragraph (a).

2.             Governing Law.  This Amendment shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State;
provided, however, that all provisions regarding the rights, duties and
obligations of the Rights Agent shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.

3.             Counterparts.  This Amendment may be executed in any number
of counterparts, each of which shall be an original and all of which together
shall constitute one instrument.

4.             No Other Changes.  Except as expressly amended, modified or
superseded by this Amendment, the terms of the Rights Agreement shall remain in
full force and effect.

(The
remainder of this page is intentionally left blank)

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IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be duly executed as
of the day and year first above written

	
  “COMPANY”

  
	
   

  
	
  CATALYTICA ENERGY SYSTEMS, INC.

  
	
  a Delaware corporation

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Robert W.
  Zack

  	
   

  
	
   

  
	
  Name:

  	
  Robert W. Zack

  	
   

  
	
   

  
	
  Title:

  	
  President and Chief Executive Officer

  	
   

  
	
   

  
	
   

  
	
  “RIGHTS AGENT”

  
	
   

  
	
  MELLON INVESTOR SERVICES LLC

  
	
  A New Jersey limited liability company

  
	
   

  
	
  By:

  	
  /s/ Asa Drew

  	
   

  
	
   

  
	
  Name:

  	
  Asa Drew

  	
   

  
	
   

  
	
  Title:

  	
  Assistant Vice President

  	
   

  
							

 

 4Exhibit 10.3

 

EXECUTION COPY

 

TRUST AGREEMENT

THIS TRUST AGREEMENT made this 2nd day of October, 2006, by and among Griffon
Corporation, a Delaware corporation (hereinafter referred to as “Company”,
which term shall include all successors and/or related entities thereto which
have adopted the Griffon Corporation Employee Stock Ownership Plan (the “Plan”)
and/or agreed to be bound by this Trust Agreement) and Wachovia Bank, National
Association as directed trustee (“Directed Trustee”).

W I  T  N  E  S
S  E  T  H:

WHEREAS, Company this day maintains the Plan for its employees; and

WHEREAS, the Plan is designed to invest primarily in
the stock of the Company, and is intended to be an employee stock ownership
plan under Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended
(“Code”) and under Section 407(d)(6) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”).

WHEREAS, Company desires to establish a Trust Fund (as defined in
Section 1.1 below) and to appoint Wachovia Bank, National Association to serve
as Directed Trustee of the Trust Fund to hold and administer property
contributed by the Company (and the income thereon) pursuant to the terms of
the Plan and this Trust Agreement.

NOW, THEREFORE, in consideration of the promises and
the mutual covenants herein contained and intending to be legally bound hereby,
it is agreed by and between the Company and the Directed Trustee as follows:

ARTICLE I

ESTABLISHMENT OF THE TRUST
FUND

1.1                                                                                 (a)           The Company hereby establishes with
the Directed Trustee a trust consisting of such sums of money or property as
shall from time to time be paid to the Directed Trustee under the Plan, and
such earnings, profits, increments, additions and appreciation thereto and
thereon as may accrue from time to time. 
All such sums of money, all investments made therewith or proceeds
thereof, and all earnings, profits, increments, appreciation and additions
thereto and thereon, less the payments which shall have been made by the
Directed Trustee, as authorized herein, to carry out the Plan, are referred to
herein as the “Trust Fund”.

(b)           The Directed Trustee agrees to perform the duties and
obligations imposed by this Trust Agreement. 
No duties or obligations shall be imposed upon the Directed Trustee with
respect to the Trust Fund unless undertaken by the Directed Trustee under the
express terms of this Trust Agreement unless imposed upon the Directed Trustee
by law.  The Directed Trustee is not
responsible for any matter affecting the administration of the Plan by the
Company, the Committee (as defined in Section 1.7 below), or any other person
or persons to whom responsibility for administration of the Plan is delegated
pursuant to the terms of the Plan.  The
Directed Trustee shall have no duty or obligation to advise Participants or
Beneficiaries as to the effect of federal or state securities laws on the Plan,
the Trust Fund or any distributions therefrom.

