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<SEC-DOCUMENT>0001010549-07-000465.txt : 20070525
<SEC-HEADER>0001010549-07-000465.hdr.sgml : 20070525
<ACCEPTANCE-DATETIME>20070525120325
ACCESSION NUMBER:		0001010549-07-000465
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		11
CONFORMED PERIOD OF REPORT:	20070331
FILED AS OF DATE:		20070525
DATE AS OF CHANGE:		20070525

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CAPITAL SOUTHWEST CORP
		CENTRAL INDEX KEY:			0000017313
		IRS NUMBER:				751072796
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	811-01056
		FILM NUMBER:		07879424

	BUSINESS ADDRESS:	
		STREET 1:		12900 PRESTON RD STE 700
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75230
		BUSINESS PHONE:		9722338242

	MAIL ADDRESS:	
		STREET 1:		12900 PRESTON RD
		STREET 2:		SUITE 700
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75230
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>capital10k033107.txt
<TEXT>



                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
 (Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended March 31, 2007

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from ...................to ...........................

                         Commission File Number: 814-61

                          CAPITAL SOUTHWEST CORPORATION
             (Exact name of registrant as specified in its charter)

                  Texas                                          75-1072796
 (State or other jurisdiction of incorporation                (I.R.S. Employer
              or organization)                               Identification No.)

   12900 Preston Road, Suite 700, Dallas, Texas               75230
    (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (972) 233-8242

Securities registered pursuant to section 12(b) of the Act: None

Securities  registered pursuant to section 12(g) of the Act: Common Stock, $1.00
par value

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes    No X


Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes    No X


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X    No


Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
One):

Large accelerated filer ____  Accelerated filer  X    Non-accelerated filer ____
                                               -----

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes    No X


The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  as of September  30, 2006 was  $332,548,127,  based on the last sale
price of such stock as quoted by Nasdaq on such date (officers, directors and 5%
shareholders are considered affiliates for purposes of this calculation).

The  number  of  shares  of  common  stock  outstanding  as of May 15,  2007 was
3,888,151.

       Documents Incorporated by Reference                    Part of Form 10-K
       -----------------------------------                    -----------------

(1)  Annual Report to Shareholders for the Year          Parts I and II; and
            Ended March 31, 2007                  Part IV, Item 15(a)(1) and (2)

(2)  Proxy Statement for Annual Meeting of                    Part III
     Shareholders to be held July 16, 2007


<PAGE>


                                TABLE OF CONTENTS


                                                                            Page
PART I
    Item 1.      Business......................................................1
    Item 1A.     Risk Factors..................................................1
    Item 1B.     Unresolved Staff Comments.....................................4
    Item 2.      Properties....................................................4
    Item 3.      Legal Proceedings.............................................4
    Item 4.      Submission of Matters to a Vote of Security Holders...........4

PART II
    Item 5.      Market for Registrant's Common Equity, Related Stockholder
                    Matters and Issuer Purchases of Equity Securities..........4
    Item 6.      Selected Financial Data.......................................5
    Item 7.      Management's Discussion and Analysis of Financial
                    Condition and Results of Operations........................5
    Item 7A.     Quantitative and Qualitative Disclosures About
                    Market Risk................................................5
    Item 8.      Financial Statements and Supplementary Data...................6
    Item 9.      Changes in and Disagreements With Accountants on
                    Accounting and Financial Disclosure........................6
    Item 9A.     Controls and Procedures.......................................6
    Item 9B.     Other Information.............................................7

PART III
    Item 10.     Directors, Executive Officers and Corporate Governance........7
    Item 11.     Executive Compensation........................................8
    Item 12.     Security Ownership of Certain Beneficial Owners and
                    Management and Related Stockholder Matters.................8
    Item 13.     Certain Relationships and Related Transactions, and
                    Director Independence......................................9
    Item 14.     Principal Accountant Fees and Services........................9

PART IV
    Item 15.     Exhibits and Financial Statement Schedules....................9

Signatures ...................................................................10






<PAGE>


                                     PART I

Item 1. Business

     We were organized as a Texas corporation on April 19, 1961. Until September
1969, we operated as a licensee under the Small Business Investment Act of 1958.
At that time, we transferred to our wholly-owned  subsidiary,  Capital Southwest
Venture Corporation ("CSVC"), certain assets and our license as a small business
investment company ("SBIC").  CSVC is a closed-end,  non-diversified  investment
company of the management  type registered  under the Investment  Company Act of
1940  (the  "1940  Act").  Prior to March  30,  1988,  we were  registered  as a
closed-end, non-diversified investment company under the 1940 Act. On that date,
we elected to become a business development company subject to the provisions of
the 1940 Act, as amended by the Small Business Incentive Act of 1980. Because we
wholly own CSVC, the portfolios of both entities are referred to collectively as
"our", "we" and "us".

     We are a venture capital  investment  company whose objective is to achieve
capital  appreciation  through long-term  investments in businesses  believed to
have  favorable  growth  potential.  Our  investment  interests  are  focused on
expansion   financings,   management   buyouts,   recapitalizations,    industry
consolidations and early-stage financings in a broad range of industry segments.
Our  portfolio is a composite  of companies in which we have major  interests as
well  as  a  number  of  developing  companies  and  marketable   securities  of
established  publicly-owned  companies. We make available significant managerial
assistance  to the  companies  in which we invest  and  believe  that  providing
material  assistance  to such investee  companies is critical to their  business
development activities.

     The 12 largest  investments we own had a combined cost of $38,566,269 and a
value  of  $638,196,845,  representing  93.7% of the  value of our  consolidated
investment  portfolio at March 31, 2007.  For a narrative  description of the 12
largest investments,  see "Twelve Largest Investments - March 31, 2007" on pages
8 through 10 of our Annual Report to  Shareholders  for the Year Ended March 31,
2007 (our "2007  Annual  Report")  which is herein  incorporated  by  reference.
Certain of the  information  presented  on the 12 largest  investments  has been
obtained  from the  respective  companies  and,  in certain  cases,  from public
filings of such companies.  The financial  information  presented on each of the
respective companies is from such companies' audited financial statements.

     We compete for attractive  investment  opportunities  with venture  capital
partnerships  and  corporations,  venture  capital  affiliates of industrial and
financial companies, SBICs and wealthy individuals.

     The number of persons employed by us at March 31, 2007 was seven.

     Our internet  website address is  www.capitalsouthwest.com.  You can review
the filings we have made with the U.S. Securities and Exchange Commission,  free
of charge by linking  directly from our website to NASDAQ, a database that links
to EDGAR, the Electronic Data Gathering,  Analysis,  and Retrieval System of the
SEC.  You should be able to access our  annual  reports on Form 10-K,  quarterly
reports  on Form  10-Q,  current  reports  on Form 8-K and  amendments  to those
reports filed or furnished  pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934.  The charters  adopted by the  committees  of our board of
directors are also available on our website.

Item 1A. Risk Factors

     You  should  carefully  consider  the risks  described  below and all other
information  contained  in this  annual  report  on  Form  10-K,  including  our
consolidated  financial  statements and the related notes thereto. The risks and
uncertainties  described below are not the only ones facing us. Additional risks
and uncertainties not presently known to us, or not presently deemed material by
us, may also impair our  operations  and  performance.  If any of the  following
risks actually occur, our business, financial condition or results of operations
could be materially  adversely affected.  If that happens,  the trading price of
our common stock could decline, and you may lose all or part of your investment.



                                       1
<PAGE>


There is  uncertainty  regarding  the  value of our  investments  in  restricted
securities.

     Our net  asset  value  is  based  on the  values  assigned  to the  various
investments  in  our  portfolio,  determined  in  good  faith  by our  board  of
directors.  Because of the inherent  uncertainty  of the  valuation of portfolio
securities which do not have readily ascertainable market values, our fair value
determinations  may differ  materially from the values which would be applicable
to unrestricted securities having a public market.

The lack of liquidity of our  restricted  securities  may  adversely  affect our
business.

     Our portfolio contains many securities which are subject to restrictions on
sale because they were acquired from issuers in "private placement" transactions
or because we are deemed to be an affiliate  of the issuer.  Unless an exemption
from the  registration  requirements of the Securities Act of 1933 is available,
we will not be able to sell these  securities  publicly  without the expense and
time  required to register the  securities  under  applicable  federal and state
securities laws. In addition,  contractual or practical limitations may restrict
our ability to liquidate our securities in portfolio  companies,  because we may
own a relatively large percentage of the issuer's outstanding securities.  Sales
may also be limited by unfavorable  market  conditions.  The  illiquidity of our
investments may preclude or delay the disposition of such securities,  which may
make it  difficult  for us to obtain  cash equal to the value at which we record
our investments.

There is limited publicly available information regarding the companies in which
we invest.

     Many of the  securities  in our  portfolio  are  issued by  privately  held
companies.  There is generally little or no publicly available information about
such  companies,  and we must rely on the diligence of our  management to obtain
the information  necessary for our decision to invest. There can be no assurance
that such diligence efforts will uncover all material  information  necessary to
make fully informed investment decisions.

Certain of our portfolio companies are highly leveraged.

     Many of our portfolio companies have incurred  substantial  indebtedness in
relation to their overall capital base. Such indebtedness  often has a term that
will  require  the  balance of the loan to be  refinanced  when it  matures.  If
portfolio companies cannot generate adequate cash flow to meet the principal and
interest payments on their  indebtedness,  the value of our investments could be
reduced or eliminated through  foreclosure on the portfolio  company's assets or
by the portfolio company's reorganization or bankruptcy.

Fluctuations may occur in our quarterly results.

     Our quarterly operating results may fluctuate materially due to a number of
factors including, among others, variations in and the timing of the recognition
of realized  and  unrealized  gains or losses,  the degree to which we encounter
competition in our portfolio  companies' markets,  the ability to find and close
suitable  investments,  and general  economic  conditions.  As a result of these
factors, results for any period should not be relied upon as being indicative of
performance  in future  periods.  See  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations."

We may not continue to qualify for pass-through tax treatment.

     We may not  qualify for conduit  tax  treatment  as a Regulated  Investment
Company ("RIC") if we are unable to comply with the requirements of Subchapter M
of the Internal Revenue Code. If we fail to satisfy such  requirements and cease
to qualify for conduit tax treatment, we will be subject to federal taxes on our
net investment  income. The loss of this pass-through tax treatment could have a
material  adverse  effect  on the  total  return,  if  any,  obtainable  from an
investment in our common stock.

     Historically, we have distributed net investment income semi-annually.  Our
current  intention is to continue these  distributions of ordinary income to our
shareholders.  Also, historically,  we have retained net realized capital gains,
paid the resulting tax at the corporate  level and retained the after-tax  gains



                                       2
<PAGE>

to  supplement  our equity  capital  and  support  continuing  additions  to our
portfolio. Our shareholders then report such capital gains on their tax returns,
receive credit for the tax we paid and are deemed to have  reinvested the amount
of the  retained  after-tax  gain.  We cannot  assure  you that we will  achieve
investment  results or maintain a RIC tax status  that will allow any  specified
level of cash  distributions  or our  shareholders'  current  tax  treatment  of
realized and retained capital gains.

Our financial  condition and results of operations will depend on our ability to
effectively manage any future growth.

     Sustaining  growth depends on our ability to identify,  evaluate,  finance,
and invest in companies that meet our investment  criteria.  Accomplishing  such
results on a  cost-effective  basis is a function of our marketing  capabilities
and skillful  management of the  investment  process.  Failure to achieve future
growth  could  have  a  material  adverse  effect  on  our  business,  financial
condition, and results of operations.

We are dependent upon management for our future success.

     Selection,  structuring  and  closing  our  investments  depends  upon  the
diligence and skill of our  management,  which is responsible  for  identifying,
evaluating,  negotiating,  monitoring  and  disposing  of our  investments.  Our
management's capabilities may significantly impact our results of operations. If
we lose any member of our management team and he/she cannot be promptly replaced
with an  equally  capable  team  member,  our  results  of  operations  could be
significantly impacted.

We operate in a highly competitive market for investment opportunities.

     We compete with a number of private equity funds, other investment entities
and  individuals  for investment  opportunities.  Some of these  competitors are
substantially larger and have greater financial resources,  and some are subject
to different  and  frequently  less  stringent  regulation.  As a result of this
competition,  we may  not be able to take  advantage  of  attractive  investment
opportunities  from time to time and there can be no  assurance  that we will be
able to identify and make investments that satisfy our objectives.

Changes in laws or regulations governing our operations or our failure to comply
with those laws or regulations may adversely affect our business.

     We and our  portfolio  companies  are subject to  regulation by laws at the
local,  state and federal level.  These laws and  regulations,  as well as their
interpretation,  may be changed from time to time.  Accordingly,  any changes in
these laws and  regulations or failure to comply with them could have a material
adverse effect on our business.  Certain of these laws and  regulations  pertain
specifically to business development companies such as ours.

Failure to deploy new capital may reduce our return on equity.

     If we fail to invest our capital  effectively,  our return on equity may be
decreased, which could reduce the price of the shares of our common stock.

Investment  in shares of our common  stock  should not be  considered a complete
investment program.

     Our stock is intended for investors seeking long-term capital appreciation.
Our investments in portfolio  securities  generally  require many years to reach
maturity,  and such  investments  generally are  illiquid.  An investment in our
shares should not be considered a complete investment program.  Each prospective
purchaser  should take into account his or her investment  objectives as well as
his or her other investments when considering the purchase of our shares.



                                       3
<PAGE>

Our common stock often trades at a discount from net asset value.

     Our  common  stock  is  listed  on The  Nasdaq  Global  Market  ("NASDAQ").
Shareholders  desiring  liquidity  may sell  their  shares on NASDAQ at  current
market value,  which has often been below net asset value.  Shares of closed-end
investment  companies  frequently trade at discounts from net asset value, which
is a risk  separate and distinct  from the risk that a fund's  performance  will
cause its net asset value to decrease.

The market price of our common stock may fluctuate significantly.

     The market price and  marketability  of shares of our common stock may from
time to time be  significantly  affected  by  numerous  factors,  including  our
investment  results,  market  conditions,  and other  influences and events over
which we have no control and that may not be directly related to us.

Item 1B. Unresolved Staff Comments

     We have no unresolved staff comments to report pursuant to Item 1B.

Item 2. Properties

     We maintain our offices at 12900 Preston Road,  Suite 700,  Dallas,  Texas,
75230, where we rent approximately 3,700 square feet of office space pursuant to
a lease  agreement  expiring in February  2008.  We believe that our offices are
adequate to meet our current and expected future needs.

Item 3. Legal Proceedings

     We have no material pending legal proceedings to which we are a party or to
which any of our property is subject.

Item 4. Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of security  holders during the quarter
ended March 31, 2007.

                                     PART II

Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
        Issuer Purchases of Equity Securities

     Information  set  forth  under  the  captions  "Shareholder  Information  -
Shareholders,  Market Prices and Dividends" on page 37 of our 2007 Annual Report
is herein incorporated by reference.


                                Performance Graph

     The following graph compares our cumulative total shareholder return during
the last five years  (based on the market price of our common stock and assuming
reinvestment  of all  dividends  and tax credits on retained  long-term  capital
gains) with the Total  Return  Index for NASDAQ  (U.S.  Companies)  and with the
Total Return Index for Nasdaq Financial Stocks,  both of which indices have been
prepared  by the Center for  Research in Security  Prices at the  University  of
Chicago.





                                       4
<PAGE>



                Comparison of Five Year Cumulative Total Returns

                                 [GRAPH OMITTED]



                  Nasdaq Total          Nasdaq Financial       Capital Southwest
                  Return (U.S.)            Stocks                 Corporation

2002                100.000                100.000                  100.000
2003                 73.397                 92.777                   70.744
2004                108.335                133.387                  112.003
2005                109.059                138.745                  118.299
2006                128.607                162.999                  143.785
2007                133.404                170.643                  241.089



Item 6. Selected Financial Data

     "Selected Consolidated Financial Data" on page 36 of our 2007 Annual Report
is herein incorporated by reference.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

     Pages 33 through 35 of our 2007 Annual  Report are herein  incorporated  by
reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     We are subject to financial market risks,  including  changes in marketable
equity  security  prices.  We do not use  derivative  financial  instruments  to
mitigate any of these risks.

     Our  investment  performance  is a  function  of our  portfolio  companies'
profitability,  which may be affected by economic  cycles,  competitive  forces,
foreign  currency  fluctuations  and production costs including labor rates, raw
material prices and certain basic commodity prices. Most of the companies in our
investment  portfolio do not hedge their  exposure to raw material and commodity
price fluctuations. However, the portfolio company with the greatest exposure to
foreign  currency  fluctuations  generally  hedges  its  exposure.  All of these
factors may have an adverse  effect on the value of our  investments  and on our
net asset value.

     Our investment in portfolio  securities includes fixed-rate debt securities
which totaled  $6,109,238 at March 31, 2007,  equivalent to 0.9% of the value of
our total  investments.  Generally,  these debt securities are below  investment
grade and have relatively high fixed rates of interest, therefore; minor changes
in market yields of publicly-traded  debt securities have little or no effect on
the values of debt securities in our portfolio and no effect on interest income.
Our investments in debt securities are generally held to maturity and their fair
values are  determined  on the basis of the terms of the debt  security  and the
financial condition of the issuer.



                                       5
<PAGE>
<TABLE>
<CAPTION>

     A  portion  of  our  investment  portfolio  consists  of  debt  and  equity
securities of private companies. We anticipate little or no effect on the values
of these  investments  from modest  changes in public market equity  valuations.
Should  significant  changes in market  valuations of comparable  publicly-owned
companies  occur,  there may be a corresponding  effect on valuations of private
companies,  which  would  affect the value and the amount and timing of proceeds
eventually  realized  from  these  investments.  A  portion  of  our  investment
portfolio also consists of restricted common stocks of publicly-owned companies.
The fair values of these  restricted  securities are influenced by the nature of
applicable resale restrictions,  the underlying earnings and financial condition
of the  issuers  of such  restricted  securities  and the market  valuations  of
comparable  publicly-owned companies. A portion of our investment portfolio also
consists of  unrestricted,  freely  marketable  common stocks of  publicly-owned
companies.  These freely marketable investments,  which are valued at the public
market price, are directly exposed to equity price risks, in that a change in an
issuer's  public market equity price would result in an identical  change in the
value of our investment in such security.

