Griffon Corp – ‘10-K’ for 9/30/01 – EX-4

On:  Friday, 12/21/01   ·   For:  9/30/01   ·   Accession #:  932214-1-500100   ·   File #:  1-06620

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Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         48    224K 
 2: EX-4        Instrument Defining the Rights of Security Holders   103    336K 
 3: EX-23       Consent of Experts or Counsel                          1      5K 

EX-4   —   Instrument Defining the Rights of Security Holders
Exhibit Table of Contents

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------------------------------------------------------------------------
AMENDED AND RESTATED LOAN AGREEMENT 

by and among

GRIFFON CORPORATION,

TELEPHONICS CORPORATION,

THE LENDERS PARTY HERETO, 

FLEET NATIONAL BANK,

AS ADMINISTRATIVE AGENT 

and 

THE CHASE MANHATTAN BANK, AS DOCUMENTATION AGENT

Dated as of October 25, 2001

------------------------------------------------------------------------

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TABLE OF CONTENTS 

Article 1       Definitions.                                                   1

Article 2       Commitments; Loans.                                           25

        Section 2.1.    Loans.                                                25
        Section 2.2.    Notices Relating to Loans.                            26
        Section 2.3.    Disbursement of Loan Proceeds.                        27
        Section 2.4.    Notes.                                                27
        Section 2.5.    Repayment of Principal of Loans.                      28
        Section 2.6.    Interest.                                             29
        Section 2.7.    Fees.                                                 30
        Section 2.8.    Changes in Commitment.                                31
        Section 2.9.    Use of Proceeds of Loans; Existing Indebtedness.      32
        Section 2.10.   Computations.                                         32
Section 2.11.   Minimum Amounts of Borrowings, Conversions,     
                        Prepayments and Interest Periods.                     33
        Section 2.12.   Time and Method of Payments.                          33
        Section 2.13.   Lending Offices.                                      34
        Section 2.14.   Failure to Fund.                                      34
        Section 2.15.   Pro Rata Treatment Between Banks.                     34
        Section 2.16.   Sharing of Payments, and Set-Off Among Banks.         35
        Section 2.17.   Conversions of Loans.                                 35
        Section 2.18.   Additional Costs; Capital Requirements.               36
        Section 2.19.   Limitation on Types of Loans.                         38
        Section 2.20.   Illegality.                                           38
Section 2.21.   Certain Conversions pursuant to Sections 2.18   
                        and 2.20.                                             38
        Section 2.22.   Indemnity.                                            39
        Section 2.23.   Security.                                             40
        Section 2.24.   Letters of Credit.                                    41

Article 3       Representations and Warranties.                               45

        Section 3.1.    Organization.                                         45
        Section 3.2.    Power, Authority, Consents.                           45
        Section 3.3.    No Violation of Law or Agreements.                    46
        Section 3.4.    Due Execution, Validity, Enforceability.              46
        Section 3.5.    Properties, Priority of Liens; Existing Guarantees.   46
        Section 3.6.    Judgments, Actions, Proceedings.                      47
        Section 3.7.    No Defaults, Compliance With Laws.                    47
        Section 3.8.    Burdensome Documents.                                 47
        Section 3.9.    Financial Statements.                                 48

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        Section 3.10.   Tax Returns.                                          48
        Section 3.11.   Intangible Assets.                                    48
        Section 3.12.   Regulation U.                                         49
        Section 3.13.   Name Changes, Mergers, Acquisitions.                  49
        Section 3.14.   Full Disclosure.                                      49
        Section 3.15.   Licenses and Approvals.                               49
 Section 3.16.   Labor Disputes; Collective Bargaining Agreements;
                        Employee Grievances.                                  49
        Section 3.17.   Condition of Assets.                                  50
        Section 3.18.   ERISA.                                                50
        Section 3.19.   Termination of Certain Lines of Credit.               52

Article 4       Conditions to the Loans.                                      53

        Section 4.1.    Conditions to Initial Extensions of Credit            53
Section 4.2.    Conditions to Effectiveness of Amended and      
                        Restated Loan Agreement.                              53
        Section 4.3.    Conditions to Subsequent Extensions of Credit.        54

Article 5       Delivery of Financial Reports, Documents and Other              
                Information.                                                  55

        Section 5.1.    Annual Financial Statements.                          55
        Section 5.2.    Quarterly Financial Statements.                       55
        Section 5.3.    Projections.                                          56
        Section 5.4.    Compliance Information.                               56
        Section 5.5.    No Default Certificate.                               56
        Section 5.6.    Certificate of Accountants.                           56
        Section 5.7.    Accountants, Reports.                                 57
        Section 5.8.    Copies of Documents.                                  57
        Section 5.9.    Certain Notices.                                      57
        Section 5.10.   ERISA Notices and Requests.                           57
        Section 5.11.   Permitted Acquisition Deliveries.                     58

Article 6       Affirmative Covenants.                                        59

        Section 6.1.    Books and Records.                                    59
        Section 6.2.    Inspections and Audits.                               59
        Section 6.3.    Maintenance and Repairs.                              59
        Section 6.4.    Continuance of Business.                              60
        Section 6.5.    Copies of Corporate Documents.                        60
        Section 6.6.    Perform Obligations.                                  60
        Section 6.7.    Notice of Litigation.                                 60
        Section 6.8.    Insurance.                                            60
        Section 6.9.    Financial Covenants.                                  61
        Section 6.10.   Notice of Certain Events.                             61

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        Section 6.11.   Comply with ERISA.                                    62
        Section 6.12.   Environmental Compliance.                             62
        Section 6.13.   Reserved.                                             63
        Section 6.14.   Projections.                                          63

Article 7       Negative Covenants.                                           63

        Section 7.1.    Indebtedness.                                         63
        Section 7.2.    Liens.                                                63
        Section 7.3.    Guaranties.                                           64
        Section 7.4.    Mergers, Acquisitions.                                65
        Section 7.5.    Redemptions; Distributions.                           65
        Section 7.6.    Stock Issuance.                                       66
        Section 7.7.    Changes in Business and Sales or Pledges of Assets.   66
        Section 7.8.    Investments.                                          66
        Section 7.9.    Fiscal Year.                                          67
        Section 7.10.   ERISA Obligations.                                    67
        Section 7.11.   Reserved.                                             68
        Section 7.12.   Transactions with Affiliates.                         68
        Section 7.13.   Hazardous Material.                                   69
        Section 7.14.   Regulation U.                                         69
        Section 7.15.   Limitations on Restrictions on Upstreaming of Funds   69
        Section 7.16.   Derivative Protection Arrangements                    70

Article 8       Events of Default.                                            70

        Section 8.1.    Payments.                                             70
        Section 8.2.    Certain Covenants.                                    70
        Section 8.3.    Other Covenants.                                      70
        Section 8.4.    Other Defaults.                                       71
        Section 8.5.    Representations and Warranties.                       71
        Section 8.6.    Bankruptcy.                                           71
        Section 8.7.    Judgments.                                            72
        Section 8.8.    ERISA.                                                72
        Section 8.9.    Liens.                                                72
        Section 8.10.   Change of Control.                                    73

Article 9       Miscellaneous Provisions.                                     73

        Section 9.1.    Fees and Expenses, Indemnity.                         73
        Section 9.2.    Taxes.                                                74
        Section 9.3.    Payments.                                             75
Section 9.4.    Survival of Agreements and Representations;     
                        Construction.                                         75
        Section 9.5.    Lien on and Set-off of Deposits.                      76
Section 9.6.    Modifications, Consents and Waivers; Entire     
                        Agreement.                                            76

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        Section 9.7.    Remedies Cumulative.                                  77
        Section 9.8.    Further Assurances.                                   78
        Section 9.9.    Notices.                                              78
        Section 9.10.   Counterparts.                                         80
        Section 9.11.   Severability.                                         80
Section 9.12.   Binding Effect; No Assignment or Delegation by  
                        Borrowers.                                            80
        Section 9.13.   Assignments and Participations by Banks.              81
        Section 9.14.   Relief From Bankruptcy Stay.                          83
 Section 9.15.   Governing Law; Consent to Jurisdiction; Waiver of
                        Trial by Jury.                                        83
        Section 9.16.   Reserved                                              85
        Section 9.17.   Interest Adjustment.                                  85
        Section 9.18.   Lost Notes.                                           86

Article 10      The Administrative Agent.                                     86

        Section 10.1.   Appointment.                                          86
        Section 10.2.   Individual Capacity.                                  86
        Section 10.3.   Exculpatory Provisions.                               86
        Section 10.4.   Reliance by Administrative Agent.                     87
        Section 10.5.   Delegation.                                           87
        Section 10.6.   Resignation; Successor Administrative Agent.          88
        Section 10.7.   NonReliance on Other Credit Parties.                  88
        Section 10.8.   Notices Binding.                                      88
        Section 10.9.   Amendment and Restatement                             89

Article 11      Mutual Guarantees.                                            90

        Section 11.1.   Guarantee                                             90
        Section 11.2.   Absolute Obligation                                   91
        Section 11.3.   Repayment in Bankruptcy, etc.                         92
        Section 11.4.   Miscellaneous                                         92

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EXHIBITS
--------

A       Form of Note                                                            
B.      States of Incorporation and Qualification, and Capitalization and       
Ownership of Stock, of each Borrower and Subsidiaries           
C.      Consents, Waivers, Approvals; Violation of Agreements                   
D.      Permitted Security Interests, Liens and Encumbrances                    
E.      Judgments, Actions, Proceedings                                         
F.      Defaults; Compliance with Laws, Regulations, Agreements                 
G.      Burdensome Documents                                                    
H.      Name Changes, Mergers, Acquisitions                                     
I.      Labor Disputes; Collective Bargaining Agreements; Employee Grievances   
J.      Pension Plans                                                           
K.      Permitted Contingent Obligations and Guaranties and Existing Guarantees,
Contingent Obligations and Investments                          
L.      Form of Assignment and Acceptance                                       

SCHEDULES 
--------- 

Schedule 1 - Fleet L/Cs                                                         
Schedule 2 - Chase L/Cs                                                         

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LOAN AGREEMENT
--------------

     THIS  LOAN   AGREEMENT,   made  this  25th  day  of  October,   2001  (this
"Agreement"),  is by and  among  GRIFFON  CORPORATION,  a  Delaware  corporation
("Griffon"),  TELEPHONICS  CORPORATION,  a Delaware corporation  ("Telephonics;"
Griffon and  Telephonics  are at times  referred to herein as a  "Borrower"  and
collectively as the "Borrowers"),  the several banks and other parties from time
to  time  that  are  permitted  parties  hereto  (individually,  a  "Bank"  and,
collectively,  the "Banks"),  FLEET NATIONAL BANK,  successor by merger to Fleet
Bank, National Association,  a national banking association,  in its capacity as
Administrative  Agent (as  hereinafter  defined) and THE CHASE MANHATTAN BANK, a
New York  banking  corporation,  in its  capacity  as  Documentation  Agent  (as
hereinafter defined).                                                           

W I T N E S S E T H:
- - - - - - - - - - 

RECITALS:                                                                       
--------                                                                        

     (1) Griffon,  the  Administrative  Agent, the  Documentation  Agent and the
Banks  are  parties  to the Loan  Agreement  dated  as of  August  31,  1999 (as
heretofore amended, modified and supplemented the "Original Agreement").        

     (2) Griffon desires to add its wholly-owned Subsidiary,  Telephonics,  as a
Borrower  under this  Agreement,  subject to the  sublimit  and other  terms and
conditions hereinafter set forth.                                               

     (3) Griffon, Telephonics, the Administrative Agent, the Documentation Agent
and the Banks wish to amend the Original  Agreement  to make certain  changes in
the terms of the Original  Agreement,  and to restate the Original  Agreement as
amended by such amendments for their convenience.                               

     (4)  Following  such  restatement,  except  where  otherwise  indicated  or
otherwise  referred  to in this  Agreement,  this  Agreement  will set forth the
definitive  terms and conditions of the agreement of Griffon,  Telephonics,  the
Administrative  Agent,  the  Documentation  Agent  and the Banks  regarding  the
matters  covered  by this  Agreement  as of and  after  the  date  the  Original
Agreement is restated,  and the Original  Agreement will continue to govern such
terms prior to such date.                                                       

NOW, THEREFORE, the parties hereto agree as follows:                  

Article 1 Definitions.                                                          

     As used in this  Agreement,  in addition to the other terms defined herein,
the following terms shall have the following meanings:                          

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"Additional Costs" is defined in subsection 2.18(b) hereof.           

     "Adjusted Net Income" means, for any period, the aggregate income (or loss)
for such period  which shall be an amount equal to net revenues and other proper
items of income, plus extraordinary and unusual non-cash losses for such period,
plus minority interest in earnings of consolidated Subsidiaries for such period,
less any and all items that are treated as  expenses  under  generally  accepted
accounting  principles,  less,  without  duplication,  Federal,  state and local
income  taxes and income  taxes  expensed  for taxes  payable  to  jurisdictions
outside of the United States, [less minority interests in losses of consolidated
Subsidiaries for such period] and less  extraordinary and unusual non-cash gains
for such period, as determined in accordance with generally accepted  accounting
principles.                                                                     

     "Administrative  Agent"  means  Fleet  National  Bank,  a national  banking
association,  in its capacity as administrative and collateral agent pursuant to
the terms and conditions of this Agreement, and any successor thereto.          

"Affected Loans" is defined in Section 2.21 hereof.                   

"Affected Type" is defined in Section 2.21 hereof.                    

     "Affiliate"  means,  as to any Person,  any other  Person that  directly or
indirectly controls,  or is under common control with, or is controlled by, such
Person. As used in this definition,  "control" (including,  with its correlative
meanings,   "controlled   by"  and  "under  common  control  with")  shall  mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies  (whether through  ownership of securities or partnership
or other ownership interests,  by contract or otherwise),  provided that, in any
event:  (i) any  Person  that owns  directly  or  indirectly  10% or more of the
securities  having  ordinary voting power for the election of directors or other
governing  body of a  corporation  or 10% or more of the  partnership  or  other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such  corporation  or other Person;  and
(ii) each director and officer of a Borrower  shall be deemed to be an Affiliate
of each Borrower.                                                               

"Agent" means the Administrative Agent or the Documentation Agent.    

     "Agents"  means  the  Administrative  Agent  and  the  Documentation  Agent
collectively.                                                                   

     "Aggregate  Revolving  Commitment" means, at any time, the sum at such time
of the  Commitments of all the Banks,  as such amount is subject to reduction in
accordance with the terms hereof.                                               

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     "Aggregate  Revolving Exposure" means, at any time, the sum at such time of
(i) the outstanding  principal  balance of the Loans of all the Banks, plus (ii)
an amount equal to the Letter of Credit Exposure of all Banks.                  

     "Aggregate  Telephonics  Revolving  Commitment"  means  Forty Five  Million
Dollars  ($45,000,000.00),  as such amount is subject to reduction in accordance
with the terms hereof.                                                          

     "Aggregate  Telephonics  Revolving Exposure" means, at any time, the sum at
such time of (i) the outstanding principal balance of the Loans of all the Banks
made to Telephonics,  plus (ii) an amount equal to the Letter of Credit Exposure
of all  Banks on  account  of  Letters  of  Credit  issued  for the  account  of
Telephonics.                                                                    

     "Applicable L/C Fee Distributor" means (i) the Administrative  Agent in the
case of all  Letters of Credit  other than Chase L/Cs and (ii) Chase in the case
of all Chase L/Cs.                                                              

     "Applicable  Lending Office" means, with respect to each Bank, with respect
to each type of Loan,  the Lending  Office as  designated  for such type of Loan
below its name on the  signature  pages hereof or such other office of such Bank
or of an  affiliate of such Bank as such Bank may from time to time specify to a
Borrower  as the  office  at which  its  Loans  of such  type are to be made and
maintained.                                                                     

     "Applicable Margin" means as at any date of determination  thereof,  (i) if
the Funded Debt to Cash Flow Ratio is less than 1.75 to 1.00,  then with respect
to any Prime Rate Loans,  0%, and with respect to any Eurodollar  Loans,  1.25%;
(ii) if the Funded  Debt to Cash Flow Ratio is equal to or greater  than 1.75 to
1.00, but less than 2.25 to 1.00, then with respect to any Prime Rate Loans, 0%,
and with respect to any Eurodollar Loans,  1.50% and (iii) if the Funded Debt to
Cash Flow Ratio is equal to or greater  than 2.25 to 1.00,  then with respect to
any Prime Rate Loans,  .25%,  and with respect to any Eurodollar  Loans,  1.75%,
plus any Post-Default  Rate, if applicable.  The determination of the applicable
percentage  set forth  above  shall be made on a  quarterly  basis  based on the
financial  statements of Griffon and its Subsidiaries  delivered pursuant to and
in compliance with Section 5.1 or Section 5.2 hereof;  provided,  however,  that
the  applicable  percentages  as of the date of this  Agreement  shall be as set
forth in clause (ii) above until December 31, 2001 and thereafter  shall only be
adjusted based on the financial  statements of Griffon delivered pursuant to and
in  compliance  with  Section 5.1 or Section 5.2 for its fiscal  quarter  ending
September  30,  2001 at which time (which in no event shall be prior to December
31, 2001) and thereafter it shall be adjusted  pursuant to this definition;  and
provided  further,  that upon the  occurrence  and during the  continuance  of a
Default or an Event of Default  (other than a Default or Event of Default  under
Section  8.1  hereof),  the  Applicable  Margin  shall  be 1% in  excess  of the
applicable percentages set forth in clause (iii) above.                         

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     The  determination  of the  applicable  percentage set forth above shall be
made on a quarterly  basis based on the financial  statements of Griffon and its
Subsidiaries delivered pursuant to and in compliance with Section 5.1 or Section
5.2 hereof. Each determination of the Applicable Margin shall be effective as of
(a) the  first  day of the  calendar  month  following  the  date on  which  the
financial  statements on which such determination was based were to be delivered
pursuant  to Section  5.1 hereof and (b) the first day of the  calendar  quarter
following the date on which the financial statements on which such determination
was based were to be delivered pursuant to Section 5.2 hereof. In the event that
financial  statements for the four full fiscal quarters most recently  completed
prior to such date of determination  either:  (i) have not been delivered to the
Banks in compliance with Section 5.1 or 5.2 hereof, or (ii) if delivered, do not
comply in form or substance with Section 5.1 or 5.2 hereof (in the sole judgment
of the Banks), then the Banks may determine,  in their reasonable judgment,  the
ratio  referred  to above that  would  have been in effect as at such date,  and
consequently,  the Applicable Margin in effect for the period commencing on such
date.                                                                           

     "Assessment  Rate"  means,  at any  time,  the rate  (rounded  upwards,  if
necessary,  to the  nearest  1/100 of 1%) then  charged by the  Federal  Deposit
Insurance  Corporation (or any successor) to the applicable Principal Office for
deposit  insurance  for  Dollar  time  deposits  with such  Principal  Office as
determined by such Principal Office.                                            

     "Assignment and Acceptance" - an agreement in the form of Exhibit L hereto.

     "Bohme"  means  Bohme-Clopay   Verpackungsfolien   GmbH,  a  wholly-  owned
subsidiary  of Clopay  Plastic  Products  and  successor  in  interest  to Bohme
Verwaltungs-Gesellschaft mbH and Bohme GmbH & Co. KG Verpackungsfolien.         

"Borrowing Date" means any Business Day on which the Banks make Loans.

"Borrowing Notice" is defined in Section 2.2 hereof.                  

     "Business Day" means, any day other than Saturday,  Sunday or any other day
on which  commercial  banks in New York City are authorized or required to close
under the laws of the State of New York.                                        

     "Capital  Expenditures"  means for any period,  the sum of (a) expenditures
for  any  fixed  assets  or  improvements  and  replacements,  substitutions  or
additions  thereto which would be treated as capital  expenditures in accordance
with  generally  accepted  accounting  principles  and  (b) the  portion  of all
payments  with  respect  to each  Capitalized  Lease  which are  required  to be
capitalized  on the balance sheet of the  applicable  lessee in accordance  with
generally accepted accounting principles.                                       

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     "Capitalized  Lease" means,  any lease the obligations to pay rent or other
amounts under which constitute Capitalized Lease Obligations.                   

     "Capitalized Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other  amounts  under a lease of (or other  agreement
conveying the right to use) real and/or personal  property which obligations are
required to be  classified  and  accounted  for as a capital  lease on a balance
sheet of such Person under  generally  accepted  accounting  principles and, for
purposes  of this  Agreement,  the  amount  of  such  obligations  shall  be the
capitalized  amount thereof,  determined in accordance  with generally  accepted
accounting principles.                                                          

     "Cash" means, as to any Person, such Person's cash and cash equivalents, as
defined in accordance with generally accepted accounting principles consistently
applied.                                                                        

     "Change of Control" means (a) the acquisition by any Person, or two or more
Persons acting in concert,  of beneficial  ownership (within the meaning of Rule
13d-3 of the Securities and Exchange  Commission  under the Securities  Exchange
Act of  1934)  of 30% or more of the  outstanding  shares  of  voting  stock  of
Griffon, or (b) during any period of 25 consecutive calendar months,, commencing
on the date of this Agreement, the ceasing of those individuals (the "Continuing
Directors")  who (i) were  directors  of  Griffon  on the first day of each such
period or (ii)  subsequently  became  directors  of  Griffon  and whose  initial
election or initial nomination for election subsequent to that date was approved
by a majority of the  Continuing  Directors  then on the board of  directors  of
Griffon, to constitute a majority of the board of directors of Griffon.         

     "Chase" means The Chase Manhattan Bank, a New York banking corporation,  in
its capacity as a Bank hereunder.                                               

     "Chase L/Cs" means the standby  letters of credit  issued by Chase prior to
the date of this Agreement as described on Schedule 2 hereto.                   

"Clopay" means Clopay Corporation, a Delaware corporation.            

     "Clopay Plastic  Products" means Clopay Plastic Products  Company,  Inc., a
Delaware Corporation.                                                           

     "Clopay   Service"   means  Clopay  Service   Company,   Inc.,  a  Delaware
Corporation.                                                                    

     "Code" means the Internal  Revenue Code of 1986,  as it may be amended from
time to time.                                                                   

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     "Commitment"  means,  in respect of any Bank,  the  maximum  amount of such
Bank's  Revolving  Exposure  as set  forth on the  signature  page of such  Bank
adjacent to the heading "Commitment" or in an Assignment and Acceptance or other
document pursuant to which it became a Bank, as such amount may be adjusted from
time to time in  accordance  herewith;  provided,  that,  without  limiting  the
foregoing,  if the Borrowers have elected to extend the  Commitment  Termination
Date in  accordance  with  the  provisions  of  Section  2.8(b)  hereof,  on the
Commitment  Termination  Date and on each Quarterly  Reduction  Date  thereafter
until the  Termination  Date,  the  Commitment of each Bank shall  automatically
reduce by an amount  equal to the  product of such Bank's  Revolving  Percentage
multiplied by Ten Million Dollars ($10,000,000).                                

"Commitment Fee" is defined in subsection 2.7(a) hereof.              

"Commitment Termination Date" means October 1, 2005.                  

     "Compliance  Certificate" means a certificate  executed by the president or
chief  financial  officer of Griffon to the effect that: (i) as of the effective
date of the  certificate,  no Default or Event of Default  under this  Agreement
exists or would exist after giving effect to the action  intended to be taken by
the Borrowers as described in such certificate,  including,  without limitation,
that the covenants  set forth in Section 6.9 hereof would not be breached  after
giving effect to such action,  together with a calculation in reasonable detail,
and in form and  substance  satisfactory  to the  Administrative  Agent  and the
Documentation  Agent,  of such  compliance,  and  (ii) the  representations  and
warranties  contained  in Article 3 hereof are true and with the same  effect as
though  such  representations  and  warranties  were  made  on the  date of such
certificate,  except for  changes in the  ordinary  course of  business  none of
which, either singly or in the aggregate, have had a Material Adverse Effect.   

     "Contingent  Obligation"  as  applied  to any  Person,  means any direct or
indirect   liability,   contingent  or  otherwise,   of  that  Person,   without
duplication:  (a) with  respect to any  indebtedness,  lease,  dividend or other
obligation  of  another  Person if the  primary  purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any  agreements  relating  thereto  will be complied  with,  or that the
holders of such  liability  will be protected (in whole or in part) against loss
with respect  thereto;  (b) with respect to any letter of credit  issued for the
account  of that  Person or as to which  that  Person is  otherwise  liable  for
reimbursement of drawings; (c) under any interest rate swap agreement,  interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement  designed to protect that Person  against  fluctuations  in interest
rates; or (d) under any foreign  exchange  contract,  currency swap agreement or
other similar  agreement or arrangement  designed to protect that Person against
fluctuations in currency values.  Contingent  Obligations  shall include (i) the
direct or indirect  guaranty,  endorsement (other than for collection or deposit
in the ordinary  course of business),  co-making,  discounting  with recourse or

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sale  with  recourse  by such  Person of the  obligation  of  another,  (ii) the
obligation to make  take-or-pay  or similar  payments if required  regardless of
nonperformance  by any other  party or  parties to an  agreement,  and (iii) any
liability of such Person for the obligations of another through any agreement to
purchase,  repurchase  or  otherwise  acquire  such  obligation  or any property
constituting security therefor, to provide funds for the payment or discharge of
such obligation or to maintain the solvency,  financial condition or any balance
sheet  item or  level  of  income  of  another.  The  amount  of any  Contingent
Obligation  shall be equal to the  amount of the  obligation  so  guaranteed  or
otherwise supported or, if not a fixed and determined amount, the maximum amount
so guaranteed.                                                                  

     "Controlled  Group" means all members of a controlled group of corporations
and all trades or businesses  (whether or not incorporated) under common control
which, together with either or both Borrowers,  are treated as a single employer
under Section  414(b),  414(c) or 414(m) of the Code and Section  4001(a)(14) of
ERISA.                                                                          

     "Credit  Party" means the  Administrative  Agent or a Bank, as the case may
be.                                                                             

     "Current   Liabilities"  means  current   liabilities,   as  determined  in
accordance with generally accepted accounting principles,  consistently applied,
and shall include, as of the date of determination thereof: (i) all Indebtedness
payable on demand or maturing within one year after such date without any option
on the part of the  obligor  to extend or renew  beyond  such  year,  (ii) final
maturities,  installments  and prepayments of  Indebtedness  required to be made
within one year after such date, (iii) the unpaid principal balance of the Notes
due within one year after such date, and (iv) all other items  (including  taxes
accrued as estimated and reserves for deferred  income taxes) that in accordance
with generally accepted  accounting  principles,  would be included on a balance
sheet as current liabilities.                                                   

"Debt Instrument" is defined in subsection  8.4(a) hereof.            

     "Default" means an event which with notice or lapse of time, or both, would
constitute an Event of Default.                                                 

     "Defined  Contribution  Plan" means a plan which is not covered by Title IV
of ERISA or subject to the minimum funding  standards of Section 412 of the Code
and which  provides  for an  individual  account  for each  participant  and for
benefits based solely on the amount  contributed to the  participant's  account,
and any income,  expenses,  gains and losses, and any forfeitures of accounts of
other participants which may be allocated to such participant's account.        

     "Derivative  Protection  Arrangement" means (i) any interest rate swap, cap
or collar  arrangement or any other derivative  product  customarily  offered by
banks or other financial  institutions to their customers in order to reduce the
exposure of such  customers to interest  rate  fluctuations,  as the same may be
amended,  supplemented  or  otherwise  modified  from  time to time or (ii)  any

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foreign exchange contract, currency swap agreement or other similar agreement or
arrangement  customarily  offered by banks or other  financial  institutions  to
their  customers  designed to protect such  customers  against  fluctuations  in
currency values.                                                                

     "Documentation  Agent" means The Chase  Manhattan  Bank, a New York banking
corporation,  in its capacity as  Documentation  Agent pursuant to the terms and
conditions of this Agreement, and any successor thereto.                        

  "Dollars" and "$" means lawful currency of the United States of America.

     "Domestic Debt Service Coverage Ratio" means, for any period,  the ratio of
(a) EBITDA of the  Domestic  Loan Parties on a  consolidated  basis for the most
recently  completed  four fiscal  quarters of the Domestic  Loan Parties  minus,
Federal, state and local income taxes expensed with respect to the most recently
completed four fiscal  quarters  minus,  Unfunded  Capital  Expenditures  of the
Domestic Loan Parties on a  consolidated  basis for the most recently  completed
four fiscal  quarters to (b) the current portion of Long-term  Indebtedness  for
borrowed money of the Domestic Loan Parties on a consolidated  basis outstanding
as of the last day of such period (excluding the final payment of $1,973,000 due
January 26, 2002 on a mortgage  note in the original  face amount of  $3,200,000
payable by Western  Synthetic  Real Estate  Corp.  to The Chase  Manhattan  Bank
(formerly known as Chemical Bank)) plus,  Interest  Expense of the Domestic Loan
Parties on a  consolidated  basis for the most  recently  completed  four fiscal
quarters,  all  determined  in accordance  with  generally  accepted  accounting
principles consistently applied.                                                

     "Domestic Funded Debt Coverage Ratio" means,  for any period,  the ratio of
(a) Long-term  Indebtedness for borrowed money of the Domestic Loan Parties on a
consolidated  basis  plus,  without  duplication,  any  Indebtedness  for  money
borrowed of the Domestic Loan Parties on a consolidated  basis which will be due
and payable  during the  immediately  succeeding  twelve month period plus,  the
Domestic  Guarantee  Amount, in each case outstanding as of the last day of such
period,  to (b) EBITDA of the Domestic Loan Parties on a consolidated  basis for
the most recently  completed four fiscal quarters,  all determined in accordance
with generally accepted accounting principles consistently applied.             

     "Domestic  Guarantee  Amount"  means the  aggregate  amount of  outstanding
obligations  of Foreign  Loan  Parties  that are  guaranteed  by  Domestic  Loan
Parties.                                                                        

     "Domestic  Loan Party"  means each  Borrower  and each  Subsidiary  of each
Borrower that is organized under the laws of any State of the United States.    

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     "EBITDA" means,  for any period,  the sum of (i) Adjusted Net Income,  (ii)
Interest Expense,  (iii)  depreciation and amortization and (iv) Federal,  state
and local income  taxes,  in each case,  computed in accordance  with  generally
accepted accounting principles.                                                 

     "Eligible  Assignee" - (a) any of the following  that have been approved by
the Required Banks: (i) a commercial bank organized under the laws of the United
States,  or any state  thereof;  (ii) a savings and loan  association or savings
bank organized under the laws of the United States, or any state thereof;  (iii)
a commercial bank organized under the laws of any other country that is a member
of the OECD or has concluded special lending arrangements with the International
Monetary Fund associated with its General Arrangements to Borrow, or a political
subdivision of any such country, so long as such bank is acting through a branch
or agency  located in the country in which it is  organized  or another  country
that is  described  in this clause  (iii);  (iv) the central bank of any country
that is a member of the OECD which bank has assumed  the assets and  liabilities
of a Bank;  and (v) a finance  company,  insurance  company  or other  financial
institution or fund (whether a corporation,  partnership, trust or other entity)
that is engaged in making, purchasing or otherwise investing in commercial loans
in the ordinary  course of its  business;  (b) any other Person  approved by the
Administrative Agent and the Required Banks; and (c) a Bank or an Affiliate of a
Bank or an entity of the type referred to in (a)(v) above which is  administered
or managed by a Bank or an Affiliate of a Bank.                                 