1.2           The Directed Trustee
shall not be responsible for the collection of any funds required by the Plan
to be paid by the Company to the Directed Trustee, nor shall the Directed
Trustee be responsible for ensuring the timely payment of contributions.  The Directed Trustee is not obligated to see
that funds deposited with it are deposited according to the provisions of the
Plan.

 

1.3           It shall be the duty
of the Directed Trustee hereunder:

(a)           To hold, invest, and reinvest the
Trust Fund, as provided in Article II, and to manage, and administer the Trust
Fund.

(b)           From time to time, on the written
direction of the Plan Administrator (as defined in Section 1.7 below), to make
payments out of the Trust Fund to such persons, in such manner, in such
amounts, and for such purposes as may be specified in such written
direction.  The Directed Trustee shall be
under no liability for any payment made by it pursuant to such a direction, unless it is clear on the direction’s face
that the actions to be taken under the direction would be prohibited by ERISA
or would be contrary to the terms of this Trust Agreement or applicable federal
law.

1.4           The Directed Trustee may refuse to accept any property
which it, in its sole discretion, deems unacceptable.

1.5           The
Directed Trustee shall rely upon the determination of the Plan Administrator
that all assets received by it are properly contributed or transferred to the
Trust Fund in accordance with the provisions of the Plan.  Such assets shall be in cash or in such other
form as may be acceptable to the Directed Trustee, but shall not include any
real property or any interest in real property, or any other assets deemed
unacceptable by the Directed Trustee. The Directed Trustee’s acceptance of any
Plan asset previously held by another trustee or fiduciary pursuant to the Plan
shall not make the Directed Trustee liable for the propriety of the purchase or
retention of such asset.  The Company
shall place those assets which are unacceptable to the Directed Trustee with
another trustee under a separate trust agreement or shall retain such assets in
the Company’s or other appropriate party’s custody.  The Directed Trustee shall have no
responsibility for such assets deemed unacceptable to the Directed Trustee and
not held in the Trust Fund.

1.6           The Company hereby
certifies that:

(a)            The Company has
established and will maintain the Plan in compliance in all material respects
with the qualification requirements of Section 401(a) of the Code and shall
promptly notify the Directed Trustee of any change in such qualified status.

(b)           The terms of the
Plan provide for the creation of a trust agreement and the appointment of a
trustee.

(c)            The Company is the
Plan Sponsor and has the authority to act for all participating employers
designated under the Plan, if any, with respect to the execution of this Trust
Agreement.

1.7.          As used in this Trust Agreement, the term “Plan
Administrator” or “Committee” means the committee so designated in accordance
with the terms of the Plan by the Company from time to time, or, if no such
Committee is so designated, such term shall mean the Company. The Company shall
provide the Directed Trustee the names and signatures of the individuals
designated as the Plan Administrator who shall be authorized to instruct the
Directed Trustee under this Trust Agreement. 
The Company shall promptly give written notice to the Directed Trustee
of a change in the identity or duties of a Plan Administrator.  Until such written notice is received by the
Directed Trustee, the Directed Trustee shall be fully protected in assuming
that the designated individuals are authorized to act as Plan Administrators.

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1.8           The members of the Committee,
collectively and individually, shall be the named fiduciaries of the trust for
purposes of Section 402 of ERISA, except that, (i) solely to the extent that
any rights attributable to Employer Securities (as defined below) may be
exercised by Participants or their Beneficiaries, each Participant and
Beneficiary also shall be a named fiduciary with respect to the exercise of
voting and tender or exchange offer rights for Employer Securities held in such
Participant or Beneficiary’s Account and (ii) with respect to all other
situations relating to the exercise of voting and tender or exchange offer
rights for Employer Securities held in a Participant’s or Beneficiary’s
Account, the Directed Trustee shall be the named fiduciary.

 

ARTICLE II

INVESTMENT OF THE TRUST FUND

2.1           The Directed Trustee shall invest and reinvest the
principal and income of the Trust Fund pursuant to the written, telephone or
computer generated direction of the Company, the “Named Fiduciary” (as
authorized under the Plan document), or a Plan Participant (if permitted under
the Plan document), or by any other party to whom authority to give such
directions, requests or approvals is delegated by the Company and keep the same
invested without distinction between principal and income.  The Directed Trustee shall not make any
determination which shall cause it to be deemed a “Fiduciary” (as defined under
Section 3(21) of ERISA) under the Plan with regard to such investment or
reinvestment.