Item 8. Financial Statements and Supplementary Data

     Pages 11 through 32 of our 2007 Annual  Report are herein  incorporated  by
reference.  See  also  Item 15 of  this  Form  10-K -  "Exhibits  and  Financial
Statement Schedules".

     Selected Quarterly Financial Data (Unaudited)
     ---------------------------------

     The following  presents a summary of the unaudited  quarterly  consolidated
financial information for the years ended March 31, 2007 and 2006.

                                                            First         Second           Third       Fourth
                                                           Quarter        Quarter         Quarter      Quarter        Total
                                                           -------        -------         -------      -------        -----
                                                                         (In thousands, except per share amounts)
<S>                                                        <C>            <C>             <C>          <C>            <C>

2007
- ----
    Net investment income                             $       492     $    1,170        $ 1,617      $    954      $  4,233
    Net realized gain (loss) on investments                   258          5,986         12,805        (2,715)       16,334
    Net increase (decrease) in unrealized
        appreciation of investments                        (3,023)        (2,120)        86,187        15,300        96,344
    Net increase (decrease) in net assets
       from operations                                     (2,273)         5,036        100,609        13,539       116,911
    Net increase (decrease) in net assets
       from operations per share                            (0.59)          1.30          25.89          3.48         30.08

2006
- ----
    Net investment income                               $     574     $      666       $    893      $    256      $  2,389
    Net realized gain on investments                        3,409          3,772          4,132         1,803        13,116
    Net increase in unrealized
       appreciation of investments                          2,692         17,436          9,755        46,521        80,685
    Net increase in net assets
       from operations                                      6,675         21,874         14,780        48,580        96,190
    Net increase in net assets
       from operations per share                             1.73           5.67           3.83         12.58         24.92
</TABLE>



Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

     None.

Item 9A. Controls and Procedures

(i)  Disclosure Controls and Procedures.

     As of March 31, 2007, an evaluation was performed under the supervision and
with the  participation of our management,  including the President and Chairman



                                       6
<PAGE>

of the Board and  Secretary-Treasurer,  of the  effectiveness  of the design and
operation of our disclosure  controls and procedures (as defined in Rules 13a-15
and 15d-15 of the Securities  Exchange Act of 1934).  Based on that  evaluation,
the President and Chairman of the Board and  Secretary-Treasurer  concluded that
our  disclosure  controls  and  procedures  are  effective  to  ensure  that the
information  required to be  disclosed is recorded,  processed,  summarized  and
reported  within the time  periods  specified  in the  Securities  and  Exchange
Commission's rules and forms, and is accumulated and communicated to management,
including the President  and Chairman of the Board and  Secretary-Treasurer,  as
appropriate, to allow timely decisions regarding such required disclosure.

     During the fiscal  quarter  ended March 31, 2007,  there were no changes to
the internal control over financial reporting that have materially affected,  or
are reasonably  likely to materially affect our internal controls over financial
reporting.

(ii) Internal Control Over Financial Reporting.

(a)  Management's annual report on internal control over financial reporting.

     The  Company's   management  report  on  internal  control  over  financial
reporting is set forth in our 2007 Annual Report on page 30 and is  incorporated
herein by reference.

(b)  Attestation report of the registered public accounting firm

     The report of Grant  Thornton  LLP, the  Company's  independent  registered
public  accounting firm, on management's  assessment of the effectiveness of the
Company's internal control over financial reporting and the effectiveness of the
Company's  internal  control over  financial  reporting is set forth in our 2007
Annual Report on page 31 and is incorporated herein by reference.

Item 9B. Other Information

     None.

                                    PART III

Item 10. Directors, Executive Officers and Corporate Governance

     The section of our 2007 Proxy Statement  captioned  "Nominees for Director"
under  "Proposal 1.  Election of Directors"  identifies  members of our board of
directors and nominees, and is incorporated in this Item 10 by reference.

     The names and ages of our executive  officers as of June 1, 2007,  together
with certain biographical information, are as follows:

     William M. Ashbaugh, age 52, has served as Senior Vice President since 2005
          and Vice  President  since  2001.  He  previously  served as  Managing
          Director  in the  corporate  finance  departments  of  Hoak  Breedlove
          Wesneski & Co. from 1998 to 2001,  Principal Financial Securities from
          1997 to 1998 and Southwest Securities from 1995 to 1997.

     Susan K. Hodgson, age 45, has served as Secretary-Treasurer  since 2001 and
          was Controller from 1994 to 2001.

     Gary L. Martin,  age 60, has been a director since July 1988 and has served
          as Vice President  since 1984. He previously  served as Vice President
          from 1978 to 1980.  Since 1980,  Mr. Martin has served as President of
          The Whitmore Manufacturing Company, a wholly-owned portfolio company.



                                       7
<PAGE>
<TABLE>
<CAPTION>

     Jeffrey G. Peterson,  age 33, has served as Vice  President  since 2005 and
          was an Investment  Associate  since 2001. He previously held positions
          with the investment banking division of Scott & Stringfellow, Inc. and
          the corporate lending division of Bank One.

     William R. Thomas, age 78, has served as Chairman of the Board of Directors
          since  1982 and  President  since  1980.  In  addition,  he has been a
          director since 1972 and was previously Senior Vice President from 1969
          to 1980.

     The sections of our 2007 Proxy Statement captioned "Meetings and Committees
of the Board of Directors  under "Proposal 1. Election of Directors" and "Report
of the Audit Committee"  identifies  members of our audit committee of our board
of directors and our audit committee  financial expert,  and are incorporated in
this Item 10 by reference.

     The section of our 2007 Proxy Statement captioned "Section 16(a) Beneficial
Ownership Reporting Compliance" is incorporated in this Item 10 by reference.

          Code of Ethics

     We have  adopted  a code  of  ethics  that  applies  to all our  directors,
officers and employees. We have made the Code of Conduct and Ethics available on
our website at www.capitalsouthwest.com.

Item 11. Executive Compensation

     The  information  in the  section  of our 2007  Proxy  Statement  captioned
"Compensation  Discussion  and  Analysis"  is  incorporated  in this  Item 11 by
reference.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
          Related Stockholder Matters

     The  information  in the  sections  of our 2007 Proxy  Statement  captioned
"Stock Ownership of Certain  Beneficial Owners" are incorporated in this Item 12
by reference.

     The table  below  sets  forth  certain  information  as of March  31,  2007
regarding  the shares of our common stock  available  for grant or granted under
stock option plans that (i) were approved by our shareholders, and (ii) were not
approved by our shareholders.

                      Equity Compensation Plan Information

                                                                                                Number of Securities
                          Number of Securities                                                 Remaining Available For
                            To Be Issued Upon            Weighted-Average Exercise          Future Issuance Under Equity
                               Exercise of                 Price Of Outstanding                  Compensation Plans
                          Outstanding Options,                   Options,                  (excluding securities reflected
Plan Category             Warrants And Rights                Warrants And Rights                   in column (a)
- -------------             -------------------                -------------------                   -------------
<S>                       <C>                                <C>                                   <C>
                                   (a)                              (b)                                  (c)
Equity                           52,500                           $86.184                              58,500
compensation plans
approved by security
holders(1)
Equity                               -                                -                                    -
compensation plans
not approved by
security holders                 ______                           ______                               ______

       Total                     52,500                           $86.184                              58,500

</TABLE>

- ------

(1) Includes the 1999 Stock Option Plan. For a description of this plan,  please
refer to Footnote 5 contained in our consolidated financial statements.


                                       8
<PAGE>



Item  13.  Certain   Relationships  and  Related   Transactions,   and  Director
           Independence

     The  information  in the  sections  of our 2007 Proxy  Statement  captioned
"Meetings  and  Committees  of the  Board  of  Directors"  -  "Committee  Member
Independence"  and "Certain  Relationships  and Related Party  Transactions" are
incorporated in this Item 13 by reference.

Item 14. Principal Accountant Fees and Services

     The  information  in the  sections  of our 2007 Proxy  Statement  captioned
"Proposal 2:  Ratification of Appointment of Independent  Registered  Accounting
Firm" and "Audit and Other Fees" are incorporated in this Item 14 by reference.

                                     PART IV

Item 15. Exhibits and Financial Statement Schedules

     (a)(1) The  following  information  included  in pages 11 through 32 of our
2007 Annual Report are herein incorporated by reference:

          (A)  Portfolio of Investments - March 31, 2007
               Consolidated  Statements of Financial  Condition - March 31, 2007
               and 2006
               Consolidated  Statements  of  Operations  - Years Ended March 31,
               2007, 2006 and 2005
               Consolidated  Statements  of Changes in Net Assets - Years  Ended
               March 31, 2007, 2006 and 2005
               Consolidated  Statements  of Cash Flows - Years  Ended  March 31,
               2007, 2006 and 2005

          (B)  Notes to Consolidated Financial Statements

          (C)  Notes to Portfolio of Investments

          (D)  Selected Per Share Data and Ratios

          (E)  Management's Report on Internal Control over Financial Reporting

          (F)  Reports of Independent Registered Public Accounting Firm

          (G)  Portfolio Changes During the Year

     (a)(2) All  schedules  are omitted  because they are not  applicable or not
required, or the information is otherwise supplied.

     (a)(3) See the Exhibit Index.




                                       9
<PAGE>




                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                              CAPITAL SOUTHWEST CORPORATION

                                                  /s/ William R. Thomas
                                              By:___________________________
                                                 William R. Thomas, President
                                                 and Chairman of the Board
Date:  May 25, 2007


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the date indicated.

      Signature                        Title                              Date
      ---------                        -----                              ----

 /s/ William R. Thomas
____________________             President and Chairman             May 25, 2007
   William R. Thomas             of the Board and Director
                                 (chief executive officer)

 /s/  Gary L. Martin
___________________              Director                           May 25, 2007
    Gary L. Martin


 /s/  Donald W. Burton
___________________              Director                           May 25, 2007
   Donald W. Burton


 /s/  Graeme W. Henderson
___________________              Director                           May 25, 2007
  Graeme W. Henderson


 /s/ Samuel B. Ligon
___________________              Director                           May 25, 2007
    Samuel B. Ligon


 /s/  John H. Wilson
______________________           Director                           May 25, 2007
    John H. Wilson


 /s/ Susan K. Hodgson
___________________              Secretary-Treasurer                May 25, 2007
   Susan K. Hodgson              (chief financial/accounting officer)





                                       10
<PAGE>


                                  EXHIBIT INDEX

     The  following  exhibits  are filed  with this  report or are  incorporated
herein by reference to a prior filing,  in accordance with Rule 12b-32 under the
Securities  Exchange  Act of 1934.  Asterisk  denotes  exhibits  filed with this
report. Double asterick denotes exhibits furnished with this report.

     Exhibit No.                            Description
     -----------                            -----------

       3.1(a)       Articles  of  Incorporation  and  Articles of  Amendment  to
                    Articles  of  Incorporation,  dated June 25,  1969 (filed as
                    Exhibit 1(a) and 1(b) to Amendment No. 3 to Form N-2 for the
                    fiscal year ended March 31, 1979).

       3.1(b)       Articles of  Amendment to Articles of  Incorporation,  dated
                    July 20, 1987 (filed as an exhibit to Form N-SAR for the six
                    month period ended September 30, 1987).

       3.2 *        By-Laws of the Company, as amended.

       4.1          Specimen of Common Stock  certificate  (filed as Exhibit 4.1
                    to Form 10-K for the fiscal year ended March 31, 2002).

       10.1 *       The RectorSeal Corporation and Jet-Lube, Inc. Employee Stock
                    Ownership  Plan as revised and restated  effective  April 1,
                    2007.

       10.2 *       Retirement   Plan  for   Employees   of  Capital   Southwest
                    Corporation  and Its  Affiliates  as  amended  and  restated
                    effective April 1, 2006.


       10.3         Capital Southwest Corporation and Its Affiliates Restoration
                    of  Retirement  Income Plan for  certain  highly-compensated
                    superseded plan participants  effective April 1, 1993 (filed
                    as Exhibit 10.4 to Form 10-K for the fiscal year ended March
                    31, 1995).

       10.4         Amendment  One to  Capital  Southwest  Corporation  and  Its
                    Affiliates Restoration of Retirement Income Plan for certain
                    highly-compensated  superceded plan  participants  effective
                    April 1, 1993  (filed as  Exhibit  10.6 to Form 10-K for the
                    fiscal year ended March 31, 1998).

       10.5         Capital Southwest Corporation  Retirement Income Restoration
                    Plan as amended and restated  effective April 1, 1989 (filed
                    as Exhibit 10.5 to Form 10-K for the fiscal year ended March
                    31, 1995).

       10.6         Form of Indemnification Agreement which has been established
                    with all  directors  and  executive  officers of the Company
                    (filed as Exhibit 10.9 to Form 8-K dated February 10, 1994).

       10.7         Capital Southwest  Corporation 1999 Stock Option Plan (filed
                    as  Exhibit  10.10 to Form 10-K for the  fiscal  year  ended
                    March 31, 2000).

       10.8         Severance Pay Agreement  with William M. Ashbaugh  (filed as
                    Exhibit 10.1 to Form 8-K dated July 18, 2005).

       10.9         Severance  Pay  Agreement  with Susan K.  Hodgson  (filed as
                    Exhibit 10.3 to Form 8-K dated July 18, 2005).

       10.10        Severance Pay Agreement  with Jeffrey G. Peterson  (filed as
                    Exhibit 10.4 to Form 8-K dated July 18, 2005).




<PAGE>


       13.1  *      Annual  Report to  Shareholders  for the  fiscal  year ended
                    March 31, 2007.

       21.1  *      List of subsidiaries of the Company.

       23.1  *      Consent of Independent  Registered  Public Accounting Firm -
                    Grant Thornton LLP.

       31.1  *      Certification   of  President  and  Chairman  of  the  Board
                    required  by  Rule   13a-14(a)  or  Rule  15d-14(a)  of  the
                    Securities  Exchange Act of 1934, as amended (the  "Exchange
                    Act"), filed herewith.

       31.2  *      Certification  of   Secretary-Treasurer   required  by  Rule
                    13a-14(a)  or Rule  15d-14(a)  of the  Exchange  Act,  filed
                    herewith.

       32.1  **     Certification   of  President  and  Chairman  of  the  Board
                    required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange
                    Act and Section 1350 of Chapter 63 of Title 18 of the United
                    States Code, furnished herewith.

       32.2  **     Certification  of   Secretary-Treasurer   required  by  Rule
                    13a-14(b) or Rule  15d-14(b) of the Exchange Act and Section
                    1350 of Chapter 63 of Title 18 of the  United  States  Code,
                    furnished herewith.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>2
<FILENAME>capital10kex32033107.txt
<TEXT>




                                                                     Exhibit 3.2







                           AMENDED AND RESTATED BYLAWS
                                       OF
                          CAPITAL SOUTHWEST CORPORATION
































<PAGE>

                                                                     Exhibit 3.2



                                TABLE OF CONTENTS

                           AMENDED AND RESTATED BYLAWS

                                       OF

                          CAPITAL SOUTHWEST CORPORATION


                                                                            Page

ARTICLE I           OFFICES....................................................1
         1.01       Registered Office..........................................1
         1.02       Other Offices..............................................1

ARTICLE II          MEETINGS OF THE SHAREHOLDERS...............................1
         2.01       Place of Meetings..........................................1
         2.02       Annual Meeting.............................................1
         2.03       Special Meetings...........................................1
         2.04       Notice of Annual or Special Meeting........................1
         2.05       Notice by Electronic Transmission..........................2
         2.06       Business at Special Meeting................................2
         2.07       Quorum of Shareholders.....................................2
         2.08       Act of Shareholders' Meeting...............................3
         2.09       Voting of Shares...........................................3
         2.10       Proxies....................................................3
         2.11       Voting List................................................4
         2.12       Action by Written Consent Without a Meeting................4
         2.13       Presence at Meeting........................................4

ARTICLE III         BOARD OF DIRECTORS.........................................4
         3.01       Powers.....................................................4
         3.02       Number of Directors........................................5
         3.03       Election and Term..........................................5
         3.04       Vacancies..................................................5
         3.05       Resignation and Removal....................................5
         3.06       Compensation of Directors..................................5
         3.07       Chairman of the Board......................................5

ARTICLE IV          MEETINGS OF THE BOARD......................................6
         4.01       First Meeting..............................................6
         4.02       Regular Meetings...........................................6
         4.03       Special Meetings...........................................6
         4.04       Written Notice.............................................6
         4.05       Notice by Electronic Transmission..........................6
         4.06       Waiver of Notice...........................................6
         4.07       Attendance as Waiver.......................................7


                                       i
<PAGE>
                                                                     Exhibit 3.2


         4.08       Business at Regular or Special Meeting.....................7
         4.09       Quorum of Directors........................................7
         4.10       Interested Directors.......................................7
         4.11       Act of Directors' Meeting..................................8
         4.12       Action by Written Consent Without a Meeting................8
         4.13       Presence at Meeting........................................8

ARTICLE V           COMMITTEES.................................................8
         5.01       Designation of Committees..................................8
         5.02       Authority and Proceedings of Committees....................8
         5.03       Employee Director..........................................8
         5.04       Regular Meetings...........................................9
         5.05       Special Meetings...........................................9
         5.06       Quorum; Majority Vote......................................9
         5.07       Minutes....................................................9
         5.08       Compensation...............................................9
         5.09       Responsibility.............................................9

ARTICLE VI          MEETING BY USE OF CONFERENCE TELEPHONE
                    OR SIMILAR COMMUNICATIONS EQUIPMENT........................9

ARTICLE VII         OFFICERS..................................................10
         7.01       Executive Officers........................................10
         7.02       Election and Qualification................................10
         7.03       Compensation..............................................10
         7.04       Term, Removal, and Vacancies..............................10
         7.05       Chief Executive Officer...................................10
         7.06       President.................................................10
         7.07       Vice Presidents...........................................11
         7.08       Secretary.................................................11
         7.09       Assistant Secretary.......................................11
         7.10       Treasurer.................................................11
         7.11       Assistant Treasurer.......................................11
         7.12       Officer's Bond............................................11

ARTICLE VIII        CERTIFICATES FOR SHARES...................................12
         8.01       Certificates Representing Shares..........................12
         8.02       Restriction on Transfer of Shares.........................12
         8.03       Voting and Shareholder Agreements.........................12
         8.04       Transfer of Shares........................................13
         8.05       Lost, Stolen or Destroyed Certificates....................13
         8.06       Closing of Transfer Books and Record Date.................13
         8.07       Registered Shareholders...................................14

ARTICLE IX          GENERAL PROVISIONS........................................14
         9.01       Dividends.................................................14
         9.02       Reserves..................................................14

                                       ii

<PAGE>
                                                                     Exhibit 3.2


         9.03       Negotiable Instruments....................................14
         9.04       Fiscal Year...............................................14
         9.05       Seal......................................................14
         9.06       Books and Records.........................................14

ARTICLE X           AMENDMENTS................................................15




<PAGE>






                           AMENDED AND RESTATED BYLAWS

                                       OF

                          CAPITAL SOUTHWEST CORPORATION



                                   ARTICLE I

                                     OFFICES

     1.01 Registered Office.  The registered office,  until changed by action of
the Board of  Directors,  shall be at 12900  Preston  Road,  Suite 700,  City of
Dallas, County of Dallas, State of Texas.