     "Employee  Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained  for employees of a Borrower or
any of its ERISA  Affiliates or (b) has at any time within the preceding six (6)
years been  maintained  for  employees  of such  Borrower or any  current  ERISA
Affiliate while an ERISA Affiliate.                                             

     "Employee  Welfare Benefit Plan" means any employee benefit plan within the
meaning of Section 3(1) of ERISA.                                               

     "Environmental  Laws and Regulations" means all  environmental,  health and
safety laws,  regulations,  resolutions,  and  ordinances  applicable  to either
Borrower or any  Subsidiary,  or any of their  respective  assets or properties,
including,  without limitation:  (i) all regulations,  resolutions,  ordinances,
decrees,  and  other  similar  documents  and  instruments  of  all  courts  and
governmental  authorities,  bureaus and agencies,  domestic and foreign, whether
issued by  environmental  regulatory  agencies or otherwise,  and (ii) all laws,
regulations,  resolutions,  ordinances  and decrees  relating  to  Environmental
Matters.                                                                        

     "Environmental  Liability" means any liability under any applicable law for
any release of a hazardous substance caused by the seeping,  spilling,  leaking,
pumping,  pouring,  emitting,  emptying,   discharging,   injecting,   escaping,
leaching, dumping or disposing of hazardous wastes or other chemical substances,

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pollutants or contaminants into the environment, and any liability for the costs
of any clean-up or other remedial action including,  without  limitation,  costs
arising  out  of  security  fencing,   alternative  water  supplies,   temporary
evacuation  and  housing  and  other  emergency  assistance  undertaken  by  any
environmental  regulatory body having  jurisdiction  over either Borrower or any
Subsidiary  to prevent or minimize  any actual or  threatened  release by either
Borrower  or  any  Subsidiary  of  any  hazardous   wastes  or  other  hazardous
substances, pollutants and contaminants into the environment that would endanger
the public health or the environment.                                           

     "Environmental  Matter(s)"  means a release of any toxic or hazardous waste
or other hazardous  substance,  pollutant or contaminant into the environment or
the generation,  treatment, storage or disposal of any toxic or hazardous wastes
or other hazardous substances.                                                  

     "Environmental  Proceeding"  means  any  judgment,  action,  proceeding  or
investigation  pending  before any court or  governmental  authority,  bureau or
agency, including,  without limitation,  any environmental regulatory body, with
respect  to, or to the best of each  Borrower's  knowledge  threatened  against,
either  Borrower or any  Subsidiary or relating to the assets or  liabilities of
any of them, including,  without limitation, in respect of any "facility" owned,
leased  or  operated  by any  of  them  under  the  Comprehensive  Environmental
Response,  Compensation  and  Liability  Act of 1980,  as amended,  or under any
state, local or municipal  statute,  ordinance or regulation in respect thereof,
in connection with any release of any toxic or hazardous waste or other chemical
substance,   pollutant  or  contaminant  into  the  environment,   or  with  the
generation,  storage  or  disposal  of any  toxic or  hazardous  wastes or other
chemical substances.                                                            

     "ERISA" means the Employee  Retirement  Income  Security Act of 1974, as it
may be amended from time to time, and the  regulations  promulgated  thereunder.

     "ERISA  Affiliate"  means as applied  to each  Borrower,  any  corporation,
person  or trade or  business  which is a member of such  Borrower's  Controlled
Group.                                                                          

     "ERISA MAE" means any matter  which  would  result in  liability  to either
Borrower or any ERISA  Affiliate in an amount which would  materially  adversely
affect the business or financial  condition of Griffon and its Subsidiaries on a
consolidated  basis.                                                            

     "Eurodollar  Business Day" means a Business Day on which dealings in Dollar
deposits are carried out in the Eurodollar interbank market.                    

     "Eurodollar  Loans" means Loans the interest on which is  determined on the
basis of rates  referred  to in the  definition  of  "Fixed  Base  Rate" in this
Article 1.                                                                      

"Existing Banks" means Fleet, Chase and Firstar, as the case may be.  

     "Extensions  of Credit"  means,  collectively,  the Loans,  the  Letters of

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Credit and any  participations  therein pursuant to Section  2.24(c).           

"Event of Default" is defined in Article 8 hereof.                    

"Facility Fee" is defined in subsection 2.7(b) hereof.                

     "Federal Funds Rate" means,  for any day, the weighted average of the rates
on overnight federal funds transactions with member banks of the Federal Reserve
System  arranged by federal  funds  brokers as published by the Federal  Reserve
Bank of New York for such day,  or if such day is not a  Business  Day,  for the
next  preceding  Business Day (or, if such rate is not so published for any such
day, the average rate charged to each Bank on such day on such  transactions  as
reasonably determined by the Banks).                                            

"Fee(s)" is defined in subsection 2.7(d) hereof.                      

     "Financial  Statements" means: (i) Griffon's  consolidated  audited Balance
Sheet as at  September  30,  2000,  together  with the  related  audited  Income
Statement, Statement of Shareholders' Equity and Statement of Cash Flows for the
fiscal year then ended, (ii) Griffon's  consolidated  unaudited Balance Sheet as
at June 30, 2001,  together  with the related  unaudited  Income  Statement  and
Statement of Cash Flows for the 9-month period then ended, and (iii) each of the
financial  statements delivered to the Banks pursuant to subsections 5.1 and 5.2
hereof.                                                                         

     "Finotech"  means Finotech  Verbundstoffe  GmbH, a 60% owned  subsidiary of
Clopay Plastic Products.                                                        

     "Firstar"  means Firstar Bank,  National  Association,  a national  banking
association, in its capacity as a Bank hereunder.                               

     "Fixed  Base  Rate"  means,  with  respect to any  Eurodollar  Loan for any
Interest Period therefor, the rate per annum as determined by the Administrative
Agent on the basis of the  offered  rates for  deposits in U.S.  dollars,  for a
period of time  comparable to such Eurodollar Loan which appears on the Telerate
page  3750 as of  11:00  a.m.  London  time on the  day  that is two  Eurodollar
Business  Days  preceding  the  first  day of such  Eurodollar  Loan;  provided,
however,  if the rate described  above does not appear on the Telerate System on
any applicable  interest  determination  date, Fixed Base Rate shall be the rate
(rounded  upward,  if  necessary,  to the  nearest one  hundred-thousandth  of a
percentage point),  determined by the  Administrative  Agent on the basis of the

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offered  rates for deposits in dollars for a period  substantially  equal to the
Interest  Period on the  Reuters  Page "LIBO" (or such other page as may replace
the LIBO Page on that service for the purpose of displaying  such rates),  as of
11:00  a.m.(London  Time),  on the day that is two (2) Eurodollar  Business Days
prior to the beginning of such Interest Period. If both the Telerate and Reuters
system are  unavailable,  then the rate for that date will be  determined by the
Administrative  Agent on the basis of the  offered  rates for  deposits  in U.S.
dollars  for a period  of time  comparable  to such  Eurodollar  Loan  which are
offered by four  major  banks in the London  interbank  market at  approximately
11:00 a.m.  London time,  on the day that is two (2)  Eurodollar  Business  Days
preceding   the  first  day  of  such   Eurodollar   Loan  as  selected  by  the
Administrative  Agent.  The  principal  London  office of each of the four major
London banks will be requested to provide a quotation of its U.S. dollar deposit
offered rate.  If at least two such  quotations  are provided,  the rate for the
date will be the arithmetic mean of the quotations. If fewer than two quotations
are  provided as  requested,  the rate for that date will be  determined  by the
Administrative  Agent on the basis of the rates quoted for loans in U.S. dollars
to leading  European  banks for a period of time  comparable to such  Eurodollar
Loan  offered by major banks in New York City at  approximately  11:00 a.m.  New
York City time, on the day that is two  Eurodollar  Business Days  preceding the
first day of such Eurodollar Loan. In the event that the Administrative Agent is
unable to obtain any such  quotation as provided  above,  it will be deemed that
the Fixed Base Rate pursuant to a Eurodollar Loan cannot be determined.         

     "Fixed  Rate"  means,  for any  Eurodollar  Loan  for any  Interest  Period
therefor,  the rate per annum  (rounded  upwards,  if necessary,  to the nearest
1/100 of 1%) determined by the Administrative  Agent equal to (x) the Fixed Base
Rate for such Loan for such Interest Period;  divided by (y) 1 minus the Reserve
Requirement for such Loan for such Interest  Period.  The  Administrative  Agent
shall use its best efforts to advise the applicable Borrower upon its request of
the Fixed Rate for each Interest Period as soon as practicable after each change
in the Fixed Rate;  provided,  however,  that the failure of the  Administrative
Agent to so advise such Borrower on any one or more  occasions  shall not affect
the  rights  of any  Agent or any Bank or the  obligations  of  either  Borrower
hereunder.                                                                      

     "Fleet"  means  Fleet  National  Bank,  successor  by merger to Fleet Bank,
National Association, a national banking association,  in its capacity as a Bank
hereunder.                                                                      

     "Fleet L/Cs" means the standby  letters of credit  issued by Fleet prior to
the date of this Agreement as described on Schedule 1 hereto.                   

     "Foreign  Loan Party"  means each  Subsidiary  of either  Borrower  that is
organized  under the laws of a  jurisdiction  other than any State of the United
States.                                                                         

     "Funded Debt to Cash Flow Ratio"  means,  for any period,  the ratio of (a)
all Indebtedness for borrowed money of Griffon and its Subsidiaries  outstanding
as of the last day of such period, to (b) EBITDA of Griffon and its Subsidiaries
minus,  Unfunded  Capital  Expenditures  made  by  Griffon  and/or  any  of  its
Subsidiaries, each for the most recently completed four fiscal quarters.        

     "Guarantor"  means (i) Griffon in the case of all Extensions of Credit made
to Telephonics and (ii) Telephonics in the case of all Extensions of Credit made
to Griffon.                                                                     

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     "Guarantor  Obligations" means, with respect to each Guarantor,  all of the
obligations and liabilities of such Guarantor under the Loan Documents,  whether
fixed, contingent, now existing or hereafter arising, created, assumed, incurred
or acquired.                                                                    

     "Indebtedness"  means, with respect to any Person and without  duplication,
all: (i) liabilities or obligations,  direct and contingent, which in accordance
with generally accepted  accounting  principles would be included in determining
total  liabilities  as shown on the  liability  side of a balance  sheet of such
Person  at the date as of which  Indebtedness  is to be  determined,  including,
without  limitation,   contingent  liabilities  that  in  accordance  with  such
principles, would be set forth in a specific Dollar amount on the liability side
of such balance sheet, and Capitalized  Lease  Obligations of such Person;  (ii)
liabilities  or  obligations  of others for which  such  Person is  directly  or
indirectly  liable, by way of guaranty (whether by direct guaranty,  suretyship,
discount,  endorsement,  take-or-pay agreement, agreement to purchase or advance
or keep in funds  or  other  agreement  having  the  effect  of a  guaranty)  or
otherwise;  (iii)  liabilities or obligations  secured by Liens on any assets of
such Person,  whether or not such  liabilities  or  obligations  shall have been
assumed by it; and (iv)  liabilities or  obligations  of such Person,  direct or
contingent, with respect to letters of credit (other than documentary letters of
credit used in connection  with the purchase of goods) issued for the account of
such Person and bankers acceptances created for such Person.                    

     "Interest  Expense"  means,  for the  applicable  period  of  determination
thereof,  the interest expense during such period  determined in accordance with
generally accepted accounting principles;  provided,  that,  notwithstanding any
such determination under generally accepted accounting principles, in each event
"Interest  Expense" shall be net of all interest  income for the applicable     
period of determination.                                                        

     "Interest  Period" means,  with respect to any Eurodollar Loan, each period
commencing  on the date such Loan is made or  converted  from a Loan or Loans of
another type, or the last day of the next preceding Interest Period with respect
to such Loan,  and ending on the same day in the first,  second,  third or sixth
calendar month thereafter,  as the applicable Borrower may select as provided in
Section 2.2 hereof,  except that each such Interest Period that commences on the
last Eurodollar  Business Day of a calendar month (or on any day for which there
is no  numerically  corresponding  day in the  appropriate  subsequent  calendar
month)  shall  end on  the  last  Eurodollar  Business  Day  of the  appropriate
subsequent  calendar  month.  Notwithstanding  the foregoing:  (i) each Interest
Period that would otherwise end on a day that is not a Business Day shall end on
the next  succeeding  Business  Day (or, in the case of an  Interest  Period for
Eurodollar Loans, if such next succeeding  Eurodollar  Business Day falls in the
next succeeding calendar month, on the next preceding  Eurodollar Business Day);
(ii) no more  than  five (5)  Interest  Periods  for  Eurodollar  Loans for each
Borrower shall be in effect at the same time;  (iii) any Interest Period for any
type of Loan that commences before the Commitment  Termination Date shall end no
later than the Commitment  Termination  Date, and if the Commitment  Termination

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Date has been extended in accordance with the terms hereof,  any Interest Period
for any type of Loan that  commences  before the  Termination  Date shall end no
later than the  Termination  Date; (iv)  notwithstanding  clause (iii) above, no
Interest  Period  shall have a  duration  of less than one month (in the case of
Eurodollar  Loans). In the event that a Borrower fails to select the duration of
any  Interest  Period for any Loan  within  the time  period  and  otherwise  as
provided in Section 2.2 hereof, such Loans will be automatically  converted into
a Prime Rate Loan on the last day of the preceding Interest Period for such Loan
and (iv) no  portion  of any Loan  shall be  continued  as or  converted  into a
Eurodollar  Loan  with an  Interest  Period  which  extends  beyond a  Quarterly
Reduction Date if, after giving effect to the continuation or conversion of such
Eurodollar Loan, the amount payable on any Quarterly Reduction Date would exceed
the sum of (i) the aggregate  principal amount of the outstanding portion of the
Loans constituting  Eurodollar Loans with Interest Periods ending on or prior to
such Quarterly Reduction Date and (ii) the aggregate  outstanding portion of the
Loans constituting Prime Rate Loans.                                            

"Investment" means, by any Person:                                    

     (a) the amount paid or  committed  to be paid,  or the value of property or
services  contributed or committed to be  contributed,  by such Person for or in
connection  with the  acquisition  by such  Person of any stock,  bonds,  notes,
debentures,  partnership or other ownership interests or other securities of any
other Person; and                                                               

     (b) the amount of any advance,  loan or extension of credit by such Person,
to any other Person, or guaranty or other similar obligation of such Person with
respect  to any  Indebtedness  of such other  Person  (other  than  Indebtedness
constituting  trade payables in the ordinary  course of business),  and (without
duplication)  any amount committed to be advanced,  loaned,  or extended by such
Person to any other  Person,  or any amount the payment of which is committed to
be assured by a guaranty  or similar  obligation  by such Person for the benefit
of, such other Person.                                                          

"IRS" means the Internal Revenue Service.                             

     "Issuer"  means (i) Fleet in the case of all  Letters of Credit  other than
the Chase L/Cs and (ii)  Chase in the case of the Chase  L/Cs.                  

"Latest  Balance  Sheet"  is  defined  in  subsection  3.9(a)  hereof.

     "LC  Disbursement"  means a payment made by the Issuer pursuant to a Letter
of Credit.                                                                      

     "Leases"  means  leases and  subleases  (other  than  Capitalized  Leases),
licenses for the use of real property,  easements,  grants, and other attachment
rights and similar  instruments under which either Borrower has the right to use
real or personal property or rights of way.                                     

"Letter of Credit" has the meaning set forth in Section 2.24.         

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"Letter of Credit Fees" has the meaning set forth in Section 2.7(c).  

     "Letter of Credit  Commitment"  means the commitment of the Issuer to issue
Letters  of Credit  having an  aggregate  outstanding  face  amount up to Thirty
Million Dollars ($30,000,000.00).                                               

     "Letter of Credit  Exposure"  means in respect of any Bank at any time,  an
amount  equal  to (i)  the sum  (without  duplication)  at such  time of (x) the
aggregate  undrawn  face amount of the  outstanding  Letters of Credit,  (y) the
aggregate  amount of unpaid  drafts drawn on all Letters of Credit,  and (z) the
aggregate  unpaid  Reimbursement  Obligations,  multiplied  by (ii) such  Bank's
Revolving  Percentage at such time.                                             

     "Lien"  means any  mortgage,  deed of  trust,  pledge,  security  interest,
encumbrance,  lien or charge of any kind (including any agreement to give any of
the foregoing),  any conditional  sale or other title retention  agreement,  any
lease in the nature of any of the  foregoing,  and the filing of or agreement to
give  any  financing   statement  under  the  Uniform  Commercial  Code  of  any
jurisdiction.                                                                   

     "Limited Contingent  Obligation" as applied to any Person, means any direct
or  indirect  liability,  contingent  or  otherwise,  of  that  Person,  without
duplication:  (a) with  respect to any  indebtedness,  lease,  dividend or other
obligation  of  another  Person if the  primary  purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any  agreements  relating  thereto  will be complied  with,  or that the
holders of such  liability  will be protected (in whole or in part) against loss
with respect  thereto or (b) with respect to any letter of credit issued for the
account  of that  Person or as to which  that  Person is  otherwise  liable  for
reimbursement of drawings.  Limited Contingent Obligations shall include (i) the
direct or indirect  guaranty,  endorsement (other than for collection or deposit
in the ordinary  course of business),  co-making,  discounting  with recourse or
sale  with  recourse  by such  Person of the  obligation  of  another,  (ii) the
obligation to make  take-or-pay  or similar  payments if required  regardless of
nonperformance  by any other  party or  parties to an  agreement,  and (iii) any
liability of such Person for the obligations of another through any agreement to
purchase,  repurchase  or  otherwise  acquire  such  obligation  or any property
constituting security therefor, to provide funds for the payment or discharge of
such obligation or to maintain the solvency,  financial condition or any balance
sheet item or level of income of another.  The amount of any Limited  Contingent
Obligation  shall be equal to the  amount of the  obligation  so  guaranteed  or
otherwise supported or, if not a fixed and determined amount, the maximum amount
so guaranteed.                                                                  

     "Loan(s)" is defined in Section 2.1 hereof.  Loans of different  types made
or converted  from Loans of other types on the same day (or of the same type but
having different  Interest Periods) shall be deemed to be separate Loans for all
purposes of this Agreement.                                                     

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     "Loan  Documents"  means  this  Agreement,  the Notes,  each  reimbursement
agreement  executed in connection with Letters of Credit,  the Pledge  Agreement
and all other  documents  required to be executed and  delivered  in  connection
herewith or therewith,  including all amendments,  modifications and supplements
of or to all such documents.                                                    

     "Loan Party" means Griffon,  Telephonics  and any  Subsidiary  which on the
date hereof or hereafter executes and delivers to any Agent or any Bank any Loan
Document.                                                                       

"Long-term Indebtedness" means:                                       

     (i) any  Indebtedness  payable more than one year from the date of creation
thereof  (including,  without  limitation and without  duplication,  any portion
thereof  payable on demand or maturing  within one year after such date),  which
under generally accepted accounting  principles is shown on the balance sheet as
a liability (including  Capitalized Lease Obligations but excluding reserves for
deferred income taxes and other reserves to the extent that such reserves do not
constitute an obligation), and                                                  

     (ii)  Indebtedness  payable  more than one year  from the date of  creation
thereof  (including,  without  limitation and without  duplication,  any portion
thereof payable on demand or maturing within one year after such date), which is
secured by any Lien on  property  owned by either  Borrower  or any  Subsidiary,
whether or not the indebtedness  secured thereby shall have been assumed by such
Borrower or such Subsidiary.                                                    

Any  obligation  shall be treated as Long-term  Indebtedness,  regardless of its
term if such  obligation  is  renewable  pursuant  to the terms  thereof or of a
revolving credit or similar agreement effective for more than one year after the
date of the creation of such  obligation,  or may be payable out of the proceeds
of a similar obligation  pursuant to the terms of such obligation or of any such
agreement.                                                                      

     "Material Adverse Effect" means any matter which would materially adversely
affect the business,  operations,  properties or financial  condition of Griffon
and its  Subsidiaries on a consolidated  basis.                                 

     "Monthly  Dates" means the first day of each calendar  month,  the first of
which shall be the first day of the first calendar  month  following the date of
this Agreement.                                                                 

     "Multiemployer  Plan"  means a  "multiemployer  plan" as defined in Section
4001 (a) (3) of ERISA which is a Pension  Plan and to which  either  Borrower or
any  ERISA  Affiliate  is  making,   or  is  accruing  an  obligation  to  make,

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contributions or has made, or been obligated to make,  contributions  within the
preceding six (6) years while an ERISA Affiliate.                               

"New Type Loans" is defined in Section 2.21 hereof.                   

"Note(s)" is defined in Section 2.4 hereof.                           

     "Obligations" means collectively, all of the Indebtedness,  liabilities and
obligations  of each Borrower to the  Administrative  Agent,  the  Documentation
Agent and/or the Banks arising under the Loan Documents (including Reimbursement
Obligations),   in  each  case  whether  fixed,  contingent  (including  without
limitation  those  Obligations  incurred as a  Guarantor  pursuant to Article 11
hereof),  now  existing or  hereafter  arising,  created,  assumed,  incurred or
acquired,  and whether  before or after the  occurrence  of any Event of Default
under Section 8.6 and  including  any  obligation or liability in respect of any
breach of any  representation  or warranty  and all  post-petition  interest and
funding losses,  whether or not allowed as a claim in any proceeding  arising in
connection with such an event.                                                  

     "Original  Agreement"  shall  have the  meaning  set forth in the  Recitals
hereto.                                                                         

     "Payment  Office" means the office of the  Administrative  Agent located at
300 Broad Hollow Road, Melville, New York 11747.                                

"PBGC" means the Pension Benefit Guaranty Corporation.                

     "Pension Plan" means at any time an employee  pension  benefit plan that is
covered by Title IV of ERISA or subject to the minimum  funding  standards under
Section 412 of the Code and is either:  (i) maintained by either Borrower or any
ERISA  Affiliate  for  employees  of  such  Borrower,  or by such  Borrower  for
employees of any ERISA  Affiliate,  or (ii) maintained  pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes  contributions  and to which such Borrower or any ERISA  Affiliate is then
making or accruing an obligation to make  contributions  or has,  while an ERISA
Affiliate, within the preceding five plan years made contributions.             

     "Permitted  Acquisition"  means the  acquisition by either  Borrower or any
Subsidiary  of any Person or of any  division  or line of business of any Person
(whether a Person,  or division or line of business,  an  "Eligible  Business"),
either by merger,  consolidation,  purchase  of stock,  or  purchase of all or a
substantial  part of the  assets  of such  Eligible  Business  (any such type of
transaction  is  referred  to in  this  Agreement  as an  "acquisition"  and the
principal  agreement relating thereto,  whether a stock purchase  agreement,  an
asset purchase  agreement,  a merger  agreement or otherwise,  is referred to in
this Agreement as the "acquisition agreement");  provided that (i) the aggregate

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Permitted  Acquisition Purchase Price of all such Permitted  Acquisitions during
the term of this  Agreement  does not exceed  (a) Two  Hundred  Million  Dollars
($200,000,000)  in the  aggregate,  and (b)  after  excluding  the  value of any
capital  stock issued by Griffon in connection  with any Permitted  Acquisition,
One Hundred Million Dollars ($100,000,000) in the aggregate,  (ii) no Default or
Event of Default shall exist immediately  before and after giving affect to such
Permitted Acquisition or result from the consummation thereof, and (iii) each of
the following conditions shall have been satisfied:                             

     (a)  such  transaction  shall  not  be a  "hostile"  acquisition  or  other
"hostile"  transaction (i.e., such transaction shall not be opposed by the Board
of Directors (or similar  governing  body) of the Eligible  Business),  provided
that in the event a Borrower  proposes to initiate such transaction as a hostile
transaction with the intent to subsequently  obtain the approval of the Board of
Directors of the Eligible Business,  such Borrower may notify the Administrative
Agent and each Bank in writing in advance  of the  initiation  of such  proposed
transaction  together with any information  concerning  such  transaction as the
Administrative   Agent  or  any  Bank  may  request,   and,  provided  that  the
Administrative  Agent and each Bank  shall have  approved  such  transaction  in
writing prior to the  initiation of such  transaction,  with the approval of the
each Bank  being  based on any  possible  conflict  of any kind or other  policy
considerations  of such Bank concerning such proposed  acquisition and with such
approval not to be  unreasonably  withheld,  such Borrower may proceed with such
transaction  so long as the  transaction  ultimately is approved by the Board of
Directors (or similar  governing body) of the Eligible  Business (and a majority
of which were members of such Board of Directors (or similar  governing body) at
the time such transaction was initiated) and is otherwise in accordance with the
terms of this Agreement;                                                        

     (b) such acquisition (1) if such acquisition is a stock acquisition,  shall
be of  greater  than 50% of the  issued and  outstanding  capital  stock of such
Eligible Business, whether by purchase or as a result of merger or consolidation
(provided that a Borrower shall be the surviving  corporation in any such merger
or  consolidation  in which it is  directly  involved),  and in any event  shall
consist of shares of capital stock with sufficient  voting rights which entitles
such Borrower to elect a majority of the directors of such Eligible Business and
to control the outcome of any shareholder votes with respect to the shareholders
of such Eligible Business,  and (2) if such acquisition is an asset acquisition,
shall be of all or a substantial part of an Eligible Business; and              

     (c) the applicable  Borrower or its Subsidiaries  shall have (1) pledged to
the  Administrative  Agent for the  benefit  of the Banks all of the  issued and
outstanding capital stock acquired by such Borrower or any Subsidiary of (A) any
Eligible  Business the capital stock of which is to be acquired pursuant to such
acquisition  in which the Permitted  Acquisition  Purchase Price is greater than
$25,000,000,  and (B) any new Subsidiary created as an acquisition  vehicle with
respect  to  such  acquisition,  (2)  delivered  to  the  Administrative  Agent,
simultaneously  with  consummation  of  such  acquisition,   all  of  the  stock

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certificates  representing  such shares,  together with stock powers executed in
blank and proxies  with  respect  thereto and (3) caused to be  delivered to the
Banks from any new Subsidiary customary corporate documents (including certified
certificate of incorporation, by-laws and good standing certificates); provided,
however,  that so long as (i) Clopay remains a wholly-owned direct Subsidiary of
Griffon and all of the issued and  outstanding  capital stock of Clopay  remains
subject to a first  priority  security  interest in favor of the  Administrative
Agent,  Clopay  shall not be  obligated  to pledge,  or cause the pledge of, the
capital  stock  of  any  of  its  direct  or  indirect  Subsidiaries;  and  (ii)
Telephonics  remains a  wholly-owned  direct  Subsidiary of Griffon  Telephonics
shall not be obligated to pledge,  or cause the pledge of, the capital  stock of
any of its direct or indirect Subsidiaries.                                     

     "Permitted Acquisition Purchase Price" means, with respect to any Permitted
Acquisition,  collectively,  without  duplication,  (i)  all  Cash  paid  by the
applicable Borrower or any of its Subsidiaries in connection with such Permitted
Acquisition,  including in respect of transaction costs, fees and other expenses
incurred by such Borrower or any of its  Subsidiaries  in  connection  with such
Permitted  Acquisition,  (ii) all  Indebtedness  created,  and all  Indebtedness
assumed,  by such Borrower or any of its  Subsidiaries  in connection  with such
Permitted Acquisition,  including, without limitation, the maximum amount of any
purchase price to be paid pursuant to any "earn out" provision  contained in the
agreements related to any Permitted Acquisition,  (iii) the value of all capital
stock issued by such Borrower or any of its Subsidiaries in connection with such
Permitted Acquisition and (iv) any deferred portion of the purchase price or any
other costs paid by such Borrower or any of its  Subsidiaries in connection with
such Permitted Acquisition.                                                     

     "Permitted Liens" means, as to any Person:  (i) pledges or deposits by such
Person under workers'  compensation  laws,  unemployment  insurance laws, social
security laws, or similar legislation, or good faith deposits in connection with
bids,  tenders,  contracts  (other than for the payment of  Indebtedness of such
Person), or leases to which such Person is a party, or deposits to secure public
or  statutory  obligations  of such Person or deposits of Cash or United  States
Government Bonds to secure surety, appeal, performance or other similar bonds to
which such Person is a party,  or deposits as security  for  contested  taxes or
import  duties or for the payment of rent;  (ii) Liens  imposed by law,  such as
carriers', warehousemen's,  materialmen's and mechanics' liens, or Liens arising
out of judgments or awards against such Person with respect to which such Person
at the time shall  currently be prosecuting an appeal or proceedings for review;
(iii) Liens for taxes not yet subject to penalties for non-payment and Liens for
taxes the  payment of which is being  contested  as  permitted  by  Section  6.6
hereof;  and (iv) minor  survey  exceptions,  minor  encumbrances,  easements or
reservations  of, or rights of, others for rights of way,  highways and railroad
crossings,  sewers,  electric  lines,  telegraph and  telephone  lines and other
similar  purposes,  or  zoning  or  other  restrictions  as to the  use of  real
properties, or Liens incidental to the conduct of the business of such Person or
to the ownership of such Person's  property that were not incurred in connection

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with  Indebtedness  of  such  Person,  all of  which  Liens  referred  to in the
preceding clause (iv) do not in the aggregate  materially detract from the value
of the  properties  to which they relate or  materially  impair their use in the
operation  of the business  taken as a whole of such  Person,  and as to all the
foregoing only to the extent  arising and  continuing in the ordinary  course of
business.                                                                       

     "Person"  means  an  individual,  a  corporation,  a  partnership,  a joint
venture, a trust or unincorporated  organization, a joint stock company or other
similar  organization,  a government or any  political  subdivision  thereof,  a
court, or any other legal entity, whether acting in an individual,  fiduciary or
other capacity.                                                                 

     "Pledge  Agreement"  means that certain Pledge  Agreement  dated August 31,
1999 between Griffon and the  Administrative  Agent,  for the ratable benefit of
the Banks,  and any other  pledge  agreement  executed  and  delivered by either
Borrower or any Subsidiary from time to time in connection  herewith,  including
all amendments, modifications and supplements of or to all such agreements.     

     "Post-Default Rate" means (i) in respect to principal of or interest on any
Loans  not paid  when due  (whether  at  stated  maturity,  by  acceleration  or
otherwise),  a rate per annum during the period commencing on the due date until
such unpaid principal is paid in full equal to: (x) if such Loans are Prime Rate
Loans,  2%  above  the  Prime  Rate as in  effect  from  time to time  plus  the
Applicable  Margin for Prime Rate Loans (but in no event less than the  interest
rate in effect on the due date),  or (y) if such Loans are Eurodollar  Loans, 2%
above the rate of interest in effect  thereon at the time of such default  until
the end of the then current Interest Period therefor and,  thereafter,  2% above
the Prime  Rate as in effect  from time to time plus the  Applicable  Margin for
Prime Rate Loans (but in no event less than the  interest  rate in effect on the
due  date);  and (ii) in  respect  of other  amounts  payable  by the  Borrowers
hereunder  (other than interest) not paid when due (whether at stated  maturity,
by acceleration or otherwise),  a rate per annum during the period commencing on
the due date  until such  other  amounts  are paid in full equal to 2% above the
Prime Rate as in effect from time to time plus the  Applicable  Margin for Prime
Rate  Loans (but in no event  less than the  interest  rate in effect on the due
date).                                                                          

     "Primary  Borrower Obligor" means (i) Griffon in the case of all Loans made
to Griffon pursuant to Section 2.1 and (ii) Telephonics in the case of all Loans
made to Telephonics pursuant to Section 2.1.                                    

     "Prime Rate" means the  variable  per annum rate of interest so  designated
from time to time by Fleet as its prime  rate.  Notwithstanding  the  foregoing,
each Borrower  acknowledges  that Fleet may regularly  make domestic  commercial
loans at rates of  interest  less than the rate of  interest  referred to in the
preceding  sentence  and that the Prime  Rate is a  reference  rate and does not
necessarily  represent  the lowest or best rate being  charged to any  borrower.
Each change in any interest  rate  provided for herein based upon the Prime Rate
resulting  from a change in the Prime Rate shall take effect  immediately at the

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time of such change in the Prime Rate when and as the Prime Rate changes without
notice or demand of any kind.                                                   

     "Prime Rate Loans" means Loans that bear  interest at a rate based upon the
Prime Rate.                                                                     

     "Principal Office" means, as to the  Administrative  Agent or any Bank, the
principal  office  designated  from  time to time  by  such  Person.            

"Principal Subsidiary" means Clopay or Telephonics.                   