Without
limiting the generality of the foregoing, the primary purpose of the Plan is to
acquire an ownership interest in the Company either from the Company or its
shareholders and to provide deferred compensation benefits to Participants and
Beneficiaries in the form of shares of Employer Securities.  Accordingly, the Plan has been established to
provide for investment primarily in shares of Employer Securities.  In furtherance of the purpose for which the
Plan has been established and designed, the Trustee shall, in accordance with
the terms of the Plan, (a) make payments from the Trust Fund in accordance with
directions from the Committee as required under the terms of any existing
Acquisition Loan and as permissible by law, (b) hold unallocated shares of
Employer Securities which have been acquired with the proceeds of an
Acquisition Loan in a Loan Suspense Account for release and allocation to the
Accounts of Participants, (c) hold shares of Employer Securities which have
been contributed by the Employer and (d) distribute to Participants or their
Beneficiaries under the terms of the Plan all shares of Employer Securities and
other assets which have been allocated to the Accounts of such Participants
pursuant to the terms of the Plan in accordance with the terms of the Plan,
notwithstanding any otherwise applicable fiduciary standard relating to (i)
diversification of Trust Fund assets, (ii) the speculative character of Trust
Fund investments, (iii) the lack or inadequacy of income provided by Trust Fund
assets, or (iv) the probable continual fluctuation in the fair market value of
Trust Fund assets.  Subject to the
provisions of the Plan, the Trustee is expressly authorized, in accordance with
the terms of the Plan, to hold 100% of the assets of the Trust Fund in shares
of Employer Securities.

The
term “Employer Securities” shall mean common stock issued by the Company (or by
a corporation which is a member of the same controlled group as defined in
Section 409(l)(4) of the Code) which is readily traded on an established
securities market which constitute qualifying employer securities within the
meaning of Section 407(d) of ERISA.

The term “Acquisition Loan”
shall mean any loan to a prior trustee by a disqualified person or party in
interest (within the meaning of the Code or ERISA as applicable) used to
finance the acquisition of Employer Securities. 
The Directed Trustee shall be entitled to rely, without inquiry, that
the terms and conditions of such Acquisition Loan satisfy the requirements of
the Code and ERISA.  The Company and the Committee have
directed the Directed Trustee to accept and comply with the terms of any
Acquisition Loan and related guaranty and pledge agreements.

 3
 

 

2.2           The Directed Trustee
shall have the following powers in addition to the powers customarily vested in
trustees by law and in no way in derogation thereof:

(a)           With any cash at any time held by
them, to purchase or subscribe for any Employer Securities and Authorized
Investment (as defined below), and to retain such Employer Securities or
Authorized Investment in trust.

(b)           To sell for cash or on credit,
convert, redeem, exchange for another Authorized Investment, or otherwise
dispose of, any Authorized Investment at any time held by it.

(c)           To retain uninvested all or any part
of the Trust Fund and to deposit the same in an interest-bearing account
in any banking or savings institution including Directed Trustee’s savings
department, in accordance with and as directed in writing by the Company or its
authorized representative.

(d)           To exercise any option appurtenant to
any Authorized Investment in which the Trust Fund is invested for conversion
thereof into another Authorized Investment, or to exercise any rights to
subscribe for additional Authorized Investments and to make all necessary payments
therefor, in accordance with and as directed in writing by the Company or its
authorized representative.

(e)           Pursuant to the written direction of
the Company or its authorized representative, to join in, consent to, dissent
from, or oppose, the reorganization, recapitalization, consolidation, sale,
merger, foreclosure, or readjustment of the finances of any corporations or
properties in which the Trust Fund may be invested, or the sale, mortgage,
pledge or lease of any such property or the property of any such corporation
upon such terms and conditions as it may deem wise; to do any act (including
the exercise of options, making of agreements or subscriptions, and payment of
expenses, assessments, or subscriptions) which may be deemed necessary or advisable
in connection therewith; and to accept any Authorized Investment which may be
issued in or as a result of any such proceeding, and thereafter to hold the
same.