     1.02 Other  Offices.  The  corporation  also may have offices at such other
places both within and without the State of Texas as the Board of Directors  may
from time to time determine or as the business of the corporation may require.

                                   ARTICLE II

                          MEETINGS OF THE SHAREHOLDERS

     2.01 Place of  Meetings.  Meetings  of  shareholders  for the  election  of
directors or for any other proper  purpose shall be held at such place within or
without  the  State of Texas as the  Board of  Directors  may from  time to time
designate.  At the discretion of the Board of Directors,  or as agreed to by all
persons entitled to notice of the meeting,  meetings of shareholders may also be
held or  shareholders  may  participate in meetings of  shareholders by means of
remote communication  authorized under the Texas Business  Organizations Code as
stated  in the  notice  of such  meeting  or a duly  executed  waiver  of notice
thereof.

     2.02 Annual  Meeting.  An annual meeting of  shareholders  shall be held at
such time and date as the Board of Directors may determine.  At such meeting the
shareholders  entitled to vote thereat  shall elect a Board of Directors and may
transact such other business as may properly be brought before the meeting.

     2.03 Special  Meetings.  Special  meetings of shareholders may be called by
the Chairman of the Board of Directors,  the President,  the Board of Directors,
or the  holders  of at  least  10% of all  the  shares  entitled  to vote at the
proposed  special  meeting.  If not  otherwise  fixed in  accordance  with these
Bylaws, the record date for determining  shareholders entitled to call a special
meeting is the date the first shareholder signs the notice of such meeting.

     2.04 Notice of Annual or Special Meeting. Written or printed notice stating
the  place,  if any,  day and  hour of the  meeting,  the  means  of any  remote
communications by which  shareholders may be considered  present and may vote at
the meeting and the means of accessing the remote communications system, and, in
the case of a special meeting,  the purpose or purposes for which the meeting is


<PAGE>



called shall be delivered not less than 10 nor more than 60 days before the date
of the meeting,  personally,  by electronic transmission,  or by mail, or by any
other  method  permitted  by  applicable  law,  by or at  the  direction  of the
President,  the Secretary, or the officer or person calling the meeting, to each
shareholder entitled to vote at such meeting except as otherwise provided in the
Texas  Business  Organizations  Code.  If the meeting is held by means of remote
communications, the notice of meeting shall include information on how to access
the list of  shareholders  entitled to vote at the  meeting  required by Section
2.11. If mailed,  such notice shall be deemed to be delivered  when deposited in
the United  States  mail,  addressed  to the  shareholder  at his  address as it
appears on the share transfer records of the  corporation,  with postage thereon
prepaid.  Whenever any notice is required to be given to any  shareholder  under
the  provisions of any law, the Articles of  Incorporation,  or these Bylaws,  a
waiver  thereof in writing  signed by the  person or  persons  entitled  to such
notice, or a waiver by electronic transmission by the person or persons entitled
to notice,  whether  before or after the time  stated  therein,  shall be deemed
equivalent to the giving of such notice.

     2.05 Notice by Electronic Transmission. On consent of a shareholder, notice
from the corporation under any applicable law, the Articles of Incorporation, or
these Bylaws may be given to the  shareholder  by electronic  transmission.  The
shareholder  may  specify  the  form of  electronic  transmission  to be used to
communicate notice. The shareholder may revoke this consent by written notice to
the  corporation.  The consent of a  shareholder  is  considered  revoked if the
corporation  is unable to deliver by  electronic  transmission  two  consecutive
notices,  and the  secretary,  assistant  secretary  or  transfer  agent  of the
corporation,  or another person  responsible for delivering  notice on behalf of
the corporation,  knows that delivery of these two electronic  transmissions was
unsuccessful.  Inadvertent failure to treat the unsuccessful  transmissions as a
revocation  of the  shareholder's  consent  does not  affect the  validity  of a
meeting or other action. Notice by electronic transmission shall be deemed given
when the  notice is: (1)  transmitted  to a  facsimile  number  provided  by the
shareholder  for  the  purpose  of  receiving  notice;  (2)  transmitted  to  an
electronic mail address provided by the shareholder for the purpose of receiving
notice;  (3)  posted  on an  electronic  network  and a  message  is sent to the
shareholder  at the  address  provided  by the  shareholder  for the  purpose of
alerting the shareholder of a posting; or (4) communicated to the shareholder by
any other form of electronic transmission consented to by the shareholder.

     2.06 Business at Special  Meeting.  The business  transacted at any special
meeting of  shareholders  shall be limited to the purposes  stated in the notice
thereof.

     2.07 Quorum of Shareholders.  Unless otherwise  provided in the Articles of
Incorporation,  the  holders of a majority  of the shares  entitled to vote at a
meeting of shareholders,  represented in person or by proxy,  shall constitute a
quorum for any matter to be presented at that  meeting.  If,  however,  a quorum
shall not be present or represented at any meeting of the  shareholders,  unless
otherwise  provided in the Articles of Incorporation,  the holders of a majority
of the shares  represented  in person or by proxy at the meeting  shall have the
power to  adjourn  the  meeting  until such time and to such place as they shall
determine,  without  notice  other than  announcement  at the  meeting.  At such
adjourned  meeting  at  which a quorum  shall be  present  or  represented,  any
business may be  transacted  that might have been  transacted  at the meeting as
originally notified. Unless otherwise provided in the Articles of Incorporation,
the  shareholders  present at a duly organized  meeting may continue to transact


                                       2
<PAGE>

business until adjournment,  and the subsequent withdrawal of any shareholder or
the refusal of any shareholder to vote shall not affect the presence of a quorum
at the meeting.

     2.08 Act of Shareholders'  Meeting.  With respect to any matter, other than
the election of directors,  a vote on a  "fundamental  action" as defined in the
Texas  Business  Organizations  Code  (a  "Fundamental  Action"),  a  vote  on a
"fundamental business transaction" as defined in the Texas Business Organization
Code (a  "Fundamental  Business  Transaction"),  or another matter for which the
affirmative vote of the holders of a specified portion of the shares entitled to
vote is required by law or the Articles of  Incorporation,  the affirmative vote
of the holders of a majority  of the shares  entitled to vote on, and that voted
for or against or expressly  abstained with respect to, that matter at a meeting
of shareholders  at which a quorum is present shall be the act of  shareholders.
Unless otherwise  provided in the Articles of Incorporation,  directors shall be
elected by a plurality  of the votes cast by the  holders of shares  entitled to
vote in the election of directors at a meeting of shareholders at which a quorum
is present.  Unless otherwise provided in the Texas Business  Organizations Code
or  the  Articles  of  Incorporation,  the  vote  required  for  approval  of  a
Fundamental Action or a Fundamental  Business Transaction by the shareholders is
the  affirmative  vote of the holders of at least  two-thirds of the outstanding
shares  entitled  to vote on the  Fundamental  Action  or  Fundamental  Business
Transaction.

     2.09 Voting of Shares.  Each outstanding share,  regardless of class, shall
be  entitled  to one vote on each  matter  submitted  to a vote at a meeting  of
shareholders,  except to the extent otherwise provided by law or the Articles of
Incorporation.  At each election for directors,  every  shareholder  entitled to
vote at such election shall have the right to vote the number of shares owned by
him for as many  persons  as there are  directors  to be  elected  and for whose
election he has the right to vote. Unless expressly permitted by the Articles of
Incorporation,  no shareholder shall be entitled to cumulate his votes by giving
one  candidate  as many  votes as the  number of such  directors  to be  elected
multiplied by the number of shares owned by such  shareholder or by distributing
such votes on the same principle among any number of such candidates.

     2.10 Proxies.  At any meeting of the shareholders,  each shareholder having
the  right to vote  shall be  entitled  to vote  either  in  person  or by proxy
executed in writing by the shareholder.  A telegram,  telex, cablegram, or other
form  of  electronic  transmission,  including  telephone  transmission,  by the
shareholder, or a photographic,  photostatic, facsimile, or similar reproduction
of a writing  executed by the  shareholder,  shall be treated as an execution in
writing for purposes of this section.  Any electronic  transmission must contain
or be  accompanied  by  information  from  which it can be  determined  that the
transmission was authorized by the shareholder. No proxy shall be valid after 11
months from the date of its execution  unless  otherwise  provided in the proxy.
Each proxy shall be revocable  unless the proxy form  conspicuously  states that
the  proxy  is  irrevocable  and the  proxy  is  coupled  with an  interest.  An
irrevocable  proxy, if noted  conspicuously on the certificate  representing the
shares  that  are  subject  to the  irrevocable  proxy,  shall  be  specifically
enforceable against the holder of those shares or any successor or transferee of
the holder.  Unless noted  conspicuously  on the  certificate  representing  the
shares that are subject to the  irrevocable  proxy, an irrevocable  proxy,  even
though  otherwise  enforceable,  is  ineffective  against a transferee for value
without actual  knowledge of the existence of the irrevocable  proxy at the time
of the transfer or against any subsequent transferee (whether or not for value),
but such an  irrevocable  proxy shall be  specifically  enforceable  against any


                                       3
<PAGE>

other person who is not a transferee  for value from and after the time that the
person acquires actual knowledge of the existence of the irrevocable proxy.

     2.11 Voting List.  The officer or agent having charge of the share transfer
records for shares of the  corporation  shall make,  not later than the 11th day
before  the  date  of each  meeting  of  shareholders,  a  complete  list of the
shareholders  entitled  to vote  at such  meeting  or any  adjournment  thereof,
arranged  in  alphabetical  order,  with the  address  of and number and type of
shares held by each  shareholder,  which list, for a period of ten days prior to
such  meeting,  shall  be kept on file at the  registered  office  or  principal
executive  office of the  corporation  and shall be subject to inspection by any
shareholder  at any time during usual  business  hours.  Such list also shall be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder  during the whole time of the meeting.  The
original share transfer records shall be prima-facie  evidence as to who are the
shareholders entitled to examine such list or transfer records or to vote at any
such  meeting of  shareholders.  Instead of being kept on file,  the list may be
kept on a reasonably  accessible  electronic network if the information required
to gain access to the list is provided  with notice of the meeting.  If the list
is  made  available  on  an  electronic  network,  the  corporation  shall  take
reasonable  measures to ensure the information is available only to shareholders
of the  corporation.  If a meeting  of  shareholders  is held by means of remote
communication,  the list must be open to inspection by a shareholder  during the
meeting on a reasonably accessible electronic network.

     2.12 Action by Written  Consent  Without a Meeting.  Any action required or
permitted to be taken at any annual or special meeting of the  shareholders  may
be taken  without a meeting,  without  prior  notice,  and without a vote,  if a
consent or consents in writing,  setting forth the action so taken, is signed by
the holder or holders of all the  shares  entitled  to vote with  respect to the
action  that is the  subject of the  consent or  consents.  A  telegram,  telex,
cablegram,  or other electronic  transmission by a shareholder  consenting to an
action  to be taken is  considered  to be  written,  signed,  and  dated for the
purposes of this section if the  transmission  sets forth or is  delivered  with
information  from which the corporation can determine that the  transmission was
transmitted by the shareholder and the date on which the shareholder transmitted
the  transmission.  Any  photographic,   photostatic,  facsimile,  or  similarly
reliable  reproduction  of a consent in writing  signed by a shareholder  may be
substituted  or used instead of the  original  writing for any purpose for which
the  original  writing  could  be  used,  if  the  reproduction  is  a  complete
reproduction of the entire original writing.

     2.13  Presence  at Meeting.  Participation  in a meeting  shall  constitute
presence in person at such meeting,  except where a person  participates  in the
meeting for the express  purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.

                                  ARTICLE III

                               BOARD OF DIRECTORS

     3.01 Powers.  The powers of the corporation  shall be exercised by or under
the  authority  of, and the  business  and affairs of the  corporation  shall be



                                       4
<PAGE>

managed under the  direction of, the Board of Directors,  which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by law, the Articles of  Incorporation,  or these Bylaws directed or required to
be exercised and done by the shareholders.

     3.02 Number of  Directors.  The Board of Directors  shall consist of one or
more directors. The initial Board of Directors shall be fixed by the Articles of
Incorporation;  thereafter,  the  number of  directors  shall be  determined  by
resolution of the Board of Directors, but no decrease in the number of directors
shall have the effect of shortening the term of any incumbent director.

     3.03  Election and Term.  The  directors,  other than the initial  Board of
Directors,  shall be elected at each annual meeting of the shareholders,  except
as provided in Section 3.04 of this  Article,  and each  director  elected shall
hold office until the next succeeding  annual meeting and until his successor is
elected and qualified or until his death, resignation,  or removal in accordance
with these  Bylaws.  Directors  need not be  residents  of the State of Texas or
shareholders of the corporation.

     3.04  Vacancies.  Any vacancy  occurring in the Board of  Directors  may be
filled by an election at an annual or special meeting of the shareholders called
for that  purpose  or by the  affirmative  vote of a majority  of the  remaining
directors  though  less  than a quorum  of the Board of  Directors.  A  director
elected  to fill a  vacancy  shall  be  elected  for the  unexpired  term of his
predecessor in office. Any directorship to be filled by reason of an increase in
the  number  of  directors  may be filled by  election  at an annual or  special
meeting  of the  shareholders  called  for that  purpose or may be filled by the
Board of Directors for a term of office  continuing only until the next election
of one or more  directors  by the  shareholders;  provided  that  the  Board  of
Directors  may not fill  more  than two such  directorships  during  the  period
between any two successive annual meetings of shareholders.

     3.05 Resignation and Removal. Any director may resign at any time by giving
notice in writing  or by  electronic  transmission  to the  corporation.  At any
meeting of shareholders  called expressly for the purpose of removing a director
or directors, any director or the entire Board of Directors may be removed, with
or without  cause,  by a vote of the  holders of a majority  of the shares  then
entitled to vote at an election of directors.

     3.06  Compensation of Directors.  As  specifically  prescribed from time to
time by resolution of the Board of Directors,  the directors of the  corporation
may be paid their expenses of attendance at each meeting of the Board and may be
paid a fixed sum for  attendance at each meeting of the Board or a stated salary
in their capacity as directors.  This provision  shall not preclude any director
from serving the  corporation in any other  capacity and receiving  compensation
therefor.  Members  of  special  or  standing  committees  may be  allowed  like
compensation for service on any such committee.

     3.07 Chairman of the Board.  The Board of  Directors,  at its first meeting
after each annual meeting of shareholders, may elect one of its members Chairman
of the Board.  Subject to the authority of the Board of Directors,  the Chairman
of the Board shall  preside at all meetings of the Board of Directors  and shall
have such other powers and duties as usually  pertain to such position or as may
be delegated by the Board of Directors.



                                       5
<PAGE>


                                   ARTICLE IV

                              MEETINGS OF THE BOARD

     4.01  First  Meeting.  The first  meeting of each  newly  elected  Board of
Directors shall be held without notice  immediately  following the shareholders'
annual meeting at which such  directors were elected,  at the same place as such
shareholders'  meeting or at such other time and place either  within or without
the State of Texas as shall be  designated  by the  Secretary  upon the  written
request of a majority of the directors then elected.

     4.02 Regular  Meetings.  Regular  meetings of the Board of Directors may be
held with or  without  notice at such time and at such  place  either  within or
without  the  State  of  Texas  as from  time to time  shall  be  prescribed  by
resolution of the Board of Directors.

     4.03 Special  Meetings.  Special  meetings of the Board of Directors may be
called by the Chairman of the Board of Directors or the President,  and shall be
called  by the  Chairman  of the  Board  of  Directors,  the  President,  or the
Secretary on the written request of two directors. Notice of special meetings of
the Board of Directors,  either in writing or by electronic transmission,  shall
be given to each director at least 24 hours prior to the time of the meeting.

     4.04  Written  Notice.  Whenever  any notice is required to be given to any
director  under the  provisions  of any law, the Articles of  Incorporation,  or
these  Bylaws,  and the  director  has not  consented  to notice  by  electronic
transmission,  it shall be given in writing and delivered  personally or mailed,
or  delivered  by any other  method  permitted  under  applicable  law,  to such
director at such address as appears on the records of the  corporation,  and, if
mailed,  such notice  shall be deemed to be  delivered at the time when the same
shall be deposited in the United  States mail with  sufficient  postage  thereon
prepaid.