     "Projections"  means the  projections  delivered  to the Banks  pursuant to
Section  5.3 hereof (in the format  provided  in  connection  with the  Original
Agreement).                                                                     

     "Purchase  Money   Indebtedness"  means  Indebtedness  (other  than  Loans)
incurred in connection with a Borrower's acquisition of fixed assets;  provided,
that:                                                                           

          (i) The  transaction  in which  any  Purchase  Money  Indebtedness  is
proposed to be created is not then prohibited by this Agreement and   

          (ii) The  Indebtedness  incurred or to be incurred does not exceed the
cost of the property or asset acquired.                               

    "Purchase Money Security Interest" is defined in subsection 7.2(c) hereof.

     "Quarterly  Dates"  means the first day of each  January,  April,  July and
October of each year,  the first of which  shall be the first such day after the
date of this  Agreement,  provided  that,  if any such date is not a  Eurodollar
Business  Day,  the  relevant  Quarterly  Date  shall  be  the  next  succeeding
Eurodollar  Business  Day (or, if the next  succeeding  Eurodollar  Business Day
falls  in the  next  succeeding  calendar  month,  then  on the  next  preceding
Eurodollar Business Day).                                                       

     "Quarterly  Reduction  Dates"  means  the first  day of each  April,  July,
October  and  January of each  year,  provided  that,  if any such date is not a
Business Day, the relevant Quarterly Reduction Date shall be the next succeeding
Business Day.                                                                   

     "Quick Ratio" means as at any date,  the ratio of cash,  Investments of the
type described in Section 7.8(a) hereof,  accounts receivable and contract costs
and recognized income not yet billed (as described in the Financial  Statements)
to Current Liabilities.                                                         

"Real Property" is defined in Section 7.13 hereof.                    

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     "Regulation D" means  Regulation D of the Board of Governors of the Federal
Reserve System, as the same may be amended or supplemented from time to time.   

     "Regulatory  Change"  means,  as to any Bank,  any change after the date of
this  Agreement in United States  federal,  state or foreign laws or regulations
(including  Regulation  D  and  the  laws  or  regulations  that  designate  any
assessment rate relating to certificates of deposit or otherwise  (including the
"Assessment  Rate" if  applicable  to any Loan) or the  adoption or making after
such date of any interpretations,  directives or requests applying to a class of
banks,  including  such Bank,  of or under any United States  federal,  state or
foreign  laws or  regulations  (whether  or not  having the force of law) by any
court or governmental or monetary  authority charged with the  interpretation or
administration thereof.                                                         

     "Reimbursement  Obligation"  means,  collectively,   the  obligation  of  a
Borrower to the Issuer with respect to each Letter of Credit and all  documents,
instruments and other agreements  related  thereto,  including the obligation of
such  Borrower to  reimburse  the Issuer for amounts  drawn under such Letter of
Credit.                                                                         

     "Related  Parties"  means,  with  respect  to  any  Person,  such  Person's
Affiliates  and  the  respective  directors,  officers,  employees,  agents  and
advisors of such Person and such Person's Affiliates.                           

     "Required  Banks"  means,  at any  time  while  no  Revolving  Exposure  is
outstanding  hereunder,  Banks having at least sixty six and two-thirds  percent
(66 2/3%) of the  aggregate  amount of the  Commitments  and,  at any time while
Revolving  Exposure is outstanding  hereunder,  Banks holding at least sixty six
and two-thirds percent (66 2/3%) of the outstanding  aggregate  principal amount
of the Revolving Exposure hereunder.                                            

     "Reserve  Requirement"  means,  for any Eurodollar  Loans for any quarterly
period (or, as the case may be, shorter  period) as to which interest is payable
hereunder,  the average maximum rate at which reserves  (including any marginal,
supplemental  or emergency  reserves) are required to be maintained  during such
period under  Regulation D by member banks of the Federal  Reserve System in New
York City with deposits  exceeding  one billion  Dollars  against  "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the  foregoing,  the Reserve  Requirement  shall  reflect any other  reserves
required  to be  maintained  by such  member  banks by reason of any  Regulatory
Change  against:  (i) any  category of  liabilities  that  includes  deposits by
references to which the Fixed Rate for  Eurodollar  Loans is to be determined as
provided in the  definition  of "Fixed Base Rate" in this Article 1, or (ii) any
category of extensions of credit or other assets that include Eurodollar Loans. 

     "Revolving  Credit Period" means the period  commencing on the date of this
Agreement and ending on the Commitment  Termination  Date, unless the Commitment
Termination                                                                     

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Date has been extended in accordance with the terms of Section 2.8(b) of this   
Agreement, in which case the "Revolving Credit Period" shall end on the         
Termination Date.                                                               

     "Revolving  Exposure"  means,  with respect to any Bank as of any date, the
sum as of such date of (i) the  outstanding  principal  balance  of such  Bank's
Loans, plus (ii) such Bank's Letter of Credit Exposure.                         

     "Revolving Percentage" means, as of any date and with respect to each Bank,
the percentage  equal to a fraction (i) the numerator of which is the Commitment
of such Bank on such date (or, if there are no  Commitments on such date, on the
last  date upon  which one or more  Commitments  were in  effect),  and (ii) the
denominator  of which is sum of the  Commitments  of all the  Banks on such date
(or, if there are no  Commitments  on such date, on the last date upon which one
or more Commitments were in effect).                                            

     "Rolling Four  Quarters"  shall mean the  consecutive  twelve-month  period
computed  from  the last day of the most  recent  fiscal  quarter  to the day 12
months prior to such last day.                                                  

"Security Documents" is defined in subsection 2.23(b) hereof.         

     "Subordinated Debt" means unsecured Indebtedness for money borrowed that is
subordinated upon terms and in form and substance reasonably satisfactory to the
Administrative  Agent and the Banks, as evidenced by the Administrative  Agent's
and  Banks'  written  consent  thereto  given  prior  to the  creation  of  such
Indebtedness.                                                                   

     "Subsidiary"   means,   with  respect  to  any  Person,   any  corporation,
partnership  or joint  venture  whether now existing or  hereafter  organized or
acquired:  (i)  in the  case  of a  corporation,  of  which  a  majority  of the
securities  having  ordinary  voting power for the election of directors  (other
than  securities  having  such  power  only  by  reason  of the  happening  of a
contingency)  are  at  the  time  owned  by  such  Person  and/or  one  or  more
Subsidiaries  of such  Person,  or (ii) in the  case of a  partnership  or joint
venture in which such Person is a general  partner or joint venturer or of which
a majority of the partnership or other ownership interests are at the time owned
by such  Person  and/or  one or more of its  Subsidiaries.  Unless  the  context
otherwise   requires,   references  in  this   Agreement  to   "Subsidiary"   or
"Subsidiaries"  shall be deemed to be references to a Subsidiary or Subsidiaries
of Griffon, Telephonics, or any of their Subsidiaries.                          

     "Tangible Net Worth" means the sum of capital  surplus,  earned surplus and
capital  stock,  minus  deferred  charges   (including,   but  not  limited  to,
unamortized  debt discount and expense,  organization  expenses and experimental
and development expenses, but excluding prepaid expenses and deferred income tax

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assets),  intangibles and treasury  stock,  all as determined in accordance with
generally accepted accounting principles consistently applied.                  

     "Telephonics"  means  Telephonics  Corporation,   a  Delaware  corporation.

     "Telephonics  Sublimit  Commitment"  means,  in  respect  of any Bank,  the
maximum amount of such Bank's Telephonics Revolving Exposure as set forth on the
signature  page of such  Bank  adjacent  to the  heading  "Telephonics  Sublimit
Commitment" or in an Assignment  and  Acceptance or other  document  pursuant to
which it became a Bank,  as such  amount  may be  adjusted  from time to time in
accordance herewith.                                                            

     "Telephonics  Revolving Exposure" means, with respect to any Bank as of any
date, the sum as of such date of (i) the outstanding  principal  balance of such
Bank's Loans to  Telephonics,  plus (ii) such Bank's  Letter of Credit  Exposure
with respect to Telephonics.                                                    

"Termination Date" means October 1, 2007.                             

     "Termination  Event" means (a) a  "Reportable  Event"  described in Section
4043 of ERISA and the regulations  issued thereunder for which the 30-day notice
requirement  is not  waived  by the  regulations;  or (b)  the  withdrawal  of a
Borrower or any ERISA  Affiliate from a Pension Plan during a plan year in which
it was a  "substantial  employer" as defined in Section  4001(a) (2) of ERISA or
was deemed such under  Section  4068(f) of ERISA;  or (c) the  termination  of a
Pension Plan  subject to Title IV of ERISA,  the filing of a notice of intent to
terminate a Pension  Plan  subject to Title IV of ERISA,  or the  treatment of a
Pension Plan amendment as a termination  under Section 4041 of ERISA; or (d) the
institution  of  proceedings to terminate a Pension Plan by the PBGC; or (e) any
other event or condition which would  constitute  grounds under Section 4042 (a)
of ERISA for the  termination of, or the appointment of a trustee to administer,
any Pension Plan subject to such Section 4042(a); or (f) the partial or complete
withdrawal of a Borrower or any ERISA  Affiliate from a  Multiemployer  Plan; or
(g) the  imposition  of a Lien pursuant to Section 412 of the IRC or Section 302
of ERISA; or (h) any event or condition which results in the  reorganization  or
insolvency of a Multiemployer  Plan under Section 4241 or Section 4245 of ERISA,
respectively;  or (i) any event or condition which results in the termination of
a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC
of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.   

     "Unfunded Capital  Expenditures" shall mean Capital Expenditures during the
applicable   period  of   determination   minus   increases  in  Purchase  Money
Indebtedness and offsetting cash sales of capital  equipment,  all determined in
accordance with generally accepted accounting principles applied on a consistent
basis.                                                                          

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     "Unsubordinated  Liabilities"  means,  with  respect  to  any  Person,  all
Indebtedness  as defined in clause (i) of the definition of  "Indebtedness"  but
excluding any Subordinated Debt.                                                

Any accounting  terms used in this Agreement that are not  specifically  defined
herein  shall have the meanings  customarily  given to them in  accordance  with
generally  accepted  accounting  principles  as in  effect  on the  date of this
Agreement,  except  that  references  in Article 5 to such  principles  shall be
deemed to refer to such  principles  as in  effect on the date of the  financial
statements  delivered  pursuant  thereto.  Any  reference  to  "Griffon  and its
Subsidiaries" shall mean Griffon and its Subsidiaries on a consolidated basis.  

Article 2 Commitments; Loans.                                                   

Section 2.1.Loans.                                                    

     Each  Bank  hereby  severally  agrees,  on the  terms  and  subject  to the
conditions of this Agreement,  to make loans to Griffon and/or Telephonics (each
a "Loan" and, as the context may require,  collectively  with all other Loans of
such Bank and with the Loans of all other Banks to Griffon  and/or  Telephonics,
the "Loans") from time to time on any Business Day during the  Revolving  Credit
Period to and including the Commitment  Termination  Date, or, if the Commitment
Termination  Date has been  extended  in  accordance  with the terms of  Section
2.8(b) of this Agreement,  the Termination  Date;  provided,  that, after giving
effect thereto (i) such Bank's  Revolving  Exposure would not exceed such Bank's
Commitment as then in effect, (ii) the Aggregate  Telephonics Revolving Exposure
would not exceed  the  Aggregate  Telephonics  Revolving  Commitment  as then in
effect,  (iii) the Aggregate  Revolving  Exposure would not exceed the Aggregate
Revolving  Commitment  as  then in  effect  and  (iv)  such  Bank's  Telephonics
Revolving Exposure would not exceed such Bank's Telephonics  Sublimit Commitment
as then in effect,. Subject to the terms of this Agreement, during the Revolving
Credit  Period the  Borrowers  may borrow,  repay  (provided  that  repayment of
Eurodollar  Loans shall be subject to the provisions of Section 2.22 hereof) and
reborrow up to the amount of each Bank's  Commitment,  the  Aggregate  Revolving
Commitment and in the case of Telephonics  the Aggregate  Telephonics  Revolving
Commitment  (in each case after giving  effect to the  mandatory  and  voluntary
reductions  required  and  permitted  herein)  by means of Prime  Rate  Loans or
Eurodollar  Loans,  and during such period and thereafter  until the date of the
payment in full of all of the Loans, the Borrowers may convert Loans of one type
into Loans of another type (as provided in section 2.17 hereof). IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT THE TELEPHONICS  SUBLIMIT COMMITMENT IS A SUBLIMIT OF
THE  COMMITMENT  AND THAT IN NO  EVENT  SHALL  (I) ANY  BANK'S  TOTAL  REVOLVING
EXPOSURE WITH RESPECT TO GRIFFON AND TELEPHONICS  EXCEED SUCH BANK'S COMMITMENT,
OR (II) SHALL THE  AGGREGATE  REVOLVING  EXPOSURE  WITH  RESPECT TO GRIFFON  AND
TELEPHONICS EXCEED THE AGGREGATE REVOLVING COMMITMENT.                          

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Section 2.2. Notices Relating to Loans.                               

     To  the  extent  Griffon   requests  a  termination  or  reduction  of  the
Commitments, or to the extent Telephonics requests a termination or reduction of
the Aggregate  Telephonics Revolving Commitment or to the extent either Borrower
requests  that the Banks make a Loan to such  Borrower,  or to the extent either
Borrower requests a conversion and prepayment of a Loan, the applicable Borrower
shall give the Administrative Agent written notice of each such event and to the
extent same involves a Eurodollar  Loan,  the duration of each  Interest  Period
applicable to each such  Eurodollar  Loan (in each case, a "Borrowing  Notice");
provided, that, it is expressly agreed that (i) only Griffon shall be authorized
to furnish a Borrowing  Notice with respect to a termination or reduction of the
Commitments  (other than a reduction in the Commitments  solely as a result of a
reduction  or  termination  of  the  Aggregate   Telephonics   Revolving  Credit
Commitment), or a Loan to be made to Griffon, or a conversion or prepayment of a
Loan made to Griffon, and (ii) only Telephonics shall be authorized to furnish a
Borrowing  Notice with respect to a  termination  or reduction of the  Aggregate
Telephonics  Revolving  Commitment,  or a Loan to be made to  Telephonics,  or a
conversion or prepayment of a Loan made to Telephonics. Each such written notice
shall  be  executed  and  acknowledged  by the  applicable  Borrower,  shall  be
irrevocable and shall be effective only if received by the Administrative  Agent
not later than 11 a.m., New York City time, on the date that is:                

     (a) in the case of each notice of  termination or reduction and each notice
of borrowing or prepayment of, or conversion into, Prime Rate Loans, the same as
the  date  of the  related  termination,  reduction,  borrowing,  prepayment  or
conversion; and                                                                 

     (b) in the case of each notice of borrowing or prepayment of, or conversion
into,  Eurodollar  Loans,  or the duration of an Interest  Period for Eurodollar
Loans,  three (3)  Eurodollar  Business  Days  prior to the date of the  related
borrowing,  prepayment,  or conversion or the first day of such Interest Period.

Each such notice of termination or reduction  shall specify the amount  thereof.
Each such notice of borrowing, conversion or prepayment shall specify the amount
(subject to Section 2.1 hereof) and type of Loans to be  borrowed,  converted or
prepaid (and, in the case of a conversion, the type of Loans to result from such
conversion),  the date of borrowing,  conversion or prepayment  (which shall be:
(x) a Business  Day in the case of each  borrowing or  prepayment  of Prime Rate
Loans  and (y) a  Eurodollar  Business  Day in the  case of  each  borrowing  or
prepayment  of  Eurodollar  Loans and each  conversion  of or into a  Eurodollar
Loan).  Each such notice of the duration of an Interest Period shall specify the
Loans to which such Interest Period is to relate.                               

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Section 2.3. Disbursement of Loan Proceeds.                           

     (a) Each  Borrower  shall  give the  Administrative  Agent  notice  of each
borrowing  hereunder  as provided in Section  2.2 hereof.  Upon  receipt of each
Borrowing  Notice,  the  Administrative  Agent shall  promptly  notify each Bank
thereof.  Subject  to its  receipt of the notice  referred  to in the  preceding
sentence,  each Bank will make the  amount of its  Revolving  Percentage  of the
requested  Loans  available to the  Administrative  Agent for the account of the
applicable  Borrower  at the  Payment  Office  not later  than 2:00 p.m.  on the
relevant  Borrowing  Date  specified  for  each  borrowing  hereunder,  in funds
immediately available to the Administrative Agent at such office. The amounts so
made  available to the  Administrative  Agent on such  Borrowing Date will then,
subject to the  satisfaction of the terms and conditions of this  Agreement,  be
made  available on such date to the  applicable  Borrower by the  Administrative
Agent at the Payment  Office by  crediting  the account of such  Borrower on the
books of the  Administrative  Agent at such  office with the  aggregate  of said
amounts (in like funds) received by the Administrative Agent.                   

     (b) Unless the Administrative  Agent shall have confirmed that prior to its
funding of a Loan it received  notice from a Bank (by  telephone  or  otherwise,
such notice to be promptly  confirmed by facsimile or other  writing)  that such
Bank will not make  available to the  Administrative  Agent such Bank's share of
the requested Loans, the Administrative Agent may assume that such Bank has made
such  share  available  to the  Administrative  Agent on the  Borrowing  Date in
accordance  with this  Section  and,  in  reliance  upon such  assumption,  make
available to the  applicable  Borrower on such  Borrowing  Date a  corresponding
amount.  If and to the  extent  such  Bank  shall  not have so made  such  share
available to the  Administrative  Agent,  such Bank and the applicable  Borrower
severally  agree to pay to the  Administrative  Agent  forthwith  on demand such
corresponding amount (to the extent not previously paid by the other),  together
with interest  thereon for each day from the date such amount is made  available
to such Borrower to the date such amount is paid to the Administrative Agent, at
a rate per annum  equal  to, in the case of such  Borrower,  the  interest  rate
otherwise  applicable to such Loan,  and, in the case of such Bank, at a rate of
interest  per annum equal to the  greater of the  Federal  Funds Rate and a rate
determined by the Administrative Agent in accordance with banking industry rates
on interbank  compensation.  If such Bank shall pay to the Administrative  Agent
such corresponding amount, such amount so paid shall constitute such Bank's Loan
as part of the relevant  borrowing for purposes of this Agreement.              

Section 2.4. Notes.                                                   

     (a) The Loans made by the Banks shall be evidenced  by separate  promissory
notes of each Borrower  payable to each Bank (each,  a "Note" and  collectively,
the  "Notes"),  each in  substantially  the form of Exhibit A hereto.  Each Note
shall be dated the date of this Agreement, shall be payable to the order of such
Bank and (i) in the case of the Note  made by  Griffon  shall be in a  principal

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amount equal to such Bank's  Commitment  as originally in effect and (ii) in the
case of the Note made by  Telephonics  shall be in a principal  amount  equal to
such  Telephonics  Sublimit  Commitment.  Each Note shall also otherwise be duly
completed.  The Notes  shall be  payable as  provided  in  Sections  2.1 and 2.5
hereof.                                                                         

     (b) Each Bank  shall  enter on a schedule  attached  to its Note a notation
with respect to each Loan made  hereunder of: (i) the date and principal  amount
thereof,  (ii) each payment and prepayment of principal  thereof,  (iii) whether
the interest rate is initially to be determined  in accordance  with  subsection
2.6(a) (i) or 2.6(a) (ii) hereof,  and (iv) the Interest Period,  if applicable.
The  failure  of any  Bank to make a  notation  on the  schedule  to its Note as
aforesaid shall not limit or otherwise  affect the obligation of either Borrower
to repay  the  Loans in  accordance  with  their  respective  terms as set forth
herein.                                                                         

     (c) The Notes executed by Griffon in connection with this Agreement payable
to the order of each Existing Bank shall amend,  restate,  replace and supersede
the  promissory  notes  made  by  Griffon  to the  order  of each  such  Bank in
connection with the Original Agreement.                                         

     (d) The Notes  executed by  Telephonics  in connection  with this Agreement
payable  to the order of Fleet and  Chase  shall  amend,  restate,  replace  and
supersede the  promissory  notes made by  Telephonics  to the order of each such
Bank in  connection  with the each such Bank's prior lending  relationship  with
Telephonics.                                                                    

Section 2.5. Repayment of Principal of Loans.                         

     (a) The Commitments of the Banks to make  additional  Loans shall terminate
on the Commitment  Termination  Date or, if the Commitment  Termination Date has
been extended in accordance with the terms of this Agreement, on the Termination
Date, and each Borrower  shall pay to each Bank the Revolving  Exposure owing to
such Bank outstanding on the close of business on such date.                    

     (b) The Extensions of Credit:  (i) shall be repaid as and when necessary to
cause  the  aggregate  principal  amount  of the  Aggregate  Revolving  Exposure
outstanding not to exceed each Bank's Commitment, as reduced pursuant to Section
2.8 hereof,  and (ii) may be repaid at any time and from time to time,  in whole
or in part,  without premium or penalty (except as otherwise provided in Section
2.22 hereof),  upon prior written notice to each Bank as provided in Section 2.2
hereof, in a minimum amount of $500,000 and in integral multiples of $100,000 in
the case of Prime  Rate  Loans,  and in a minimum  amount of  $2,000,000  and in
integral  multiples  of  $100,000  in the case of  Eurodollar  Loans,  except as
otherwise provided in Section 2.11 hereof, and any amount so repaid may, subject
to the terms and conditions hereof,  including the borrowing  limitation imposed
by the Commitments,  be reborrowed hereunder during the Revolving Credit Period;
provided, however, that: (A) Eurodollar Loans may be repaid only on the last day

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of an Interest  Period for such Loans,  and (B) all  repayments  of Loans or any
portion  thereof shall be made together with payment of all interest  accrued on
the amount repaid through the date of such repayment.                           

     (c)  Except  as set  forth in  Sections  2.18,  2.19 and 2.21  hereof,  all
payments  and  repayments  of Loans made  pursuant to the terms  hereof shall be
applied first to Prime Rate Loans, and shall be applied to Eurodollar Loans only
to the extent any such payment exceeds the principal  amount of Prime Rate Loans
outstanding at the time of such payment.                                        

     (d) A  Borrower  may  request a  Eurodollar  Loan only if  compliance  with
subsection  2.8(b) hereof (with the payments  provided for therein being applied
in accordance with subsection  2.5(c) hereof) would not result in any portion of
the principal amount of such Eurodollar Loan being paid prior to the last day of
the Interest Period applicable thereto.                                         

Section 2.6. Interest.                                                

     (a) For all Loans each Borrower agrees to pay to the Administrative  Agent,
for  the  account  of  the  Banks  in  accordance  with  each  Bank's  Revolving
Percentage,  interest on the unpaid  principal  amount of each Loan made by such
Bank for the period commencing on the date of such Loan until such Loan shall be
paid in full, at the following rates per annum:                                 

          (i) During such periods that such Loan is a Prime Rate Loan, the Prime
Rate plus the Applicable Margin; and                                  

          (ii) During such periods that such Loan is a Eurodollar Loan, for each
     Interest  Period  relating  thereto,  the Fixed Rate for such Loan for such
Interest Period plus the Applicable Margin.                           

     (b) Notwithstanding the foregoing,  each Borrower shall pay interest on any
Loan  or any  installment  thereof,  and on any  other  amount  payable  by such
Borrower  hereunder  (to the extent  permitted by law) that shall not be paid in
full when due (whether at stated maturity, by acceleration or otherwise) for the
period  commencing on the due date thereof until the same is paid in full at the
applicable Post-Default Rate.                                                   

     (c) Except as provided in the next sentence,  accrued interest on each Loan
shall be  payable:  (i) in the case of a Prime Rate Loan,  monthly in arrears on
the Monthly  Dates,  (ii) in the case of a Eurodollar  Loan,  on the last day of
each Interest  Period for such Loan (and, if such Interest  Period exceeds three
months in duration,  on the last day of each three-month period occurring during
such  Interest  Period)  and (iii) in the case of any Loan,  upon the payment or
prepayment  thereof or the  conversion  thereof into a Loan of another type (but
only on the principal so paid,  prepaid or converted).  Interest that is payable

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at the  Post-Default  Rate shall be  payable  from time to time on demand of any
Bank.  Promptly after the establishment of any interest rate provided for herein
or any change therein,  the Administrative Agent will notify a Borrower thereof,
provided  that the  failure  to so  notify  a  Borrower  shall  not  affect  the
obligations  of  either  Borrower  hereunder  or under  any of the  Notes in any
respect.                                                                        

     (d)  Anything  in  this  Agreement  or  any of the  Notes  to the  contrary
notwithstanding,  the  obligation  of the Borrowers to make payments of interest
shall be  subject to the  limitation  that  payments  of  interest  shall not be
required to be made to any Bank to the extent that such Bank's  receipt  thereof
would not be permissible  under the law or laws applicable to such Bank limiting
rates of  interest  that may be charged  or  collected  by such  Bank.  Any such
payments of interest that are not made as a result of the limitation referred to
in the preceding  sentence shall be made by the  applicable  Borrower(s) to such
Bank on the earliest interest payment date or dates on which the receipt thereof
would be  permissible  under the laws  applicable to such Bank limiting rates of
interest that may be charged or collected by such Bank.  Such deferred  interest
shall not bear  interest.                                                       

Section 2.7. Fees.                                                    

     (a) Griffon agrees to pay to the  Administrative  Agent, for the account of
the Banks in accordance with each Bank's Revolving Percentage,  a commitment fee
(the  "Commitment  Fee"), at a rate per annum equal to .25% on the average daily
unused  Aggregate  Revolving  Commitment.  The accrued  Commitment  Fee shall be
payable quarterly in arrears on the Quarterly Dates,  commencing January 1, 2002
to and  including  (i)  the  earlier  of the  date  such  Bank's  Commitment  is
terminated  or the  Commitment  Termination  Date,  or  (ii)  if the  Commitment
Termination  Date has been  extended  in  accordance  with the terms of  Section
2.8(b) of this  Agreement,  the  earlier of the date such Bank's  Commitment  is
terminated  or the  Termination  Date,  and,  in the event the  Commitments  are
reduced as  provided  in  section  2.8  hereof,  on the  effective  date of such
reduction.                                                                      

     (b) Simultaneously  with the execution and delivery of this Agreement,  the
Borrowers shall pay to the Administrative Agent, for the account of the Banks in
accordance with each Bank's Revolving Percentage,  a non-refundable facility fee
(the "Facility Fee") in an amount equal to Three Hundred Twenty Thousand Dollars
($320,000.00) in the aggregate.                                                 

     (c) Each Borrower agrees to pay  commissions  (the "Letter of Credit Fees")
with  respect to the  Letters of Credit for its  account for the period from and
including the date of issuance of each thereof  through the  expiration  date in
accordance with the following:                                                  

          (i) In the case of  Letters of  Credit,  at a rate per annum  equal to
     1.25% on the average daily maximum amount  available  under any contingency
     to be drawn under such Letter of Credit (but in no event less than $1,000),

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     such  commissions to be payable to the Applicable L/C Fee  Distributor  for
     the  account  of  the  Banks  in  accordance  with  each  Bank's  Revolving
     Percentage.  Letter of Credit Fees on account of Letters of Credit shall be
     (i) calculated on the basis of a 360-day year for the actual number of days
     elapsed  and (ii)  payable on (x) the date  hereof in the case of the Fleet
     L/Cs and the Chase L/Cs,  each for the period  beginning on the date hereof
     to the next  Quarterly  Date,  (y) the date of  issuance  of such Letter of
     Credit,  in each case for the period beginning on the date of such issuance
     to the next  Quarterly  Date and (z) with respect to each Letter of Credit,
     quarterly in advance on each Quarterly Date of each year, commencing on the
     first such day following the date of this  Agreement,  and on the date that
the Commitments shall expire.                                         

          (ii) With  respect  to each  Letter of Credit and in  addition  to the
     Letter of Credit Fees, the requesting Borrower agrees to pay to the Issuer,
     for its own account,  its standard fees and charges  customarily charged to
  customers similar to such Borrower with respect to any Letter of Credit.

     (d) The Commitment  Fee, the Facility Fee and the Letter of Credit Fees are
hereinafter  sometimes  referred to individually as a "Fee" and  collectively as
the "Fees".                                                                     

Section 2.8. Changes in Commitment.                                   

     (a) Subject to Section 2.15 hereof,  Griffon shall be entitled to terminate
or reduce the Banks'  Commitments and Telephonics shall be entitled to terminate
or reduce the  Aggregate  Telephonics  Revolving  Commitment  provided  that the
applicable  Borrower  shall give notice of such  termination or reduction to the
Administrative  Agent as  provided  in Section  2.2 hereof and that any  partial
reduction of the Commitments  shall be in an aggregate  amount equal to $500,000
or an integral  multiple  thereof.  Any such  termination or reduction  shall be
permanent and irrevocable.                                                      

     (b) At the  option of the  Borrowers,  to be  exercised  on the  Commitment
Termination  Date,  provided that the Borrowers can satisfy the  conditions  set
forth in Section 4.3 hereof as if an Extension of Credit were being made on such
date, in lieu of paying the  outstanding  Extensions of Credit on such date, the
Borrowers may elect to extend the Commitment  Termination Date on the decreasing
basis as  provided  in the  definition  of  "Commitment"  and in such  event the
Commitment  Termination  Date shall be deemed to have been extended for purposes
of this Agreement and the Commitments shall be deemed to automatically  decrease
as provided in the definition of  "Commitment."  The Borrowers shall give notice
of its intention to exercise  such option by delivering a written  notice to the
Administrative  Agent  on,  or at any time  prior  to 10 days of the  Commitment
Termination  Date.  If the  Commitment  Termination  Date has been  extended  in
accordance with this Section 2.8(b),  on the Commitment  Termination Date and on
each Quarterly  Reduction Date thereafter,  if, the Aggregate Revolving Exposure
exceeds  the  Aggregate  Revolving  Commitment  as then  required to be reduced,
within one Business Day of the first day there exists such excess  Griffon shall

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make payment to the  Administrative  Agent (to be distributed in accordance with
the terms of Section 2.15 of this  Agreement)  in an amount equal to such excess
together  with any  amounts  payable  pursuant  to  Section  2.22 in  connection
therewith.                                                                      

     (c) If on the date of any reduction of the Aggregate Revolving  Commitment,
the Aggregate  Revolving  Exposure  exceeds the Aggregate  Revolving  Commitment
after giving effect to such  reduction  and, if the Loans have been paid in full
and the Letter of Credit  Exposure  of all  Lenders is  greater  than zero,  the
Borrowers shall deposit into a cash  collateral  account an amount in cash which
would  cause the balance on deposit in the cash  collateral  account to equal or
exceed the Letter of Credit Exposure of all Lenders.                            

     (d) If on the date of any reduction of the Aggregate  Telephonics Revolving
Commitment,  the Aggregate  Telephonics Revolving Exposure exceeds the Aggregate
Telephonics  Revolving  Commitment after giving effect to such reduction and, if
the  Telephonics  Loans  have  been paid in full and the  Telephonics  Letter of
Credit  Exposure of all Banks is greater than zero,  Telephonics  shall  deposit
into a cash  collateral  account an amount in cash which would cause the balance
on deposit  in the cash  collateral  account to equal or exceed the  Telephonics
Letter of Credit  Exposure of all Banks.                                        

Section 2.9. Use of Proceeds of Loans; Existing Indebtedness.         

     (a) The  proceeds  of Loans made to  Telephonics  shall  refinance  certain
obligations  of  Telephonics  in the aggregate  amount of  $19,800,000  owing to
Fleet,  Chase and  Citibank,  N.A. and the proceeds of the other  Extensions  of
Credit hereunder may be used by the Borrowers solely for such Borrower's working
capital  purposes  and  for  other  corporate   purposes   permitted   hereunder
(including,  without  limitation,  Permitted  Acquisitions  and the  repurchase,
redemption,  retirement or acquisition of Griffon's capital stock not prohibited
by Section 7.5 hereof).                                                         

     (b) With respect to all loans  outstanding  under the  Original  Agreement,
Griffon shall pay to each Existing Bank on the date hereof, the then outstanding
principal  balance of each such loan,  if any,  together  with all  accrued  and
unpaid interest with respect thereto.  With respect to all loans owing to a Bank
by Telephonics as of the date of this Agreement,  Telephonics  shall pay to each
appropriate Bank on the date hereof,  the then outstanding  principal balance of
each such loan,  if any,  together  with all  accrued and unpaid  interest  with
respect thereto.                                                                

Section 2.10. Computations.                                           

     Interest on all Loans and each Fee shall be computed on the basis of a year
of 360 days and actual days elapsed  (including  the first day but excluding the
last) occurring in the period for which payable.                                