(f)            To vote, in person
or by general or limited proxy, at any election of any corporation (other than
the Company) in which the Trust Fund is invested, and similarly to exercise,
personally or by a general or limited power of attorney, any right appurtenant
to any Authorized Investment held in the Trust Fund, in accordance with and as
directed in writing by the Company or its authorized representative.  Except as otherwise required by ERISA or regulations
thereunder, or the Code or regulations thereunder, all voting rights of
Employer Securities held by the Trust Fund, and all rights to sell or otherwise
tender Employer Securities held by the Trust Fund, shall be exercised by the
Trustee in accordance with the directions of the Participants and Beneficiaries
as provided in the Plan (as in effect on the date of this Trust Agreement or as
thereafter amended with the consent of the Directed Trustee, which consent
shall not be unreasonably withheld). 
Anything in this Trust Agreement or in the Plan to the contrary
notwithstanding, proceeds of any unallocated Employer Securities tendered by
the Trustee shall be reinvested in Employer Securities.

(g)           To
make payments from the Trust Fund in accordance with directions from the
Committee as required under the terms of any Acquisition Loan and as
permissible by law.

 4
 

 

(h)           To purchase Employer Securities and Authorized
Investments at a premium or discount in accordance with and as directed in
writing by the Company or its authorized representative.

(i)            To employ suitable agents,
sub-custodians, actuaries, accountants, investment advisors or managers and
counsel and to pay their reasonable expenses and compensation.

(j)            To cause any investment in the Trust
Fund to be registered in, or transferred into, its name as Directed Trustee or
the name of its nominee or nominees or to retain them unregistered or in form permitting
transfer by delivery, but the books and records of the Directed Trustee shall
at all times show that all such investments are part of the Trust Fund, and the
Directed Trustee shall be fully responsible for any misappropriation or
defalcation in respect of any investment held by its nominee or held in
unregistered form and shall cause the indicia of ownership to be maintained
within the jurisdiction of the district courts of the United States.

(k)           To do all acts which it may deem
necessary or proper and to exercise any and all powers of the Directed Trustee
under this Trust Agreement upon such terms and conditions which it may deem are
for the best interests of the Trust Fund.

2.3           “Authorized Investment” as used in this Article II shall
mean bonds, debentures, notes, or other evidences of indebtedness; stocks
(regardless of class), or other evidences of ownership, in any corporation,
mutual investment fund, put or call options traded on a national exchange,
common or collective trust fund, pooled investment fund, investment company,
association, or business trust; life insurance, retirement income or annuity
contracts. Employer Securities shall be excluded from the term Authorized
Investment. “Authorized Investments” shall not be limited to that class of
investments which are defined as legal investments for trust funds under the
laws of North Carolina or of any other jurisdiction.

2.4         If investment of the
Trust Fund is to be directed in whole or in part by an Investment Manager, the
Plan Administrator shall deliver satisfactory evidence to the Directed Trustee
that:

(a)            The applicable
Investment Advisor has delivered a statement acknowledging that it is an
Investment Advisor and fiduciary of the Plan;

(b)           The Investment
Advisor is currently a registered investment adviser under the Investment
Advisers Act of 1940 or otherwise qualifies as an investment manager described
in Section 3(38) of ERISA; and

(c)            The Investment
Advisor has accepted appointment as an Investment Manager to the Trust Fund.

The Directed Trustee shall be entitled to
rely entirely, without any independent investigation, upon such documents until
such time as it is otherwise notified in writing.  The Plan Administrator shall promptly deliver
to the Directed Trustee prior written notice of the removal or replacement of
any Investment Advisor.  Notwithstanding
any provision of this Trust Agreement to the contrary, the Directed Trustee
shall not be entitled to rely on any direction that is clear on its face that
the actions to be taken under the direction would be prohibited by ERISA or
would be contrary to the terms of this Trust Agreement or applicable federal
law.

 5
 

 

ARTICLE III

ACCOUNTS TO BE KEPT AND
RENDERED BY THE DIRECTED TRUSTEE

3.1           The Directed Trustee shall keep accurate and detailed
accounts of all investments, receipts and disbursements and other transactions
hereunder, including such specific records as shall be required by law and such
additional records as may be agreed upon in writing between the Company and the
Directed Trustee.  All accounts, books
and records relating thereto shall be open to inspection and audit by any
person or persons designated by the Plan Administrator or the Company, at all
reasonable times.