     4.05 Notice by Electronic Transmission. On consent of a director, notice of
the date,  time,  place, or purpose of a regular or special meeting of the Board
of  Directors  may be given to the  director  by  electronic  transmission.  The
director  may  specify  the  form  of  electronic  transmission  to be  used  to
communicate notice. Notice by electronic transmission shall be deemed given when
the notice is: (1)  transmitted to a facsimile  number  provided by the director
for the purpose of receiving  notice;  (2)  transmitted  to an  electronic  mail
address provided by the director for the purpose of receiving notice; (3) posted
on an  electronic  network and a message is sent to the  director at the address
provided by the  director for the purpose of alerting the director of a posting;
or (4) communicated to the director by any other form of electronic transmission
consented  to by the  director.  The director may revoke this consent by written
notice  to the  corporation.  The  director's  consent  under  this  Section  is
considered  revoked  if the  corporation  is unable  to  deliver  by  electronic
transmission two consecutive notices, and the secretary, assistant secretary, or
transfer agent of the corporation,  or another person responsible for delivering
notice on behalf of the corporation, knows that delivery of those two electronic
transmissions  was unsuccessful.  Inadvertent  failure to treat the unsuccessful
transmissions  as a  revocation  of the  director's  consent does not affect the
validity of a meeting or other action.

     4.06 Waiver of Notice.  Whenever  any notice is required to be given to any
director  under the  provisions  of any law, the Articles of  Incorporation,  or
these Bylaws,  a waiver  thereof in writing  signed by the director or directors



                                       6
<PAGE>

entitled to such notice, or a waiver by electronic  transmission by the director
or  directors  entitled  to  notice,  whether  before or after  the time  stated
therein, shall be deemed equivalent to the giving of such notice.

     4.07  Attendance  as Waiver.  Attendance  of a director at a meeting of the
Board of Directors or a committee thereof shall constitute a waiver of notice of
such meeting,  except when a director  attends a meeting for the express purpose
of objecting to the  transaction  of any business on the ground that the meeting
is not lawfully called or convened.

     4.08  Business at Regular or Special  Meeting.  Neither the  business to be
transacted  at, nor the purpose of, any regular or special  meeting of the Board
of Directors  need be specified in the notice,  or waiver of notice,  whether in
writing or by electronic transmission, of such meeting.

     4.09  Quorum of  Directors.  A  majority  of the Board of  Directors  shall
constitute a quorum for the  transaction  of business.  If a quorum shall not be
participating  at  any  meeting  of  the  Board  of  Directors,   the  directors
participating  thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be participating.

     4.10  Interested  Directors.  An otherwise  valid  contract or  transaction
between the corporation and one or more of its directors or officers, or between
the corporation  and any other  corporation or other entity in which one or more
of its  directors  or  officers  are  directors,  officers  or other  managerial
officials or have a financial interest,  shall be valid notwithstanding that the
director or officer is present at or participates in the meeting of the Board of
Directors or committee thereof that authorizes the contract or transaction,  and
notwithstanding whether his or their votes are counted for such purpose, if:

(a)  The  material  facts  as to  his  relationship  or  interest  and as to the
     contract  or  transaction  are  disclosed  to or are  known by the Board of
     Directors or the committee, and the Board of Directors or committee in good
     faith  authorizes the contract or transaction by the affirmative  vote of a
     majority of the disinterested  directors or committee members,  even though
     the disinterested directors be less than a quorum; or

(b)  The  material  facts  as to  his  relationship  or  interest  and as to the
     contract or transaction  are disclosed to or are known by the  shareholders
     entitled to vote thereon,  and the contract or transaction is  specifically
     approved in good faith by vote of the shareholders; or

(c)  The contract or transaction is fair as to the corporation as of the time it
     is authorized, approved, or ratified by the Board of Directors, a committee
     thereof, or the shareholders.

Common or interested  directors may be counted in determining  the presence of a
quorum at a meeting of the Board of Directors or of a committee that  authorizes
the contract or transaction.



                                       7
<PAGE>


     4.11 Act of  Directors'  Meeting.  The act of a majority  of the  directors
present at a meeting at which a quorum is present  shall be the act of the Board
of Directors  unless the act of a greater  number is required by the Articles of
Incorporation, by these Bylaws or by law.

     4.12 Action by Written  Consent  Without a Meeting.  Any action required or
permitted to be taken at a meeting of the Board of  Directors  or any  committee
thereof may be taken  without a meeting if a consent in writing,  setting  forth
the  action so taken,  is signed by all  members  of the Board of  Directors  or
committee, as the case may be. A telegram, telex, cablegram, or other electronic
transmission  by a director is  considered  written,  signed,  and dated for the
purposes of this section if the  transmission  sets forth or is  delivered  with
information  from which the corporation can determine that the  transmission was
transmitted by the director and the date on which the director  transmitted  the
transmission. Such consent shall be filed with the minutes of the proceedings of
the Board of Directors or committee, as the case may be. Such consent shall have
the same force and effect as a unanimous vote at a meeting.

     4.13  Presence  at Meeting.  Participation  in a meeting  shall  constitute
presence in person at such meeting,  except where a person  participates  in the
meeting for the express  purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.

                                   ARTICLE V

                                   COMMITTEES

     5.01 Designation of Committees.  The Board of Directors, by resolution, may
designate from among its members one or more committees;  provided, however, the
Board of Directors shall establish all committees required by the Securities and
Exchange   Commission  or  the  principal   securities  exchange  on  which  the
corporation's  securities are listed for trading. No director who is employed by
the corporation may serve on the audit,  nominating or compensation  committees.
Each committee  shall be comprised of one or more  directors,  and the Board may
designate one or more of its members as alternate members of any committee,  who
may,  subject  to any  limitations  imposed by the Board of  Directors,  replace
absent or disqualified  members at any meeting of that  committee.  The Board of
Directors may remove a member of a committee appointed by the Board if the Board
determines the removal is in the best interests of the corporation.  The removal
shall be  without  prejudice  to any  contract  rights  of the  person  removed.
Appointment of a committee member shall not of itself create contract rights.

     5.02 Authority and Proceedings of Committees.  Any such  committee,  to the
extent provided in the resolution of the Board of Directors,  shall have and may
exercise  all of the  authority  of  the  Board  of  Directors,  subject  to the
limitations imposed by applicable law. Each committee shall keep regular minutes
of its  proceedings and report the same to the Board of Directors when required.
To the extent applicable, the provisions of Article IV of these Bylaws governing
the meetings of the Board of Directors shall likewise govern the meetings of any
committee thereof.

     5.03 Employee Director. No director who is also employed by the corporation
shall serve on any audit, nominating or compensation committee.



                                       8
<PAGE>


     5.04  Regular  Meetings.  Regular  meetings  of any  committee  may be held
without notice at such time and place as may be designated  from time to time by
the committee and communicated to all members thereof.

     5.05  Special  Meetings.  Special  meetings  of any  committee  may be held
whenever  called by any  committee  member.  The  committee  member  calling any
special meeting shall cause notice of such special  meeting,  including  therein
the time and place of such special meeting, to be given to each committee member
at least two days  before  such  special  meeting.  Neither  the  business to be
transacted at, nor the purpose of, any special  meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.

     5.06 Quorum; Majority Vote. At meetings of any committee, a majority of the
number of members designated by the Board of Directors shall constitute a quorum
for the transaction of business.  If a quorum is not present at a meeting of any
committee,  a majority of the members  present may adjourn the meeting from time
to time,  without  notice other than an  announcement  at the  meeting,  until a
quorum is present.  The act of a majority of the members  present at any meeting
at which a quorum is in attendance  shall be the act of a committee,  unless the
act of a greater  number is required by law, the Articles of  Incorporation,  or
these  Bylaws.  If any committee  shall consist of two members,  the presence of
both  directors  shall be necessary to  constitute a quorum,  and the consent of
both members shall be necessary to approve any action.

     5.07 Minutes.  Each committee  shall cause minutes of its proceedings to be
prepared and shall report the same to the Board of Directors upon the request of
the Board of Directors.  The minutes of the  proceedings of each committee shall
be delivered to the  Secretary of the  Corporation  for  placement in the minute
books of the corporation.

     5.08  Compensation.  Committee  members may, by  resolution of the Board of
Directors,  be  allowed a fixed sum and  expenses  of  attendance,  if any,  for
attending any committee meetings or a stated salary.

     5.09 Responsibility. The designation of any committee and the delegation of
authority  to it shall not  operate to  relieve  the Board of  Directors  or any
director of any responsibility imposed upon it or such director by law.

                                   ARTICLE VI

                     MEETING BY USE OF CONFERENCE TELEPHONE
                       OR SIMILAR COMMUNICATIONS EQUIPMENT

     The  shareholders,  members  of the Board of  Directors,  or members of any
committee  designated  by the Board of Directors may  participate  in and hold a
meeting of such  shareholders,  Board of  Directors,  or  committee  by means of
conference  telephone or similar  communications  equipment or another  suitable
electronic communications system, including videoconferencing  technology or the
Internet,  or any  combination  if the  telephone  or other  equipment or system
permits each person  participating  in the meeting to communicate with all other
persons  participating  in the  meeting  and,  if voting is to take place at the
meeting,  to vote.  If voting is to take place at the meeting,  the  corporation
must  implement  reasonable  measures to verify  that each person  voting at the



                                       9
<PAGE>

meeting  by  means of  remote  communications  is  sufficiently  identified  and
entitled to vote and must keep a record of any vote or other action taken.

                                  ARTICLE VII

                                    OFFICERS

     7.01 Executive Officers. The officers of the corporation shall consist of a
President and a Secretary,  and may also include one or more Vice Presidents,  a
Treasurer,  and such other  officers as are provided for in this  Article.  Each
officer  of the  corporation  shall be  elected  by the  Board of  Directors  as
provided in Section 7.02 of this Article. Any two or more offices may be held by
the same person.

     7.02  Election  and  Qualification.  The Board of  Directors,  at its first
meeting after each annual meeting of shareholders, shall elect a President and a
Secretary.  The Board of Directors also may elect one or more Vice Presidents, a
Treasurer, and such other officers,  including assistant officers and agents, as
may be deemed  necessary,  who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors.

     7.03  Compensation.  The  compensation  of all  officers  and agents of the
corporation  shall be determined  by or determined in a manner  specified by the
Board of Directors.

     7.04 Term,  Removal,  and Vacancies.  Each officer of the corporation shall
hold office  until his  successor  is chosen and  qualified  or until his death,
resignation,  or removal. Any officer may resign at any time upon giving written
notice to the corporation,  but such resignation  shall be without  prejudice to
the contract  rights,  if any, of the  corporation.  Any officer or agent may be
removed by the Board of Directors for or without cause  whenever in its judgment
the best interests of the corporation  will be served thereby,  but such removal
shall be without  prejudice  to the  contract  rights,  if any, of the person so
removed.  Election  or  appointment  of an  officer  shall not of itself  create
contract  rights.  Any vacancy  occurring  in any office of the  corporation  by
death,  resignation,  removal,  or  otherwise  shall be  filled  by the Board of
Directors.

     7.05 Chief  Executive  Officer.  Unless the Board of  Directors  designates
otherwise,   the  President  shall  be  the  chief  executive   officer  of  the
corporation.  The Chief  Executive  Officer shall preside at all meetings of the
shareholders.  The Chief  Executive  Officer  shall have such  other  powers and
duties as usually  pertain to such office or as may be delegated by the Board of
Directors.

     7.06 President. Unless the Board of Directors shall otherwise delegate such
duties, the President shall have general powers of oversight,  supervision,  and
management  of the business and affairs of the  corporation,  and shall see that
all orders and  resolutions  of the Board of Directors  are carried into effect.
The  President  shall have such  powers  and  duties as usually  pertain to such
office,  except as the same may be modified by the Board of Directors.  He shall
execute  bonds,  mortgages,   instruments,   contracts,  agreements,  and  other
documentation,  except when the signing and execution thereof shall be expressly
delegated  by the  Board of  Directors  to some  other  officer  or agent of the
corporation.



                                       10
<PAGE>


     7.07  Vice  Presidents.   Unless  otherwise  determined  by  the  Board  of
Directors, the Vice Presidents in order of their seniority as such seniority may
from time to time be  designated  by the Board of  Directors,  shall perform the
duties and exercise the powers of the  President in absence or disability of the
President.  They shall  perform  such other duties and have such other powers as
the Board of Directors may from time to time prescribe.

     7.08  Secretary.  The  Secretary  shall attend all meetings of the Board of
Directors and of the shareholders, record all the proceedings of the meetings of
the Board of  Directors  and of the  shareholders  in a book to be kept for that
purpose,  and  shall  perform  like  duties  for the  standing  committees  when
required.  He shall give,  or cause to be given,  notice of all  meetings of the
shareholders and special meetings of the Board of Directors as may be prescribed
by the Board of  Directors or the  President.  He shall keep in safe custody the
seal of the corporation,  and, when authorized by the Board of Directors,  affix
the same to any  instrument  requiring  it. When so affixed,  such seal shall be
attested by his  signature or by the  signature of the Treasurer or an Assistant
Secretary.  He shall perform all duties  incident to the office of the Secretary
and such other  duties as may from time to time be  assigned to him by the Board
of Directors.

     7.09  Assistant  Secretary.   An  Assistant  Secretary,   unless  otherwise
determined by the Board of Directors, shall, in the absence or disability of the
Secretary,  perform  the duties and  exercise  the powers of the  Secretary.  An
Assistant  Secretary  shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.

     7.10 Treasurer. The Treasurer shall have the custody of the corporate funds
and  securities,   shall  keep  full  and  accurate  accounts  of  receipts  and
disbursements  in books  belonging  to the  corporation,  and shall  deposit all
moneys  and  other  valuable  effects  in the  name  and to  the  credit  of the
corporation in such depositories as may be designated by the Board of Directors.
He shall disburse the funds of the corporation as may be ordered by the Board of
Directors,  taking proper vouchers for such  disbursements,  and shall render to
the  President and the Board of Directors at its regular  meetings,  or when the
Board of Directors so requires, an account of all his transactions as Treasurer,
and of the financial  condition of the corporation.  The Treasurer shall perform
all the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the Board of Directors.

     7.11  Assistant  Treasurer.   An  Assistant  Treasurer,   unless  otherwise
determined by the Board of Directors, shall, in the absence or disability of the
Treasurer,  perform  the duties and  exercise  the powers of the  Treasurer.  An
Assistant  Treasurer  shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.

     7.12 Officer's Bond. If required by the Board of Directors,  any officer so
required shall give the  corporation a bond (which shall be renewed as the Board
of Directors  may require) in such sum and with such surety or sureties as shall
be  satisfactory  to the Board of Directors for the faithful  performance of the
duties of his office and for the restoration to the corporation,  in case of his
death,  resignation,  retirement,  or removal from office, of any and all books,
papers,  vouchers,  money, and other property of whatever kind in his possession
or under his control belonging to the corporation.



                                       11
<PAGE>


                                  ARTICLE VIII

                             CERTIFICATES FOR SHARES

     8.01  Certificates  Representing  Shares.  The  corporation  shall  deliver
certificates  representing  shares to which shareholders are entitled,  provided
that the Board of Directors  may provide by  resolution  that some or all of any
class or series of the  corporation's  stock may be uncertificated  shares.  Any
such  resolution  shall not apply to shares  represented by a certificate  until
such  certificate is surrendered  to the  corporation  (or the transfer agent or
registrar, as the case may be).  Notwithstanding the adoption of such resolution
by the Board of Directors,  every holder of stock  represented  by  certificates
and, upon request, a holder of uncertificated shares shall be entitled to have a
certificate  signed in the name of the corporation by the Chairman of the Board,
if  any,  or the  President  or a Vice  President  and  by the  Treasurer  or an
Assistant Treasurer or the Secretary or any Assistant Secretary,  certifying the
number of shares and the class or series of shares of the  corporation  owned by
the  stockholder.  Any  or  all of the  signatures  on  the  certificate  may be
facsimile.  In case any officer,  transfer  agent or registrar who has signed or
whose facsimile  signature has been placed upon a certificate  shall have ceased
to be such  officer,  transfer  agent or registrar  before such  certificate  is
issued,  it may be issued  by the  corporation  with the same  effect as if such
person were an officer,  transfer agent or registrar at the date of issue.  If a
holder of  uncertificated  shares elects to receive a certificate  for shares of
the corporation's stock, the corporation (or the transfer agent or registrar, as
the case may be) shall (to the extent  permitted under applicable law and rules,
regulations  and listing  requirements  of any stock exchange or stock market on
which the  corporation's  shares are listed or traded),  cease providing  annual
statements indicating such holder's holdings of shares in the corporation.. Such
certificates  shall  be  numbered  and  shall  be  entered  in the  books of the
corporation as they are issued, and shall be signed by the President or any Vice
President  and the  Treasurer or an Assistant  Treasurer or the  Secretary or an
Assistant  Secretary of the corporation,  and may be sealed with the seal of the
corporation  or a facsimile  thereof.  The  signatures  of such  officers upon a
certificate  may be  facsimiles.  In case any  officer  who has  signed or whose
facsimile  signature has been placed upon such certificate  shall have ceased to
be such  officer  before  such  certificate  is issued,  it may be issued by the
corporation  with the same effect as if he were such  officer at the date of its
issuance.  Each certificate  representing shares issued by the corporation shall
conspicuously  set forth such provisions as are required by applicable law. Each
certificate  representing  shares  shall  state upon the face  thereof  that the
corporation is organized  under the laws of the State of Texas,  the name of the
person to whom issued, the number and class of shares and the designation of the
series, if any, that such certificate represents and the par value of each share
represented  by such  certificate or a statement that the shares are without par
value. No certificate shall be issued for any share until the full amount of the
consideration therefor, fixed as provided by law, has been paid or delivered.