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     Section 2.11. Minimum Amounts of Borrowings,  Conversions,  Prepayments and
Interest Periods.                                                               

     Except for borrowings,  conversions  and prepayments  that exhaust the full
remaining  amount  of  the  Aggregate  Revolving  Commitment  (in  the  case  of
borrowings)  or  result  in the  conversion  or  prepayment  of all  Loans  of a
particular type (in the case of conversions or prepayments) or conversions  made
pursuant to Section 2.18 or Section 2.20 hereof,  each borrowing from each Bank,
each  conversion  of Loans  of one type  into  Loans  of  another  type and each
prepayment of principal of Loans  hereunder shall be in an amount at least equal
to  $500,000  and in  integral  multiples  of $100,000 in the case of Prime Rate
Loans,  and in an amount at least equal to $2,000,000 and in integral  multiples
of  $100,000  in the  case of  Eurodollar  Loans  (borrowings,  conversions  and
prepayments of different  types of Loans at the same time hereunder to be deemed
separate borrowings,  conversions and prepayments for purposes of the foregoing,
one for each type).                                                             

Section 2.12. Time and Method of Payments.                            

     (a) Except as provided below, all payments of principal, interest, Fees and
other amounts  (including  indemnities)  to be paid by a Borrower under the Loan
Documents  or payable  by a  Borrower  hereunder  shall be made in  Dollars,  in
immediately available funds, shall be made to the Administrative Agent, prior to
11:00 a.m. on the date such  payment is due,  for the account of the  applicable
Credit Party at the Payment Office,  without counterclaim or setoff and free and
clear of, and without  any  deduction  or  withholding  for,  any taxes or other
payments.  The failure of either  Borrower to make any such payment by such time
shall not  constitute a Default,  provided that such payment is made on such due
date, but any such payment made after 1:00 p.m. on such due date shall be deemed
to have  been  made on the next  Business  Day for the  purpose  of  calculating
interest on amounts outstanding on the Revolving Loans. As between each Borrower
and each Credit Party, any payment by a Borrower to the Administrative Agent for
the account of such Credit Party shall be deemed to be payment by such  Borrower
to such Credit Party.  Notwithstanding the foregoing,  (i) all payments pursuant
to Sections  2.18,  2.22, 9.1 and 9.2 shall be paid directly to the Credit Party
entitled  thereto and (ii) all payments  pursuant to Section  2.7(c)(i) shall be
made to the Applicable L/C Fee Distributor  for the account of and  distribution
to the Credit Parties.  Furthermore,  the Administrative  Agent and any Bank for
whose account any such payment is to be made may, but shall not be obligated to,
debit  the  amount  of any such  payment  that is not  made by such  time to any
ordinary  deposit  account of either Borrower with the  Administrative  Agent or
such Bank, as the case may be. If any payment under the Loan Documents  shall be
due and  payable  on a day which is not a  Business  Day,  the due date  thereof
(except as  otherwise  provided  with  respect  to  Interest  Periods)  shall be
extended  to the next  Business  Day and  (except  with  respect to  payments in
respect of the Fees) interest shall be payable at the applicable  rate specified
herein during such extension,  provided, however, that if such next Business Day

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would  be  after  the  Commitment   Termination  Date  (or,  if  the  Commitment
Termination  Date has been  extended  in  accordance  with the terms of  Section
2.8(b) of this Agreement,  the Termination  Date), such payment shall instead be
due on the immediately preceding Business Day. Additional provisions relating to
payments are set forth in Section 9.3 hereof.                                   

     (b) If at any time insufficient  funds are received by and available to the
Administrative  Agent to pay fully all amounts of  principal,  interest and fees
then due hereunder,  such funds shall be applied (A) first,  towards  payment of
interest and fees then due under the Loan  Documents,  ratably among the parties
entitled thereto in accordance with the amounts of interest and fees then due to
such parties,  and (B) second,  towards  payment of principal then due under the
Loan Documents,  ratably among the parties  entitled  thereto in accordance with
the amounts of principal then due to such parties.                              

Section 2.13. Lending Offices.                                        

     The Loans of each type made by each Bank  shall be made and  maintained  at
such Bank's Applicable Lending Office for Loans of such type.                   

Section 2.14. Failure to Fund.                                        

     The  failure  of any  Bank to make  any  Loan to be made by it on the  date
specified   therefor  shall  not  relieve  any  other  Bank  of  its  respective
obligations to make its Loans on such date, but no Bank shall be responsible for
the  failure  of any other  Bank to make  Loans to be made by such  other  Bank.

Section 2.15. Pro Rata Treatment Between Banks.                       

     Notwithstanding   anything  to  the  contrary  provided  herein:  (i)  each
borrowing  from the Banks  under  Section 2.1 hereof will be made from the Banks
and each  payment of each Fee shall be made to the Banks pro rata  according  to
each Bank's  Revolving  Percentage  (without  giving  effect to the  termination
thereof,  whether pursuant to subsection 2.5 (a), Article 8 or otherwise);  (ii)
each partial reduction of the Commitments shall be applied to the Commitments of
the Banks pro rata  according to each Bank's  Revolving  Percentage;  (iii) each
conversion  of Loans of a particular  type under Section 2.17 hereof (other than
conversions  provided  for by Section 2.20 or 2.21 hereof) will be made pro rata
among the Banks holding Loans of such type according to the respective principal
amounts of such Loans held by such Banks;  (iv) each payment and  prepayment  of
principal of or interest on  Extensions  of Credit of a particular  type will be
made to the Banks pro rata in accordance  with the respective  unpaid  principal
amounts of such Extensions of Credit held by such Banks;  and (v) each borrowing
from the Banks under  Section 2.1 hereof will be made from the Banks at the same
Interest  Period (if applicable)  with respect to each such  borrowing.         

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Section 2.16. Sharing of Payments, and Set-Off Among Banks.           

     Each Borrower  hereby  agrees that, in addition to (and without  limitation
of) any right of set-off,  banker's  lien or  counterclaim  a Bank may otherwise
have, each Bank shall be entitled,  at its option, to offset balances held by it
at any of its offices against any Revolving  Exposure  hereunder,  or any Fee or
other  amount  payable to it, that is not paid when due  (regardless  of whether
such balances are then due to such  Borrower),  in which case it shall  promptly
notify a Borrower and the other Banks thereof, provided that its failure to give
such  notice  shall not affect  the  validity  thereof.  If any Bank  shall,  by
exercising any right of setoff or counterclaim  or otherwise,  obtain payment in
respect of any principal of, or interest on, any of its Loans or  participations
in LC  Disbursements  resulting  in such  Bank  receiving  payment  of a greater
proportion  of the  aggregate  amount  of its  Loans  and  participations  in LC
Disbursements  and accrued interest thereon than the proportion  received by any
other   applicable  Bank,  then  the  applicable  Bank  receiving  such  greater
proportion shall purchase (for cash at face value)  participations  in the Loans
and  participations  in LC Disbursements of other applicable Banks to the extent
necessary  so that the  benefit  of all such  payments  shall be  shared  by the
applicable  Banks ratably in accordance  with the aggregate  amount of principal
of, and accrued  interest on, their respective  Loans and  participations  in LC
Disbursements,  provided that (i) if any such  participations  are purchased and
all or any  portion  of the  payment  giving  rise  thereto is  recovered,  such
participations  shall be rescinded and the purchase price restored to the extent
of such recovery,  without  interest,  and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower  pursuant to
and in  accordance  with the  express  terms of this  Agreement  or any  payment
obtained  by a  Bank  as  consideration  for  the  assignment  of or  sale  of a
participation in any of its Loans or  participations  in LC Disbursements to any
assignee or participant, other than to a Borrower or any Subsidiary or Affiliate
thereof (as to which the  provisions of this paragraph  shall apply).  Each Loan
Party consents to the foregoing and agrees,  to the extent it may effectively do
so under applicable law, that any Bank acquiring a participation pursuant to the
foregoing arrangements may exercise against such Loan Party rights of setoff and
counterclaim with respect to such  participation as fully as if such Bank were a
direct creditor of such Loan Party in the amount of such participation.  Nothing
contained  herein  shall  require any Bank to  exercise  any such right or shall
affect the right of any Bank to exercise and retain the benefits of  exercising,
any such right with respect to any other  indebtedness  or  obligation of either
Borrower.                                                                       

Section 2.17. Conversions of Loans.                                   

     Each Borrower  shall have the right to convert Loans of one type into Loans
of another type from time to time,  provided  that: (i) such Borrower shall give
the  Administrative  Agent notice of each such conversion as provided in Section
2.2 hereof;  (ii)  Eurodollar  Loans may be converted only on the last day of an
Interest Period for such Loans; and (iii) except as required by Sections 2.18 or
2.21 hereof,  no Prime Rate Loan may be converted  into a Eurodollar  Loan if on

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the proposed  date of  conversion a Default or an Event of Default  exists.  The
Administrative  Agent  shall use its best  efforts to notify a  Borrower  of the
effectiveness  of such  conversion,  and  the new  interest  rate to  which  the
converted  Loans are  subject,  as soon as  practicable  after  the  conversion;
provided,  however, that any failure to give such notice shall not affect either
Borrower's  obligations,  or the Banks' or the Administrative Agent's rights and
remedies,  hereunder in any way  whatsoever.                                    

Section 2.18. Additional Costs; Capital Requirements.                 

     (a) In the event that any existing or future law or  regulation,  guideline
or  interpretation  thereof,  by any  court or  administrative  or  governmental
authority  charged with the  administration  thereof,  or compliance by any Bank
with any  request or  directive  (whether or not having the force of law) of any
such  authority  shall  impose,  modify  or deem  applicable  or  result  in the
application of, any capital  maintenance,  capital ratio or similar  requirement
against loan commitments made by any Bank hereunder, and the result of any event
referred to above is to impose upon any Bank or increase any capital requirement
applicable as a result of the making or maintenance  off such Bank's  Commitment
or the obligation of either  Borrower  hereunder with respect to such Commitment
(which  imposition  of capital  requirements  may be  determined  by each Bank's
reasonable   allocation   of  the   aggregate  of  such  capital   increases  or
impositions),  then,  upon demand  made by such Bank as promptly as  practicable
after it obtains knowledge that such law, regulation, guideline, interpretation,
request or directive  exists and  determines to make such demand,  each Borrower
shall  immediately  pay to such Bank from time to time as specified by such Bank
additional commitment fees which shall be sufficient to compensate such Bank for
such imposition of or increase in capital requirements together with interest on
each such amount from the date  demanded  until  payment in full  thereof at the
Post-Default  Rate. A certificate  setting forth in reasonable detail the amount
necessary to compensate such Bank as a result of an imposition of or increase in
capital  requirements  submitted by such Bank to a Borrower shall be conclusive,
absent manifest  error,  as to the amount thereof.  For purposes of this Section
2.18:  (i) in  calculating  the amount  necessary to compensate any Bank for any
imposition of or increase in capital requirements,  such Bank shall be deemed to
be  entitled  to a rate of return on  capital  (after  federal,  state and local
taxes) of fifteen percent per annum, and (ii) all references to any "Bank" shall
be deemed to include any participant in such Bank's Commitment.                 

     (b) In the event that any Regulatory  Change shall: (i) change the basis of
taxation of any amounts payable to any Bank under this Agreement or the Notes in
respect of any Loans including, without limitation, Eurodollar Loans (other than
taxes  imposed on the  overall net income of such Bank for any such Loans by the
United  States  of  America  or the  jurisdiction  in  which  such  Bank has its
Principal  Office);  or (ii)  impose  or modify  any  reserve,  Federal  Deposit
Insurance  Corporation  premium  or  assessment,   special  deposit  or  similar
requirements  relating to any  Extensions  of Credit or other  assets of, or any

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deposits with or other liabilities of, such Bank (including any of such Loans or
any  deposits  referred to in the  definition  of "Fixed Base Rate" in Article 1
hereof);  or (iii)  impose any other  conditions  affecting  this  Agreement  in
respect of Loans,  including,  without  limitation,  Eurodollar Loans (or any of
such extensions of credit, assets,  deposits or liabilities);  and the result of
any event  referred to in clause  (i),  (ii) or (iii) above shall be to increase
such  Bank's  costs of making  or  maintaining  any  Loans,  including,  without
limitation,  Eurodollar  Loans,  or its  Commitment,  or to  reduce  any  amount
receivable by such Bank hereunder in respect of any of its Eurodollar  Loans, or
its  Commitment,  or to increase the cost to any Bank of issuing or  maintaining
the  Letters  of  Credit  or  participating  therein,  as the  case may be (such
increases in costs and reductions in amounts receivable are hereinafter referred
to as "Additional  Costs") in each case, only to the extent that such Additional
Costs are not  included  in the Fixed Base Rate  applicable  to such  Eurodollar
Loans,  then, upon demand made by such Bank as promptly as practicable  after it
obtains  knowledge  that such a Regulatory  Change exists and determines to make
such demand, each Borrower shall pay to such Bank from time to time as specified
by such  Bank,  additional  commitment  fees or  other  amounts  which  shall be
sufficient  to  compensate  such Bank for such  increased  cost or  reduction in
amounts  receivable  by such Bank from the date of such  change,  together  with
interest  on each such  amount  from the date  demanded  until  payment  in full
thereof at the  Post-Default  Rate. All references to any "Bank" shall be deemed
to include any participant in such Bank's  Commitment.                          

     (c) Without limiting the effect of the foregoing provisions of this Section
2.18, in the event that, by reason of any  Regulatory  Change,  any Bank either:
(i) incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other  liabilities of such Bank
which  includes  deposits by reference to which the interest  rate on Eurodollar
Loans is determined as provided in this Agreement or a category of extensions of
credit or other assets of such Bank which  includes  Eurodollar  Loans,  or (ii)
becomes  subject to restrictions on the amount of such a category of liabilities
or assets that it may hold, then, if such Bank so elects by notice to a Borrower
(with a copy to the other Banks),  the  obligation of such Bank to make,  and to
convert  Loans of any other type  into,  Loans of such type  hereunder  shall be
suspended until the date such Regulatory  Change ceases to be in effect (and all
Loans of such type then outstanding  shall be converted into Prime Rate Loans or
into  Eurodollar  Loans of another  duration,  as the case may be, in accordance
with Sections 2.17 and 2.21 hereof).                                            

     (d)  Determinations  by any Bank for  purposes of this  Section 2.18 of the
effect of any Regulatory  Change on its costs of making or maintaining  Loans or
on amounts  receivable by it in respect of Loans, and of the additional  amounts
required to compensate  such Bank in respect of any Additional  Costs,  shall be
set forth in  writing  in  reasonable  detail  and shall be  conclusive,  absent
manifest error.                                                                 

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Section 2.19. Limitation on Types of Loans.                           

     Anything  herein to the  contrary  notwithstanding,  if, on or prior to the
determination  of an interest  rate for any  Eurodollar  Loans for any  Interest
Period  therefor,  the  Administrative  Agent  or  any  Bank  determines  (which
determination shall be conclusive):                                             

     (a) by reason of any  event  affecting  the  Eurodollar  interbank  market,
quotations of interest rates for the relevant deposits are not being provided in
the relevant amounts or for the relevant  maturities for purposes of determining
the rate of interest for such Loans under this Agreement; or                    

     (b) the rates of  interest  referred  to in the  definition  of "Fixed Base
Rate" in Article 1 hereof  upon the basis of which the rate of  interest  on any
Eurodollar  Loans for such period is determined,  do not accurately  reflect the
cost to the Banks of making or maintaining such Loans for such period;          

then the  Administrative  Agent or such Bank,  as the case may be,  shall give a
Borrower and the other Banks prompt notice thereof (and shall  thereafter give a
Borrower and such other Banks prompt  notice of the  cessation,  if any, of such
condition),  and so long as such condition remains in effect, the Banks shall be
under no  obligation to make Loans of such type or to convert Loans of any other
type into Loans of such type and each Borrower  shall, on the last day(s) of the
then current Interest  Period(s) for the outstanding  Loans of the affected type
either prepay such Loans in  accordance  with Section 2.8 hereof or convert such
Loans into Loans of another type in accordance with Section 2.17 hereof.        

Section 2.20. Illegality.                                             

     Notwithstanding any other provision in this Agreement, in the event that it
becomes unlawful for any Bank or its Applicable Lending Office to: (i) honor its
obligation to make Eurodollar Loans hereunder, or (ii) maintain Eurodollar Loans
hereunder,  then such Bank shall promptly notify a Borrower thereof (with a copy
to the other Banks),  describing such illegality in reasonable detail (and shall
thereafter  promptly notify a Borrower and the other Banks of the cessation,  if
any, of such  illegality),  and such Bank's  obligation to make Eurodollar Loans
and to convert other types of Loans into Eurodollar Loans hereunder shall,  upon
written notice given by such Bank to a Borrower, be suspended until such time as
such  Bank may  again  make  and  maintain  Eurodollar  Loans  and  such  Bank's
outstanding  Eurodollar  Loans  shall be  converted  into  Prime  Rate  Loans in
accordance with Sections 2.17 and 2.21 hereof.                                  

Section 2.21. Certain Conversions pursuant to Sections 2.18 and 2.20. 

     If the  Loans of any Bank of a  particular  type  (Loans  of such  type are
hereinafter  referred  to as  "Affected  Loans"  and  such  type is  hereinafter
referred to as the "Affected Type") are to be converted pursuant to Section 2.18
or 2.20 hereof,  such Bank's  Affected  Loans shall be converted into Prime Rate

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Loans,  or  Eurodollar  Loans of another type, as the case may be (the "New Type
Loans")  on the last  day(s)  of the then  current  Interest  Period(s)  for the
Affected Loans (or, in the case of a conversion  required by subsection  2.18(c)
or Section  2.20  hereof,  on such  earlier  date as such Bank may  specify to a
Borrower  with a copy to the other  Banks) and,  until such Bank gives notice as
provided below that the  circumstances  specified in Section 2.18 or 2.20 hereof
that gave rise to such conversion no longer exist:                              

     (a) to the extent that such Bank's  Affected  Loans have been so converted,
all payments and  prepayments  of principal  that would  otherwise be applied to
such Affected Loans shall be applied instead to its New Type Loans; and         

     (b) all Loans  that  would  otherwise  be made by such Bank as Loans of the
Affected Type shall be made instead as New Type Loans and all Loans of such Bank
that would  otherwise  be  converted  into Loans of the  Affected  Type shall be
converted  instead  into (or shall  remain  as) New Type  Loans.                

Section 2.22. Indemnity.                                              

     Each  Borrower  hereby  agrees to  indemnify  each Bank against any loss or
expense  which  such Bank may  sustain or incur as a  consequence  of any of the
following:                                                                      

     (a) the  failure  of such  Borrower  to  borrow  a  Eurodollar  Loan  after
agreement  shall have been  reached on the amount,  interest  rate and  Interest
Period thereof;                                                                 

     (b) the receipt or recovery by such Bank, whether by voluntary  prepayment,
acceleration or otherwise,  of all or any part of a Eurodollar Loan prior to the
last day of an Interest Period applicable thereto; or                           

     (c) the conversion, prior to the last day of an applicable Interest Period,
of a Eurodollar Loan into a Prime Loan.                                         

     Without limiting the effect of the foregoing, the amount to be paid by such
Borrower to such Bank in order to so indemnify such Bank for any loss occasioned
by any of the events  described in the  preceding  paragraph,  and as liquidated
damages therefor, shall be equal to the excess,  discounted to its present value
as of the date paid to such Bank, of (i) the amount of interest which  otherwise
would have accrued on the principal amount so received, recovered,  converted or
not borrowed during the period (the "Indemnity Period") commencing with the date
of such receipt,  recovery,  conversion, or failure to borrow to the last day of
the applicable  Interest Period for such Eurodollar Loan at the rate of interest
applicable  to such  Loan (or the rate of  interest  agreed  to in the case of a
failure to borrow)  provided for herein  (prior to default) over (ii) the amount
of interest which would be earned by such Bank during the Indemnity Period if it

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invested the principal amount so received, recovered,  converted or not borrowed
at the rate per  annum  determined  by such Bank as the rate it would bid in the
London interbank market for a deposit of eurodollars in an amount  approximately
equal to such principal  amount for a period of time comparable to the Indemnity
Period.                                                                         

     A certificate as to any additional amounts payable pursuant to this Section
2.22 setting  forth the basis and method of  determining  such amounts  shall be
conclusive,  absent  manifest error,  as to the  determination  by such Bank set
forth therein if made reasonably and in good faith.  Each Borrower shall pay any
amounts so  certified  to it by such Bank  within 10 days of receipt of any such
certificate.  For purposes of this Section  2.22,  all  references to the "Bank"
shall be deemed to include  any  participant  in such Bank's  Commitment  and/or
Loans.                                                                          

     The  indemnities  set forth  herein  shall  survive  payment in full of all
Eurodollar Loans and all other Loans made pursuant to this Agreement.           

Section 2.23. Security.                                               

     (a) In order to secure the due payment and  performance by the Borrowers of
the Obligations Griffon:                                                        

          (A) Has granted to the Administrative Agent for the ratable benefit of
     the Banks a first Lien on, and pledge to the  Administrative  Agent for the
     ratable benefit of the Banks,  all of the issued and outstanding  shares of
     the  capital  stock  of  Clopay  by  the  execution  and  delivery  to  the
     Administrative  Agent of a Pledge Agreement dated August 31, 1999 (which is
     hereby confirmed in all respects); it being expressly agreed that the grant
     of a Lien on,  and  pledge  to the  Administrative  Agent  for the  ratable
     benefit of the Banks of, all of the  issued and  outstanding  shares of the
     capital stock of  Telephonics  pursuant to the Original  Agreement is being
     released  contemporaneously  with  the  effectiveness  of  this  Agreement;
     provided,  that,  same is subject to being  reinstated  pursuant to Section
2.23(a)(C) hereof;                                                    

          (B) Shall grant,  or cause each of its  Subsidiaries  to grant, to the
     Administrative  Agent a first  Lien on,  and  pledge to the  Administrative
     Agent  for  the  ratable  benefit  of the  Banks,  all of  the  issued  and
     outstanding  shares of the capital stock of any Eligible  Business acquired
     after  the  date  hereof  in a  Permitted  Acquisition,  provided  that the
     foregoing terms of this subsection (B) in respect of Subsidiaries of Clopay
     and of  Telephonics  shall be  subject  to the terms of the  proviso at the
     conclusion of subsection (c) of the definition of "Permitted  Acquisition";

          (C) At any time the Aggregate Revolving Exposure exceeds $130,000,000,
     shall grant to the Administrative  Agent a first Lien on, and pledge to the
     Administrative  Agent for the  ratable  benefit  of the  Banks,  all of the
     issued and  outstanding  shares of the capital stock of  Telephonics,  such
     grant of Lien and  pledge to  thereafter  remain in  effect  regardless  of
     whether the Aggregate Revolving Exposure falls below such $130,000,000; and

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          (D) Shall  execute and deliver or cause to be executed  and  delivered
     such other  agreements,  instruments  and  documents as the  Administrative
     Agent or any Bank may reasonably require in order to effect the purposes of
the Pledge Agreement, this Section 2.23 and this Agreement.           

     (b)  All of the  agreements,  instruments  and  documents  provided  for or
referred  to  in  this  Section  2.23  are  hereinafter  sometimes  referred  to
collectively as the "Security  Documents".                                      

Section 2.24. Letters of Credit.                                      

     (a)  Availability;  Procedure.  Either  Borrower  may request the Issuer to
issue standby letters of credit (the "Letters of Credit"; each, individually,  a
"Letter of Credit;" which term, as used herein, shall include the Chase L/Cs and
Fleet  L/Cs)  during the period  from the date  hereof  through  the  Commitment
Termination  Date, or, if the Commitment  Termination  Date has been extended in
accordance  with the terms of  Section  2.8(b) of this  Agreement,  through  the
Termination  Date,  provided  that (i)  immediately  after the  issuance of each
Letter of Credit the Letter of Credit  Exposure of all Lenders  would not exceed
the Letter of Credit Commitment, (ii) the Aggregate Revolving Exposure would not
exceed the  Aggregate  Revolving  Commitment,  (iii) the  Aggregate  Telephonics
Revolving  Exposure  would  not  exceed  the  Aggregate   Telephonics  Revolving
Commitment and (iv) the issuance,  amendment, renewal or extension of any Letter
of Credit shall be in the  reasonable  discretion  of the Issuer and in no event
shall any Letter of Credit be issued  unless the issuance  thereof is consistent
with the Issuer's  policies and  procedures  for standby  letters of credit.  To
request  the  issuance  of a Letter  of Credit  (or the  amendment,  renewal  or
extension of an outstanding Letter of Credit),  the requesting Borrower shall at
least three  Business Days prior to the requested  date thereof  issuance,  hand
deliver or telecopy (if by telecopy it shall be confirmed  promptly,  and in any
event  within  five  Business  Days)  to the  Issuer,  the  Applicable  L/C  Fee
Distributor and the  Administrative  Agent a notice (which shall be irrevocable)
requesting  the  issuance of a Letter of Credit,  or  identifying  the Letter of
Credit to be  amended,  renewed  or  extended,  and  specifying  (A) the date of
issuance,  amendment,  renewal or extension (which shall be a Business Day), (B)
the name and  address  of the  beneficiary  thereof,  (C) the date on which such
Letter of Credit is to expire  (which  shall comply with  paragraph  (b) of this
Section),  (D) such  Borrower's  proposal  as to the  conditions  under  which a
drawing  may be made under such  Letter of Credit  and the  documentation  to be
required in respect  thereof,  (E) the maximum amount to be available under such
Letter  of  Credit  and (F) such  other  information  as shall be  necessary  to
prepare,  amend,  renew or extend  such Letter of Credit.  Such notice  shall be

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accompanied  by a duly completed  application  for such Letter of Credit on such
forms as may be made  available  from time to time by the  Issuer and such other
certificates,   documents  (including  a  reimbursement   agreement)  and  other
information  as may be required by the Issuer in  accordance  with its customary
procedures (collectively, the "Letter of Credit Documentation"). Upon receipt of
such  notice  from such  Borrower,  the  Applicable  L/C Fee  Distributor  shall
promptly notify each Bank thereof.  Subject to the satisfaction of the terms and
conditions of this  Agreement,  the Issuer shall issue each requested  Letter of
Credit.  In the event of any conflict  between the  provisions of this Agreement
and any Letter of Credit  Documentation,  the provisions of this Agreement shall
control.  Notwithstanding  the  foregoing,  with respect to the Chase L/Cs,  the
applicable Borrower shall only be required to notify the Administrative Agent as
to an  Amendment  of a Chase L/C if same  involves  an  increase  in the  amount
thereof or a renewal or extension of the expiration  date thereof.              

     (b)  Terms of  Letters  of  Credit.  Each  Letter  of  Credit  shall (i) be
denominated  in  Dollars,  (ii) be  issued  for the  account  of the  requesting
Borrower  and in  support  of  obligations,  contingent  or  otherwise,  of such
Borrower  arising  in the  ordinary  course of its  business,  and (iii) have an
expiration  date which shall be not later than the earlier of five Business Days
before the Commitment  Termination  Date or, if the Commitment  Termination Date
has been  extended  in  accordance  with the  terms of  Section  2.8(b)  of this
Agreement,  five Business Days before the  Termination  Date,  provided that the
expiration  date of such  Letter of Credit  may be  extended  or such  Letter of
Credit  may be  renewed  (but not  beyond  the  Commitment  Termination  Date or
Termination  Date, as applicable,  as aforesaid),  provided,  further,  that any
renewal,  or any  extension  of any  expiry  date,  of a Letter of Credit  shall
constitute  the  issuance  of such  Letter of Credit  for all  purposes  of this
Agreement.                                                                      

     (c) Letter of Credit  Participations.  Immediately  upon the  issuance of a
Letter of Credit  (and in the case of the Chase  L/Cs and Fleet  L/Cs,  upon the
effectiveness  of this  Agreement),  the Issuer shall be deemed to have sold and
transferred to each Bank, and each Bank shall be deemed to have  irrevocably and
unconditionally  purchased  and received  from the Issuer,  without  recourse or
warranty, an undivided interest and participation,  to the extent of such Bank's
Revolving  Percentage  thereof,  in such Letter of Credit and the obligations of
such  Borrower with respect  thereto and any security  therefor and any guaranty
pertaining thereto at any time existing.                                        

     (d)  Drawings on Letters of Credit.  The Issuer shall  promptly  notify (i)
each Bank of the  Issuer's  receipt  of a drawing  request  under any  Letter of
Credit,  stating the amount of such Bank's Revolving  Percentage of such drawing
request  and the  date on  which  such  request  will be  honored  and  (ii) the
Administrative  Agent and a Borrower of the amount of such  drawing  request and
the date on which such  request  will be  honored.  Any failure of the Issuer to
give or any delay in the  Issuer's  giving any such notice  shall not release or
diminish the obligations of the Borrower or any Bank  hereunder.  In determining
whether to pay under any Letter of Credit,  the Issuer shall have no  obligation
to any Bank or either Borrower other than to confirm that any documents required

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to be delivered  under such Letter of Credit have been  delivered  and that they
appear to comply on their face with the  requirements  of such Letter of Credit.
In the  absence of gross  negligence  or willful  misconduct  on the part of the
Issuer,  the Issuer shall have no  liability to any Bank or either  Borrower for
any action  taken or omitted to be taken by it under or in  connection  with any
Letter of Credit,  including any such action  negligently  taken or  negligently
omitted to be taken by it.                                                      

     (e) Reimbursement. The Borrower that is the account party under a Letter of
Credit  shall pay to the  Administrative  Agent for the account of the Issuer on
demand  therefor,  in Dollars in immediately  available funds, the amount of all
Reimbursement  Obligations  owing to the Issuer under any such Letter of Credit,
together with interest thereon until paid (i) a rate per annum during the period
commencing on the first date there exists such a Reimbursement  Obligation until
five Business Days thereafter, equal to the Prime Rate as in effect from time to
time plus the Applicable Margin for Prime Rate Loans and (ii) beginning with the
date that is five  Business  Days  after  the first  date  there  exists  such a
Reimbursement  Obligation  and  thereafter  until  paid in  full,  equal  to the
Post-Default  Rate, in each case irrespective of any claim,  setoff,  defense or
other right which such  Borrower  may have at any time against the Issuer or any
other Person. In the event that the Issuer makes any payment under any Letter of
Credit and such  Borrower  shall not have  repaid such amount to the Issuer when
due, the Issuer shall promptly  notify each Bank of such failure,  and each Bank
shall promptly and  unconditionally  pay to the  Administrative  Agent,  for the
account of the Issuer,  the amount of such Bank's  Revolving  Percentage of such
payment in Dollars in immediately available funds on the Business Day the Issuer
so  notifies  such Bank if such  notice is given prior to 12:00 Noon or, if such
notice is given after 12:00 Noon, such Bank shall make its Revolving  Percentage
of such  payment  available  to the  Issuer  prior  to  12:00  Noon on the  next
succeeding Business Day.                                                        

     (f) Banks'  Obligations.  If and to the extent any Bank shall not make such
Bank's Revolving  Percentage of any Reimbursement  Obligations  available to the
Issuer when due in  accordance  with  Section  2.24(e),  such Bank agrees to pay
interest  to the  Issuer on such  unpaid  amount for each day from the date such
payment  is due until the date such  amount is paid in full to the Issuer at the
Federal Funds Rate until (and  including)  the third Business Day after the date
due and  thereafter at the Prime Rate.  The  obligations of the Banks under this
Section 2.24(f) are several and not joint or joint and several,  and the failure
of any Bank to make  available  to the Issuer its  Revolving  Percentage  of any
Reimbursement  Obligations when due in accordance with Section 2.24(e) shall not
relieve  any  other  Bank of its  obligation  hereunder  to make  its  Revolving
Percentage of such  Reimbursement  Obligations  so available when so due, but no
Bank shall be  responsible  for the failure of any other Bank to make such other
Bank's Revolving Percentage of such Reimbursement  Obligations so available when
so  due.                                                                        

     (g)  Rescission.  Whenever the Issuer receives a payment of a Reimbursement
Obligation  from or on behalf of a Borrower as to which the Issuer has  received
any payment from a Bank pursuant to Section  2.24(e),  the Issuer shall promptly
pay to such Bank an amount  equal to such Bank's  Revolving  Percentage  of such

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payment  from or on behalf of such  Borrower.  If any payment by or on behalf of
such Borrower and received by the Issuer with respect to any Letter of Credit is
rescinded  or must  otherwise  be  returned by the Issuer for any reason and the
Issuer has paid to any Bank any portion thereof,  each such Bank shall forthwith
pay over to the Issuer an amount equal to such Bank's  Revolving  Percentage  of
the amount  which must be so returned by the Issuer.                            