3.2           Within ninety (90) days following the close of each year of
the Plan or the receipt of the Company’s contribution for such year, whichever
is later, or within ninety (90) days following the Directed Trustee’s
resignation or removal under Article IV of this Trust Agreement, the Directed
Trustee shall file with the Plan Administrator a written account, setting forth
all investments, receipts and disbursements, and other transactions effected by
it during such year of the Plan or during the period from the close of the last
preceding year of the Plan to the date of such removal or resignation,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales, and showing all cash,
securities and other property held at the end of such year or as of the date of
removal or resignation, as the case may be. 
Neither the Company nor the Plan Administrator nor any other person
shall have the right to demand or to be entitled to any further or different
accounting by the Directed Trustee, except as may be required by statute or by
regulations published by federal government agencies with respect to reporting
and disclosure.

3.3           Each report
submitted pursuant to Section 3.2 shall be promptly examined by the
Committee.  If the Committee approves of
such report, then except with respect to acts or omissions constituting willful
misconduct, bad faith, breach of applicable law or breach of fiduciary duty, upon
the expiration of ninety (90) days from the date of filing of such annual or
other account, the Directed Trustee shall be forever released from any
liability of accountability with respect to the propriety of any of its
accounts or transactions so reported, as if such account had been settled by
judgment or decree of a court of competent jurisdiction in which the Directed
Trustee, the Committee, the Company, and all persons having or claiming any
interest in the Trust Fund were made parties, except with respect to any acts
or transactions as to which (a) the
Plan Administrator shall within such ninety-day period file with the
Directed Trustee a written statement claiming negligence or (b) the Company could not reasonably be
expected to have recognized after reviewing such accounting.  The foregoing, however, is not to be construed
to deprive the Directed Trustee of the right to have its account judicially
settled if it so desires.

3.4           The
Committee may approve of any report furnished by the Directed Trustee under
Section 3.2 either by written statement of approval furnished to the Directed
Trustee or shall be deemed to have approved of any such report by failure to
file a written objection to the report with the Directed Trustee within 90 days
of the date on which the Committee receives such report.  The Committee may disapprove of any report
furnished by the Directed Trustee under Section 3.2 by written statement of
disapproval furnished to the Directed Trustee setting forth the reason for such
disapproval (a “Notice of Disapproval”). 
In such event the Directed Trustee shall amend such report with due
regard for the Committee’s reasons for such disapproval and submit such amended
report to the Company for its approval or disapproval within thirty (30) days
following its receipt of such Notice of Disapproval.  The Committee shall not be liable to any
person for its approval, disapproval or failure to approve any such report
rendered by the Directed Trustee.

 6
 

 

ARTICLE
IV

THE DIRECTED TRUSTEE

4.1           The Directed Trustee accepts the Trust Fund hereby created
and agrees to perform the duties hereby required by it, subject, however, to
the following conditions:

(a)           The Directed Trustee and its
officers, directors, employees, agents and affiliates, shall not be liable for
losses of any kind which may result (1) by reason of any action taken by it in
accordance with the directions or instructions of the Company or the Plan
Administrator or otherwise required to be taken in accordance with this Trust
Agreement; provided, however, that the Directed Trustee must not act upon any direction
that is clear on its face that the actions to be taken under the direction
would be prohibited by ERISA or would be contrary to the terms of this Trust
Agreement or applicable federal law, (2) by reason of any failure to act due to
the absence of such directions or instructions, or (3) by reason of any actions
taken by any other trustee, custodian, or fiduciary, whether previous or
current, acting on behalf of the Plan. 
The Directed Trustee has no duty to perform any action other than those
specified herein.