     8.02 Restriction on Transfer of Shares. Any restriction on the transfer, or
registration  of the transfer,  of shares shall be noted  conspicuously  on each
certificate   representing  shares  that  are  subject  to  the  restriction  in
accordance with applicable law.

     8.03 Voting and Shareholder Agreements. Any voting or shareholder agreement
shall be noted  conspicuously on each  certificate  representing the shares that
are subject to the agreement in accordance with applicable law.



                                       12
<PAGE>


     8.04 Transfer of Shares.  Upon surrender to the corporation or the transfer
agent  of  the  corporation  of  a  certificate  for  shares  duly  endorsed  or
accompanied  by proper  evidence of  succession,  assignment,  or  authority  to
transfer,  it shall be the duty of the corporation to issue a new certificate to
the  person  entitled  thereto,  cancel  the old  certificate,  and  record  the
transaction upon its books.

     8.05 Lost,  Stolen or Destroyed  Certificates.  The Board of Directors,  or
such officer or officers of the  corporation  as the Board of Directors may from
time to time  designate,  may direct a new  certificate  or  certificates  to be
issued in place of any  certificate or  certificates  theretofore  issued by the
corporation  alleged to have been lost,  stolen, or destroyed upon the making of
an affidavit of that fact by the person claiming the certificate or certificates
of stock to be lost,  stolen,  or destroyed.  When authorizing the issuance of a
new  certificate  or  certificates,  the Board of Directors,  or such officer or
officers,  in its or his discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative,  to advertise the same in such manner
as it or he shall  require or to give the  corporation  a bond in such form,  in
such sum,  and with such surety or sureties as it or he may direct as  indemnity
against  any claim that may be made  against the  corporation  on account of the
certificate or certificates  alleged to have been lost,  stolen, or destroyed or
the issuance of the new certificate or certificates.

     8.06  Closing  of  Transfer  Books and  Record  Date.  For the  purpose  of
determining  shareholders  entitled  to notice of or to vote at any  meeting  of
shareholders or any adjournment  thereof,  or entitled to receive a distribution
by the corporation (other than a distribution involving a purchase or redemption
by the  corporation  of any of its own  shares)  (a  "Distribution")  or a share
dividend,  or in order to make a  determination  of  shareholders  for any other
proper  purpose  (other  than  determining  shareholders  entitled to consent to
action taken by  shareholders  that is proposed to be taken without a meeting of
shareholders),  the Board of  Directors  may  provide  that the  share  transfer
records shall be closed for a stated  period but not to exceed,  in any case, 60
days.  If the  share  transfer  records  shall  be  closed  for the  purpose  of
determining  shareholders  entitled  to  notice  of or to vote at a  meeting  of
shareholders,  such  records  shall be closed  for at least 10 days  immediately
preceding such meeting. In lieu of closing the share transfer records, the Board
of  Directors  may  fix in  advance  a date as the  record  date  for  any  such
determination of shareholders, such date in any case to be not more than 60 days
and, in case of a meeting of  shareholders,  not less than 10 days, prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. If the share transfer  records are not closed and no record date
is fixed for the determination of shareholders  entitled to notice of or to vote
at a meeting of shareholders, or shareholders entitled to receive a Distribution
or a share  dividend,  the date on which  notice of the meeting is mailed or the
date  on  which  the  resolution  of  the  Board  of  Directors  declaring  such
Distribution  or share  dividend  is adopted,  as the case may be,  shall be the
record date for such  determination  of  shareholders.  When a determination  of
shareholders  entitled to vote at any meeting of  shareholders  has been made as
provided in this Section 9.06, such determination shall apply to any adjournment
thereof,  except when the determination has been made through the closing of the
share  transfer  records and the stated period of closing has expired.  Unless a
record  date shall have  previously  been fixed or  determined  pursuant to this
Section 9.06, whenever action by shareholders is proposed to be taken by consent
in writing without a meeting of  shareholders,  the Board of Directors may fix a
record date for the purpose of determining  shareholders  entitled to consent to



                                       13
<PAGE>

that action, which record date shall not precede, and shall not be more than ten
days after, the date upon which the resolution fixing the record date is adopted
by the  Board of  Directors.  If no record  date has been  fixed by the Board of
Directors and the prior action of the Board of Directors is not required by law,
the record date for  determining  shareholders  entitled to consent to action in
writing  without a meeting  shall be the  first  date on which a signed  written
consent  setting  forth the action taken or proposed to be taken is delivered to
the  corporation.  If no  record  date  shall  have  been  fixed by the Board of
Directors  and prior  action of the Board of  Directors  is required by law, the
record  date for  determining  shareholders  entitled  to  consent  to action in
writing without a meeting shall be at the close of business on the date on which
the Board of Directors adopts a resolution taking such prior action.

     8.07 Registered  Shareholders.  The corporation  shall be entitled to treat
the  holder of  record  of any  share or  shares of stock as the  holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or  interest  in such share or shares on the part of any other  person,
whether  or not it  shall  have  express  or other  notice  thereof,  except  as
otherwise provided by law.

                                   ARTICLE IX

                               GENERAL PROVISIONS

     9.01 Dividends.  The Board of Directors from time to time may authorize and
declare,  and the corporation may pay,  dividends or other  distributions on its
outstanding  shares in cash,  property,  or its own shares  pursuant  to law and
subject to the provisions of the Articles of Incorporation and these Bylaws.

     9.02 Reserves. The Board of Directors may by resolution create a reserve or
reserves out of surplus for any proper purpose or purposes,  and may abolish any
such reserve in the same manner.

     9.03 Negotiable Instruments. All bills, notes, checks, or other instruments
for the payment of money  shall be signed or  countersigned  by such  officer or
officers or such other person or persons and in such manner as are  permitted by
these Bylaws or in such manner as the Board of  Directors  from time to time may
designate.

     9.04  Fiscal  Year.  The fiscal year of the  corporation  shall be fixed by
resolution of the Board of Directors.

     9.05 Seal. The  corporation  may have a corporate seal and, if the Board of
Directors  adopts a corporate  seal,  the  corporate  seal shall have  inscribed
thereon the name of the corporation and may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.

     9.06 Books and  Records.  The  corporation  shall keep books and records of
account and shall keep minutes of the proceedings of the shareholders, the Board
of  Directors,  and each  committee of the Board of Directors.  The  corporation
shall keep at its registered  office or principal  place of business,  or at the



                                       14
<PAGE>

office of its transfer agent or registrar,  a record of the original issuance of
shares issued by the  corporation  and a record of each transfer of those shares
that have been presented to the corporation for  registration of transfer.  Such
records  shall  contain  the  names  and  addresses  of  all  past  and  current
shareholders  of the  corporation  and the  number and class or series of shares
issued by the corporation held by each of them. Any books, records, minutes, and
share  transfer  records may be in written  form or in any other form capable of
being converted into written paper form within a reasonable time.

                                   ARTICLE X

                                   AMENDMENTS

     These Bylaws may be amended or repealed or new Bylaws may be adopted by the
Board of  Directors at any regular or special  meeting of the Board,  unless the
Articles of  Incorporation  or applicable law reserves the power  exclusively to
the shareholders in whole or part or the shareholders in amending,  repealing or
adopting a particular  bylaw  expressly  provide that the Board may not amend or
repeal that bylaw. In addition,  unless the Articles of Incorporation or a Bylaw
adopted  by the  shareholders  provides  otherwise  as to  all or a part  of the
corporation's  Bylaws,  the shareholders  may amend or repeal the  corporation's
Bylaws.




                                       15
<PAGE>



                            CERTIFICATE OF SECRETARY


     The  undersigned  does hereby  certify that (i) she is the duly elected and
qualified  Secretary of Capital Southwest  Corporation,  a Texas corporation and
(ii) the  foregoing is a true and correct copy of the Bylaws of the  corporation
as of April __, 2007.



                                            ------------------------------------
                                            _________________________, Secretary








                                       16
<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>capital10kex101033107.txt
<TEXT>


                                                                    Exhibit 10.1























                  THE RECTORSEAL CORPORATION AND JET-LUBE, INC.
                          EMPLOYEE STOCK OWNERSHIP PLAN
                (As Revised and Restated Effective April 1, 2007)
























<PAGE>


                  THE RECTORSEAL CORPORATION AND JET-LUBE, INC.
                          EMPLOYEE STOCK OWNERSHIP PLAN
                (As Revised and Restated Effective April 1, 2007)


                                TABLE OF CONTENTS


                                                                            Page


ARTICLE I              DEFINITIONS.............................................5

   Sec. 1.1              Administrator.........................................5
   Sec. 1.2              Affiliated Company....................................6
   Sec. 1.3              Allocation Date.......................................6
   Sec. 1.4              Alternate Payee.......................................6
   Sec. 1.5              Anniversary Date......................................6
   Sec. 1.6              Annual Compensation...................................6
   Sec. 1.7              Beneficiary...........................................7
   Sec. 1.8              Code..................................................9
   Sec. 1.9              Committee.............................................9
   Sec. 1.10             Company...............................................9
   Sec. 1.11             Disability............................................9
   Sec. 1.12             Early Retirement Date................................10
   Sec. 1.13             Employee.............................................10
   Sec. 1.14             Employer.............................................10
   Sec. 1.15             Entry Date...........................................11
   Sec. 1.16             ERISA................................................11
   Sec. 1.17             Five-Year Break in Service...........................11
   Sec. 1.18             Former Participant...................................11
   Sec. 1.19             Hours of Service.....................................11
   Sec. 1.20             Individual Account...................................14
   Sec. 1.21             Interactive Electronic Communication.................14
   Sec. 1.22             Leased Employee......................................14
   Sec. 1.23             Named Fiduciary......................................15
   Sec. 1.24             Normal Retirement Date...............................15
   Sec. 1.25             Notice...............................................15
   Sec. 1.26             One-Year Break in Service............................16
   Sec. 1.27             Other Investments Account............................16
   Sec. 1.28             Parent Company Stock.................................16
   Sec. 1.29             Parent Company Stock Account.........................16
   Sec. 1.30             Participant..........................................17
   Sec. 1.31             Plan.................................................17
   Sec. 1.32             Qualified Domestic Relations Order...................17
   Sec. 1.33             Qualified Election Period............................17



                                        i
<PAGE>

   Sec. 1.34             Qualified Participant................................17
   Sec. 1.35             Recordkeeper.........................................17
   Sec. 1.36             Trust Agreement......................................17
   Sec. 1.37             Trust Fund...........................................18
   Sec. 1.38             Trustee..............................................18
   Sec. 1.39             Valuation Date.......................................18
   Sec. 1.40             Year.................................................18
   Sec. 1.41             Year of Service (Participation)......................18
   Sec. 1.42             Year of Service (Vesting)............................18
   Sec. 1.43             Gender and Number....................................19

ARTICLE II             ELIGIBILITY OF EMPLOYEES...............................19

   Sec. 2.1              Eligibility..........................................19
   Sec. 2.2              Election Not to Participate..........................19
   Sec. 2.3              Eligibility upon Reemployment........................19
   Sec. 2.4              Reemployment of Participant..........................20
   Sec. 2.5              Exclusion of Employees Covered by
                         Collective Bargaining................................20
   Sec. 2.6              Eligibility Upon Entry or Reentry into
                         Eligible Class of Employees..........................20

ARTICLE III            CONTRIBUTIONS..........................................21

   Sec. 3.1              Contributions of the Employer........................21
   Sec. 3.2              Form of Employer Contributions.......................21
   Sec. 3.3              Time of Contributions................................21
   Sec. 3.4              Limit on Employer Contributions......................22
   Sec. 3.5              Manner of Making Contributions.......................22
   Sec. 3.6              Contributions with Respect to Military Leave.........22

ARTICLE IV             ACCOUNTS AND VALUATION OF TRUST FUND...................22

   Sec. 4.1              Participants' Individual Accounts....................22
   Sec. 4.2              Valuation of the Trust Fund and of the
                         Interest of Each Participant.........................23
   Sec. 4.3              Allocations to Individual Accounts...................24
   Sec. 4.4              Included Individual Accounts.........................28
   Sec. 4.5              Time When Contributions are Allocated................28

ARTICLE V              LIMITATION ON ALLOCATIONS..............................28

   Sec. 5.1              Limitation on Allocations............................28
   Sec. 5.2              Definitions..........................................29
   Sec. 5.3              Excess Annual Additions..............................32

                                       ii
<PAGE>

   Sec. 5.4              Special Rules........................................33

ARTICLE VI             INDIVIDUAL ACCOUNTS....................................35

   Sec. 6.1              Participant Interest in Individual Accounts..........35
   Sec. 6.2              Periodic Statements to Participant...................35

ARTICLE VII            RETIREMENT.............................................36

   Sec. 7.1              Normal Retirement....................................36
   Sec. 7.2              Early Retirement.....................................36
   Sec. 7.3              Other Retirement.....................................36
   Sec. 7.4              Benefits on Retirement...............................36
   Sec. 7.5              Commencement of Benefits.............................36
   Sec. 7.6              Final Contribution After Distribution of Benefits....36

ARTICLE VIII           DEATH..................................................37

   Sec. 8.1              Benefits on Death....................................37
   Sec. 8.2              Final Contribution After Payment of Benefits.........37

ARTICLE IX             DISABILITY.............................................38

   Sec. 9.1              Benefits on Disability...............................38
   Sec. 9.2              Final Contribution After Payment of Benefits.........38

ARTICLE X              TERMINATION BENEFITS...................................39

   Sec. 10.1             Termination of Employment Other than by Reason
                         of Death, Disability or Retirement...................39
   Sec. 10.2             Vested Interest......................................39
   Sec. 10.3             Time of Distribution.................................39
   Sec. 10.4             Forfeiture and Return to Employment Prior to Complete
                         Distribution.........................................41
   Sec. 10.5             Application of Forfeitures...........................41

ARTICLE XI             DISTRIBUTIONS AND WITHDRAWALS..........................42

   Sec. 11.1             Form of Payment......................................42
   Sec. 11.2             Consent to Distribution..............................42
   Sec. 11.3             Minority or Disability of Distributee................43

                                      iii
<PAGE>

   Sec. 11.4             Additional Requirements Relating to Benefit
                         Payments and Death Distributions.....................44
   Sec. 11.5             Withdrawals..........................................47
   Sec. 11.6             Claims Procedure.....................................48
   Sec. 11.7             Administrator's Duty to Trustee......................48
   Sec. 11.8             Duty to Keep Administrator Informed of
                         Distributee's Current Address........................48
   Sec. 11.9             Failure to Claim Benefits............................49
   Sec. 11.10            Distribution Pursuant to Qualified
                         Domestic Relations Orders............................49
   Sec. 11.11            Tax Withholding and Participant's Direct Rollover....50

ARTICLE XII            NOTICES................................................53

   Sec. 12.1             Notice...............................................53
   Sec. 12.2             Modification of Notice...............................53
   Sec. 12.3             Reliance on Notice...................................53

ARTICLE XIII           AMENDMENT OR TERMINATION OF PLAN.......................54

   Sec. 13.1             Amendment or Termination by Company..................54
   Sec. 13.2             Effect of Amendment..................................54
   Sec. 13.3             Distribution on Termination or
                         Discontinuance of Contributions......................54
   Sec. 13.4             Reversion of Contributions to Employer...............55
   Sec. 13.5             Amendment of Vesting Schedule........................55
   Sec. 13.6             Merger or Consolidation of Plan......................56
   Sec. 13.7             Withdrawal of Employer...............................57

ARTICLE XIV            COMMITTEE..............................................57

   Sec. 14.1             Committee Composition................................57
   Sec. 14.2             Committee Actions....................................57
   Sec. 14.3             Committee Procedure..................................58
   Sec. 14.4             Delegation to Committee and Company's Duty
                         to Furnish Information...............................58
   Sec. 14.5             Construction of Plan and Trustee's and
                         Record-keeper's Reliance.............................60
   Sec. 14.6             Committee Member's Abstention in Cases
                         Involving Own Rights.................................60
   Sec. 14.7             Counsel to Committee.................................61
   Sec. 14.8             Indemnification of Employees and Directors...........61

                                       iv
<PAGE>

   Sec. 14.9             Action Taken in Good Faith...........................61

ARTICLE XV             MISCELLANEOUS..........................................61

   Sec. 15.1             No Employment or Compensation Agreement..............61
   Sec. 15.2             Spendthrift Provision................................62
   Sec. 15.3             Construction.........................................62
   Sec. 15.4             Titles...............................................62
   Sec. 15.5             Texas Law Applicable.................................62
   Sec. 15.6             Successors and Assigns...............................62
   Sec. 15.7             Allocation of Fiduciary Responsibility by
                         Named Fiduciary......................................63
   Sec. 15.8             Expenses of Administration...........................63
   Sec. 15.9             Plan Controls........................................64
   Sec. 15.10            Effect of Mistakes...................................64
   Sec. 15.11            Operation of the Plan; Permitted Corrections.........64

ARTICLE XVI            ADOPTION BY AFFILIATED COMPANIES.......................65

   Sec. 16.1             Transfer of Employment to Another Employer...........65
   Sec. 16.2             Contributions and Forfeitures........................65
   Sec. 16.3             Transfers of Employment Between Affiliated
                         Companies............................................65
   Sec. 16.4             Action by Company....................................66
   Sec. 16.5             Termination of Employer's Status as Affiliated
                         Company..............................................66

ARTICLE XVII           THE TRUSTEE............................................67

   Sec. 17.1             Trust Fund...........................................67
   Sec. 17.2             Trustee's Duties.....................................67
   Sec. 17.3             Benefits Only from Trust Fund........................67
   Sec. 17.4             Trust Fund Applicable Only to Payment of Benefits....67
   Sec. 17.5             Texas Trust Code.....................................67
   Sec. 17.6             Voting Rights........................................67

ARTICLE XVIII          INVESTMENTS............................................68

   Sec. 18.1             Investment of Contributions and Trust Assets.........68
   Sec. 18.2             Diversification of Investments by Qualified
                         Participants.........................................69

                                       v
<PAGE>


ARTICLE XIX            TOP HEAVY PROVISIONS...................................70

   Sec. 19.1             Minimum Allocation Requirements......................70
   Sec. 19.2             Vesting Schedule.....................................70
   Sec. 19.3             Definitions..........................................71













                                       vi

<PAGE>



                                                                    Exhibit 10.1


                  THE RECTORSEAL CORPORATION AND JET-LUBE, INC.
                          EMPLOYEE STOCK OWNERSHIP PLAN
                (As Revised and Restated Effective April 1, 2007)


     THIS  AGREEMENT,  executed  this ____ day of May,  2007,  and effective the
first  day of  April,  2007  unless  specifically  provided  otherwise  in  this
Agreement,  by The RectorSeal  Corporation,  a Delaware corporation,  having its
principal office in Houston, Texas (hereinafter referred to as the "Company").