     (h) Expenses. Each Bank, upon the demand of the Issuer, shall reimburse the
Issuer,  to the extent the Issuer has not been  reimbursed  by a Borrower  after
demand  therefor,  for the reasonable costs and expenses  (including  reasonable
attorneys'  fees)  incurred by the Issuer in connection  with the  collection of
amounts due under,  and the preservation and enforcement of any rights conferred
by, any  Letter of Credit or the  performance  of the  Issuer's  obligations  as
issuer of the Letters of Credit under this Agreement in respect thereof,  to the
extent of such  Bank's  Revolving  Percentage  of the  amount of such  costs and
expenses provided,  however, that no Bank shall be liable for the payment of any
portion of such liabilities,  obligations,  losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent the same result
solely from the gross negligence or willful misconduct of the Issuer. The Issuer
shall  refund  any  costs  and  expenses   reimbursed  by  such  Bank  that  are
subsequently  recovered  from a  Borrower  in an  amount  equal  to such  Bank's
Revolving Percentage thereof.                                                   

     (i) Obligations Absolute.  The obligation of the Borrowers to reimburse the
Issuer  pursuant to this Section 2.25,  and the  obligation of each Bank to make
available  to the Issuer the  amounts  set forth in this  Section  2.24 shall be
absolute,  unconditional and irrevocable under any and all circumstances,  shall
be made without  reduction for any set-off,  counterclaim  or other deduction of
any nature  whatsoever,  may not be  terminated,  suspended  or delayed  for any
reason  whatsoever,  shall not be subject to any  qualification or exception and
shall be made in  accordance  with the terms and  conditions  of this  Agreement
under all circumstances,  including any of the following circumstances:  (1) any
lack of validity or  enforceability  of this  Agreement or any of the other Loan
Documents,  (2) the existence of any claim, setoff, defense or other right which
either Borrower may have at any time against a beneficiary  named in a Letter of
Credit,  any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the Issuer, any Bank or any other Person,  whether in
connection with this Agreement,  any other Loan Document,  any Letter of Credit,
the   transactions   contemplated   in  the  Loan  Documents  or  any  unrelated
transactions  (including any underlying  transaction between either Borrower and
the beneficiary named in any such Letter of Credit), (3) any draft,  certificate
or any other document presented under any Letter of Credit proving to be forged,
fraudulent,  invalid or  insufficient  in any respect or any  statement  therein
being untrue or  inaccurate  in any respect,  (4) the surrender or impairment of
any collateral  for the  performance or observance of any of the terms of any of
the Loan  Documents,  or (5) the  occurrence of any Default or Event of Default.
Nothing  contained  in this  Section  2.24(i),  however,  shall  require  either
Borrower or any Lender to  reimburse  the Issuer for any amounts that become due
by reason of the Issuer's gross negligence or willful misconduct.               

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Article 3       Representations and Warranties.                                 

     Each Borrower hereby  represents and warrants to the  Administrative  Agent
and the Banks that:                                                             

Section 3.1. Organization.                                            

     (a) Each  Borrower  and  each  Subsidiary  is duly  organized  and  validly
existing  under the laws of its state of  organization  and has the power to own
its assets and to transact the business in which it is presently  engaged and in
which it proposes  to be engaged.  Exhibit B hereto  accurately  and  completely
lists,  as to each  Borrower  and each  Principal  Subsidiary:  (i) the state of
incorporation  or  organization,  and the type of legal entity that each of them
is, and (ii) the  classes and number of  authorized  and  outstanding  shares of
capital  stock of each such  corporation,  and the  owners  of such  outstanding
shares of capital stock (other than with respect to Griffon).  All of the shares
of capital stock of each Borrower and each Subsidiary or other equity  interests
that are issued and outstanding  have been duly and validly issued and are fully
paid and  non-assessable,  and are owned by the Persons (other than with respect
to Griffon and any Subsidiary that is not a Principal Subsidiary) referred to on
Exhibit B, free and clear of any Lien except as  otherwise  provided for herein.
Except as set forth on Exhibit B, there are no  outstanding  warrants,  options,
contracts  or  commitments  of any kind  entitling  any  Person to  purchase  or
otherwise  acquire any shares of capital stock or other equity  interests of any
Subsidiary nor are there outstanding any securities that are convertible into or
exchangeable  for any shares of capital  stock or other equity  interests of any
Subsidiary.  Except  as set  forth  on  Exhibit  B,  neither  Borrower  nor  any
Subsidiary has any Subsidiary.                                                  

     (b) Each  Borrower and each  Subsidiary is in good standing in its state of
organization  and in each state in which it is qualified  to do business.  There
are no  jurisdictions  other  than as set forth on Exhibit B hereto in which the
character of the properties  owned or proposed to be owned by either Borrower or
any Principal  Subsidiary or in which the  transaction of the business of either
Borrower  or any  Principal  Subsidiary  as now  conducted  or as proposed to be
conducted  requires or will require either Borrower or any Principal  Subsidiary
to qualify to do  business  and as to which  failure to so qualify  could have a
Material Adverse Effect.                                                        

Section 3.2. Power, Authority, Consents.                              

     Each  Borrower  and each Loan Party has the power to  execute,  deliver and
perform the Loan  Documents to which it is a party.  Each Borrower has the power
to borrow  hereunder and has taken all necessary  corporate  action to authorize
the  borrowing  hereunder on the terms and  conditions of this  Agreement.  Each
Borrower  and each  Loan  Party has taken all  necessary  action,  corporate  or

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otherwise,  to authorize the  execution,  delivery and  performance  of the Loan
Documents  to  which  it is a  party.  No  consent  or  approval  of any  Person
(including,  without limitation,  any stockholder of either Borrower or any Loan
Party ), no consent or approval of any landlord or  mortgagee,  no waiver of any
Lien or right of  distraint  or other  similar  right and no  consent,  license,
certificate of need, approval,  authorization or declaration of any governmental
authority,  bureau or agency,  is or will be  required  in  connection  with the
execution,  delivery or performance by either Borrower or any Loan Party, or the
validity, enforcement or priority, of the Loan Documents or any Lien created and
granted  thereunder,  except  as set forth on  Exhibit  C hereto,  each of which
either has been duly and validly  obtained on or prior to the date hereof and is
now in full force and  effect,  or is  designated  on Exhibit C as waived by the
Required  Banks.                                                                

Section 3.3. No Violation of Law or Agreements.                       

     The  execution  and delivery by each  Borrower and each  Subsidiary of each
Loan  Document  to which  it is a party  and  performance  by it  hereunder  and
thereunder,  will not violate any provision of law applicable to either Borrower
and its  Subsidiaries  and will not,  except  as set forth on  Exhibit C hereto,
conflict with or result in a breach of any order, writ,  injunction,  ordinance,
resolution,  decree,  or other  similar  document or  instrument of any court or
governmental  authority,  bureau or agency,  domestic or foreign  applicable  to
either Borrower and its  Subsidiaries,  or any certificate of  incorporation  or
by-laws of either  Borrower  or any  Subsidiary  or create  (with or without the
giving  of notice  or lapse of time,  or both) a default  under or breach of any
agreement, bond, note or indenture to which either Borrower or any Subsidiary is
a party, or by which it is bound or any of its properties or assets is affected,
or result in the imposition of any Lien of any nature whatsoever upon any of the
properties or assets owned by or used in connection  with the business of either
Borrower   or  any   Subsidiary.                                                

Section 3.4. Due Execution, Validity, Enforceability.                 

     This  Agreement  and each other Loan  Document  has been duly  executed and
delivered by each  Borrower and each Loan Party and each  constitutes  the valid
and legally binding obligation of each Borrower and each Loan Party, enforceable
in  accordance  with its  terms,  except as such  enforcement  may be limited by
applicable bankruptcy, insolvency, reorganization,  moratorium, or other similar
laws,  now or hereafter in effect,  relating to or affecting the  enforcement of
creditors'  rights generally and except that the remedy of specific  performance
and other equitable  remedies are subject to judicial  discretion.              

Section 3.5. Properties, Priority of Liens; Existing Guarantees.      

     All of the properties and assets owned by each Borrower and each Subsidiary
are  owned by each of  them,  respectively,  free  and  clear of any Lien of any
nature  whatsoever,  except as provided  for in the Security  Documents,  and as

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permitted by Section 7.2 hereof. The Liens that have been created and granted by
the Security Documents  constitute valid perfected first Liens on the properties
and assets covered by the Security Documents,  subject to no prior or equal Lien
except as  permitted by Section 7.2 hereof.  Exhibit K correctly  sets forth all
Guarantees,  Investments  in Foreign  Loan  Parties and other  known  Contingent
Obligations of each Borrower and each of its Subsidiaries as of the date hereof.

Section 3.6. Judgments, Actions, Proceedings.                         

     Except  as set  forth  on  Exhibit  E  hereto,  there  are  no  outstanding
judgments,   actions  or  proceedings,   including,   without  limitation,   any
Environmental  Proceeding,  pending before any court or governmental  authority,
bureau or agency, with respect to or, to the best of each Borrower's  knowledge,
threatened against or affecting either Borrower or any Subsidiary that would, if
adversely  determined,  in the case of any  action or court  proceeding,  have a
Material Adverse Effect, nor, to the best of each Borrower's knowledge, is there
any  reasonable  basis  for the  institution  of any  such  material  action  or
proceeding  that is probable  of  assertion,  nor are there any such  actions or
proceedings  in which  either  Borrower  or any  Subsidiary  is a  plaintiff  or
complainant.                                                                    

Section 3.7. No Defaults, Compliance With Laws.                       

     Except  as set  forth  on  Exhibit  F  hereto,  neither  Borrower  nor  any
Subsidiary is in default under any  agreement,  ordinance,  resolution,  decree,
bond, note,  indenture,  order or judgment to which it is a party or by which it
is  bound,  or any  other  agreement  or other  instrument  by which  any of the
properties  or assets  owned by it or used in the  conduct  of its  business  is
affected,  which default could have a material  adverse  effect on the business,
operations, financial condition or properties of Griffon and its Subsidiaries on
a  consolidated  basis or on the  ability  of either  Borrower  to  perform  its
obligations  under the Loan  Documents.  Each Borrower and each  Subsidiary  has
complied  and is in  compliance  in  all  respects  with  all  applicable  laws,
ordinances and regulations,  resolutions,  ordinances, decrees and other similar
documents and instruments of all courts and  governmental  authorities,  bureaus
and  agencies,  domestic  and  foreign,   including,   without  limitation,  all
applicable  Environmental Laws and Regulations,  non-compliance with which could
have a material adverse effect on the business, operations,  financial condition
or  properties  of Griffon on a  consolidated  basis or on the ability of either
Borrower to perform  its  obligations  under the Loan  Documents.               

Section 3.8. Burdensome Documents.                                    

     Except  as set  forth  on  Exhibit  G  hereto,  neither  Borrower  nor  any
Subsidiary  is a party to or bound by, nor are any of the  properties  or assets
owned  by  either  Borrower  or any  Subsidiary  used in the  conduct  of  their
respective businesses affected by, any agreement, ordinance, resolution, decree,
bond, note, indenture, order or judgment,  including, without limitation, any of

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the  foregoing  relating  to  any  Environmental  Matter,  that  materially  and
adversely affects their respective businesses,  assets or conditions,  financial
or otherwise,  on a consolidated basis.                                         

Section 3.9. Financial Statements.                                    

     Each of the  Financial  Statements  is correct and  complete  and  presents
fairly  the  consolidated   financial  position,  the  consolidated  results  of
operations  and cash flows of Griffon  and its  Subsidiaries,  as at and for its
date,  and has been prepared in accordance  with generally  accepted  accounting
principles  consistently  applied.  Neither  Borrower nor any Subsidiary has any
material obligation,  liability or commitment,  direct or contingent (including,
without limitation, any Environmental Liability and any Contingent Obligation) ,
that is required to be but is not reflected in the Financial  Statements.  There
has been no material  adverse change in the financial  position or operations of
Griffon  and its  Subsidiaries  on a  consolidated  basis  since the date of the
latest balance sheet included in the Financial  Statements  (the "Latest Balance
Sheet") which could reasonably result in either Borrower's  inability to perform
its  obligations  under  the  Loan  Documents.  Griffon's  fiscal  year  is  the
twelve-month period ending on September 30th in each year.                      

Section 3.10. Tax Returns.                                            

     Each Borrower and each of the Subsidiaries has filed all federal, state and
local  tax  returns  required  to be filed by it and has not  failed  to pay any
taxes, or interest and penalties  relating  thereto,  on or before the due dates
thereof.  Except to the extent  that  reserves  therefor  are  reflected  in the
Financial  Statements:  (i) there are no  material  federal,  state or local tax
liabilities  of either  Borrower or any  subsidiary due or to become due for any
tax year ended on or prior to the date of the Latest  Balance Sheet  relating to
such  entity,  whether  incurred in respect of or measured by the income of such
entity,  that are not properly reflected in the Latest Balance Sheet relating to
such entity,  and (ii) there are no material claims pending or, to the knowledge
of  each  Borrower,  proposed  or  threatened  against  either  Borrower  or any
Subsidiary for past federal,  state or local taxes,  except those, if any, as to
which proper reserves are reflected in the Financial  Statements.               

Section 3.11. Intangible Assets.                                      

     Each  Borrower  and each  Subsidiary  possesses  all  patents,  trademarks,
service  marks,  trade  names,  and  copyrights,  and rights with respect to the
foregoing, necessary to conduct its business as now conducted and as proposed to
be conducted, without any conflict with the patents, trademarks,  service marks,
trade names,  and copyrights  and rights with respect to the  foregoing,  of any
other Person.                                                                   

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Section 3.12. Regulation U.                                           

     No part of the proceeds  received by either Borrower from the Extensions of
Credit will be used  directly or  indirectly  for: (a) any purpose other than as
set forth in Section 2.9 hereof,  or (b) the purpose of  purchasing or carrying,
or for  payment in full or in part of  Indebtedness  that was  incurred  for the
purposes of purchasing or carrying,  any "margin stock", as such term is defined
in 221.3 of  Regulation  U of the  Board of  Governors  of the  Federal  Reserve
System, 12 C.F.R., Chapter II, Part 221, other than purchases made in compliance
with Regulation U.                                                              

Section 3.13. Name Changes, Mergers, Acquisitions.                    

     Except as set forth on Exhibit H hereto, neither Borrower nor any Principal
Subsidiary has within the six-year period immediately preceding the date of this
Agreement   changed  its  name,  been  the  surviving  entity  of  a  merger  or
consolidation, or acquired all or substantially all of the assets of any Person,
where  the  value  of the  assets  acquired  in such  merger,  consolidation  or
acquisition  was  material in  relation  to the total  assets of Griffon and its
Subsidiaries on a consolidated basis.                                           

Section 3.14. Full Disclosure.                                        

     None of the Financial  Statements,  nor any  certificate,  opinion,  or any
other statement made or furnished in writing to the Administrative  Agent or the
Banks by or on behalf of either  Borrower or any  Subsidiary in connection  with
this  Agreement or the  transactions  contemplated  herein,  contains any untrue
statement of a material  fact,  or omits to state a material  fact  necessary in
order to make the statements  contained therein or herein not misleading,  as of
the date such statement was made. There is no fact known to either Borrower that
has, or would in the forseeable  future have, a Material  Adverse Effect,  which
fact has not been set  forth  herein,  or in the  Financial  Statements,  or any
certificate,  opinion or other  written  statement  so made or  furnished to the
Administrative  Agent or the Banks.                                             

Section 3.15. Licenses and Approvals.                                 

     Each  Borrower  and each of the  Subsidiaries  has all  material  licenses,
permits  and  governmental   authorizations,   including,   without  limitation,
licenses,  permits and authorizations  relating to Environmental Matters, to own
and  operate  its  properties  and to carry on its  business  as now  conducted.

     Section 3.16. Labor Disputes;  Collective Bargaining  Agreements;  Employee
Grievances.                                                                     

     Except as set  forth on  Exhibit I  hereto:  (a) no  collective  bargaining
agreement or other labor contract will expire during the term of this Agreement;
(b) to each  Borrower's  knowledge,  no  union or other  labor  organization  is
seeking to organize,  or to be recognized as  bargaining  representative  for, a

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bargaining unit of employees of either Borrower or any Subsidiary;  (c) there is
no pending or threatened strike,  work stoppage,  material unfair labor practice
claim or  charge,  arbitration  or  other  material  labor  dispute  against  or
affecting either Borrower or any Subsidiary or their  representative  employees,
in each case the  consequences  of which could  reasonably be expected to affect
aggregate  business  (regardless  of  division  or entity)  of  Griffon  and its
Subsidiaries  which business  generated  gross revenues in excess of $50,000,000
individually  or in the aggregate in the prior fiscal year; and (d) there are no
actions, suits, charges,  demands, claims,  counterclaims or proceedings pending
or, to the best of each Borrower's knowledge, threatened against either Borrower
or any of the  Subsidiaries,  by or on behalf of, or with, its employees,  other
than any  such  actions,  suits,  charges,  demands,  claims,  counterclaims  or
proceedings  arising in the  ordinary  course of  business  that are not, in the
aggregate,  material.                                                           

Section 3.17. Condition of Assets.                                    

     All of the assets and properties of each Borrower and the Subsidiaries that
are reasonably necessary for the operation of their respective  businesses,  are
in good working  condition,  ordinary  wear and tear  excepted,  and are able to
serve the function for which they are currently being used.                     

Section  3.18.  ERISA.                                                

     (a) Except as  disclosed  on Exhibit J hereto,  no Pension  Plan or Defined
Contribution  Plan  which  is  an  Employee  Benefit  Plan  including,   without
limitation,  any  Multiemployer  Plan,  exists or has ever,  within the six-year
period  immediately  preceding the date of this  Agreement,  existed and neither
Borrower nor any ERISA Affiliate is a participating employer in any Pension Plan
which  is an  Employee  Benefit  Plan in which  more  than  one  employer  makes
contributions  as  described  in  Sections  4063 and 4064 of  ERISA.  Except  as
disclosed  on  Exhibit  J,  neither  Borrower  nor any ERISA  Affiliate  has any
contingent  liability  with  respect to any  post-retirement  benefit  under any
Employee  Welfare  Benefit  Plan which is a welfare  plan (as defined in Section
3(l) of ERISA),  other than  liability  for health  plan  continuation  coverage
described  in Part 6 of Title I of  ERISA,  which  together  with any  disclosed
liability  on Exhibit J, will not have an ERISA MAE.  Each  Borrower  has given,
made available,  or upon request will deliver,  to the Administrative  Agent and
the Banks true and complete  copies of all the  following:  each Pension Plan or
Defined  Contribution  Plan which is an Employee  Benefit Plan and related trust
agreement  (including  all  amendments  and  commitments  with  respect  to such
Employee  Benefit plan or trust) which  either  Borrower or any ERISA  Affiliate
maintains or is committed  to  contribute  to as of the date hereof and the most
recent summary plan description,  actuarial report,  determination letter issued
by the  Internal  Revenue  Service  and Form 5500  filed in respect of each such
Employee  Benefit  Plan;  a listing of all of the  Multiemployer  Plans to which

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either Borrower or any ERISA Affiliate contributes or is committed to contribute
and the aggregate amount of the most recent annual contributions  required to be
made to each  such  Multiemployer  Plan,  and any  information  which  has  been
provided  to  either  Borrower  or  any  ERISA  Affiliate  regarding  withdrawal
liability under any Multiemployer Plan and the collective  bargaining  agreement
pursuant to which such  contribution  is required to be made.                   

     (b) Each Employee Benefit Plan complies,  in both form and operation in all
material  respects,  with  its  terms,  ERISA  and the Code  including,  without
limitation,  Code Section 4980B,  and no condition  exists or event has occurred
with  respect to any such plan which would  result in the  incurrence  by either
Borrower or any ERISA  Affiliate  of any  material  liability,  fine or penalty.
Neither  Borrower nor any ERISA Affiliate has incurred any liability to the PBGC
which remains  outstanding other than the payment of premiums,  and there are no
premiums which have become due which are unpaid.  Neither Borrower nor any ERISA
Affiliate  has engaged in any  transaction  which  could  subject it to material
liability under Section 4069 or Section 4212(c) of ERISA.  Each Employee Benefit
Plan,  related trust agreement,  arrangement and commitment of each Borrower and
each ERISA  Affiliate is legally valid and binding and in full force and effect.
Except as provided on Exhibit J and subject to amendment  and  submission  for a
determination  letter with regard to the Tax Reform Act of 1986 requirements and
other post 1986 requirements,  each Employee Benefit Plan that is intended to be
qualified  under Section 401(a) of the Code has been  determined by the Internal
Revenue Service to be so qualified, and each trust related to such plan has been
determined  to be exempt under  Section  501(a) of the Code. To the knowledge of
each Borrower, nothing has occurred or is expected to occur that would adversely
affect the  qualified  status of the Employee  Benefit Plan or any related trust
subsequent to the issuance of such  determination  letter.  No Employee  Benefit
Plan is being audited or, to the knowledge of each Borrower, investigated by any
government  agency or subject to any pending or  threatened  claim or suit.     

     (c) Each  Pension  Plan  currently  meets the minimum  funding  standard of
Section 302 of ERISA and Section 412 of the Code (without  regard to any funding
waiver).  All contributions or payments due and owing as required by Section 302
of ERISA,  Section  412 of the Code or the terms of any  Pension  Plan have been
made by the due date for such  contributions  or payments.  With respect to each
Multiemployer  Plan,  each Borrower and each ERISA Affiliate has paid or accrued
all contributions  pursuant to the terms of the applicable collective bargaining
agreement  required  to be paid or accrued by it and  neither  Borrower  nor any
ERISA  Affiliate  has incurred any  withdrawal  liability in  connection  with a
complete  withdrawal or partial  withdrawal from any Multiemployer Plan that has
not been  discharged.  With  respect to each Pension  Plan,  the market value of
assets (exclusive of any contribution due to the Pension Plan) equals or exceeds
or is not more than $250,000 below the present value of benefit liabilities (FAS
35)  (assuming  such  Plan  were to  continue  in  existence)  as of the  latest
actuarial  valuation date for such plan (but not prior to 24 months prior to the
date  hereof),  determined  on  the  basis  of  such  Pension  Plan's  actuarial

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assumptions set forth in the most recent  actuarial  report,  and since its last
valuation  date,  there  have been no  amendments  to such plan that  materially
increased the present value of accrued  benefits nor any other material  adverse
changes in the  funding  status of such  plan.  Neither  Borrower  nor any ERISA
Affiliate is required to provide  security to a Pension Plan pursuant to Section
307 of ERISA or Section  401(a) (29) of the Code.                               

     (d)  Neither  Borrower  nor any ERISA  Affiliate,  nor, to the best of each
Borrower's knowledge, any fiduciary of any Employee Benefit Plan, has engaged in
a prohibited  transaction under Section 406 of ERISA or Section 4975 of the Code
with regard to any such Employee  Benefit  Plans.  The  execution,  delivery and
carrying out of the terms of any agreements that are related to this transaction
will not constitute a prohibited transaction under the aforementioned sections. 

   (e) No Termination Event has occurred or is reasonably expected to occur.

     (f) None of the  following  "reportable  events"  which are  subject to the
30-day notice  requirement of Section  4043(b) of ERISA in respect of any of the
Pension  Plans has  occurred:  (i) an inability to pay benefits  when due,  (ii)
bankruptcy or insolvency of the sponsor of the Pension Plan,  (iii)  liquidation
or  dissolution  of the sponsor of the Pension Plan,  (iv) a failure to meet the
minimum funding  standards,  or (v) certain  transactions  involving a change of
employer. Neither Borrower has received any notice from the PBGC that any of the
Pension  Plans is being  involuntarily  terminated  or from the Secretary of the
Treasury  that any partial or full  termination  of any of the Employee  Benefit
Plans has occurred and no event shall have occurred, and there shall exist as of
the date hereof no condition or set of  circumstances  which  present a material
risk  of the  involuntary  termination  of any of the  Pension  Plans.          

     (g) All  references  to a  Borrower  in this  Section  3.18 or in any other
Section of this  Agreement  relating  to ERISA  shall be deemed to refer to such
Borrower, and any other entity which is considered an ERISA Affiliate.          

     (h) All  references in this Section 3.18,  and in other  provisions of this
Agreement  relating to ERISA,  to materiality  or material  liability or similar
phrases  shall be  deemed  to  refer  to the  event  or  matter  described  both
individually  and when taken together in the aggregate with respect to all other
events and matters referred to in this Agreement relating to ERISA as to which a
materiality  standard  applies.                                                 

Section 3.19. Termination of Certain Lines of Credit.                 

     At such time as this Agreement  shall become  effective in accordance  with
its terms and all sums due and owing under the lines of credit  facilities  made
available by Chase and Fleet to Telephonics  shall have been paid in full,  each
of such lines of credit shall been deemed  terminated and of no further force or
effect.                                                                         

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Article 4 Conditions to the Loans.                                              

Section 4.1.Conditions to Initial Extensions of Credit                

     The  conditions  precedent  fulfilled in connection  with the obligation of
each  Bank to make the  initial  Loans  under  this  Agreement  are set forth in
Section 4.1 of the  Original  Agreement,  which  conditions  were  satisfied  in
connection with the Original Agreement. Each of the parties hereto has copies of
the documents referred to in such Section 4.1.                                  

     Section 4.2.  Conditions  to  Effectiveness  of Amended and  Restated  Loan
Agreement.                                                                      

     The amendments  effected by this Amended and Restated Loan Agreement  shall
not become effective unless and until it has been executed and delivered by each
party  hereto and each of the  following  conditions  has been  fulfilled to the
satisfaction of the Administrative Agent:                                       

    (a) Each Borrower shall have executed and delivered to each Bank its Note.

     (b) The  Borrowers  shall  have paid to the  Administrative  Agent (for the
ratable benefit of the Banks) the Facility Fee.                                 

     (c) The  Borrowers  shall  have  paid all  amounts  required  to be paid by
Section  2.7(c) and the  Administrative  Agent shall have  received all fees and
other  amounts  due and  payable  to the  Administrative  Agent  under  the Loan
Documents on or prior to the date hereof.                                       

     (d) Blau,  Kramer,  Wactlar  &  Lieberman,  P.C.,  general  counsel  to the
Borrowers and the Subsidiaries  shall have delivered its opinion to, and in form
and substance satisfactory to, the Banks.                                       

     (e) The  Administrative  Agent  shall have  received  and  reviewed  to its
satisfaction copies of the following:                                           

          (i) All of the consents,  approvals and waivers referred to on Exhibit
     C hereto  (except  only those  which,  as stated on Exhibit C, shall not be
delivered);                                                           

          (ii)  The  certificate  of  incorporation  of each  Borrower  and each
     Principal  Subsidiary  certified by the  Secretary of State of its state of
incorporation;                                                        

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     (iii) The by-laws of each Borrower and each Principal  Subsidiary certified
by its secretary or assistant secretary;                                        

     (iv)  All  corporate  action  taken  by  each  Borrower  to  authorize  the
execution,  delivery and performance of the Loan Documents and the  transactions
contemplated  thereby,  certified  by  its  secretary  or  assistant  secretary,
including,  without  limitation,  resolutions  of the Board of Directors of each
Borrower;                                                                       

     (v) Good  standing  certificates  as of dates not more than forty (40) days
prior to the date of the initial  Loan,  with respect to each  Borrower and each
Principal  Subsidiary from the Secretary of State of its state of  incorporation
and each state in which it is qualified to do business;                         

     (vi) An incumbency  certificate (with specimen  signatures) with respect to
each Borrower; and                                                              

     (vii) Lien searches from such  jurisdictions and in such names as the Banks
may request.                                                                    

     (f) (i) Each  Borrower and each  Subsidiary  shall have  complied and shall
then be in compliance  with all of the terms,  covenants and  conditions of this
Agreement;                                                                      

     (ii) After giving effect to the initial Loan,  there shall exist no Default
or Event of Default hereunder; and                                              

     (iii) The representations and warranties  contained in Article 3 hereof and
in the other Loan  Documents  shall be true and correct on the date hereof;     

and the Administrative Agent shall have received a Compliance  Certificate dated
the date hereof  certifying,  inter alia,  that the conditions set forth in this
subsection 4.2(f) are satisfied on such date.                                   

     (g) All sums due and  owing  under  the  lines of  credit  facilities  made
available by Chase and Fleet to Telephonics shall have been paid in full.       

     (h) All legal matters  incident to the initial Loans shall be  satisfactory
to counsel to the Administrative Agent and each Bank.                           

Section 4.3. Conditions to Subsequent Extensions of Credit.           

     The obligation of each Bank to make each Extension of Credit  subsequent to
its  initial  Extension  of Credit  shall be subject to the  fulfillment  of the
condition  precedent  that  the  Administrative  Agent  shall  have  received  a
Borrowing Notice in accordance with Section 2.2 hereof,  containing, in addition

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to the notice of borrowing,  a representation by the applicable Borrower (signed
by the president or chief financial  officer or treasurer in the case of Griffon
and signed by the president or chief  financial  officer or Robert  Balemian (as
vice  president)  in the case of  Telephonics)  that (i) no  Default or Event of
Default  has  occurred  and is  continuing  and  (ii)  the  representations  and
warranties  made by the  Borrowers  under Section 3.9 hereof shall be correct on
and as of the borrowing  date for such  Extension of Credit as if made on and as
of such date.                                                                   

Article 5 Delivery of Financial Reports, Documents and Other Information.       

     While the  Commitments  are  outstanding,  and, until the principal of, and
interest on, each Loan, all  Reimbursement  Obligations,  all Fees and all other
amounts  payable under the Loan Documents shall have been paid in full and there
shall have been full and complete  performance of all other obligations  arising
hereunder,  Griffon,  and  Telephonics  (as  required),  shall  deliver  to  the
Administrative  Agent and each Bank:                                            

Section 5.1. Annual Financial Statements.                             

     Annually,  as soon as available,  but in any event within one hundred (100)
days  after the last day of each of its fiscal  years,  a  consolidated  balance
sheet of Griffon and its  Subsidiaries  as at such last day of the fiscal  year,
and consolidated statements of income,  shareholders' equity and cash flows, for
such fiscal year, each prepared in accordance with generally accepted accounting
principles  consistently  applied, in reasonable detail, and certified without a
"going concern" or like qualification or exception, or qualification arising out
of the scope of the audit by Arthur  Andersen LLP or another firm of independent
certified public  accountants  satisfactory to the Banks, which shall state that
such consolidated financial statements present fairly the consolidated financial
position, the consolidated results of operations and cash flows of Griffon as at
and for the year  ending on its date and as having been  prepared in  accordance
with generally accepted accounting principles.                                  

Section 5.2. Quarterly Financial Statements.                          