(b)           The Directed Trustee shall receive as
compensation for its services such amounts as may be agreed upon at the time of
execution of this Trust Agreement, subject to
change at any time and from time to time by agreement between the Company and
the Directed Trustee.  Except as
otherwise provided herein, the Directed Trustee’s compensation and any other
proper expense of the Directed Trustee for the Trust Fund (unless payable out
of the Directed Trustee’s compensation) including all real and personal
property taxes, income taxes, transfer taxes, and other taxes of any and all
kinds whatsoever that may be levied or assessed under existing or future laws
of any jurisdiction upon or in respect of the Trust Fund hereby created, or any
money, property or securities forming a part thereof shall be paid out of the
Trust Fund.  The Company shall have the
option, but not the obligation, to pay any such compensation and expenses
directly, in whole or in part, and by so doing, to relieve the Trust Fund from
the obligation of bearing such expenses.

(c)           The Directed Trustee
shall not be answerable for any action taken pursuant to any direction,
consent, request, or other paper or document on the belief that the same is
genuine and signed by the proper person if such direction, consent, request or
other paper or document relates to a matter with respect to which the purported
initiator or signatory has authority under the Plan.  If the Directed Trustee makes a written
request for directions from the Committee, the Directed Trustee may await such
directions without incurring liability. 
The Directed Trustee has no duty to act in the absence of such requested
directions, but may in its discretion take such action as it deems appropriate
to carry out the purposes of this Trust Agreement, without liability therefor.

(d)           The Company shall indemnify and hold
harmless the Directed Trustee from all loss or liability (including expenses and
reasonable attorneys’ fees) to which the Directed Trustee may be subject by reason of its
execution of its duties under this Trust Agreement, or by reason of any acts taken in good
faith in accordance with directions, or acts omitted in good faith due to absence of
directions, from the Committee unless such loss or liability is due to the Directed
Trustee’s negligence or willful misconduct. The Directed Trustee is entitled to collect on
the indemnity provided by this Section 4.1(d) only from the Company and is not entitled to any
direct or indirect 

 7
 

 

indemnity payment from assets of the Trust Fund.  For purposes of subsection (d), negligence
shall be defined as acts or omissions that constitute a material departure from
standards of
ordinary care.

In the event that the Directed Trustee is named as a defendant in a
lawsuit or proceeding involving the Plan or the Trust Fund, the Directed Trustee
shall be entitled to receive on a current basis the indemnity payments provided for in this
Section.  If, however, the final judgment
entered in the lawsuit or proceeding holds that the Directed Trustee is guilty
of negligence or willful misconduct with respect to one or more counts alleged against
it, the
Directed Trustee shall refund the portion of the indemnity payments that are
reasonably allocable to the defense of those counts with respect to which the
Directed Trustee has been found to have committed acts of negligence or willful
misconduct.

The
Directed Trustee may begin, maintain or defend any litigation necessary in
connection with the administration of the Plan, except that the Directed
Trustee is not obligated or required to do so unless indemnified to its
satisfaction against all expenses and liabilities which it may sustain or
reasonably anticipate by reason thereof. 
Anything hereinabove to the contrary notwithstanding, any obligation of the
Company to indemnify and hold harmless the Directed Trustee pursuant to this
Section 4.1(d) shall be expressly conditioned on the Directed Trustee giving
prompt written notice to the Company of any proceeding for which
indemnification pursuant to this Section 4.1(d) will be requested and the
Directed Trustee giving the Company an opportunity to meaningfully participate
in the defense thereof and to approve any settlement thereof.

Notwithstanding any
provision of this Trust Agreement to the contrary, nothing shall be deemed to
limit the Company’s rights against Directed Trustee for any breach of any term
of this Trust Agreement by Directed Trustee, including, without limitation, any
breach of a representation or warranty by Directed Trustee, or as a result of
Directed Trustee’s negligence, bad faith, fraud, willful misconduct,
breach of a fiduciary responsibility under ERISA or breach of this Trust
Agreement.

(e)           Neither Directed Trustee nor Company
shall be liable for any indirect, consequential, or special damages suffered by
any other person in connection herewith. 
The indemnification provisions under this Section 4.1 shall not apply
with respect to any dispute between the Company and the Directed Trustee.  The indemnification provisions under this
Section 4.1 and any other hold harmless provision in this Trust Agreement shall
survive the termination of this Trust Agreement.