                              W I T N E S S E T H:

     WHEREAS,  effective  June 1, 1976, the Company  established  The RectorSeal
Corporation  Employee  Stock  Ownership  Plan  (hereinafter  referred  to as the
"Plan") in the form of a stock bonus plan  designed to  constitute  a "qualified
plan"  within the meaning of the  applicable  sections of the  Internal  Revenue
Code,  as amended (the "Code") for the benefit of eligible  employees  and their
beneficiaries;

     WHEREAS,  the Plan was subsequently  amended from time to time and was then
amended and restated  effective  April 1, 1985,  except for specific  provisions
which were effective  April 1, 1984, to bring the Plan into  compliance with the
Tax Equity and Fiscal Responsibility Act of 1982, the Tax Reform Act of 1984 and
the Retirement Equity Act of 1984;

     WHEREAS,  the Plan was  subsequently  amended by Amendment No. 1 effective,
with respect to specific provisions, on April 1, 1984 and April 1, 1985;

     WHEREAS,  Jet-Lube,  Inc.,  a Delaware  corporation  ("Jet  Lube"),  and an
Affiliated  Company (herein  defined),  established the Jet-Lube,  Inc. Employee
Stock Ownership Plan (the "Jet Lube Plan") effective June 1, 1976;

     WHEREAS, the Jet Lube Plan was subsequently amended from time to time prior
to April 1, 1984, was amended and restated  effective April 1, 1985,  except for
specific  provisions  which were effective  April 1, 1984, to bring the Jet Lube
Plan into compliance with the Tax Equity and Fiscal  Responsibility Act of 1982,
the Tax Reform Act of 1984 and the  Retirement  Equity Act of 1984,  and, due to


<PAGE>

the  merger of the Jet Lube Plan with and into the Plan,  was  amended to comply
with (i) those  provisions  of the Tax  Reform  Act of 1986 that were  technical
corrections to the Retirement Equity Act of 1984 and (ii) the temporary Treasury
regulations  issued with respect to those  provisions in the Code enacted by the
Retirement Equity Act of 1984 or the subsequent technical correction  provisions
thereto;

     WHEREAS,  Jet Lube approved (i) the merger of the Jet Lube Plan,  effective
as of April 1, 1989, with and into the Plan and (ii) the transfer of assets from
the Jet Lube  Plan to the Plan as soon as  practicable  after the  valuation  of
accounts in the Jet Lube Plan at March 31, 1990;

     WHEREAS,  the  Company  subsequently  amended  and  restated  the  Plan (i)
effective  April 1, 1989, to bring the Plan into  compliance with the Tax Reform
Act of 1986 as well as all other applicable laws, rules and regulations  enacted
or promulgated  since the prior plan  restatement  and (ii)  effective  April 1,
1994,  to  change  the  name  of the  Plan to "The  RectorSeal  Corporation  and
Jet-Lube, Inc. Employee Stock Ownership Plan;"

     WHEREAS,  the Plan was  subsequently  amended by Amendment  No. I effective
August 15, 1997;

     WHEREAS, the Company revised and restated the Plan effective April 1, 1998,
except for certain  provisions for which another effective date was subsequently
provided  otherwise in the terms of the Plan, to bring the Plan into  compliance
with the Code, as modified by the Small Business Job Protection Act of 1996, the
General  Agreement on Tariffs and Trade under the Uruguay Round  Agreements Act,
the Uniformed  Services  Employment  and  Reemployment  Rights Act of 1994,  the
Taxpayer  Relief Act of 1997, the Internal  Revenue  Service  Restructuring  and
Reform Act of 1998, and the Community Renewal Tax Relief Act of 2000, as well as
all  other  applicable  rules,  regulations  and  administrative  pronouncements
enacted, promulgated or issued since the date the Plan was last restated;

     WHEREAS,  the Company  adopted  Amendment No. 1 to the revised and restated
Plan,  effective as of April 1, 2002, except as specifically  provided otherwise
in Amendment No. 1, to (i) reflect certain provisions of the Economic Growth and
Tax  Relief  Reconciliation  Act  of  2001  ("EGTRRA")  which  generally  became
applicable to the Plan effective as of April 1, 2002, and (ii)  constitute  good

                                       2
<PAGE>

faith compliance with the requirements of EGTRRA;

     WHEREAS,  final  Treasury  regulations  were  issued  April 17,  2002 under
section  401(a)(9) of the Code relating to  distributions  under Section 11.4 of
the Plan (the "Final Distribution Regulations");

     WHEREAS, the Pension and Welfare Benefits  Administration of the Department
of Labor issued final  regulations  establishing  new standards  for  processing
benefit claims of participants and beneficiaries  under Section 11.6 of the Plan
which were  subsequently  clarified  by further  guidance  from the  Pension and
Welfare  Benefits  Administration  (collectively  the  "Final  Claims  Procedure
Regulations");

     WHEREAS,  the Company  adopted  Amendment No. 2 to the revised and restated
Plan to (i) revise  Section  11.4 of the Plan,  effective  January  1, 2003,  to
reflect the Final Distribution  Regulations  consistent with the Model Amendment
provided by the Internal Revenue Service in Rev. Proc. 2002-29,  and (ii) revise
Section  11.6 of the  Plan,  effective  April  1,  2002,  to  provide  that  the
administrator  of the Plan shall  process  benefit  claims of  participants  and
beneficiaries  pursuant to the claims  procedure  specified  in the summary plan
description  for the Plan which  shall  comply with the Final  Claims  Procedure
Regulations, as may be amended from time to time;

     WHEREAS,  the Company  adopted  Amendment No. 3 to the revised and restated
Plan,  effective  as of August 1, 2004,  to exclude  the  Director  of  Business
Development of Cargo Chemical Corporation from participation in the Plan;

     WHEREAS,  EGTRRA amended Section  401(a)(31)(B) of the Code to require that
mandatory  distributions  of more than  $1,000 from the Plan be paid in a direct
rollover to an individual  retirement plan as defined in Sections 408(a) and (b)
if the distributee does not make an affirmative election to have the amount paid
in a  direct  rollover  to  an  eligible  retirement  plan  or  to  receive  the
distribution  directly and I.R.S.  Notice 2005-5  provides  that this  provision
became effective to the Plan for distributions on or after March 28, 2005;

     WHEREAS,  the Company  adopted  Amendment No. 4 to the revised and restated
Plan,  effective as of March 28, 2005,  to reduce the maximum  dollar  amount of
mandatory distributions under the Plan from $5,000 to $1,000;

                                       3
<PAGE>


     WHEREAS, pursuant to the guidance issued by the Internal Revenue Service in
Rev. Proc.  2005-66,  the Plan has been assigned a five-year  remedial amendment
cycle of Cycle A which requires the Plan to be amended no later than January 31,
2007  (except  as may be  provided  otherwise  by Rev.  Proc.  2005-66  or other
published  guidance  for  certain  interim  amendments)  to bring  the Plan into
compliance  with the  2005  Cumulative  List of  Changes  in Plan  Qualification
published by the Internal  Revenue  Service in Notice 2005-101 for Cycle A plans
(the  "Cycle  A  Cumulative   List"),   which  identifies  all  changes  in  the
qualification requirements applicable to Cycle A plans resulting from statutory,
regulatory and other guidance published in the Internal Revenue Bulletin;

     WHEREAS,  the Pension Protection Act of 2006 (the "Pension Protection Act")
enacted changes to the Code,  certain  provisions of which become  applicable to
the Plan for Years beginning on or after April 1, 2007;

     WHEREAS,  the Pension Protection Act enacted Section 401(a)(35) of the Code
which imposes  diversification  requirements  for certain  defined  contribution
plans  within the meaning of Section  401(a)(35)(E)  of the Code,  excluding  an
employee stock  ownership  plan within the meaning of Section  4975(e)(7) of the
Code which meets the requirements of Section 401(a)(35)(E)(ii) of the Code;

     WHEREAS, the Company amended and restated the Plan effective April 1, 2002,
except for certain  provisions for which another  effective date is subsequently
provided  otherwise in the terms of the Plan, to (i)  incorporate the provisions
of Amendment  Nos. 1-4 to the Plan,  as revised as restated  effective  April 1,
1998,  (ii) bring the Plan into  compliance  with the Code,  as  modified by the
changes  in the  qualification  requirements  applicable  to the  Plan  that are
identified in the Cycle A Cumulative List, including,  but not limited to EGTRRA
and the Final Distribution Regulations,  (iii) effective April 1, 2007, formally
designate  the Plan an  employee  stock  ownership  plan  within the  meaning of
Section  4975(e)(7)  of the  Code and  Treas.  Reg.  ss.54.4975-11(a),  add pass
through  voting in accordance  with the  requirements  of Section  409(e) of the
Code, and add a diversification of investment  provision applicable to qualified



                                       4
<PAGE>

participants  in compliance with the  requirements of Section  401(a)(28) of the
Code,  such  that the Plan  will be  exempt  from the  requirements  of  Section
401(a)(35)  of  the  Code,  (iv)  reflect  certain  provisions  of  the  Pension
Protection Act and to constitute good faith  compliance with the requirements of
the Pension  Protection  Act,  and (v) bring the Plan into  compliance  with all
other applicable rules,  regulations and administrative  pronouncements enacted,
promulgated or issued since the Plan was last restated effective April 1, 1998;

     WHEREAS,  the Company now desires to amend and restate the Plan,  effective
as of April 1, 2007,  to revise the  permissible  method of  complying  with the
diversification of investment provision applicable to qualified  participants in
compliance with the requirements of Section 401(a)(28) of the Code; and

     WHEREAS,  (i) the  benefits  payable from the Plan are  independent  of any
benefits  an  Employee  is or may  become  entitled  to under any  other  funded
pension,  profit  sharing  or  savings  plan,  (ii) the  benefits  payable to an
Employee or Beneficiary  under the Plan shall be determined  solely by reference
to the  provisions  of the  Plan  in  effect  on the  date  of  such  Employee's
retirement or other termination of employment,  except as otherwise specifically
provided  herein,  and (iii)  except as  otherwise  provided  in the Plan or any
amendment to the Plan,  the  provisions of any amendment to the Plan shall apply
solely to an Employee, former Employee,  Participant or Former Participant whose
employment  with an Employer  terminates on or after the  effective  date of the
amendment;

     NOW,  THEREFORE,  in consideration of the premises and the covenants herein
contained,  the Company  hereby  adopts the  following as the  provisions of the
revised and restated Plan:

                                    ARTICLE I

                                   DEFINITIONS
                                   -----------

     Unless by the  context  hereof a  different  meaning is clearly  indicated,
whenever  used in this  Plan,  the  following  words  shall  have  the  meanings
hereinafter set forth:

     Sec.  1.1  Administratorfor  the  purposes  of  ERISA  means  the  Company;
provided,  that the Company,  by action of its  governing  body,  may  designate
another  person  or  entity,  including  the  Trustee,  the  Recordkeeper  or  a



                                       5
<PAGE>

Committee, as Administrator of the Plan.

     Sec. 1.2 Affiliated Companymeans the Company and any other entity which is,
along with the Company,  a member of a  controlled  group of  corporations  or a
controlled group of trades or businesses [as defined in Section 414(b) or (c) of
the Code],  any entity which along with the Company is included in an affiliated
service  group as defined in Section  414(m) of the Code,  and any other  entity
which is required to be aggregated  with the Company  pursuant to Section 414(o)
of the Code.

     Sec. 1.3 Allocation Datemeans the Anniversary Date and each additional date
or dates designated by the Administrator  from time to time on which allocations
of contributions are made.

     Sec. 1.4 Alternate  Payeemeans a person defined in Section 414(p)(8) of the
Code who is entitled to benefits under the Plan pursuant to a Qualified Domestic
Relations Order.

     Sec. 1.5 Anniversary Datemeans the last day of each Year.

     Sec. 1.6 Annual  Compensationmeans the sum of (i) the amounts actually paid
to an  Employee  by the  Employer  for  services  rendered,  as  reported on the
Employee's Federal income tax withholding  statement (Form W-2 or its subsequent
equivalent)  for the  Year,  exclusive,  however,  of  reimbursements  and other
expense  allowances,  fringe  benefits  (cash and  noncash),  including  but not
limited to automobile allowances,  taxable group life insurance and amounts that
are paid to the Employee in cash in lieu of being  contributed  on his behalf to
the Plan or any other  qualified  defined  contribution  plan  maintained by the
Employer,  moving  expenses,  welfare  benefits,  and  all  other  extraordinary
compensation,  such as income  attributable  to phantom  stock  plans,  and (ii)
amounts applied to purchase  benefits  pursuant to a salary reduction  agreement
under a  cafeteria  plan as defined in Section 125 of the Code  sponsored  by an
Employer,  amounts deferred  pursuant to a salary reduction  agreement under any
other plan  described in Sections  401(k) and 408(k) of the Code sponsored by an
Employer,  and elective  amounts that are not  includible in gross income of the
Participant  by  reason of  Section  132(f)(4)  of the Code.  For each Year only
$225,000  of Annual  Compensation  shall be taken into  account by the Plan with
respect to any  Participant  [or, for each Year beginning  after March 31, 2008,



                                       6
<PAGE>

such other amount as may be determined  under Section  401(a)(17)(B) of the Code
to  reflect   cost-of-living   increases]   (hereinafter   referred  to  as  the
"Compensation  Limitation");   provided,  however,  if  a  Participant's  Annual
Compensation for the Year exceeds the maximum amount of Annual Compensation that
can be taken into account for any purpose under the Plan,  the  Participant  may
designate  which portion of his total  compensation  shall be considered for any
such purpose.

     Sec.  1.7   Beneficiarymeans  any  person  or  fiduciary  designated  by  a
Participant  or Former  Participant  in  accordance  with the terms  hereof  and
Section 401(a)(9) of the Code to receive benefits hereunder  following the death
of  such  Participant  or  Former  Participant.   Each  Participant  and  Former
Participant may, from time to time, select one or more  Beneficiaries to receive
benefits  pursuant to Section 8.1 in the event of the death of such  Participant
or Former Participant.  Such selection shall be made in writing by Notice to the
Administrator.  Unless  the  provisions  of the  Plan  or a  Qualified  Domestic
Relations  Order  provide  otherwise,  the last such  selection  filed  with the
Administrator  prior  to  the  date  of  death  of  the  Participant  or  Former
Participant shall determine to whom Plan benefits shall be paid.

     If the  Participant  or Former  Participant  is  married at the date of his
death,  the  Beneficiary  shall be the  surviving  spouse  unless the spouse has
consented  in  writing  to the  designation  of some  other  Beneficiary,  which
designation  may not be changed  without  spousal  consent  unless the voluntary
consent of the spouse (i) expressly  permits  designations by the Participant or
Former Participant  without any requirement of further consent by the spouse and
(ii)  acknowledges  that the  spouse  has the  right to limit the  consent  to a
specific  Beneficiary.  Such written consent must acknowledge the effect of such
selection  and such  consent must be  witnessed  by a Plan  representative  or a
notary  public.  Spousal  consent is not  required if it is  established  to the
satisfaction of the Plan representative that the consent may not be obtained (i)
because the Participant or Former  Participant  has no spouse,  (ii) because the
spouse  cannot be located or (iii)  because of such other  circumstances  as the
Secretary of Treasury may by regulations prescribe.  Any consent by a spouse (or
establishment that the consent of the spouse is not required) shall be effective
only with respect to that particular spouse.



                                       7
<PAGE>


     If the  Administrator  cannot  readily  determine  whether a Participant or
Former  Participant  has a  spouse  under  the laws of the  state  in which  the
Participant or Former  Participant  resides resulting from an individual's claim
to be a "common law" spouse of a Participant  or Former  Participant  or similar
circumstances,  the  Administrator  may request such  individual  to provide the
Administrator  with a legal opinion  satisfactory to the  Administrator or other
evidence demonstrating the individual's status as a spouse of the Participant or
Former  Participant.  The Administrator  has the sole and absolute  authority to
determine  an  individual's  status  as a  spouse  of a  Participant  or  Former
Participant and any such determination shall be final, binding and conclusive on
all parties ever  claiming an interest in the Plan.  Any consent by a spouse (or
establishment  that the  consent  of the spouse  may not be  obtained)  shall be
effective only with respect to that spouse. If a Participant is divorced and the
Participant's  spouse was a  Beneficiary  named by the  Participant,  the spouse
shall be deemed to have  predeceased the Participant and such designation of the
spouse shall be void and the next successive  Beneficiary or Beneficiaries shall
become the  Beneficiary(ies)  entitled to the benefits under the Plan,  unless a
Qualified  Domestic  Relations  Order requires a death benefit be payable to the
spouse.

     If a  Participant's  or  Former  Participant's  selection  is not  made  in
compliance with these  provisions or if all designated  persons shall predecease
the  Participant  or Former  Participant,  or the  designation  becomes  void as
provided  in  the  preceding  paragraph,  Beneficiary  means  the  first  of the
following classes of successive  preference  beneficiaries  then surviving:  the
Participant's or Former Participant's:

(a)  surviving spouse,

(b)  descendants, per stirpes(including adopted children),

(c)  parents in equal shares,

(d)  brothers and sisters in equal shares, and

(e)  estate.