     As soon as  available,  but in any event within (i) seventy (70) days after
the end of each of Griffon's first three fiscal  quarterly  periods and (ii) one
hundred,  (100) days after the end of each of Griffon's  fourth fiscal quarterly
periods,  a  consolidated  and  consolidating  balance  sheet of Griffon and the
Subsidiaries  as  of  the  last  day  of  such  quarter  and   consolidated  and
consolidating  statements of income and cash flows,  for such quarter,  and on a
comparative  basis  figures  for the  corresponding  period  of the  immediately
preceding  fiscal year,  all in  reasonable  detail,  each such  statement to be
certified  in a  certificate  of the  president  or chief  financial  officer of
Griffon  and  the  Subsidiaries  as  fairly   presenting  the  consolidated  and

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consolidating  financial position, the consolidated and consolidating results of
operations  and cash flows of Griffon as at its date and for such quarter and as
having been prepared in accordance with generally accepted accounting principles
consistently  applied  (subject to year-end  audit  adjustments).               

Section 5.3. Projections.                                             

     Annually,  as soon as available,  but in any event within 60 days after the
last day of each of  Griffon's  fiscal  years,  consolidated  and  consolidating
projections  of Griffon and the  Subsidiaries  for the following five (5) fiscal
years of Griffon.                                                               

Section 5.4. Compliance Information.                                  

     Promptly after a written  request  therefor,  such other  financial data or
information  evidencing compliance with the requirements of this Agreement,  the
Notes and the other Loan Documents, as any Bank may reasonably request from time
to time.                                                                        

Section 5.5. No Default Certificate.                                  

     At the same time as it delivers the financial statements required under the
provisions of Section 5.1 and Section 5.2 hereof, a certificate of the president
or chief financial  officer of Griffon to the effect that no Default or Event of
Default  hereunder and that no default under any other agreement to which either
Borrower or any of the  Subsidiaries  is a party or by which it is bound,  or by
which,  to the best  knowledge  of each  Borrower or any  Subsidiary  any of its
properties or assets,  taken as a whole, may be materially  adversely  affected,
and no event  which,  with the  giving of notice or the lapse of time,  or both,
would constitute such an Event of Default or default, exists, or, if such cannot
be so certified, specifying in reasonable detail the exceptions, if any, to such
statement.  Such  certificate  shall be  accompanied  by a detailed  calculation
indicating  compliance with the covenants contained in Sections 6.9, 7.3 and 7.8
(other than 7.8(a)) hereof.                                                     

Section 5.6. Certificate of Accountants.                              

     At the same time as it delivers the financial statements required under the
provisions of Section 5.1 hereof,  a certificate  of the  independent  certified
public  accountants  of Griffon to the  effect  that  during the course of their
audit of the operations of Griffon and its condition as of the end of the fiscal
year,  nothing has come to their attention which would indicate that Griffon was
not in compliance with any of the terms, covenants,  provisions or conditions of
Section 6.9 or Article 7 insofar as they relate to  accounting  matters,  or, if
such cannot be so certified,  specifying in reasonable detail the exceptions, if
any, to such statement.                                                         

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Section 5.7. Accountants, Reports.                                    

     Promptly upon receipt  thereof,  copies of all other  reports  submitted to
Griffon by its independent  certified public  accountants in connection with any
annual  or  interim  audit  or  review  of the  books  of  Griffon  made by such
accountants.                                                                    

Section 5.8. Copies of Documents.                                     

     (a) Promptly upon their  becoming  available,  copies of any: (i) financial
statements,  projections,  and requests for waivers, in each case,  delivered by
either Borrower or any of the Subsidiaries to any lending institution other than
the Banks;  (ii)  correspondence or notices received by either Borrower from any
federal,  state or local governmental authority that regulates the operations of
either  Borrower  or  any  of its  Subsidiaries  or  relating  to an  actual  or
threatened  change or  development  that would be  materially  adverse to either
Borrower or any Subsidiary; (iii) registration statements and any amendments and
supplements  thereto,  and any regular and periodic  reports,  if any,  filed by
either Borrower or any of its Subsidiaries with any securities  exchange or with
the Securities and Exchange Commission or any governmental  authority succeeding
to any or all of the functions of the said Commission;  and (iv) any other items
which the Banks may reasonably request.                                         

     (b)  Promptly  upon  request  by  any  Bank,   copies  of  all  acquisition
agreements,  exhibits, schedules, documents and other agreements relating to any
Permitted  Acquisition  (as and when  available  and  whether  in draft or final
form).                                                                          

Section 5.9. Certain Notices.                                         

     Promptly,  notice of the occurrence of any Default or Event of Default,  or
any event  that  would  constitute  or cause a  material  adverse  change in the
condition,  financial  or  otherwise,  or the  operations  of  Griffon  and  its
Subsidiaries on a consolidated basis.                                           

Section 5.10. ERISA Notices and Requests.                             

     Notice of any of the following  within twenty (20) days after such event or
occurrence:                                                                     

     (a) either Borrower or any ERISA Affiliate knowing or having reason to know
that a Termination  Event has occurred or that a Defined  Contribution  Plan has
been  terminated  or  partially  terminated,  and a  written  statement  by  the
appropriate chief financial officer setting forth the details of such event;    

     (b) the filing of a request for a funding waiver by either  Borrower or any
ERISA Affiliate with respect to any Pension Plan, and a copy of such request and
all  communications  received  by either  Borrower or any ERISA  Affiliate  with
respect to such request;                                                        

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     (c) receipt by either  Borrower or any ERISA  Affiliate  of a notice of the
PBGC's intent to terminate a Pension Plan, and a copy of such notice;           

     (d)  either  Borrower  or any ERISA  Affiliate  failing  to make a required
installment  or payment under Section 302 of ERISA or Section 412 of the Code by
the due date, and a written notice of such failure;                             

     (e) either Borrower or any ERISA Affiliate knowing or having reason to know
that a  prohibited  transaction  (as  defined in Section 406 of ERISA or Section
4975 of the Code) has occurred with respect to any Employee  Benefit Plan, and a
written  statement of the appropriate  chief financial  officer  describing such
transaction and the action taken;                                               

     (f)  the  establishment  of a  Pension  Plan  and  written  notice  of such
occurrence;                                                                     

     (g)   receipt  by  either   Borrower   or  any  ERISA   Affiliate   of  any
disqualification   notice  from  the  Internal  Revenue  Service  regarding  the
qualification  of a Pension Plan under Section  401(a) of the Code and a copy of
such letter;                                                                    

     (h) upon the request of any Bank, the filing of an annual report (Form 5500
series),  including  Schedule B thereto,  filed by either  Borrower or any ERISA
Affiliate with respect to a Employee Benefit Plan, and a copy of such report;   

     (i) upon  request  of any Bank,  receipt  by either  Borrower  or any ERISA
Affiliate  of an  actuarial  report  for any  Pension  Plan,  and a copy of such
report;                                                                         

     (j) receipt by either Borrower or any ERISA Affiliate of all correspondence
from the PBGC,  the  Secretary  of Labor or any  representative  of the IRS with
respect to any  Employee  Benefit  Plans,  relating  to an actual or  threatened
change or  development  which would have a materially  adverse  effect on either
Borrower's  business;  and                                                      

     (k) receipt by either Borrower or any ERISA Affiliate of any correspondence
from a Multiemployer Plan with respect to withdrawal liability.                 

Section 5.11. Permitted Acquisition Deliveries.                       

     Not later than ten (10) Business Days after the consummation of a Permitted
Acquisition,  (i) on a pro forma  basis  after  giving  effect  to the  proposed
acquisition and based on reasonable assumptions made by Griffon in good faith, a
consolidated and  consolidating  balance sheet of Griffon,  its subsidiaries and

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each Eligible Business,  and a related consolidated and consolidating  statement
of income and  statements of cash flow for the three (3) fiscal years  following
the date of such  acquisition,  each such statement (1) to show all deferred and
contingent  payments  which  either  Borrower  or  the  Eligible  Business,   as
applicable,  directly  or  indirectly,  would be  required  to make based on the
Eligible  Business'  projected  pro forma results of  operations,  and (2) to be
accompanied  by  a  certificate  of  the  chief  financial  officer  of  Griffon
certifying that after giving effect to the  acquisition,  no Default or Event of
Default has occurred and is continuing,  which  certificate shall be accompanied
by a list of Liens,  Indebtedness,  guaranties and letters of credit incurred or
otherwise assumed in connection with such acquisition and such other information
as the Administrative Agent or any Bank may reasonably request.                 

Article 6 Affirmative Covenants.                                                

     While the  Commitments  are  outstanding,  and, until the principal of, and
interest on, each Loan, all  Reimbursement  Obligations,  all Fees and all other
amounts  payable under the Loan Documents shall have been  indefeasibly  paid in
full,  Griffon shall and shall cause each  Subsidiary to:                       

Section 6.1. Books and Records.                                       

     Keep proper  books of record and  account in which  full,  true and correct
entries  shall  be made of all  dealings  or  transactions  in  relation  to its
business and activities.                                                        

Section 6.2.  Inspections and Audits.                                 

     Permit  the  Administrative  Agent and the Banks (i) to make or cause to be
made (and,  after the  occurrence of and during the  continuance  of an Event of
Default,  at the  Borrowers'  expense),  inspections  and  audits of any  books,
records and papers of each  Borrower  and each of its  Subsidiaries  and to make
extracts therefrom and copies thereof and (ii) make inspections and examinations
of any  properties'  and  facilities of the Borrowers  and the  Subsidiaries  on
reasonable   notice,   at  all  such  reasonable  times  and  as  often  as  the
Administrative  Agent or any Bank may reasonably require, in order to assure the
Administrative  Agent  and  each  Bank  that  the  Borrowers  are and will be in
compliance  with their  obligations  under the Loan Documents or to evaluate any
Bank's investment in the then outstanding  Notes.                               

Section 6.3. Maintenance and Repairs.                                 

     Maintain in good repair,  working  order and  condition,  subject to normal
wear and tear, all material  properties and assets from time to time owned by it
and  used in or  necessary  for the  operation  of its  business,  and  make all
reasonable repairs, replacements, additions and improvements thereto.           

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Section 6.4. Continuance of Business.                                 

     Do, or cause to be done,  all things  reasonably  necessary to preserve and
keep in full force and effect its corporate  existence  and all permits,  rights
and privileges  necessary for the proper conduct of its business and continue to
engage in the same line of business and comply in all material respects with all
applicable  laws,  regulations  and orders.                                     

Section 6.5. Copies of Corporate Documents.                           

     Promptly  deliver to the  Administrative  Agent and the Banks copies of any
amendments  or  modifications  to  its  and  any  Subsidiary's   certificate  of
incorporation  and  by-laws,  certified  with  respect  to  the  certificate  of
incorporation by the Secretary of State of its state of incorporation  and, with
respect  to the  by-laws,  by the  secretary  or  assistant  secretary  of  such
corporation.                                                                    

Section 6.6. Perform Obligations.                                     

     Pay  and  discharge  all of its  obligations  and  liabilities,  including,
without  limitation,  all taxes,  assessments and governmental  charges upon its
income  and  properties  when  due,  unless  and to the  extent  only  that such
obligations,  liabilities,  taxes, assessments and governmental charges shall be
contested in good faith and by appropriate  proceedings  and that, to the extent
required by generally accepted accounting  principles then in effect, proper and
adequate book  reserves  relating  thereto are  established  by the  appropriate
Borrower, or, as the case may be, by the appropriate Subsidiary and then only to
the extent that a bond is filed in cases where the filing of a bond is necessary
to avoid the creation of a Lien, other than a Permitted Lien, against any of its
properties.                                                                     

Section 6.7. Notice of Litigation.                                    

     Promptly  notify the  Administrative  Agent and the Banks in writing of any
litigation,  legal proceeding or dispute  (including,  without  limitation,  any
Environmental  Proceeding),  other  than  disputes  in the  ordinary  course  of
business  or,  whether  or not in the  ordinary  course of  business,  involving
amounts  in  excess  of  One  Million  ($1,000,000)  Dollars,  affecting  either
Borrower,  any Subsidiary or any Eligible  Business whether or not fully covered
by insurance, and regardless of the subject matter thereof (excluding,  however,
any actions  relating  to  workers'  compensation  claims or  negligence  claims
relating to use of motor  vehicles,  if fully covered by  insurance,  subject to
deductibles).                                                                   

Section 6.8. Insurance.                                               

     (a) (i) Maintain with  responsible  insurance  companies  such insurance on
such of its properties, in such amounts and against such risks as is customarily

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maintained by similar  businesses;  (ii) file with the Administrative  Agent and
each of the Banks upon its  request a  detailed  list of the  insurance  then in
effect,  stating the names of the insurance companies,  the amounts and rates of
the insurance,  the dates of the expiration thereof and the properties and risks
covered thereby; and (iii) within ten (10) days after notice in writing from the
Administrative  Agent or any of the Banks,  obtain such additional  insurance as
the Administrative  Agent or any Bank may reasonably  request;  provided,  that,
Griffon may  maintain  self-insurance  consistent  with its past  practices  and
policies;  and                                                                  

     (b) Carry all insurance available through the PBGC or any private insurance
companies covering its obligations to the PBGC.                                 

Section 6.9. Financial Covenants.                                     

Have or maintain, with respect to Griffon on a consolidated basis:    

     (a) As of the end of each  fiscal  quarter,  a Quick Ratio of not less than
1.30 to 1.00.                                                                   

     (b) As of the end of each fiscal quarter, on a Rolling Four Quarters basis,
a Funded Debt to Cash Flow Ratio of not more than 3.25 to 1.00.                 

     (c) As of the end of each  fiscal  quarter,  a ratio of (i)  Unsubordinated
Liabilities  of Griffon and its  Subsidiaries  to (ii) the sum of  Tangible  Net
Worth plus  Subordinated  Debt of Griffon and its  Subsidiaries of not more than
2.00 to 1.00.                                                                   

     (d) As of the end of each fiscal quarter, on a Rolling Four Quarters basis,
a Domestic Funded Debt Coverage Ratio of not more than 3.00 to 1.00.            

     (e) As of the end of each fiscal quarter, on a Rolling Four Quarters basis,
a Domestic Debt Service Coverage Ratio of not less than 1.60 to 1.00.           

Section 6.10. Notice of Certain Events.                               

     (a) Promptly  notify the  Administrative  Agent and the Banks in writing of
the occurrence of any "Reportable  Event",  as defined in Section 4043 of ERISA,
if a notice of such Reportable  Event is required under ERISA to be delivered to
the  PBGC  within  30  days  after  the  occurrence  thereof,  together  with  a
description  of  such  Reportable  Event  and a  statement  of  the  action  the
appropriate  Borrower or ERISA Affiliate  intends to take with respect  thereto,
together with a copy of the notice thereof given to the PBGC.                   

     (b) Promptly  notify the  Administrative  Agent and the Banks in writing of
the  receipt by either  Borrower  or any ERISA  Affiliate  of an  assessment  of

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withdrawal  liability in connection  with a complete or partial  withdrawal with
respect to any Multiemployer Plan, which liability of either Borrower and/or any
ERISA Affiliate may exceed  $1,000,000 in aggregate  amount,  and a statement of
the action that the appropriate Borrower or ERISA Affiliate intends to take with
respect thereto.                                                                

     (c) Promptly  notify the  Administrative  Agent and the Banks in writing if
either Borrower or any Subsidiary  receives:  (i) any notice of any violation or
administrative  or judicial  complaint or order having been filed or about to be
filed  against  such  Borrower or such  subsidiary  alleging  violations  of any
Environmental Law and Regulation which could reasonably be expected to result in
liability to either Borrower or any subsidiary in excess of $1,000,000,  or (ii)
any notice from any  governmental  body or any other Person  alleging  that such
Borrower or such Subsidiary is or may be subject to any Environmental  Liability
in excess of $1,000,000;  and promptly upon receipt  thereof,  provide the Banks
with a copy of such notice together with a statement of the action such Borrower
or such Subsidiary intends to take with respect thereto.                        

Section 6.11. Comply with ERISA.                                      

     Materially comply with all applicable  provisions of ERISA and the Code now
or hereafter in effect.                                                         

Section 6.12. Environmental Compliance.                               

     Operate  all  property  owned  or  leased  by it such  that no  obligation,
including a clean-up  obligation,  shall arise under any  Environmental  Law and
Regulation,  which  obligation would constitute a Lien on any property of either
Borrower or any of its Subsidiaries;  provided,  however, that in the event that
any such claim is made or any such  obligation  arises,  such  Borrower  or such
Subsidiary  shall, at its own cost and expense:                                 

     (a) provide  the  Administrative  Agent and the Banks with  prompt  written
notice with respect to any suit or claim initiated or threatened  against either
Borrower or any of its Subsidiaries involving liability in excess of $1,000,000;
and                                                                             

     (b) either:  (i)  immediately  satisfy  such claim or  obligation;  or (ii)
contest such claim by appropriate  proceedings and upon final judgment  (subject
to no further  appeal)  immediately  satisfy such judgment;  provided,  however,
that,  in all such  cases,  the  appropriate  Borrower  shall  file a bond  when
necessary  to avoid  the  creation  of a Lien  against  any of its or any of its
Subsidiaries'  properties;  and  provided,  further,  that each  Borrower  shall
indemnify  and hold  harmless  the  Administrative  Agent and the Banks from any
liability,  responsibility or obligation in respect thereof or in respect of any
clean-up or any other  liability,  as successor,  secured party or otherwise for
any reason, including,  without limitation the enforcement of the Administrative
Agent and/or the Banks'  rights under any Loan  Document or by operation of law.

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Section 6.13. Reserved.                                               

Section 6.14. Projections.                                            

     Take all necessary  action to ensure that the  Projections  when  delivered
reflect  as  of  the  date  thereof  Griffon's  good  faith  projections,  after
reasonable  analysis,  of the  matters  set forth  therein.                     

Article 7 Negative Covenants.                                                   

     While the  Commitments  are  outstanding,  and, until the principal of, and
interest on, each Loan, all  Reimbursement  Obligations,  all Fees and all other
amounts  payable under the Loan Documents shall have been  indefeasibly  paid in
full,  Griffon shall not and shall not permit any of its  Subsidiaries  to do or
agree  to  do,  or  permit  to be  done,  any  of the  following:               

Section 7.1. Indebtedness.                                            

     Create,  incur,  permit to exist or have outstanding any Indebtedness  that
would violate the terms of this Agreement.                                      

Section 7.2. Liens.                                                   

     Create,  or assume or permit to exist, any Lien on any of the properties or
assets  of  either  Borrower  or any of its  Subsidiaries  whether  now owned or
hereafter acquired, except:                                                     

(a) Permitted Liens;                                                  

(b) Liens in favor of the Banks under the Loan Documents;             

     (c)  Purchase  money  mortgages  or security  interests,  conditional  sale
arrangements  and other  similar  security  interests,  on property  acquired by
either  Borrower or any Subsidiary  (hereinafter  referred to  individually as a
"Purchase Money Security Interest") with the proceeds of Indebtedness; provided,
however, that:                                                                  

          (i) The  transaction in which any Purchase Money Security  Interest is
proposed to be created is not then prohibited by this Agreement;      

          (ii) Any Purchase  Money  Security  Interest  shall attach only to the
     property or asset acquired in such  transaction  and shall not extend to or
     cover any other assets or properties of either Borrower or, as the case may
be, a Subsidiary;                                                     

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          (iii) The  Indebtedness  secured  or  covered  by any  Purchase  Money
     Security  Interest  is  secured  solely  by such  Purchase  Money  Security
     Interest and shall not exceed the cost of the  property or asset  acquired;
and                                                                   

          (iv) Such  Indebtedness may be refinanced  provided that the principal
amount of such outstanding Indebtedness is not increased;             

     (d) The  interests of the lessor under any  Capitalized  Lease as permitted
hereunder;                                                                      

     (e) Liens on  specifically  identified  inventory  and accounts  receivable
covered by bankers acceptances  resulting from import letters of credit which do
not cover any assets other than those financed with such bankers acceptances;   

     (f) Liens securing  Indebtedness  permitted to exist in accordance with the
terms of Section 7.4 hereof in  connection  with a Permitted  Acquisition  which
Liens are of the type otherwise permitted under subsections 7.2(a), (c), (d) and
(e) hereof,  provided that (i) such Liens were  existing  prior to the Permitted
Acquisition in which such  Indebtedness  was assumed or acquired and not created
in contemplation of such Permitted  Acquisition,  and (ii) such Liens shall only
attach  to or  encumber  the  property  and  assets  acquired  in the  Permitted
Acquisition  in which such  Indebtedness  was assumed or acquired  and shall not
attach to or encumber  any other  property  or assets of either  Borrower or any
subsidiary (including, without limitation, any Eligible Business);              

(g) As set forth on Exhibit D hereto;                                 

     (h) Liens on the properties or assets of Finotech securing  Indebtedness of
Finotech  not  in  excess  of an  aggregate  of  $32,000,000  at  any  one  time
outstanding  and liens on the  properties or assets of Bohme not in excess of an
aggregate of $35,000,000 at any one time outstanding; and                       

     (i) Liens on the properties or assets of Clopay Service or any subsidiaries
of Clopay Service  securing  Indebtedness of Clopay Service and any subsidiaries
of Clopay  Service not in excess of any  aggregate of $5,000,000 at any one time
outstanding.                                                                    

Section 7.3. Guaranties.                                              

     Assume, endorse, be or become liable for, or guarantee, (a) the obligations
of any Person (except by the  endorsement of negotiable  instruments for deposit
or collection in the ordinary course of business), or (b) any Limited Contingent
Obligations,  except (i) as set forth on Exhibit K hereto,  (ii)  guarantees  of
Griffon and its  Subsidiaries not in excess of an aggregate of $5,000,000 at any
one  time  outstanding,  (iii)  guarantees  by  Griffon  or  any  Subsidiary  of

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obligations of the Subsidiaries;  provided, that either Borrower or any Domestic
Loan Party may guarantee the  Indebtedness  of any Foreign Loan Party as long as
the aggregate  amount of  Indebtedness  which is so  guaranteed  does not in the
aggregate  at any one  time  outstanding  exceed  the sum of  $20,000,000,  (iv)
guarantees  by a Subsidiary of  obligations  of either or both  Borrowers  under
leases  for real or  personal  property,  provided,  that such  Subsidiary  will
utilize  all or a portion of such  property,  and (v) other  Limited  Contingent
Obligations  not described in the preceding  clauses (i) through (iv) of Griffon
and  the  Subsidiaries  not  in  excess  of an  aggregate  amount  of 20% of the
consolidated  Tangible Net Worth of Griffon and its Subsidiaries (as computed at
any time as shown on Griffon's  Financial  Statements most recently delivered to
the  Banks)  at any one time  outstanding.  For the  purposes  hereof,  the term
"guarantee"  shall  include  any  agreement,  whether  such  agreement  is  on a
contingency  or  otherwise,   to  purchase,   repurchase  or  otherwise  acquire
Indebtedness  of any other Person,  or to purchase,  sell or lease, as lessee or
lessor,  property or  services,  in any such case  primarily  for the purpose of
enabling another person to make payment of Indebtedness,  or to make any payment
(whether as an advance, capital contribution,  purchase of an equity interest or
otherwise)  to assure a minimum  equity,  asset base,  working  capital or other
balance sheet or financial  condition,  in connection  with the  Indebtedness of
another Person,  or to supply funds to or in any manner invest in another Person
in  connection   with  such  Person's   Indebtedness.                           

Section 7.4. Mergers, Acquisitions.                                   

     Merge or  consolidate  with any Person  (whether  or not a Borrower  or any
Subsidiary is the surviving entity),  or acquire all or substantially all of the
assets or any of the capital stock of any Person;  provided,  however,  that (i)
any Subsidiary may merge with and into any other  Subsidiary or either  Borrower
(so long as a Borrower or a wholly-owned Subsidiary is the surviving entity) and
(ii) each Borrower or any Subsidiary may make Permitted Acquisitions.           

Section 7.5. Redemptions; Distributions.                              

     Upon the  occurrence  and during the  continuance  of a Default or Event of
Default, or if a Default or Event of Default would be caused thereby:           

     (a) Purchase,  redeem, retire or otherwise acquire, directly or indirectly,
or make any sinking  fund  payments  with respect to, any shares of any class of
stock of either  Borrower now or hereafter  outstanding or set apart any sum for
any such purpose; or                                                            

     (b) Declare or pay any  dividends or make any  distribution  of any kind on
Griffon's  outstanding stock, or set aside any sum for any such purpose,  except
that  Griffon may declare or pay any  dividend  payable  solely in shares of its
capital stock.                                                                  

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Section 7.6. Stock Issuance.                                                

     Issue any  additional  shares or any right or option to acquire any shares,
or any  security  convertible  into  any  shares,  of the  capital  stock of any
Subsidiary,  except (a) in  connection  with  stock  dividends  permitted  under
subsection 7.5(b) hereof and (b) to either Borrower or a Subsidiary.            

Section 7.7. Changes in Business and Sales or Pledges of Assets.      

     Make any material change in its business on a consolidated basis, or in the
nature of its  operation,  or  liquidate  or  dissolve  itself  (or  suffer  any
liquidation  or  dissolution),  or convey,  sell,  lease,  assign,  transfer  or
otherwise  dispose  of any of its  property,  assets or  business  except in the
ordinary  course of  business  and for a fair  consideration  or  dispose of any
shares of stock (other than sales or issuances  of Griffon's  capital  stock) or
any Indebtedness,  whether now owned or hereafter acquired,  or discount,  sell,
pledge,  hypothecate or otherwise dispose of accounts receivable,  except in the
ordinary course of business and for fair consideration;  provided, however, that
Western  Synthetic Real Estate Corp.  and/or SKG Realty Corp. may dispose of the
real property  presently owned by such  corporations  and either Borrower or any
Subsidiary may convey, sell, lease, assign, transfer or otherwise dispose of (a)
its  property  and assets the fair market  value of which does not exceed in the
aggregate  in any fiscal year five percent  (5%) of the  consolidated  assets of
Griffon and its  Subsidiaries as of the end of the immediately  preceding fiscal
year for fair  consideration and (b) the capital stock of any Subsidiary (i) the
net revenues of which do not exceed five percent  (5%) of the  consolidated  net
revenues  of  Griffon  and its  Subsidiaries  or (ii) the assets of which do not
exceed  five  percent  (5%)  of the  consolidated  assets  of  Griffon  and  its
Subsidiaries;  provided,  however,  that in no event may either  Borrower or any
subsidiary  convey,  sell, lease,  assign,  transfer or otherwise dispose of any
capital stock that is at any time pledged to the Banks  pursuant to the Security
Documents.                                                                      

Section 7.8. Investments.                                             

     Make, or suffer to exist, any Investment in any Person, including,  without
limitation, any shareholder, director, officer or employee of either Borrower or
any of the  Subsidiaries,  except  Investments  which  do not in the  aggregate,
exceed $1,000,000 and:                                                          

(a) Investments in:                                                   

         (i) obligations issued or guaranteed by the United States of America;

          (ii)  certificates  of deposit,  bankers  acceptances and other "money
     market instruments" issued by any bank or trust company organized under the

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     laws of the  United  States of  America  or any State  thereof  and  having
     capital and surplus in an aggregate  amount of not less than  $100,000,000;

          (iii) open market  commercial  paper bearing the highest credit rating
     issued by Standard & Poor's Corporation or by another nationally recognized
credit rating agency;                                                 

          (iv) repurchase agreements entered into with any bank or trust company
     organized  under  the laws of the  United  States of  America  or any State
     thereof and having  capital and surplus in an aggregate  amount of not less
     than  $100,000,000   relating  to  United  States  of  America   government
obligations;                                                          

          (v) shares of "money market funds", each having net assets of not less
than $100,000,000; and                                                

          (vi) corporate  bonds rated at least AA or the  equivalent  thereof by
     Standard & Poor's  Corporation or Aa or the  equivalent  thereof by Moody's
Investors Service, Inc.;                                              

in each case  maturing  or being due or  payable  in full not more than 180 days
after the applicable Borrower's acquisition thereof;                            

     (b) Investments by either Borrower or any Subsidiary in entities related to
the business of either Borrower or any Subsidiary in an aggregate  amount not to
exceed $5,000,000;                                                              

     (c) Investments,  other than guarantees permitted by Section 7.3, by either
Borrower or any Subsidiary in any  majority-owned  Subsidiary of either Borrower
or any Subsidiary; provided, that either Borrower or any Domestic Loan Party may
make an Investment in any Foreign Loan Party as long as the aggregate  amount of
such Investments  does not in the aggregate at any one time  outstanding  exceed
the sum of $10,000,000  plus the aggregate  amount of such  Investments that are
outstanding as of June 30, 2001; and                                            

     (d) Permitted Acquisitions by either Borrower or any subsidiary pursuant to
Section 7.4 hereof.                                                             

Section 7.9. Fiscal Year.                                             

Change its fiscal year.                                     

Section 7.10. ERISA Obligations.                                      

Neither Borrower will:                                      

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     (a) permit the occurrence of any Termination  Event, or the occurrence of a
termination or partial  termination of a Defined  Contribution  Plan which would
have a material adverse effect on either Borrower; or                           

     (b) permit any  accumulated  deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code) in excess of $1,000,000 in the aggregate  liability
to either  Borrower and its ERISA  Affiliates with respect to all Pension Plans,
whether or not waived; or                                                       

     (c) engage,  or permit either Borrower or any ERISA Affiliate to engage, in
any  prohibited  transaction  under  Section 406 of ERISA or Section 4975 of the
Code for which a civil  penalty  pursuant  to  Section  502(i) of ERISA or a tax
pursuant to Section 4975 of the Code which would have a material  adverse effect
on either Borrower; or                                                          

     (d) engage or permit either Borrower or any ERISA  Affiliate to engage,  in
any  breach  of  fiduciary  duty  under  Part 4 of Title I of ERISA for which 20
percent of the  applicable  recovery  amount under Section 502(l) of ERISA which
would have a material adverse effect on either Borrower; or                     

     (e) fail, or permit any ERISA Affiliate to fail, to establish, maintain and
operate each Employee  Benefit Plan in compliance in all material  respects with
the  provisions  of  ERISA,  the  Code  and all  other  applicable  laws and the
regulations and interpretations thereof.                                        

Section 7.11. Reserved.                                               

Section 7.12. Transactions with Affiliates.                           

     Except as expressly  permitted by this  Agreement,  directly or indirectly:
(a) make any Investment in an Affiliate;  (b) transfer,  sell, lease,  assign or
otherwise  dispose of any assets to an Affiliate;  (c) merge into or consolidate
with or purchase  or acquire  assets  from an  Affiliate;  or (d) enter into any
other  transaction  directly  or  indirectly  with  or for  the  benefit  of any
Affiliate  (including,   without  limitation,   guarantees  and  assumptions  of
obligations  of  an  Affiliate);   provided,  however,  that:  (i)  payments  on
Investments  expressly  permitted  by Section  7.8 hereof may be made,  (ii) any
Affiliate who is a natural person may serve as an employee or director of either
Borrower and receive reasonable  compensation for his services in such capacity,
(iii) either Borrower may enter into any transaction with an Affiliate providing
for the  leasing of  property,  the  rendering  or receipt  of  services  or the
purchase or sale of product,  inventory and other assets in the ordinary  course
of business if the monetary or business consideration arising therefrom would be
substantially  as  advantageous  to such  Borrower  as the  monetary or business
consideration  that would obtain in a comparable arm's length transaction with a
Person not an  Affiliate  and (iv) either  Borrower or any  Subsidiary  may make

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loans to Persons who are stockholders,  officers or directors of either Borrower
or a  Subsidiary  which do not, in the  aggregate,  exceed  $250,000;  provided,
however, that for purposes of this Section 7.12 an Affiliate shall not be deemed
to include a Subsidiary of either Borrower.                                     

Section 7.13. Hazardous Material.                                     