4.2           Upon the appointment of the Plan Administrator and upon
any change in the Plan Administrator, the Company shall advise the Directed
Trustee in writing thereof, and the Directed Trustee shall be fully protected
in assuming that there has been no change until so advised by the Company.

4.3           Directed Trustee
acting hereunder may resign at any time by giving sixty (60) days’ written
notice to the Plan Administrator.  The
Company may terminate the Directed Trustee at any time (i) without cause by
giving sixty (60) days’ written notice to the Directed Trustee or (ii) for
cause upon written notice to the Directed Trustee.  Within forty-five (45) days of the date of
the notice of termination or resignation, the Company shall notify the Directed
Trustee in writing of the name of the successor trustee. The above
notwithstanding, resignation or termination may be made effective at any time
upon mutual consent of the parties. 
Except as otherwise provided in section 4.4, upon the effective date of
the resignation or removal of Directed Trustee, or upon the date on which there
is no longer any property hold under the Trust, if earlier, the Directed
Trustee shall be forever released and discharged from any liability or
accountability to anyone with respect to its actions as Directed Trustee.

 8
 

 

4.4           Upon the appointment
of a successor trustee, the resigning or removed Directed Trustee shall
transfer and deliver the Trust Fund to such successor trustee after reserving
such reasonable amount as it shall deem necessary to provide for its expenses
in the settlement of its account, and any sums chargeable against the Trust
Fund for which it may be liable.  If the
sums so reserved are not sufficient for such purposes, the resigning or removed
Trustee shall be entitled to reimbursement for any deficiency from the
successor trustee and the Company who shall be jointly and severally liable
therefor.  If the sums so reserved exceed
the amount necessary for such purposes, the resigning or removed Trustee shall
promptly transfer and deliver such excess sums, with earnings thereon, to the
Trust Fund.  Upon the appointment of a
successor trustee, the resigning or removed Trustee shall transfer and deliver
to such successor trustee, within a reasonable period of time, all records
within its possession relevant to the continued performance of trustee
duties.  When the assets comprising the
Trust Fund, shall have been transferred and delivered to the successor trustee
or custodian, as applicable, the Directed Trustee shall be released and
discharged from all further accountability for the Trust Fund and shall not be
responsible in any way for the further disposition of the Trust Fund or any
part thereof.

4.5           Directed
Trustee shall not act, nor be under any obligation to act, absent direction of
the Company, Named Fiduciary or Plan Participant (as appropriate).

4.6 
        The Directed
Trustee shall discharge its duties under this Trust Agreement with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent person acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like aims,
consistent with the requirements of applicable law and in accordance with its
responsibilities under Section 403(a)(1) of ERISA.

ARTICLE
V

AMENDMENTS
TO TRUST AGREEMENT -

DISCONTINUANCE OF PLAN

5.1           The provisions of
this Trust Agreement may be amended at any time and from time to time by the
Company provided that: (a) no such amendment shall be effective unless the Plan
and the Trust Agreement, as so amended, shall be for the exclusive benefit of
the employees of the Company or their respective beneficiaries; (b) no such
amendment shall operate to deprive a Participant of any rights or benefits
irrevocably vested in him under the Plan or Trust Agreement prior to such
amendment; (c) no such amendment which may affect the Directed Trustee shall be
effective until the Directed Trustee has consented thereto; and (d) each such
amendment shall be effective when adopted by the Board of Directors of Company,
and filed with the Directed Trustee, except that where the consent of the
Directed Trustee is required, any such amendment shall not become effective
until the Directed Trustee has given its consent by approving the copy of the
amendment filed with it.

 9
 

 

ARTICLE VI

MISCELLANEOUS PROVISIONS

6.1           Any person dealing with the Directed Trustee may rely upon
a copy of this Trust Agreement and any amendments thereto, certified to be a
true and correct copy by any officer of the Directed Trustee.

6.2           Other than as provided in Section 4.1 and 6.3 hereof, in
no circumstance, whether upon amendment or termination of this Trust Agreement,
or otherwise, shall any part of the Trust Fund be used for or diverted to any
purposes other than (i) the exclusive benefit of employees of the Company who
are Participants under the Plan, or their beneficiaries, and (ii) defraying the
reasonable expenses of administering the Plan and the Trust Fund.