     If more than one  Beneficiary of a particular  class (primary or secondary)
is  entitled  to  benefits,  payments  shall  be made in  equal  shares  to such
Beneficiaries,  unless some other specific proportions are clearly designated by
the  Participant  or  Former  Participant.  If more  than one  Beneficiary  of a



                                       8
<PAGE>

particular  class (primary or secondary) is named,  the interest of any deceased
Beneficiary   of  that  class  shall  pass  to  the  surviving   Beneficiary  or
Beneficiaries  of that class except to the extent that the designation  provides
for payment to any secondary  Beneficiary or  Beneficiaries  upon the death of a
primary Beneficiary. In determining whether any person named as a Beneficiary is
living at the time of a  Participant's  or Former  Participant's  death, if such
person and the Participant or Former  Participant  died in a common disaster and
there is  insufficient  evidence to determine  which person died first,  then it
shall be deemed that the Beneficiary died first.

     Sec. 1.8 Codemeans the Internal  Revenue Code of 1986, as it may be amended
from  time to time.  Reference  to a  section  of the Code  shall  include  that
section,   applicable  Treasury  regulations   promulgated  thereunder  and  any
comparable  section  of any  future  legislation  that  amends,  supplements  or
supersedes  said section,  effective as of the date such  comparable  section is
effective with respect to the Plan.

     Sec.  1.9  Committeemeans  the  committee  appointed  under  Article XIV to
administer the Plan, as from time to time  constituted.  If no such committee is
appointed, the Company shall constitute the Committee.

     Sec. 1.10 Companymeans The RectorSeal Corporation,  a Delaware corporation,
or such other organization which, pursuant to a spinoff, merger,  consolidation,
reorganization,  or similar corporate transaction where a significant portion of
the  Company's  employees  become  employees  of such  organization,  adopts and
assumes the Plan and the Trust  Agreement as the sponsor with the consent of the
Company and agrees to accept the duties, responsibilities and obligations of the
sponsor  of the  Plan  and the  Trust  Agreement.  Reference  in the Plan to the
Company  shall  refer to any such  organization  which  adopts and  assumes  the
sponsorship of the Plan and the Trust Agreement.

     Sec.  1.11   Disabilitymeans   the  physical  or  mental  incapacity  of  a
Participant  which, in the opinion of a physician approved by the Administrator,
will  permanently  prevent such  Participant  from  performing  any of the usual
duties of his employment.



                                       9
<PAGE>


     Sec.  1.12 Early  Retirement  Datemeans  the  Anniversary  Date of the Year
coinciding  with or next  following the later of the date a Participant  attains
age 55 and has completed at least ten Years of Service  (Vesting),  provided the
Participant  has  elected  at least 60 days  prior to such  Anniversary  Date to
terminate his employment with all Affiliated Companies.

     Sec. 1.13 Employee means any individual in the employ of an Employer who is
included on the Federal Insurance Contribution Act rolls of an Employer (and who
is classified as an Employee of an Employer),  excluding (i) any Leased Employee
that  Section  414(n) of the Code treats as an Employee of an  Employer,  unless
classification  of such Leased  Employee as an Employee is necessary to maintain
the qualification of the Plan, (ii) any employee included in a unit of Employees
covered by a collective  bargaining  agreement  between an Employer and employee
representatives,   if  retirement  benefits  were  the  subject  of  good  faith
bargaining and if two percent or less of the employees who are covered  pursuant
to that  agreement  are  professional  employees  [as  defined  in  Treas.  Reg.
ss.1.410(b)-9],  (iii) any  employee  who is a  non-resident  alien  [within the
meaning of Section  7701(b)(1)(B) of the Code] and who received no earned income
[within the meaning of Section  911(d)(2) of the Code] from any  Employer  which
constitutes  income from sources within the United States [within the meaning of
Section  861(a)(3)  of the Code],  and (iv)  those  employees  of an  Affiliated
Employer that has not elected to participate  in the Plan.  The term  "Employee"
shall not  include any  individual  who by  contract  is not  classified  by the
Employer as a common law employee of the  Employer,  even if such  individual is
included on the Employer's  payroll for Federal income tax withholding  purposes
or whether  such  person is later  classified  as an  employee  by the  Internal
Revenue Service, the Department of Labor, a court, an administrative  agency, or
an Employer.

     Sec. 1.14 Employer means the Company and any other Affiliated Company, with
respect to its Employees,  provided such Affiliated Company is designated by the
governing  body  of  the  Company  as an  Employer  under  the  Plan  and  whose
designation  as such has become  effective  and has  continued  in  effect.  The
designation  shall become effective only when it shall have been accepted by the
governing body of the Employer and shall be effective for the Year determined by
the governing  body of the Company and the Employer.  An Employer may revoke its
acceptance of such  designation at any time, but until such  acceptance has been



                                       10
<PAGE>

revoked, all of the provisions of the Plan and amendments thereto shall apply to
the Employees of the Employer.  In the event the  designation of the Employer as
such is revoked by the governing body of the Employer, this will not be deemed a
termination of the Plan.

     Sec. 1.15 Entry Datemeans the first day of the Year.

     Sec. 1.16 ERISAmeans the Employee  Retirement  Income Security Act of 1974,
as it may be amended from time to time, and applicable  regulations  promulgated
thereunder.

     Sec. 1.17 Five-Year Break in Servicemeans any five consecutive Years during
each of which the Employee or Participant performs for an Affiliated Company 500
or fewer Hours of Service.

     Sec. 1.18 Former Participantmeans any individual who has been a Participant
in the Plan (i) who is no longer in the  employ of an  Employer  and who has not
yet received the entire  benefit to which he is entitled under the Plan, or (ii)
who is still in the employ of an  Affiliated  Company and who has an interest in
the Plan but who is not eligible for Employer contributions and forfeitures.

     Sec.  1.19 Hours of  Servicemeans  each hour  credited to an  individual in
accordance with the following:

(a)  An Hour of Service  shall be  credited to an  individual  for each hour for
     which he is either directly or indirectly paid, or entitled to payment,  by
     any Affiliated Company or, to the extent permitted by the governing body of
     the Company or the  Administrator  in accordance with Section  401(a)(4) of
     the Code, by the predecessor  company.  An Employee on a non-hourly payroll
     whose Annual Compensation is not determined on the basis of certain amounts
     for each hour worked  shall be  credited  with 45 Hours of Service for each
     week  during  which he would  otherwise  have at least one Hour of Service,
     adjusted pro rata on the basis of 10 hours per day when  employment  or the
     Year begins on other than a Monday or ends on other than a Friday.

(b)  An Hour of Service  shall be  credited to an  individual  for each hour for
     which back pay,  irrespective  of  mitigation  of damages,  has been either
     awarded or agreed to by an Affiliated  Company or, to the extent  permitted



                                       11
<PAGE>

     by the  governing  body of the Company or the  Administrator  in accordance
     with Section 401(a)(4) of the Code, by the predecessor company. These Hours
     of Service shall be credited to the individual for the  computation  period
     or  periods  to which  the  award or  agreement  pertains  rather  than the
     computation period in which the award, agreement or payment is made.

(c)  An Hour of Service shall be credited to an  individual  for each hour while
     on unpaid  leave  pursuant to the Family and Medical  Leave Act of 1993 for
     which he would  have been paid or  entitled  to  payment  by an  Affiliated
     Company had he been performing services.

(d)  In no event  shall an  individual  be given  credit for a specific  Hour of
     Service under more than one of the above  subsections  (a), (b) or (c) and,
     notwithstanding  any  other  provision  of the  Plan  to the  contrary,  an
     individual  shall not be credited with Hours of Service more than once with
     respect to the same period of time.

(e)  Hours of Service for periods during which no duties are performed  shall be
     calculated and credited pursuant to Section  2530.200b-2(b)  and (c) of the
     Department of Labor regulations which are incorporated herein by reference.
     No more than 501 Hours of Service  shall be  credited  under the  preceding
     sentence during any computation period.

(f)  Notwithstanding  any other provisions of this Section 1.19, in the event an
     Employee is:

     (i)  on leave of absence  authorized  by his  Employer in  accordance  with
          standard   personnel   policies   of  such   Employer   applied  in  a
          nondiscriminatory   manner  to  all  Employees   similarly   situated,
          including those described in Section 1.19(g) hereof, or

     (ii) on  military  leave  while  the  Employee's  reemployment  rights  are
          protected by law,

     a  Five-Year  Break in  Service  and a One-Year  Break in Service  shall be
     deemed not to have occurred and the Employee shall continue to accrue Hours
     of Service  under the Plan  during the period of leave of  absence,  at the
     same rate he would have had he remained an active Employee  throughout such
     leave of absence,  provided he returns to  employment  immediately  (in the



                                       12
<PAGE>

     case of  military  leave,  within the  90-day  period  after his  honorable
     discharge or release or within the period  prescribed  by  applicable  law,
     whichever is longer) upon the expiration of such authorized  absence. If an
     Employee fails to return to the active employment of an Affiliated  Company
     within the time  specified  in a written  leave of  absence,  or after such
     period of military  service,  as  appropriate,  his service  will be deemed
     terminated as of the end of such permitted period of absence.

(g)  In  addition,  solely for the purpose of  determining  a One-Year  Break in
     Service  and a  Five-Year  Break in  Service,  the Plan  shall  credit  the
     Employee with the Hours of Service which otherwise would normally have been
     credited  to such  individual  during  the  computation  period in which an
     absence from the service of an Affiliated  Company occurs for any period by
     reason of (i)  pregnancy  of the  individual,  (ii) birth of a child of the
     individual,  (iii)  placement of a child with the  individual in connection
     with the adoption of such child by such individual, or (iv) for purposes of
     caring for such child for a period  beginning  immediately  following  such
     birth or placement;  provided, however, if the Employee has credit for more
     than 500 Hours of Service  without the  application of this sentence in the
     computation  period in which the absence from the service of an  Affiliated
     Company occurs for the reasons  specified in this sentence,  the Plan shall
     credit the Employee with such Hours of Service in the following computation
     period.  The Plan shall not credit any  Employee  with any Hours of Service
     under this  subsection  (g)  unless  such  Employee  timely  furnishes  the
     Administrator  information  establishing  (i)  that  the  absence  from the
     service of an Affiliated  Company was for one or more reasons  specified in
     the first  sentence of this  subsection (g) and (ii) the number of days for
     which there was an absence.

(h)  Effective  December 12, 1994,  each period of  qualified  military  service
     (within the meaning of Chapter 43 of Title 38,  United  States Code) served
     by an  Employee  who is  reemployed  under that  chapter  by an  Affiliated
     Company  following  such  service  shall  be  considered  service  with  an
     Affiliated Company for purposes of determining his Hours of Service.



                                       13
<PAGE>


     Sec. 1.20 Individual  Accountmeans an account or record to be maintained by
the Trustee or the  Recordkeeper  reflecting the monetary value of the undivided
interest in the Trust Fund of each Participant, each Former Participant and each
Beneficiary  and shall  include  the Other  Investments  Account  and the Parent
Company Stock Account.

     Sec.  1.21  Interactive  Electronic   Communicationmeans,   to  the  extent
available  under  the  Plan,  a  communication  between  a  Participant,  Former
Participant or Beneficiary and the Recordkeeper  pursuant to a system maintained
by the Recordkeeper and communicated to each Participant, Former Participant and
Beneficiary in compliance with final Treasury  regulations and final  Department
of Labor regulations  whereby each such individual may initiate actions approved
from time to time by the Administrator, including the options under Section 18.2
if he is a  Qualified  Participant,  with  respect  to his  Individual  Account,
through the use of the  telephone,  internet or such other system and a personal
identification  number  assigned  to  the  Participant,  Former  Participant  or
Beneficiary by the Recordkeeper or the Administrator.  If a Participant,  Former
Participant or Beneficiary (i) consents to participate in the Plan's Interactive
Electronic  Communication  procedures  adopted  by the  Administrator  and  (ii)
acknowledges  that actions  taken by such  Participant,  Former  Participant  or
Beneficiary,  through the use of his personal  identification  number constitute
his  signature,  to the extent  allowed by the  Administrator,  for such actions
approved  from  time to  time  by the  Administrator,  the  Participant,  Former
Participant or Beneficiary, as the case may be, will be deemed to have given his
written consent and  authorization  to any action  resulting from the use of the
Interactive   Electronic   Communication  system  by  the  Participant,   Former
Participant or Beneficiary.

     Sec. 1.22 Leased Employeemeans an individual who is not in the employ of an
Employer and who,  pursuant to a leasing  agreement  between an Employer and any
other person (including such individual) ("leasing organization"), has performed
services for an Employer [or for an Employer and any other person  related to an
Employer within the meaning of Section 144(a)(3) of the Code] on a substantially
full-time  basis for at least one year and who performs such services  under the
primary direction or control by the Employer. Leased Employee shall also include
any  individual  who is deemed to be an employee of an  Employer  under  Section
414(o) of the Code.  Notwithstanding  the preceding  sentences,  if  individuals



                                       14
<PAGE>

described in the preceding  sentence  constitute  less than 20% of an Employer's
non-highly compensated work force within the meaning of Section 414(n)(5)(C)(ii)
of the Code, the Plan shall not treat an individual as a Leased  Employee if the
leasing  organization  covers the  individual in a money  purchase  pension plan
providing   immediate   participation,   full  and   immediate   vesting  and  a
non-integrated  contribution  formula  equal  to at  least  ten  percent  of the
individual's  annual  compensation [as defined in Section 415(c)(3) of the Code,
but including amounts  contributed by an Employer pursuant to a salary reduction
agreement which are excludable from the individual's gross income under Sections
125,  402(e)(3),  402(h)(1)(B),  403(b) or 132(f)(4) of the Code]. If any Leased
Employee shall be treated as an Employee of an Employer, however,  contributions
or benefits  provided  by the leasing  organization  which are  attributable  to
services of the Leased  Employee  performed for an Employer  shall be treated as
provided by the Employer.

     Sec.  1.23  Named  Fiduciarymeans  the  Company,  except to the  extent the
Company has delegated specific functions to the Committee,  if any, appointed by
the Company  pursuant to Article XIV. If no Committee is appointed,  the Company
will perform the functions of the Committee.

     Sec.  1.24  Normal   Retirement   Datemeans  a   Participant's   or  Former
Participant's 65th birthday.

     Sec. 1.25 Noticemeans,  unless otherwise provided specifically in the Plan,
(i) written Notice on an appropriate form provided by the  Administrator,  which
is properly  completed and executed by the party giving such Notice and which is
delivered  by  hand  or by mail to the  Administrator  or to  such  other  party
designated  by the  terms of the Plan or by the  Administrator  to  receive  the
Notice or (ii) Notice by  Interactive  Electronic  Communication,  to the extent
authorized  by  the   Administrator,   to  the   Recordkeeper.   Notice  to  the
Administrator,  the Recordkeeper or to any other person as provided herein shall
be deemed to be given when it is  actually  received  (either  physically  or by
Interactive Electronic  Communication,  as the case may be) by the party to whom
such Notice is given.



                                       15
<PAGE>


     Sec. 1.26 One-Year Break in Servicemeans any Year during which the Employee
or Participant performs for an Affiliated Company 500 or fewer Hours of Service.

     Sec.  1.27 Other  Investments  Accountmeans  the portion of the  Individual
Account  maintained  by the Trustee or the  Recordkeeper  for each  Participant,
Former Participant or Beneficiary reflecting the monetary value of such person's
individual interest in the Trust Fund attributable to Employer contributions and
forfeitures  in cash  under  the Plan  which  have not been  invested  in Parent
Company Stock and are to be invested in other assets;  it shall be credited with
the net income (or  debited  with the loss) of the Trust  Fund  attributable  to
investments in the Other Investments Account.

     Sec. 1.28 Parent Company Stockmeans shares of any class of stock, preferred
or common  stock  which are issued by  Capital  Southwest  Corporation,  a Texas
corporation,  and are readily tradable on an established  securities market. The
shares of Parent Company Stock  currently held by the Plan are regularly  traded
on the Nasdaq  National  Market.  If there is no common  stock  which  meets the
foregoing requirement, Parent Company Stock means common stock issued by Capital
Southwest  Corporation  having a combination of voting power and dividend rights
equal to or in excess of (i) that  class of common  stock of  Capital  Southwest
Corporation  having the  greatest  voting  power,  and (ii) that class of common
stock of Capital  Southwest  Corporation  having the greatest  dividend  rights.
Noncallable  preferred  stock shall be deemed to be Parent Company Stock if such
stock is  convertible  at any time into stock which  constitutes  Parent Company
Stock hereunder and if such conversion is at a conversion price which (as of the
date of the  acquisition by the Trust Fund) is  reasonable.  For purposes of the
preceding sentence, pursuant to applicable Treasury regulations, preferred stock
shall be treated  as  noncallable  if after the call there will be a  reasonable
opportunity  for a  conversion  which meets the  requirements  of the  preceding
sentence.

     Sec. 1.29 Parent Company Stock  Accountmeans  the portion of the Individual
Account  maintained  by the Trustee or the  Recordkeeper  for each  Participant,
Former  Participant  or  Beneficiary  to which  is  credited  shares  (including
fractional  shares) of Parent Company Stock which are  attributable  to Employer
contributions and forfeitures under the Plan.



                                       16
<PAGE>


     Sec.  1.30  Participantmeans  an  Employee  who  has  met  the  eligibility
requirements  of the Plan as  provided  in  Article  II hereof and who has begun
participating in the Plan.

     Sec. 1.31 Planmeans the stock bonus plan embodied  herein,  as the same may
be amended from time to time, and shall be known as "The RectorSeal  Corporation
and Jet-Lube,  Inc. Employee Stock Ownership Plan." Effective April 1, 2007, the
Plan has been formally  designated an employee  stock  ownership plan within the
meaning of Section 4975(e)(7) of the Code and Treas. Reg. ss.54.4975-11(a).