     (a)  Cause or  permit  (i) any  "Hazardous  Material"  (as  defined  in any
applicable  Environmental  Laws and Regulations) to be placed,  held, located or
disposed  of, on,  under or at any real  property  used in  connection  with the
operation of the business of either Borrower or any of its  Subsidiaries  ("Real
Property") or any part thereof,  except for such Hazardous  Materials  which are
necessary  for either  Borrower's  operation of its  business  thereon and which
shall be  used,  stored  and  disposed  of in  compliance  with  all  applicable
Environmental  Laws and  Regulations  or (ii)  such  Real  Property  or any part
thereof  to be used as a  collection,  storage  or dump  site for any  Hazardous
Material.                                                                       

     (b) Each  Borrower  and each  Subsidiary  acknowledges  and agrees that the
Banks shall have no liability or responsibility for either:                     

          (i)  damage,  loss,  or injury to human  health,  the  environment  or
     natural resources caused by the presence,  disposal,  release or threatened
release of Hazardous Materials on any part of such real property; or  

          (ii)  abatement   and/or   clean-up   required  under  any  applicable
     Environmental  Laws and  Regulations for a release,  threatened  release or
     disposal of any Hazardous  Materials  located at such real property or used
     by or in connection with either  Borrower's or any Subsidiary's or any such
tenant's  business.                                                   

Section 7.14. Regulation U.                                           

     Not use any part of the proceeds received by either Borrower from the Loans
directly or  indirectly  for: (a) any purpose other than as set forth in Section
2.9 hereof, or (b) the purpose of purchasing or carrying, or for payment in full
or in part of  Indebtedness  that was incurred for the purposes of purchasing or
carrying,  any "margin stock",  as such term is defined in 221.3 of Regulation U
of the Board of Governors of the Federal Reserve System, 12 C.F.R.,  Chapter II,
Part 221,  other than purchases  made in compliance  with  Regulation U.        

Section 7.15. Limitations on Restrictions on Upstreaming of Funds     

     No Loan Party shall enter into any agreement  which prohibits or limits the
ability of any Subsidiary to pay dividends or otherwise advance funds to another
Subsidiary or to either Borrower, the effect of which would, with respect to any
fiscal year, not allow the payment by such Subsidiary of an aggregate  amount at
least  equal to the sum of (i) the  amount of  Federal,  state and local  income
taxes  payable by a Borrower with respect to the income of such  Subsidiary  (as

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determined  in  accordance  with  generally   accepted   accounting   principles
consistently  applied)  for such  fiscal  year and (ii) 50% of the net income of
such Subsidiary (as determined in accordance with generally accepted  accounting
principles consistently applied) for such fiscal year.                          

Section 7.16. Derivative Protection Arrangements.                     

     No Loan Party shall enter into any Derivative Protection Arrangement unless
such Loan Party has  reasonably  determined  that entering into such  Derivative
Protection  Arrangement  is in the best  interests of such Loan Party and is not
for speculative purposes.                                                       

Article 8   Events of Default.                                                  

     If any one or more of the  following  events  ("Events of  Default")  shall
occur and be continuing,  the Commitments  shall terminate and the entire unpaid
balance of the principal of and interest on the Notes  outstanding and all other
obligations and Indebtedness of each Borrower to each Bank arising hereunder and
under the other Loan  Documents  shall  immediately  become due and payable upon
written notice to that effect given to Griffon by the Administrative  Agent upon
the direction of the Required  Banks (except that in the case of the  occurrence
of any  Event of  Default  described  in  Section  8.6 no such  notice  shall be
required),  without  presentment or demand for payment,  notice of  non-payment,
protest  or  further  notice or demand of any kind,  all of which are  expressly
waived by each Borrower:                                                        

Section 8.1. Payments.                                                

     Failure to make (i) any payment or mandatory  prepayment of principal under
any Note when due; (ii) any payment or mandatory prepayment of interest upon any
Note or to make any  payment  of any Fee not later than five (5) days after such
payment or prepayment is due; (iii) any payment in respect of any  Reimbursement
Obligation,  within five (5) days of when due and  payable;  or (iv) any deposit
into a cash collateral account when required hereby; or                         

Section 8.2. Certain Covenants.                                       

     Failure  to perform or observe  any of the  agreements  of either  Borrower
contained in Section 6.9 or Article 7 hereof; or                                

Section 8.3. Other Covenants.                                         

     Failure by either  Borrower  or any  Subsidiary  to perform or observe  any
other term,  condition or covenant of this Agreement or of any of the other Loan

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Documents to which it is a party,  which shall remain unremedied for a period of
15 days after notice  thereof  shall have been given to Griffon by any Bank;  or

Section  8.4.  Other  Defaults.                                                 

     (a)  Failure to perform or observe any term,  condition  or covenant of any
bond, note, debenture,  loan agreement,  indenture,  guaranty,  trust agreement,
mortgage or similar  instrument to which either  Borrower or any Subsidiary is a
party or by which it is bound,  or by which any of its  properties or assets may
be affected (a "Debt  Instrument"),  so that, as a result of any such failure to
perform,  the  Indebtedness  included  therein or secured or covered thereby has
been declared due and payable prior to the date on which such Indebtedness would
otherwise become due and payable; or                                            

     (b) Any event or condition  referred to in any Debt Instrument  shall occur
or fail to  occur,  so that,  as a result  thereof,  the  Indebtedness  included
therein or secured or covered thereby has been declared due and payable prior to
the date on which such Indebtedness would otherwise become due and payable; or  

(c) Failure to pay any Indebtedness for borrowed money when due;      

provided,  however,  that  the  provisions  of this  Section  8.4  shall  not be
applicable  to any Debt  Instrument  that on the date  this  Section  8.4  would
otherwise  be  applicable  thereto,  relates to or evidences  Indebtedness  in a
principal amount of less than $1,000,000; or                                    

Section 8.5. Representations and Warranties.                          

     Any representation or warranty made in writing to the Administrative  Agent
or the Banks in any of the Loan  Documents,  or any  certificate,  statement  or
report made or  delivered in  compliance  with this  Agreement,  shall have been
false or misleading in any material  respect when made or delivered;  or        

Section 8.6. Bankruptcy.                                              

     (a) Either  Borrower or any  Subsidiary  shall make an  assignment  for the
benefit of creditors,  file a petition in bankruptcy,  be adjudicated insolvent,
petition or apply to any tribunal for the appointment of a receiver,  custodian,
or any trustee for it or a substantial part of its assets, or shall commence any
proceeding under any bankruptcy,  reorganization,  arrangement,  readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or  hereafter in effect,  or either  Borrower or any  Subsidiary  shall take any
corporate action to authorize any of the foregoing actions;  or there shall have
been filed any such petition or application,  or any such proceeding  shall have
been commenced against it, that remains  undismissed for a period of thirty (30)
days or more;  or any order for relief shall be entered in any such  proceeding;
or either  Borrower or any  Subsidiary by any act or omission shall indicate its
consent to,  approval of or  acquiescence  in any such petition,  application or

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proceeding or the appointment of a custodian,  receiver or any trustee for it or
any  substantial   part  of  any  of  its   properties,   or  shall  suffer  any
custodianship, receivership or trusteeship to continue undischarged for a period
of thirty  (30) days or more;  or                                               

     (b) Either Borrower or any Subsidiary  shall generally not pay its debts as
such debts become due; or                                                       

     (c) Either  Borrower or any Subsidiary  shall have concealed,  removed,  or
permitted to be concealed or removed,  any part of its property,  with intent to
hinder,  delay or defraud  its  creditors  or any of them or made or  suffered a
transfer of any of its property  that may be  fraudulent  under any  bankruptcy,
fraudulent  conveyance  or similar  law; or shall have made any  transfer of its
property  to or for the  benefit  of a creditor  at a time when other  creditors
similarly  situated  have not been paid;  or shall have  suffered or  permitted,
while insolvent,  any creditor to obtain a Lien upon any of its property through
legal  proceedings or distraint that is not vacated within thirty (30) days from
the date  thereof;  or                                                          

Section 8.7. Judgments.                                               

     Any judgment  against either  Borrower or any Subsidiary or any attachment,
levy or execution  against any of their  properties  for any amount in excess of
$1,000,000 shall remain unpaid,  unstayed on appeal,  undischarged,  unbonded or
undismissed for a period of thirty (30) days or more; or Section 8.8. ERISA.    

     (a) The  termination of any Pension Plan or the  institution by the PBGC of
proceedings for the involuntary termination of any Pension Plan, in either case,
by reason of, or that results in, a material  "accumulated  funding  deficiency"
with respect to either Borrower and its ERISA Affiliates, individually or in the
aggregate, under Section 412 of the Code; or                                    

     (b)  Failure  by  either  Borrower  to  make  required  contributions,   in
accordance with the applicable provisions of ERISA, to each of the Pension Plans
hereafter established or assumed by it; or                                      

Section 8.9. Liens.                                                   

     Any of the Liens  created and granted to the  Administrative  Agent for the
ratable  benefit  of the Banks  under the  Security  Documents  shall fail to be
valid,  first,  perfected  Liens,  subject to no prior or equal Lien,  except as
permitted by Section 7.2 hereof; or                                             

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Section 8.10. Change of Control.                                      

A Change of Control shall occur.                                      

     Upon any Event of Default,  the Commitments  shall terminate and the entire
unpaid balance of the principal of and interest on the Notes outstanding and all
other  obligations and Indebtedness of each Borrower to each Agent and each Bank
arising  hereunder and under the other Loan Documents shall  immediately  become
due and payable upon written  notice to that effect given to either  Borrower by
the Administrative  Agent upon consent of the Required Banks (except that in the
case of the occurrence of any Event of Default  described in Section 8.6 no such
notice shall be  required)  and in any such event the  Administrative  Agent (i)
upon the direction of the Required Banks, shall proceed to enforce the rights of
the  holders  of the  Notes  by suit  in  equity,  action  at law  and/or  other
appropriate proceedings,  whether for payment or the specific performance of any
covenant or agreement  contained in the Loan Documents and (ii) may exercise any
and all rights and  remedies  provided to the  Administrative  Agent by the Loan
Documents.  Except as otherwise  expressly provided in the Loan Documents,  each
Borrower expressly waives presentment,  demand,  notice of non-payment,  protest
and any  similar  notice.  Furthermore,  upon any such  Event of  Default,  each
Borrower   shall  deposit  into  a  cash   collateral   account  and  grant  the
Administrative Agent, for the ratable benefit of the Banks, a first Lien on cash
or cash  equivalents in an amount equal to the then Letter of Credit Exposure of
such  Borrower.                                                                 

Article  9  Miscellaneous  Provisions.                                          

Section 9.1. Fees and Expenses, Indemnity.                            

     Each  Borrower  will  on  demand  pay:  (a)  all  reasonable  costs  of the
Administrative  Agent in  preparing  the Loan  Documents  and (b) all  costs and
expenses of the issuance of the Notes and of the Borrowers'  performance and the
Subsidiaries'  performance of and compliance  with all agreements and conditions
contained  herein  on its part to be  performed  or  complied  with  (including,
without limitation, all costs of filing or recording any assignments, mortgages,
financing  statements  and other  documents),  and (c) the fees and expenses and
disbursements of special counsel to the Administrative  Agent in connection with
the preparation, execution and delivery, review, administration,  interpretation
and enforcement of the Loan  Documents,  the  consummation  of the  transactions
contemplated by all such documents, the negotiation,  preparation, execution and
delivery of any amendment,  modification  or supplement of or to, or any consent
or waiver under, any such document (or any such instrument which is proposed but
not executed and  delivered)  and with any claim or action  threatened,  made or
brought against any Bank or the Administrative  Agent arising out of or relating
to any extent to the Loan Documents, or the transactions  contemplated hereby or

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thereby and (d) the fees and expenses and  disbursements of counsel to the Banks
and of examiners and consultants of each Bank in connection with  enforcement of
the Loan  Documents  and with any claim or action  threatened,  made or  brought
against any Bank arising out of or relating to any extent to the Loan Documents,
or the transactions  contemplated hereby or thereby. In addition,  each Borrower
will on demand pay all costs and expenses (including,  without limitation,  fees
and disbursements of counsel) suffered or incurred by the  Administrative  Agent
and/or the Banks in connection  with its  enforcement of the payment of any Note
or any sum due to the  Administrative  Agent  and/or  the  Banks  under the Loan
Documents,  as the case may be,  or any of  Administrative  Agent's  and/or  the
Banks' other rights hereunder or thereunder.  In addition to the foregoing, each
Borrower  shall  indemnify  the  Administrative  Agent and each Bank and each of
their  respective  directors,   officers,   employees,   attorneys,  agents  and
Affiliates against, and hold each of them harmless from, any loss,  liabilities,
damages,  claims, costs and expenses (including  reasonable  attorneys' fees and
disbursements)  suffered or incurred  by any of them  arising out of,  resulting
from or in any manner connected with, the execution, delivery and performance of
each  of  the  Loan  Documents,  the  Extensions  of  Credit  and  any  and  all
transactions  related to or  consummated  in connection  with the  Extensions of
Credit, including,  without limitation,  losses,  liabilities,  damages, claims,
costs and expenses suffered or incurred by the  Administrative  Agent, such Bank
and/or any of their  respective  directors,  officers,  employees,  attorneys or
Affiliates in  investigating,  preparing for,  defending  against,  or providing
evidence,  producing  documents  or taking  any other  action in  respect of any
commenced or threatened litigation,  administrative  proceeding or investigation
under any federal  securities law or any other statute of any  jurisdiction,  or
any  regulation,  or at common law or otherwise.  The indemnity set forth herein
shall be in addition to any other obligations or liabilities of the Borrowers to
the  Administrative  Agent  and/or each such Bank  hereunder or at common law or
otherwise.  All fees, expenses,  costs, charges and other amounts payable by the
Borrowers  hereunder shall be deemed to be Obligations,  and the  Administrative
Agent and each Bank may,  in its sole  discretion,  exercise  its  rights  under
Section 9.5 of this  Agreement in respect of any or all thereof.  The provisions
of this Section 9.1 shall  survive the payment of the Notes and the  termination
of this Agreement.                                                              

Section 9.2. Taxes.                                                   

     If, under any law in effect on the date of the closing of any  Extension of
Credit  hereunder,  or under any retroactive  provision of any law  subsequently
enacted, it shall be determined that any Federal,  state or local tax is payable
in respect of the  issuance  of any Note,  or in  connection  with the filing or
recording  of  any  assignments,   mortgages,  financing  statements,  or  other
documents (whether measured by the amount of Indebtedness  secured or otherwise)
as contemplated by this Agreement,  then the Borrowers will pay any such tax and
all  interest  and  penalties,  if any,  and will  indemnify  each  Bank and the
Administrative  Agent  against and save each of them  harmless  from any loss or
damage  resulting  from or arising out of the  nonpayment or delay in payment of
any such tax. If any such tax or taxes  shall be assessed or levied  against any
Bank or the Administrative  Agent, such Bank or the Administrative Agent, as the
case may be, may notify  either  Borrower and make  immediate  payment  thereof,

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together with interest or penalties in connection therewith, and shall thereupon
be entitled  to and shall  receive  immediate  reimbursement  therefor  from the
Borrowers.  Notwithstanding any other provision contained in this Agreement, the
covenants  and  agreements  of the  Borrowers in this Section 9.2 shall  survive
payment  of the  Notes  and the  termination  of this  Agreement.               

Section 9.3. Payments.                                                

     As set forth in Article 2 hereof,  all payments by each Borrower on account
of  principal,  interest,  Reimbursement  Obligations,  Fees and  other  charges
(including any indemnities)  shall be made to the  Administrative  Agent for the
account of the applicable Credit Party at the Payment Office, in lawful money of
the United States of America in immediately available funds, by wire transfer or
otherwise, not later than 11:00 A.M. New York City time on the date such payment
is due.  Any such  payment  made on such date but after such time shall,  if the
amount paid bears  interest,  be deemed to have been made on, and interest shall
continue to accrue and be payable thereon until,  the next  succeeding  Business
Day. If any payment of principal  or interest  becomes due on a day other than a
Business Day, such payment may be made on the next  succeeding  Business Day and
such extension  shall be included in computing  interest in connection with such
payment.  All payments  hereunder,  under the Notes and in  connection  with any
Reimbursement  Obligation,  shall be made without set-off or counterclaim and in
such amounts as may be necessary  in order that all such  payments  shall not be
less than the amounts otherwise  specified to be paid under this Agreement,  the
Notes and the other Loan Documents (after  withholding for or on account of: (i)
any present or future taxes, levies, imposts, duties or other similar charges of
whatever nature imposed by any government or any political subdivision or taxing
authority  thereof,  other than any tax (except those referred to in clause (ii)
below) on or measured by the net income of the Bank or the Administrative  Agent
to which any such payment is due pursuant to applicable federal, state and local
income tax laws, and (ii) deduction of amounts equal to the taxes on or measured
by the net income of such Bank or the Administrative  Agent payable by such Bank
or the  Administrative  Agent with  respect to the amount by which the  payments
required to be made under this sentence exceed the amounts  otherwise  specified
to be paid in this  Agreement and the Notes).  Upon payment in full of any Note,
the Bank  holding  such Note  shall  mark the Note  "Paid"  and return it to the
appropriate  Borrower.                                                          

Section 9.4. Survival of Agreements and Representations; Construction.

     All  agreements,  representations  and warranties made herein shall survive
the delivery of this Agreement and the Notes and the making of any Extensions of
Credit.  The headings  used in this  Agreement and the table of contents are for
convenience  only and shall not be deemed to constitute a part hereof.  All uses
herein of the masculine gender or of singular or plural terms shall be deemed to

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include uses of the feminine or neuter gender,  or plural or singular  terms, as
the context may  require.                                                       

Section 9.5. Lien on and Set-off of Deposits.                         

     As collateral  security for the payment of the  Obligations,  each Borrower
hereby  grants to each Bank and the  Administrative  Agent,  a continuing  Lien,
security  interest and right of setoff as security for all Obligations,  whether
now  existing or  hereafter  arising,  upon and against all  deposits,  credits,
collateral  and  property,   now  or  hereafter  in  the  possession,   custody,
safekeeping  or  control  of any Bank or any  entity  under the  control  of any
holding  company  controlling  such Bank and its  successors  or assigns,  or in
transit  to any of  them.  At any time  after  the  occurrence  and  during  the
continuance  of any Event of Default,  without demand or notice (any such notice
being expressly waived by each Borrower),  any Bank may setoff same, or any part
thereof and apply the same to any of the Obligations  even though  unmatured and
regardless of the adequacy of any other collateral securing the Obligations, all
subject to the terms of  Section  2.16  hereof.  ANY AND ALL RIGHTS TO REQUIRE A
BANK TO EXERCISE  ITS RIGHTS OR REMEDIES  WITH  RESPECT TO ANY OTHER  COLLATERAL
WHICH  SECURES THE  OBLIGATIONS,  PRIOR TO  EXERCISING  ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH  DEPOSITS,  CREDITS OR OTHER  PROPERTY OF A BORROWER  ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.                                  

Section 9.6. Modifications, Consents and Waivers; Entire Agreement.   

     No modification, amendment or waiver of or with respect to any provision of
this  Agreement,  any Notes,  the Security  Documents,  or any of the other Loan
Documents and all other agreements, instruments and documents delivered pursuant
hereto or thereto,  nor consent to any departure by either  Borrower from any of
the terms or conditions thereof, shall in any event be effective unless it shall
be in  writing  and  signed  by the  Required  Banks;  provided,  however,  that
notwithstanding the foregoing,  without the written consent of each Bank and the
Administrative Agent, in no event shall any amendment,  modification,  waiver or
consent:                                                                        

     (a)  Be  effective  with  respect  to  Article  2 or  Article  3 (it  being
understood  that a waiver of any Default or Event of Default  under  Section 8.5
hereof  shall  not  constitute  an  amendment  or  modification  of any  Section
therein),  or Sections 8.1 or 9.6 hereof or the  definitions  in Article 1 which
are used in any of the foregoing;                                               

     (b)  Extend  the  final  maturity  of any  Extension  of  Credit  (it being
understood that any waiver of the application of any prepayment of or the method
of  application of any  prepayment to the  amortization  of, the Loans shall not
constitute  any such  extension)  or reduce or extend the time of payment of the
principal  amount of any  Extension of Credit,  or reduce the rate or extend the
time of payment of interest or fees thereon;                                    

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  (c) Reduce the percentage specified in the definition of Required Banks;

     (d) Increase the amount of the  Commitment of any Bank  hereunder (it being
understood that a waiver of any Default or Event of Default shall not constitute
a change in the terms of any Commitment of any Bank);                           

     (e)  Extend the  Commitment  Termination  Date  except in  accordance  with
Section 2.8(b) hereof, or amend Section 2.8(b) hereof;                          

(f) Extend the Termination Date;                                      

     (g)  Release or permit the  release of any asset  pledged  under any of the
Security  Documents;  or                                                        

(h) Consent to any assignment by either Borrower of the Obligations.  

     Any such waiver or consent shall be effective only in the specific instance
and for the purpose for which given.  No consent to or demand on either Borrower
in any case  shall,  of itself,  entitle  it to any other or  further  notice or
demand in similar or other circumstances. Without limiting the generality of the
foregoing,  the making of an  Extension  of Credit  shall not be  construed as a
waiver of any  Default,  regardless  of whether  any Bank may have had notice or
knowledge  of such  Default  at the time.  This  Agreement  and the  other  Loan
Documents  are  intended by the  parties as the final,  complete  and  exclusive
statement of the transactions  evidenced  thereby.  All prior or contemporaneous
promises, agreements and understandings,  whether oral or written, are deemed to
be superceded by this Agreement and such other Loan  Documents,  and no party is
relying  on any  promise,  agreement  or  understanding  not set  forth  in this
Agreement or such other Loan Documents.                                         

Section 9.7. Remedies Cumulative.                                     

     Each and every  right  granted  to the Banks and the  Administrative  Agent
hereunder  or under any other  document  delivered  hereunder  or in  connection
herewith,  or  allowed  it by law or  equity,  shall  be  cumulative  and may be
exercised  from  time  to  time.  No  failure  on the  part  of any  Bank or the
Administrative  Agent to exercise,  and no delay in exercising,  any right shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
right preclude any other or future exercise thereof or the exercise of any other
right.  The due  payment and  performance  of the  obligations  shall be without
regard to any  counterclaim,  right of offset or any other claim whatsoever that
either  Borrower  may have  against  any Bank or the  Administrative  Agent  and
without regard to any other obligation of any nature whatsoever that any Bank or
the Administrative  Agent may have to either Borrower,  and no such counterclaim
or offset shall be asserted by either Borrower in any action, suit or proceeding
instituted by any Bank or the Administrative Agent for payment or performance of
the obligations.                                                                

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Section 9.8. Further Assurances.                                      

     At any time and from  time to  time,  upon the  request  of any Bank or the
Administrative  Agent,  each Borrower shall execute,  deliver and acknowledge or
cause to be executed,  delivered and  acknowledged,  such further  documents and
instruments and do such other acts and things as any Bank or the  Administrative
Agent may  reasonably  request  in order to fully  effect the  purposes  of this
Agreement,  the other Loan Documents and any other  agreements,  instruments and
documents  delivered  pursuant  hereto or in connection  with the  Extensions of
Credit.                                                                         

Section 9.9. Notices.                                                 

     All notices,  requests,  reports and other communications  pursuant to this
Agreement shall be in writing, either by letter (delivered by hand or commercial
messenger  service or sent by certified mail, return receipt  requested,  except
for routine  reports  delivered in compliance with Article 5 hereof which may be
sent by  ordinary  first-class  mail) or  telegram  or  telecopy,  addressed  as
follows:                                                                        

(a) If to Griffon:                                                    

Griffon Corporation                             
100 Jericho Quadrangle                          
Jericho, New York 11753                         
Attention:  Robert Balemian                     
Telecopier No.: (516) 938-5644                  

with a copy to:                                 

Blau, Kramer, Wactlar & Lieberman, P.C.         
100 Jericho Quadrangle                          
Jericho, New York 11753                         
Attention: Edward I. Kramer                     
Telecopier No.: (516) 822-4824                  

(b) If to  Telephonics:                                               

Telephonics  Corporation                        
815  Broad  Hollow  Road                        
Farmingdale, New York 11735                     
Attention: Joseph J. Battaglia                  
Telecopier No.: (631) 755-7010                  

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with a copy to:                                 

Griffon Corporation                             
100 Jericho Quadrangle                          
Jericho, New York 11753                         
Attention:  Robert Balemian                     
Telecopier No.: (516) 938-5644                  

AND                                             

Blau, Kramer, Wactlar & Lieberman, P.C.         
100 Jericho Quadrangle                          
Jericho, New York 11753                         
Attention:  Edward  I.  Kramer                  
Telecopier  No.:  (516)  822-4824               

(c) If to the Administrative Agent:                                   

Fleet National Bank                             
300 Broad Hollow Road                           
Melville,  New York 11747                       
Attention:  Christopher J. Mendelsohn           
Vice President          
Telecopier No.: (631)  547-7815                 

               with a copy  (other  than in the case of  Borrowing Notices and
                reports and other documents delivered in compliance with Article
5 hereof) to:                                   

Emmet,  Marvin & Martin,  LLP                   
120 Broadway                                    
New York,  New York 10271                       
Attention:  Richard  M.  Skoller,  Esq.         
Telecopier  No.:  (212)  238-3100               

(d) If to the Documentation Agent:                                    

The Chase Manhattan Bank                        
395 North Service Road                          
Melville, NY 11747                              
Attention:  Barbara G. Bertschi                 
Vice President          
Telecopier  No.: (631) 755-5184                 

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(e) If to a Bank:                                                     

          To its respective address (telecopy number) set forth on its signature
page to this Agreement.                                     

     Any notice, request or communication hereunder shall be deemed to have been
given on the day on  which  it is  telecopied  to such  party at the  telecopier
number  referred  to above or  delivered  by hand or such  commercial  messenger
service to such party at its address  referred to above, or, if sent by mail, on
the third Business Day after the day deposited in the mail, postage prepaid,  or
in the case of  telegraphic  notice,  when  delivered to the telegraph  company,
addressed as aforesaid.  Any party may change the person,  address or telecopier
number to whom or which notices are to be given hereunder,  by notice duly given
hereunder;  provided, however, that any such notice shall be deemed to have been
given  hereunder  only  when  actually  received  by the  party  to  which it is
addressed.                                                                      

Section 9.10. Counterparts.                                           

     This  Agreement may be signed in any number of  counterparts  with the same
effect as if the  signatures  thereto and hereto were upon the same  instrument.

Section 9.11. Severability.                                           

     The  provisions  of this  Agreement  are  severable,  and if any  clause or
provision  hereof shall be held invalid or  unenforceable in whole or in part in
any  jurisdiction,  then such invalidity or  unenforceability  shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner  affect such clause or  provision in any other  jurisdiction,  or any
other  clause or provision in this  Agreement in any  jurisdiction.  Each of the
covenants,  agreements and conditions contained in this Agreement is independent
and   compliance  by  either   Borrower  with  any  of  them  shall  not  excuse
non-compliance by either Borrower with any other. All covenants  hereunder shall
be given  independent  effect so that if a particular action or condition is not
permitted  by any of such  covenants,  the fact that it would be permitted by an
exception to, or be otherwise  within the limitations of, another covenant shall
not avoid the  occurrence  of a Default or an Event of Default if such action is
taken or condition  exists.                                                     

 Section 9.12. Binding Effect; No Assignment or Delegation by Borrowers.

     This  Agreement  shall be  binding  upon and inure to the  benefit  of each
Borrower  and  its   successors  and  to  the  benefit  of  the  Banks  and  the
Administrative Agent and their respective successors and assigns. The rights and
obligations  of each  Borrower  under this  Agreement  shall not be  assigned or
delegated without the prior written consent of each Bank and the  Administrative
Agent, and any purported  assignment or delegation without such consent shall be
void.                                                                           

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Section 9.13.  Assignments and Participations by Banks.                         

     (a) Each Bank may  assign to one or more banks or other  entities  all or a
portion of its rights and obligations under this Agreement  (including,  without
limitation,  all or a portion of its Commitment,  the Extensions of Credit owing
to it, and the Note or Notes held by it); provided, however, that: (i) each such
assignment shall be of a constant,  and not a varying,  percentage of all of the
assigning Bank's rights and obligations under this Agreement, (ii) the amount of
the  Commitment  of the  assigning  Bank being  assigned  pursuant  to each such
assignment  (determined as of the date of the  Assignment  and  Acceptance  with
respect to such assignment)  shall in no event be less than $5,000,000 and shall
be an integral multiple of $500,000,  (iii) each assignee shall agree in writing
satisfactory  in form and substance to the  Administrative  Agent to be bound by
the terms and conditions of this Agreement, (iv) each such assignment other than
to a Bank party  hereto,  or a banking  Affiliate  of such a Bank,  or an entity
described in clause  (a)(iv) of the definition of "Eligible  Assignee"  which is
administered  or managed by a Bank or an Affiliate  of a Bank shall  require the
consent of Griffon (unless an Event of Default has occurred and is continuing in
which case such consent  shall not be  required),  and (v) each such  assignment
shall be to an Eligible Assignee. Upon such execution,  delivery, acceptance and
recording,  from and after the effective date  specified in each  Assignment and
Acceptance,  which effective date shall be at least five (5) Business Days after
the execution thereof:  (x) the assignee thereunder shall be a party hereto and,
to the extent that rights and  obligations  hereunder  have been  assigned to it
pursuant to such Assignment and Acceptance, have the rights and obligations of a
Bank hereunder,  and (y) the Bank assignor  thereunder shall, to the extent that
rights and  obligations  hereunder  have been  assigned  by it  pursuant to such
Assignment  and  Acceptance,  relinquish  its  rights and be  released  from its
obligations  under  this  Agreement  (and,  in the  case  of an  Assignment  and
Acceptance  covering all or the remaining  portion of an assigning Bank's rights
and  obligations  under  this  Agreement,  such Bank  shall  cease to be a party
hereto).                                                                        

     (b) By executing  and  delivering an Assignment  and  Acceptance,  the Bank
assignor  thereunder and the assignee  thereunder confirm to and agree with each
other and the other  parties  hereto as  follows:  (i) other than as provided in
such Assignment and Acceptance,  such assigning Bank makes no  representation or
warranty  and  assumes  no  responsibility   with  respect  to  any  statements,
warranties or  representations  made in or in connection  with this Agreement or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of this Agreement or any other instrument or document  furnished  pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility  with respect to the financial condition of either Borrower or
the performance or observance by either Borrower of any of its obligations under
this Agreement or any other  instrument or document  furnished  pursuant hereto;
(iii) such  assignee  confirms  that it has  received a copy of this  Agreement,

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together with copies of such financial  statements and such other  documents and
information  as it has deemed  appropriate  to make its own credit  analysis and
decision to enter into such Assignment and Acceptance;  (iv) such assignee will,
independently   and  without   reliance   upon  such   assigning   Bank  or  the
Administrative  Agent  or any  other  Bank  and  based  on  such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking action under this Agreement;  (v) such
assignee confirms that it is an Eligible Assignee; and (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Bank.    

     (c) Upon  its  receipt  of an  Assignment  and  Acceptance  executed  by an
assignee  representing that it is an Eligible  Assignee,  together with any Note
subject to such assignment, the assigning Bank shall: (i) accept such Assignment
and Acceptance, and (ii) give prompt notice thereof to the Administrative Agent,
each  Borrower and each of the other Banks.  Within five Business Days after its
receipt of such notice,  each appropriate  Borrower,  at its own expense,  shall
execute and deliver to the assignee Bank in exchange for the surrendered  Note a
new Note to the  order  of such  Eligible  Assignee  in an  amount  equal to the
Commitment  assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained a Commitment  hereunder,  a new Note to the order of
the  assigning  Bank  in an  amount  equal  to  the  Commitment  retained  by it
hereunder. Such new Notes shall be in an aggregate principal amount equal to the
aggregate  principal  amount  of such  surrendered  Note,  shall  be  dated  the
effective  date of such  Assignment  and  Acceptance  and shall  otherwise be in
substantially the form of Exhibit A-1 hereto.                                   