6.3           Neither this Trust Agreement nor the Plan shall prohibit
any of the following transactions, each of which is specifically authorized
hereby, to the extent permitted by Section 403(c) of ERISA:

(a)           The return to Company of all or any
part of one or more contributions made by Company by reason of a mistake of
fact if such return is made within one (1) year after the payment of such
contribution;

(b)           The return to Company of all or any
part of one or more contributions made by Company if all of the following
conditions apply: (i) the contribution was conditioned on the qualification of
the Plan under Section 401 of the Code, (ii) the Plan is found not to so
qualify, and (iii) the contribution(s) is/are returned to Company within one
(1) year of the date of denial of qualification of the Plan; and

(c)           The return to Company of any
contribution for which deduction is wholly or partially disallowed under
Section 404 of the Code, to the extent of such disallowances, if the (i)
contribution, when made, was conditioned upon its deductibility and (ii) the
return of the contribution occurs within one (1) year after the disallowance of
the deduction.

This Section 6.3 shall not be construed to permit any payment which
would deprive the Trust Fund of its tax-exempt status.

6.4           In the event of any conflict between the provisions of the
Plan and the Trust Agreement, the latter shall control.

6.5           The term “Plan” whenever used herein shall mean the Plan
as amended from time to time, and the Company will cause a copy of any
amendment or a copy of the Plan, as amended, revised or changed, in any way and
from time to time to be delivered to the Directed Trustee.

6.6           Any term used herein which is defined in the Plan shall be
considered to have the same meaning as in the Plan unless the contrary is
clearly indicated.

6.7           The
Company shall be responsible for timely filing all tax and information returns,
as well as all required descriptions, reports, and disclosures, relating to the
Plan and Trust.

 10
 

 

6.8           Any notice or other
communication required or permitted to be given under this Trust Agreement (a “Notice”)
shall be in writing and delivered in person, by facsimile transmission (with a
Notice contemporaneously given by another method specified in this Section
6.8), by overnight courier service or by postage prepaid mail with a return
receipt requested, at the following locations (or to such other address as
either party may have furnished to the other in writing by like Notice).  All such Notices shall only be duly given and
effective upon receipt (or refusal of receipt).

	
  

  	
  If to the
  Directed Trustee:

  
	
   

  	
   

  
	
   

  	
  Wachovia
  Retirement Services

  
	
   

  	
  One Penn Plaza,
  27th floor

  
	
   

  	
  New York, NY
  10119

  
	
   

  	
  Attention:
  Richard A. Vollmer, Vice President

  
	
   

  	
  Facsimile: (212)
  273-7056

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  If to the
  Company:

  
	
   

  	
   

  
	
   

  	
  Griffon
  Corporation

  
	
   

  	
  100 Jericho
  Quadrangle

  
	
   

  	
  Jericho, NY
  11753

  
	
   

  	
  Attention:
  Patrick L. Alesia, Vice President

  
	
   

  	
  Facsimile: (516)
  938-5544

  

 

6.9           This
Trust Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and said counterparts shall constitute one and the
same instrument.

6.10         This
Trust Agreement shall be construed, enforced and regulated under federal law,
and to the extent (if any) not preempted thereby, under the laws of the State
of North Carolina.

6.11         This
Trust Agreement and the Plan contain the entire agreement and understanding of
the Company and the Directed Trustee with respect to the subject matter hereof
and supersede all prior agreements and understandings related to such subject
matter.  This Trust Agreement shall be
binding upon the parties hereto and their successors and assigns.

6.12         Any
provision of this Trust Agreement prohibited by law shall be ineffective to the
extent of any such prohibition, without invalidating the remaining provisions
hereof.

[Remainder of Page Intentionally Left Blank]

 11

 

IN WITNESS
WHEREOF, the Company and the Directed Trustee have caused this Trust Agreement
to be executed and their respective corporate seals to be hereunto affixed and
attested as of the day and year first above written.

 

	
  Wachovia Bank, National
  Association

  	
   

  	
  Griffon Corporation

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name: Patrick L. Alesia

  	 

	
  Title:

  	
   

  	
  Title:

  	
   

  	
  Vice President

  	 

										

[Signature Page to Trust Agreement]

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