     (d) Each Bank may,  without  the prior  consent of any other Bank or either
Borrower, sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement  (including,  without
limitation,  all or a portion of its Commitment,  the Extensions of Credit owing
to it,  and the Note  held by it);  provided,  however,  that:  (i) such  Bank's
obligations under this Agreement (including,  without limitation, its Commitment
hereunder)  shall  remain   unchanged,   (ii)  such  Bank  shall  remain  solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Bank shall  remain  the holder of any such Note for all  purposes  of
this  Agreement,  and each  Borrower  and the other Bank shall  continue to deal
solely and directly  with such Bank in  connection  with such Bank's  rights and
obligations  under this  Agreement.                                             

     (e) Each Bank may, in connection  with any assignment or  participation  or
proposed assignment or participation  pursuant to this Section 9.13, disclose to
the assignee or participant or proposed assignee or participant, any information
relating  to either  Borrower  furnished  to such Bank by or on behalf of either
Borrower;  provided  that,  prior  to  any  such  disclosure,  the  assignee  or
participant  or proposed  assignee or  participant  shall agree to preserve  the
confidentiality  of any  confidential  information  relating to either  Borrower
received by it from such Bank.                                                  

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     (f)  Notwithstanding any other provision contained in this Agreement or any
other Loan Document to the contrary, each Bank may at any time pledge all or any
portion of its rights  under the Loan  Documents  including  any  portion of the
Notes to any of the twelve (12) Federal  Reserve Banks organized under Section 4
of the Federal Reserve Act, 12 U.S.C.  Section 341 or the United States Treasury
(and its  transferees)  as collateral  security  pursuant to Regulation A of the
Board of  Governors of the Federal  Reserve  System and any  operating  Circular
issued by such Federal  Reserve  Bank,  provided  that any payment in respect of
such  assigned  Note made by a Borrower to or for the  account of the  assigning
Bank  in  accordance  with  the  terms  of this  Agreement  shall  satisfy  such
Borrower's  obligations hereunder in respect of such assigned Note to the extent
of such payment.  No such pledge or  enforcement  thereof shall release any such
Bank from its obligations under any of the Loan Documents.                      

Section 9.14. Relief From Bankruptcy Stay.                            

     In the  event  that  either  Borrower  or any of  the  persons  or  parties
constituting a Borrower  shall (i) file with any  bankruptcy  court of competent
jurisdiction  or be the subject of any petition under Title 11 of the U.S. Code,
as  amended  ("Bankruptcy  Code"),  (ii) be the  subject of any order for relief
issued under the Bankruptcy  Code,  (iii) file or be the subject of any petition
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution,  or similar relief under any present or future federal or state act
or  law  relating  to  bankruptcy,  insolvency,  or  other  relief  for  debtors
(collectively,  "Insolvency  Law")  ,  (iv)  have  sought  or  consented  to  or
acquiesced  in  the  appointment  of  any  trustee,  receiver,  conservator,  or
liquidator,  or (v) be the subject of any order,  judgment, or decree entered by
any court of  competent  jurisdiction  approving a petition  filed  against such
party   for  any   reorganization,   arrangement,   composition,   readjustment,
liquidation,  dissolution,  or similar  relief  under any  Insolvency  Law,  the
Administrative Agent and each Bank shall thereupon be entitled and each Borrower
irrevocably  consents to immediate and  unconditional  relief from any automatic
stay  imposed by Section 362 of the  Bankruptcy  Code,  or any other stay issued
pursuant  to the  Bankruptcy  Code or any  Insolvency  Law,  on or  against  the
exercise  of the rights and  remedies  otherwise  available  to each Bank or the
Administrative  Agent  as  provided  in  connection  herewith  and as  otherwise
provided by law, and each Borrower hereby irrevocably waives any right to object
to  such   relief  and  will  not  contest  any  motion  by  each  Bank  or  the
Administrative  Agent  seeking  relief  from  such stay and each  Borrower  will
cooperate with each Bank and the  Administrative  Agent, in any manner requested
by each Bank or the  Administrative  Agent, in its efforts to obtain relief from
any such stay.                                                                  

     Section 9.15.  Governing Law; Consent to  Jurisdiction;  Waiver of Trial by
Jury.                                                                           

     (a) THIS  AGREEMENT,  THE NOTES AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND DUTIES OF THE PARTIES  HEREUNDER  AND  THEREUNDER  SHALL BE GOVERNED BY, AND

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CONSTRUED AND  INTERPRETED IN ACCORDANCE  WITH, THE LAW OF THE STATE OF NEW YORK
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).                  

     (b) EACH BORROWER  IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING
AGAINST IT UNDER,  ARISING OUT OF OR IN ANY MANNER  RELATING TO THIS  AGREEMENT,
AND EACH  OTHER  LOAN  DOCUMENT  MAY BE BROUGHT IN ANY COURT OF THE STATE OF NEW
YORK,  COUNTY  OF NEW  YORK,  OR IN THE  UNITED  STATES  DISTRICT  COURT FOR THE
SOUTHERN  DISTRICT OF NEW YORK. EACH BORROWER,  BY THE EXECUTION AND DELIVERY OF
THIS AGREEMENT,  EXPRESSLY AND  IRREVOCABLY  ASSENTS AND SUBMITS TO THE PERSONAL
JURISDICTION  OF ANY OF SUCH  COURTS  IN ANY SUCH  ACTION  OR  PROCEEDING.  EACH
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY COMPLAINT,  SUMMONS,
NOTICE OR OTHER  PROCESS  RELATING TO ANY SUCH ACTION OR  PROCEEDING BY DELIVERY
THEREOF  TO IT BY HAND OR BY MAIL IN THE  MANNER  PROVIDED  FOR IN  SECTION  9.9
HEREOF.  EACH  BORROWER  HEREBY  EXPRESSLY AND  IRREVOCABLY  WAIVES ANY CLAIM OR
DEFENSE IN ANY SUCH ACTION OR  PROCEEDING  BASED ON ANY ALLEGED LACK OF PERSONAL
JURISDICTION,  IMPROPER  VENUE OR FORUM NON  CONVENIENS  OR ANY  SIMILAR  BASIS.
NEITHER  BORROWER  SHALL BE ENTITLED IN ANY SUCH ACTION OR  PROCEEDING TO ASSERT
ANY DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE OTHER THAN THE STATE OF
NEW YORK UNLESS  SUCH  DEFENSE IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE
OF NEW YORK.  NOTHING IN THIS  SECTION 9.15 SHALL AFFECT OR IMPAIR IN ANY MANNER
OR TO ANY EXTENT THE RIGHT OF THE  ADMINISTRATIVE  AGENT OR ANY BANK TO COMMENCE
LEGAL   PROCEEDINGS  OR  OTHERWISE   PROCEED  AGAINST  EITHER  BORROWER  IN  ANY
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.                

     (c) EACH  BORROWER  AND EACH BANK (BY  ACCEPTANCE  OF THE  NOTES)  MUTUALLY
HEREBY KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY  WAIVE THE RIGHT TO A TRIAL BY
JURY  IN  RESPECT  OF ANY  CLAIM  BASED  HEREON,  ARISING  OUT OF,  UNDER  OR IN
CONNECTION  WITH THIS  AGREEMENT,  THE NOTES  AND/OR  ANY OTHER  LOAN  DOCUMENTS
CONTEMPLATED  TO BE  EXECUTED IN  CONNECTION  HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF  DEALINGS,  STATEMENTS  (WHETHER  VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF THE  ADMINISTRATIVE  AGENT AND/OR THE BANKS RELATING TO
THE  ADMINISTRATION  OF THE  EXTENSIONS  OF  CREDIT OR  ENFORCEMENT  OF THE LOAN

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DOCUMENTS AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE  ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  EXCEPT
AS PROHIBITED BY LAW, EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM
OR RECOVER IN ANY LITIGATION ANY SPECIAL,  EXEMPLARY,  PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES  OTHER THAN,  OR IN ADDITION  TO,  ACTUAL  DAMAGES.  EACH
BORROWER   CERTIFIES   THAT  NO   REPRESENTATIVE,   AGENT  OR  ATTORNEY  OF  THE
ADMINISTRATIVE AGENT OR ANY BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT A
CREDIT  PARTY  WOULD  NOT,  IN THE  EVENT OF  LITIGATION,  SEEK TO  ENFORCE  THE
FOREGOING WAIVER.  THIS WAIVER CONSTITUTES A MATERIAL  INDUCEMENT FOR THE CREDIT
PARTIES TO ENTER INTO THIS  AGREEMENT,  ACCEPT THE NOTES AND MAKE THE EXTENSIONS
OF CREDIT.                                                                      

Section 9.16. Reserved                                                

Section 9.17. Interest Adjustment.                                    

     All agreements  between each  Borrower,  the  Administrative  Agent and the
Banks  are  hereby  expressly  limited  so  that  in  no  contingency  or  event
whatsoever,  whether by reason of acceleration  of maturity of the  indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be paid to any
Bank for the use or the forbearance of the indebtedness  evidenced hereby exceed
the  maximum  permissible  under  applicable  law.  As  used  herein,  the  term
"applicable  law" shall mean the law in effect as of the date  hereof  provided,
however,  that in the  event  there is a change in the law  which  results  in a
higher  permissible rate of interest,  then the Loan Documents shall be governed
by such new law as of its effective date. In this regard, it is expressly agreed
that it is the intent of each Borrower and the Bank in the  execution,  delivery
and acceptance of this Agreement to contract in strict  compliance with the laws
of the  State of New York  from time to time in  effect.  If,  under or from any
circumstances  whatsoever,  fulfillment of any provision hereof or of any of the
Loan Documents at the time of performance of such provision  shall be due, shall
involve  transcending  the limit of such validity  prescribed by applicable law,
then the obligation to be fulfilled shall automatically be reduced to the limits
of such validity,  and if under or from circumstances  whatsoever the applicable
Bank should ever  receive as interest  and amount which would exceed the highest
lawful rate,  such amount which would be excessive  interest shall be applied to
the  reduction of the principal  balance  evidenced by a Note (in such manner as
such  Bank may  determine  in its sole  discretion)  and not to the  payment  of
interest.  This provision  shall control every other provision of all agreements
between the Borrowers and such Bank.                                            

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Section 9.18. Lost Notes.                                             

     Upon  receipt  of a  certificate  of an officer of any Bank as to the loss,
theft,  destruction  or  mutilation of any Note or any other  security  document
which  is not of  public  record,  and,  in the case of any  such  loss,  theft,
destruction or mutilation, upon surrender and cancellation of such Note or other
security  document,  the appropriate  Borrower(s) will issue, in lieu thereof, a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.                                                    

Article 10 The Administrative  Agent.                                           

Section 10.1. Appointment.                                            

     Each of the Banks hereby irrevocably  appoints the Administrative  Agent as
its agent and  authorizes the  Administrative  Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative  Agent
by the terms  hereof,  together  with such actions and powers as are  reasonably
incidental thereto.                                                             

Section 10.2. Individual Capacity.                                    

     The Person serving as the  Administrative  Agent  hereunder  shall have the
same  rights  and  powers in its  capacity  as a Bank as any other  Bank and may
exercise  the same as  though  it were not the  Administrative  Agent,  and such
Person and its Affiliates may accept  deposits from, lend money to and generally
engage in any kind of business  with either  Borrower,  any  Subsidiary,  or any
Affiliate  of  either  Borrower  as if it  were  not  the  Administrative  Agent
hereunder.                                                                      

Section 10.3. Exculpatory Provisions.                                 

     The  Administrative  Agent shall not have any duties or obligations  except
those  expressly  set forth  herein.  Without  limiting  the  generality  of the
foregoing, (1) the Administrative Agent shall not be subject to any fiduciary or
other  implied  duties,  regardless  of whether a Default  has  occurred  and is
continuing,  (2) the  Administrative  Agent  shall not have any duty to take any
discretionary action or exercise any discretionary  powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required  to  exercise  in  writing  pursuant  to a written  directive  from the
Required  Banks (or such  other  number or  percentage  of the Banks as shall be
necessary under the circumstances as provided in Section 9.6), and (3) except as
expressly set forth herein, the Administrative  Agent shall not have any duty to
disclose,  and shall not be liable for the failure to disclose,  any information

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relating  to  either  Borrower  or any  Subsidiary  that is  communicated  to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity.  The Administrative Agent shall not be liable for any action taken
or not taken by it with the consent or at the request of the Required  Banks (or
such other number or  percentage  of the Banks as shall be  necessary  under the
circumstances  as  provided  in Section  9.6) or in the absence of its own gross
negligence or willful misconduct.  The Administrative  Agent shall be deemed not
to have  knowledge of any Default  unless and until  written  notice  thereof is
given to the Administrative  Agent by a Borrower or another Credit Party and the
Administrative  Agent shall not be responsible for or have any duty to ascertain
or inquire  into (i) any  statement,  warranty or  representation  made in or in
connection with this Agreement, (ii) the contents of any certificate,  report or
other  document  delivered  hereunder  or  in  connection  herewith,  (iii)  the
performance or observance of any of the covenants,  agreements or other terms or
conditions set forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other  agreements,  instrument or document,
or (v) the  satisfaction  of any  condition  set forth in Article 4 or elsewhere
herein,  other  than to  confirm  receipt  of  items  expressly  required  to be
delivered to the Administrative  Agent.                                         

Section 10.4. Reliance by Administrative Agent.                       

     The  Administrative  Agent shall be  entitled  to rely upon,  and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement,  instrument,  document or other writing  believed by it to be genuine
and to have been signed or sent by the proper Person. The  Administrative  Agent
also may rely upon any statement  made to it orally or by telephone and believed
by it to be made by the proper  Person,  and shall not incur any  liability  for
relying thereon.  The  Administrative  Agent may consult with legal counsel (who
may be counsel to the  Borrowers),  independent  accountants  and other  experts
selected by it, and shall not be liable for any action  taken or not taken by it
in  accordance  with the advice of any such  counsel,  accountants  or  experts.

Section 10.5. Delegation.                                             

     The Administrative Agent may perform any and all of its duties and exercise
its rights and powers by or through any one or more  subagents  appointed by the
Administrative Agent, including, without limitation, the appointment of Chase as
Documentation  Agent,  provided that no such delegation shall serve as a release
of the Administrative  Agent or waiver by the Borrowers of any rights hereunder;
provided further that although Chase, as  Documentation  Agent shall be entitled
to all the benefits of the  exculpatory  provisions set forth in this Agreement,
Chase,  as  Documentation  Agent  shall  have  no  duties,  responsibilities  or
liabilities whatsoever,  in such capacity. The Administrative Agent and any such
subagent  may  perform  any and all of its  duties and  exercise  its rights and
powers through their respective Related Parties.  The exculpatory  provisions of
this Article 10 shall apply to any such  subagent and to the Related  Parties of
the  Administrative  Agent  and any  such  subagent,  and  shall  apply to their
respective   activities  in  connection  with  the  syndication  of  the  credit
facilities  provided for herein as well as activities as  Administrative  Agent.

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Section 10.6. Resignation; Successor Administrative Agent.            

     Subject to the  appointment  and  acceptance of a successor  Administrative
Agent as provided in this Section 10.6, the  Administrative  Agent may resign at
any time by notifying the Banks and a Borrower.  Upon any such resignation,  the
Required Banks shall have the right, in consultation with a Borrower, to appoint
a successor.  If no successor shall have been so appointed by the Required Banks
and shall have  accepted  such  appointment  within 30 days  after the  retiring
Administrative  Agent  gives  notice  of  its  resignation,  then  the  retiring
Administrative   Agent  may,  on  behalf  of  the  Banks,  appoint  a  successor
Administrative Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank.  Upon the  acceptance  of its  appointment  as
Administrative  Agent hereunder by a successor,  such successor shall succeed to
and become  vested with all the  rights,  powers,  privileges  and duties of the
retiring  Administrative  Agent, and the retiring  Administrative Agent shall be
discharged from its duties and obligations  hereunder.  After the Administrative
Agent's  resignation  hereunder,  the provisions of this Article and Section 9.6
shall continue in effect for the benefit of such retiring  Administrative Agent,
its subagents  and their  respective  Related  Parties in respect of any actions
taken  or  permitted  to be  taken  by any  of  them  while  it  was  acting  as
Administrative  Agent.                                                          

Section 10.7. NonReliance on Other Credit Parties.                    

     Each  Credit  Party  acknowledges  that it has,  independently  and without
reliance  upon the  Administrative  Agent or any other Credit Party and based on
such documents and information as it has deemed appropriate, made its own credit
analysis  and  decision to enter into this  Agreement.  Each  Credit  Party also
acknowledges  that  it  will,   independently  and  without  reliance  upon  the
Administrative  Agent or any other Credit Party and based on such  documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.        

Section 10.8. Notices Binding.                                        

     (a) Each Borrower  agrees that the Banks shall not have any  responsibility
to inquire into the  apportionment,  allocation or  disposition of extensions of
credit  as  among  the  Borrowers.                                              

     (b) For the purpose of  implementing  the  provisions of this Agreement and
each of the Loan Documents,  Telephonics hereby irrevocably  appoints Griffon as
its agent and  attorney-in-fact  for all purposes of this  Agreement and each of
the Loan  Documents,  including the giving and  receiving of notices  (excluding
Borrowing  Notices  which shall be  furnished  in  accordance  with  Section 2.2
hereof) and other communications, the execution and delivery of certificates and
the receipt and allocation of  disbursements.  Each Borrower hereby accepts such
appointment.   Except  for  Borrowing  Notices  (which  shall  be  furnished  in

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accordance with Section 2.2 hereof),  each Credit Party may regard any notice or
other communication  pursuant to any Loan Document from any Borrower as a notice
or  communication  from each  Borrower and may give any notice or  communication
required or  permitted  to be given to any  Borrower or  Borrowers  hereunder to
Griffon on behalf of such Borrower or Borrowers.  Each Borrower  agrees that (i)
each notice,  communication,  election,  representation and warranty,  covenant,
agreement  and  undertaking  made on its behalf by any other  Borrower  shall be
deemed for all purposes to have been made by such  Borrower and shall be binding
upon and enforceable against such Borrower to the same extent as if the same had
been  made  directly  by such  Borrower  and (ii) any  notice  or  communication
required or  permitted to be given to any  Borrower  hereunder  that is given to
Griffon shall be deemed for all purposes to have been given to each Borrower and
shall be binding upon and  enforceable  against  each such  Borrower to the same
extent as if the same had been given  directly to each such  Borrower.          

     (c) Each Borrower hereby waives, with respect to itself and its obligations
hereunder,  any right  (except as shall be  required by  applicable  statute and
cannot be waived) to require the Banks to (i) proceed against any other Borrower
or any other Person,  (ii) proceed against or exhaust any security held from any
other  Borrower  or any other  Person or (iii)  pursue  any other  remedy in the
Banks' power  whatsoever.  Each  Borrower  hereby waives any defense based on or
arising out of any defense of any other  Borrower or any other Person other than
payment in full of the  Obligations,  including  any defense based on or arising
out of the  disability  of any  other  Borrower  or  any  other  Person,  or the
enforceability  of the  Obligations  or any part thereof from any cause,  or the
cessation  from any cause of the liability of any Borrower other than payment in
full of the Obligations.                                                        

     (d) Each Borrower assumes all  responsibility  for being and keeping itself
informed of the other  Borrower's  financial  condition  and assets,  and of all
other  circumstances  bearing upon the risk of nonpayment of the Obligations and
the nature, scope and extent of the risks which such Borrower assumes and incurs
under any Loan  Document,  and agrees that the Bank shall have no duty to advise
such Borrower,  the other  Borrower of  information  known to the Bank regarding
such circumstances or risks.                                                    

Section 10.9. Amendment and Restatement                               

     Commencing with the date of this  Agreement,  but not prior to such date of
this Agreement,  this Agreement shall amend, restate,  replace and supersede the
Original  Agreement  (within the limitations of Recital (4) to this Agreement));
provided,  however,  that the execution and delivery of this Agreement shall not
in any  circumstance  be deemed to have  terminated,  extinguished or discharged
Griffon's  Obligations under such Original  Agreement,  all of which Obligations
shall  continue  under and be  governed  by this  Agreement  and the other  Loan
Documents.  This  Agreement  is  a  replacement,  consolidation,  amendment  and
restatement of the Original Agreement and IS NOT A NOVATION. The Borrowers shall

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also pay any and all  unpaid  interest  on all Loans made by the Bank to Griffon
pursuant to Original  Agreement,  and at the interest  rate  specified  therein.

Article 11 Mutual Guarantees.                                                   

Section 11.1. Guarantee                                               

     (a)  Subject  to  Section   11.1(b),   each  Borrower  hereby   absolutely,
irrevocably and unconditionally  guarantees the full and prompt payment when due
(whether  at  stated  maturity,  by  acceleration  or  otherwise)  of the  other
Borrower's Obligations and in such capacity each such Borrower is a Guarantor of
such  Obligations.  The  agreements  of each  Borrower  under  this  Article  11
constitute  a guarantee  of payment,  and no Bank shall have any  obligation  to
enforce any Loan  Document or exercise  any right or remedy with  respect to any
collateral security thereunder by any action, including making or perfecting any
claim against any Person or any collateral  security for any of the  Obligations
prior to being entitled to the benefits of this  Agreement.  The  Administrative
Agent may, at its option, proceed against the Guarantor,  in the first instance,
to enforce  the  Guarantor  Obligations  without  first  proceeding  against the
Primary Borrower Obligor or any other Person, and without first resorting to any
other rights or remedies,  as the  Administrative  Agent may deem advisable.  In
furtherance hereof, if any Bank is prevented by law from collecting or otherwise
hindered  from  collecting or otherwise  enforcing any  Obligation in accordance
with its  terms,  such Bank shall be  entitled  to  receive  hereunder  from the
Guarantor after demand therefor, the sums that would have been otherwise due had
such   collection  or   enforcement   not  been   prevented  or  hindered.      

     (b) Notwithstanding  anything to the contrary contained herein, the maximum
aggregate amount of the obligations of each Guarantor hereunder shall not, as of
any date of determination,  exceed the lesser of (i) the greatest amount that is
valid and enforceable  against such Guarantor under principles of New York State
contract  law,  and  (ii)  the  greatest  amount  that  would  not  render  such
Guarantor's liability hereunder subject to avoidance as a fraudulent transfer or
conveyance  under  Section  548 of Title  11 of the  United  States  Code or any
provisions of  applicable  state law  (collectively,  the  "Fraudulent  Transfer
Laws"),  in each case  after  giving  effect to all  other  liabilities  of such
Guarantor,  contingent  or  otherwise,  that are relevant  under the  Fraudulent
Transfer Laws (specifically excluding,  however, any liability (A) in respect of
intercompany  indebtedness to the Primary  Borrower  Obligor or any affiliate or
subsidiary of the Primary Borrower Obligor, to the extent that such intercompany
indebtedness  would be  discharged in an amount equal to the amount paid by such
Guarantor  hereunder,  and (B)  under  any  guarantee  of (1)  senior  unsecured
indebtedness,  or (2)  indebtedness  subordinated  in  right of  payment  to any
Obligation,  in either case that contains a limitation  as to maximum  liability
similar to that set forth in this  Section  11.1(b)  and  pursuant  to which the

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liability of such Guarantor  hereunder is included in the liabilities taken into
account in determining such maximum liability) and after giving effect as assets
to the value (as determined  under the  applicable  provisions of the Fraudulent
Transfer  Laws)  of any  rights  to  subrogation,  contribution,  reimbursement,
indemnity or similar rights of such Guarantor  pursuant to applicable law or any
agreement  providing for an equitable  allocation among such Guarantor and other
affiliates  or  subsidiaries  of the  Primary  Borrower  Obligor of  obligations
arising under  guarantees by such parties.                                      

     (c) Each Guarantor  agrees that the Guarantor  Obligations  may at any time
and from time to time exceed the maximum  aggregate amount of the obligations of
such  Guarantor  hereunder  without  impairing  this  Agreement or affecting the
rights and remedies of any Bank hereunder.                                      

Section  11.2.  Absolute  Obligation.                                 

     No Guarantor  shall be released from liability  hereunder  unless and until
the Commitments  have terminated and either (i) each Borrower shall have paid in
full the outstanding principal balance of the Extensions of Credit owing by such
Borrower,  together with all accrued and unpaid interest thereon,  and all other
amounts then due and owing under the Loan Documents,  or (ii) the Obligations of
such Guarantor shall have been paid in full in cash. Each Guarantor acknowledges
and agrees  that (a) no Bank has made any  representation  or  warranty  to such
Guarantor with respect to either  Borrower,  any of its  Subsidiaries,  any Loan
Document,  or any  agreement,  instrument  or document  executed or delivered in
connection  therewith,  or any other matter  whatsoever,  and (b) such Guarantor
shall be liable hereunder, and such liability shall not be affected or impaired,
irrespective of (A) the validity or enforceability of any Loan Document,  or any
agreement, instrument or document executed or delivered in connection therewith,
or the collectability of any of the Obligations,  (B) the preference or priority
ranking with respect to any of the  Obligations,  (C) the  existence,  validity,
enforceability  or  perfection of any security  interest or collateral  security
under any Loan  Document,  or the  release,  exchange,  substitution  or loss or
impairment  of any  such  security  interest  or  collateral  security,  (D) any
failure,  delay,  neglect or omission by any Bank to realize upon or protect any
direct or indirect collateral security,  indebtedness,  liability or obligation,
any  Loan  Document,  or any  agreement,  instrument  or  document  executed  or
delivered in connection therewith, or any of the Obligations,  (E) the existence
or exercise of any right of set-off by any Bank, (F) the existence,  validity or
0enforceability  of any other  guarantee with respect to any of the Obligations,
the liability of any other Person in respect of any of the  Obligations,  or the
release of any such Person or any other guarantor of any of the Obligations, (G)
any act or omission of any Bank in  connection  with the  administration  of any
Loan  Document  or any of  the  Obligations,  (H)  the  bankruptcy,  insolvency,
reorganization  or  receivership  of, or any other  proceeding for the relief of
debtors commenced by or against, any Person, (I) the disaffirmance or rejection,
or  the  purported   disaffirmance  or  purported  rejection,   of  any  of  the

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Obligations,  any  Loan  Document,  or any  agreement,  instrument  or  document
executed or delivered in connection  therewith,  in any bankruptcy,  insolvency,
reorganization  or  receivership,  or any  other  proceeding  for the  relief of
debtor,  relating  to any  Person,  (J) any law,  regulation  or  decree  now or
hereafter  in  effect  that  might  in any  manner  affect  any of the  terms or
provisions  of any Loan  Document,  or any  agreement,  instrument  or  document
executed or delivered in connection therewith or any of the Obligations, or that
might cause or permit to be invoked any alteration in the time,  amount,  manner
or payment or performance of any of the Primary Borrower  Obligor's  obligations
and liabilities (including its Obligations),  (K) the merger or consolidation of
the  Primary  Borrower  Obligor  into or with  any  Person,  (L) the sale by the
Primary Borrower Obligor of all or any part of its assets,  (M) the fact that at
any time and from time to time none of the  Obligations  may be  outstanding  or
owing to any Bank, (N) any amendment or  modification  of, or supplement to, any
Loan  Document,  or (O) any other reason or  circumstance  that might  otherwise
constitute a defense available to or a discharge of the Primary Borrower Obligor
in respect of its obligations or liabilities  (including the  Obligations) or of
such Guarantor in respect of any of the Guarantor Obligations (other than by the
performance in full thereof).                                                   

Section 11.3. Repayment in Bankruptcy, etc.                           

     If, at any time or times  subsequent  to the  payment of all or any part of
the  Obligations  or the  Guarantor  Obligations,  any Bank shall be required to
repay  any  amounts  previously  paid by or on behalf  of the  Primary  Borrower
Obligor or any Guarantor in reduction thereof by virtue of an order of any court
having  jurisdiction  in the premises,  including as a result of an adjudication
that such amounts constituted  preferential payments or fraudulent  conveyances,
the Guarantors  unconditionally agree to pay to the Administrative Agent, within
10 days  after  demand,  a sum in cash  equal to the  amount of such  repayment,
together  with  interest on such amount from the date of such  repayment by such
Bank to the  date of  payment  to the  Administrative  Agent  at the  applicable
Post-Default  Rate.                                                             

Section 11.4. Miscellaneous                                           

     Each  Guarantor  agrees that any  statement  of account with respect to the
Obligations  from any Bank that binds the Primary Borrower Obligor shall also be
binding  upon such  Guarantor,  and that  copies of said  statements  of account
maintained in the regular course of such Bank's business may be used in evidence
against such Guarantor in order to establish its Guarantor Obligations.         

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date first above written.                                       

                   GRIFFON CORPORATION
                         By:   /s/ Robert Balemian
                     Name: Robert Balemian
                 Title:  President

                       TELEPHONICS CORPORATION
                          By:    /s/ Robert Balemian
                      Name:  Robert Balemian
                      Title:  Vice President

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Commitment                           FLEET NATIONAL BANK, individually          
                                     and in its capacity as Administrative Agent
$60,000,000.00                                                                  
                             /s/ Christopher J. Mendelsohn
Telephonics Sublimit Commitment:     By:______________________________          
                               Name: Christopher J. Mendelsohn
$16,875,000.00                          Title: Vice President                   

                                       Lending Office for Prime Rate Loans and
                 Eurodollar Loans:

                     300 Broad Hollow Road
                        Melville, New York 11747

                                     Attention:  Christopher J. Mendelsohn

                    Address for Notices:

                     300 Broad Hollow Road
                        Melville, New York 11747

                                    Attention: Christopher J. Mendelsohn

                              Telecopier No.: (631) 547-7815

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Commitment                               THE CHASE MANHATTAN BANK,              
                                     individually and in its capacity as
$50,000,000.00                           Documentation Agent                    

                             /s/ Barbara G. Bertschi
Telephonics Sublimit Commitment:        By:______________________________       
                               Name: Barbara G. Bertschi
$14,062,500.00                             Title:Vice President                 

                                       Lending Office for Prime Rate Loans and
                 Eurodollar Loans:

                        The Chase Manhattan Bank
                      395 North Service Road
                  Melville, NY 11747

                              Attention: Barbara G. Bertschi

                    Address for Notices:
                        The Chase Manhattan Bank
                      395 North Service Road
                  Melville, NY 11747

                               Attention:  Barbara G. Bertschi

                               Telecopier No.:  (516) 364-3307

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Commitment                              FIRSTAR BANK, NATIONAL                  
                 ASSOCIATION
$25,000,000.00                                                                  
                              /s/ Derek S. Roudebush
Telephonics Sublimit Commitment:        By:______________________________       
                               Name:  Derek S. Roudebush
$7,031,250.00                              Title: Vice President                

                                       Lending Office for Prime Rate Loans and
                 Eurodollar Loans:
                            425 Walnut Street - CN-WM-08
                      Cincinnati, Ohio 45202

                              Attention:  Derek S. Roudebush
                                      Vice President

                    Address for Notices:
                            425 Walnut Street - CN-WM-08
                      Cincinnati, Ohio 45202

                              Attention:  Derek S. Roudebush
                                      Vice President

                               Telecopier No.:  (513) 632-2068

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Commitment                              HSBC BANK USA                           

$25,000,000.00                          /s/ Thomas J. Dionian                   

Telephonics Sublimit Commitment:        By:______________________________       
                             Name: Thomas J. Dionian
$7,031,250.00                              Title: Vice President                

                                       Lending Office for Prime Rate Loans and
                 Eurodollar Loans:

                         1 HSBC Center, 26th Floor
                       Buffalo, New York 14203
                      Attention: Donna Riley
                                             Agent Servicing Manager

                    Address for Notices:
                         1 HSBC Center, 26th Floor
                       Buffalo, New York 14203
                      Attention: Donna Riley
                                             Agent Servicing Manager

                                    Telecopier No.:  (716) 841-0269/5863

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EXECUTION COPY                                                                  

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		10/1/07		30
		10/1/05		12
		1/26/02		14
		1/1/02		36
		12/31/01		9					10-Q
Filed on:		12/21/01
		10/25/01		1
For Period End:		9/30/01		9
		6/30/01		17		73			10-Q
		9/30/00		17					10-K405
		8/31/99		7		46
									List all Filings