     Sec. 1.32 Qualified Domestic Relations  Ordermeans any judgment,  decree or
order (including approval of a property settlement  agreement) which (i) relates
to the provision of child support,  alimony payments, or marital property rights
to a spouse,  former spouse, child or other dependent of a Participant or Former
Participant,  (ii) is made pursuant to a state  domestic  relations  law,  (iii)
creates or recognizes the existence of an Alternate Payee's right to, or assigns
to an  Alternate  Payee the right to,  receive all or a portion of the  benefits
payable with respect to a Participant or Former  Participant  under the Plan and
(iv) complies with the requirements of Section 414(p) of the Code.

     Sec. 1.33 Qualified Election Periodmeans the six-Year period beginning with
the later of (i) the first Year in which the  Participant or Former  Participant
first becomes a Qualified  Participant,  or (ii) the first Year beginning  after
March 31, 2007.

     Sec. 1.34 Qualified  Participantmeans any Participant or Former Participant
who has  completed  ten Years of  Service  (Vesting)  as a  Participant  and has
attained age 55.

     Sec. 1.35  Recordkeepermeans  any person or entity appointed by the Company
or the Committee to perform  recordkeeping and other administrative  services on
behalf of the Plan. If no Recordkeeper  is appointed,  the Trustee shall perform
the duties of the Recordkeeper.

     Sec. 1.36 Trust  Agreementmeans "The RectorSeal  Corp-oration and Jet-Lube,
Inc.  Employee Stock  Ownership Plan Trust  Agreement"  entered into between the
Company  and the  Trustee to carry out the  purposes of the Plan and under which
the Trust Fund is  maintained;  provided  that if such  agreement  be amended or



                                       17
<PAGE>

supplemented,  Trust  Agreement,  as  of a  particular  date,  shall  mean  such
agreement, as amended and supplemented and in force on such date.

     Sec. 1.37 Trust  Fundmeans  all assets of  whatsoever  kind and nature from
time to time held by the Trustee  pursuant to terms and  conditions of the Trust
Agreement out of which benefits of the Plan are provided.

     Sec. 1.38 Trusteemeans any institution or individuals designated as Trustee
or Trustees by the governing  body of the Company,  or any successor  trustee or
additional  trustee or  trustees  acting at any time as Trustee  under the Trust
Agreement.

     Sec. 1.39 Valuation  Datemeans any day of the Year the Nasdaq Global Market
is open for trading.

     Sec. 1.40  Yearmeans  the 12-month  period from April 1 of each year to the
next following March 31.

     Sec. 1.41 Year of Service  (Participation)means  the 12- consecutive  month
period  commencing  with the employment  commencement  date of an Employee by an
Affiliated  Company,  which is the date the Employee  first  performs an Hour of
Service for an Affiliated  Company,  during which the Employee performs at least
1,000  Hours of Service  for an  Affiliated  Company.  If an  Employee  does not
perform at least 1,000 Hours of Service in the 12-month  period  beginning  with
his employment commencement date, Year of Service (Participation) means the Year
commencing with the Year immediately following his employment  commencement date
during  which the  Employee  performs  at least  1,000  Hours of Service  for an
Affiliated Company.

     Sec. 1.42 Year of Service (Vesting)means any Year during which the Employee
performs at least 1,000 Hours of Service for an Affiliated  Company,  subject to
the following:

     (a)  if an  Employee  has a  One-Year  Break in  Service,  Years of Service
          (Vesting)  before such break shall not be taken into account  until he
          has  completed  a Year  of  Service  (Vesting)  after  his  return  to
          employment; and

     (b)  if an  Employee  has a Five-Year  Break in  Service,  Years of Service
          (Vesting)  after such break  shall not be taken into  account  for the
          purposes of determining the  nonforfeitable  percentage of his accrued



                                       18
<PAGE>

          benefit derived from Employer  contributions which accrued before such
          break.

     Sec. 1.43 Gender and Number.  Except as otherwise indicated by the context,
any masculine terminology used herein also includes the feminine and neuter, and
vice  versa,  and the  definition  of any term  herein in a singular  shall also
include the plural, and vice versa.

                                   ARTICLE II

                            ELIGIBILITY OF EMPLOYEES
                            ------------------------

     Sec. 2.1 Eligibility. Each eligible Employee shall be deemed to have become
a  Participant  (unless he elects  otherwise  pursuant to Section 2.2) as of the
Entry Date which falls within the  Employee's  completion of one Year of Service
(Participation).

     Sec. 2.2 Election Not to Participate.  An Employee  eligible to participate
or  participating in the Plan may elect not to participate (or elect to withdraw
from the Plan if then  participating)  for a given Year,  provided  that written
notice of such  election  is given to the  Administrator  in  satisfactory  form
before the end of the Year in  question.  Upon receipt by the  Administrator  of
such notice, the Participant shall become a Former Participant  retroactively to
the  beginning of the  particular  Year.  Such  election  shall remain in effect
unless and until the Employee ceases to be such or elects to participate  again.
An  Employee  eligible  to  participate  in the  Plan  who  has  elected  not to
participate  (or  elected  to  withdraw)  may elect to  participate  in any Year
thereafter by giving written notice in satisfactory  form to the  Administrator.
Such election shall be effective  immediately,  and the Employee shall become an
active  Participant  as  of  the  date  of  receipt  of  such  election  by  the
Administrator   or  such  later  date  as  may  be   specified  in  the  notice.
Notwithstanding the foregoing  provisions of this Section 2.2, William R. Thomas
and the Director of Business  Development of Blue Magic,  Inc.  (formerly  Cargo
Chemical Corporation) are excluded from participating in the Plan.

     Sec. 2.3 Eligibility upon Reemployment.  Notwithstanding  Section 2.1, each
Employee who completes a Year of Service  (Participation) in either his first 12



                                       19
<PAGE>

months of employment or a Year, as required in Section 1.41, but is not employed
at the  expiration  of  such  12-month  period  or such  Year,  shall  become  a
Participant  immediately  upon his return to the status of Employee,  subject to
Section  2.6. An Employee who  completes  1,000 Hours of Service in the 12-month
period or the Year  while  employed  by an  Affiliated  Company  which is not an
Employer  shall become a Participant  as of the Entry Date preceding the date on
which he becomes an Employee of an Employer.

     Sec. 2.4 Reemployment of Participant. If the employment of a Participant is
terminated for any reason and he subsequently  is reemployed by an Employer,  he
shall be eligible to become a Participant  (unless he elects otherwise  pursuant
to Section 2.2) on the date he resumes employment with an Employer.

     Sec.  2.5  Exclusion  of  Employees   Covered  by  Collective   Bargaining.
Notwithstanding  Section  2.1, an Employee  covered by a  collective  bargaining
agreement  between  the  Employer  and a  collective  bargaining  representative
certified under the Labor Management  Relations Act who is otherwise eligible to
become a Participant under this Article shall be excluded if retirement benefits
were the subject of good faith bargaining between the Employee's  representative
and the Employer and if the  agreement  does not require the Employer to include
such Employee in this Plan. An Employee who is a Participant in the Plan when he
is  excluded  under  the  provisions  of this  Section  2.5 shall  cease  active
participation  in the Plan on the effective date of that  collective  bargaining
agreement and shall not participate in Employer  contributions while a member of
the ineligible class but shall not be considered to have terminated employment.

     Sec.  2.6  Eligibility  Upon  Entry  or  Reentry  into  Eligible  Class  of
Employees.  In the event a  Participant  is  excluded  because he is no longer a
member of an eligible  class of  Employees as specified in this Article II, such
Employee shall participate as of the Entry Date preceding the date of his return
to an eligible  class of  Employees.  In the event that an Employee who is not a
Former  Participant  in the Plan  becomes a member of the eligible  class,  such
Employee  shall  participate  as of the  Entry  Date  preceding  the date of his
becoming an eligible class member if such Employee has satisfied the eligibility
requirements of Section 2.1 and would have  previously  become a Participant had
he been in the eligible class.



                                       20
<PAGE>


                                   ARTICLE III

                                  CONTRIBUTIONS
                                  -------------

     Sec.  3.1  Contributions  of the  Employer.  The  governing  body  of  each
Employer,  in its  discretion,  shall  determine  the amount of, and cause to be
made, its contribution to the Plan. Each Employer's  liability for the amount of
its  contribution  will be established by its governing  body, and other actions
taken,  within the time required by law so as to permit the  contributions for a
particular  Year to be  deductible  for  Federal  income  tax  purposes  for the
corresponding  taxable  year,  and  the  amount  of  such  contribution  will be
communicated to the Participants as soon as practicable after the amount thereof
has been established.

     Sec. 3.2 Form of Employer Contributions.  The Employer contribution by each
Employer may be paid in cash or in securities,  other property, or shares having
an equivalent  value, or any combination  thereof,  as the governing body of the
Employer may determine.  To the extent that the Trust Fund has cash  obligations
payable  in one  year  from  the date the  Employer  contribution  is due,  such
Employer  contribution  shall  be paid in cash in an  amount  determined  by the
Employer or the Administrator.

     Sec. 3.3 Time of Contributions.  Contributions made by an Employer pursuant
to Section  3.1 may be made at any time and from time to time,  except  that the
total  contribution  for any Year  shall be paid in full not later than the time
prescribed  by law to enable the Employer to obtain a deduction  therefor on its
federal  income  tax  return  for  said  Year.   Contributions  made  after  the
Anniversary  Date of the Year but  within  the time  for  filing  an  Employer's
federal income tax return (including extensions thereof) shall be deemed made as
of the Anniversary Date of that Year if so directed by the Employer, except such
contributions  shall not share in increases,  decreases,  or income to the Trust
Fund prior to the date  actually  made.  Notwithstanding  the  foregoing,  on an
Employer's  request,  a contribution which was made upon a mistake of fact or on
deductibility of the  contribution  shall be returned to the Employer within one
year after payment of the  contribution or disallowance of the deduction (to the
extent disallowed),  as the case may be; provided,  however, the amount returned



                                       21
<PAGE>

to an  Employer  shall not be  increased  by any  earnings  thereon and shall be
reduced by any losses attributable to such amount.

     Sec. 3.4 Limit on Employer  Contributions.  Notwithstanding  the  foregoing
provisions  of this Article III,  the  contribution  of an Employer for any Year
shall in no event exceed an amount which will, under the law then in effect,  be
deductible by the Employer in computing its federal taxes for the fiscal year of
the Employer in which that Year ends.

     Sec. 3.5 Manner of Making  Contributions.  All  contributions  to the Trust
Fund  shall  be  paid  directly  to  the  Trustee.   In  connection   with  each
contribution,  the Employer shall provide the Recordkeeper with information that
identifies each  Participant on whose behalf the  contribution is being made and
the amount thereof.  The Recordkeeper  shall provide the Trustee with any of the
information  received  by it which is  necessary  for the Trustee to perform its
duties and obligations with respect to the Trust Fund.

     Sec. 3.6 Contributions with Respect to Military Leave.  Notwithstanding any
provision of the Plan to the contrary,  contributions  with respect to qualified
military  service  (within the meaning of Chapter 43 of Title 38,  United States
Code) shall be permitted in accordance with Section 414(u) of the Code.

                                   ARTICLE IV

                      ACCOUNTS AND VALUATION OF TRUST FUND
                      ------------------------------------

     Sec. 4.1 Participants'  Individual  Accounts.  The assets of the Trust Fund
shall constitute a single fund in which each Participant and Former  Participant
shall have his proportionate interest as provided in the Plan. The Administrator
shall  maintain,  or cause to be maintained,  with respect to each Employer,  an
Individual  Account  for each  Participant  or Former  Participant  which  shall
reflect the credits and charges  allocable  thereto in accordance with the Plan.
The Administrator shall maintain, or cause to be maintained,  records which will
adequately  disclose  at all  times  the  state  of the  Trust  Fund and of each
separate interest therein.  The books,  forms and methods of accounting shall be
entirely in the hands of and subject to the supervision of the Administrator.



                                       22
<PAGE>


     Sec.  4.2  Valuation  of  the  Trust  Fund  and  of the  Interest  of  Each
Participant.   Within  a  reasonable  time  after  each  Allocation   Date,  the
Administrator  shall direct the Trustee to prepare a statement of the  condition
of the Trust Fund,  setting forth all investments,  receipts and  disbursements,
and other transactions  effected by it during the applicable period, and showing
all the assets of the Trust  Fund and the cost and fair  market  value  thereof.
This statement shall be delivered to the Administrator.  At least annually,  the
Administrator shall cause to be prepared, and shall deliver to each Participant,
Former  Participant and Beneficiary,  a report disclosing the vesting status and
fair  market  value  of his  Individual  Account  in the  Trust  Fund  as of the
applicable Allocation Date.

     The value of the Trust Fund shall be  determined  by the  Trustee as of the
close of business on any Valuation Date determined  necessary by the Trustee, or
as soon  thereafter  as  practicable,  and shall be the cash and the fair market
value of Parent  Company  Stock and other  assets held by the Trust  Fund,  with
equitable adjustments for pending trades, less all charges,  expenses,  reserves
and liabilities due which are determined to be properly  chargeable to the other
investments  of the  Trust  Fund  as of the  Valuation  Date.  For  purposes  of
determining the market value of securities held by the Trustee,  such securities
shall be  valued  as of the  close of  business  on the  Valuation  Date or,  if
securities  shall not have been  traded and  reported  on a national  securities
exchange or in the  over-the-counter  market on such date,  then at the last bid
price as of the close of business on the Valuation Date.

     Notwithstanding  any other  provision  of this  Section 4.2, if the Trustee
shall  determine  that the  Trust  Fund  assets  consist  in whole or in part of
property not traded freely on a recognized market,  including but not limited to
Parent Company Stock, or that information necessary to ascertain the fair market
value thereof is not readily available to the Trustee, the Trustee shall request
the  Administrator  to instruct the Trustee as to the value of such property for
all  purposes  under the Plan,  and the  Administrator  shall  comply  with such
request. The Administrator may engage a competent appraiser to assist it in this
process.  The  value  placed  upon such  property  by the  Administrator  in its
instructions  to the Trustee  shall be  conclusive  and binding upon the Trustee
subject to the fiduciary provisions of ERISA. If the Administrator shall fail or
refuse  to  instruct  the  Trustee  as to the  value of such  property  within a



                                       23
<PAGE>

reasonable time after receipt of the Trustee's request to do so, the Trustee may
engage a competent  appraiser to fix the fair market value of such  property for
all purposes  hereunder.  The determination of any duly retained appraiser as to
the fair market value of such property  shall be the value  reported  hereunder,
and  neither  the  Administrator  nor the Trustee  shall have any  liability  in
connection  therewith,  subject  to  the  fiduciary  provisions  of  ERISA.  The
reasonable fees and expenses  incurred for any such appraisal shall be deemed an
expense of the Trustee and paid as provided in Section 15.8.

     If the  Administrator  in good faith  determines  that certain  expenses of
administration  paid by the Trustee during the Year under  consideration are not
general,   ordinary  and  usual  and  should  not  equitably  be  borne  by  all
Participants, Former Participants and Beneficiaries, but should be borne only by
one or more  Participants,  Former  Participants or  Beneficiaries,  for whom or
because of whom such  specific  expenses  were  incurred,  the net  earnings and
adjustments  in value of the  Individual  Accounts  shall  be  increased  by the
amounts of such expenses,  and the Administrator shall make suitable adjustments
by debiting the particular Individual Account or Individual Accounts of such one
or more Participants,  Former Participants or Beneficiaries;  provided, however,
that any such  adjustment  must be  nondiscriminatory  and  consistent  with the
provisions of Section 401(a) of the Code.

     The  determination of the fair market value of the assets of the Trust Fund
and the  Administrator's  charges  or credits to the  Individual  Accounts  with
respect to Participants, Former Participants or Beneficiaries shall be final and
conclusive  on all persons ever  interested  hereunder,  subject to Section 11.6
hereof.

     Sec.  4.3   Allocations  to  Individual   Accounts.   In  order  that  each
Participant's interest as provided in the Plan may be determined, the Individual
Account of each  Participant  [or Former  Participant,  for purposes of Sections
4.3(c)(iii)] shall be adjusted as follows:

     (a)  The Parent Company Stock Account of each  Participant will be credited
          at least once each Year with his allocable share of (i) Parent Company
          Stock purchased and paid for by the Trust Fund from  contributions  or
          out of his Other  Investments  Account or  contributed  in kind by his
          Employer,   (ii)   forfeitures  of  Parent  Company  Stock  which  are
          attributable  to his  Employer  and (iii)  stock  dividends  of Parent
          Company Stock on Parent Company Stock held in his Parent Company Stock
          Account or acquired in exchange for other assets not yet allocated.

     (b)  The Other  Investments  Account of each  Participant  will be credited
          with his remaining  allocable share of  contributions  and forfeitures
          not represented by Parent Company Stock which are  attributable to his
          Employer and with cash dividends on Parent Company Stock in his Parent
          Company Stock Account;  it will also be credited (or debited) with his
          share of the net income (or loss) of the Trust  Fund  attributable  to



                                       24
<PAGE>

          it. Each Participant's  Other Investments  Account may also be debited
          for any purchases of Parent Company Stock and his Parent Company Stock
          Account shall then be credited.

     (c)  The allocations will be made as follows:

          (i)  Employer  Contributions and Other Items.  Employer  contributions
               and Parent Company Stock  attributable  thereto will be allocated
               as of each  Anniversary  Date among the  Individual  Accounts  of
               Participants who are Employees of each Employer at the end of the
               Year and,  for any Year in which the Plan is not a Top Heavy Plan
               as defined in Section 19.3(f), who completed at least 1,000 Hours
               of Service  during the Year,  and to the  Individual  Accounts of
               Former  Participants whose employment was terminated by reason of
               death,  Disability  or  retirement  under  Article VII during the
               Year, in the ratio in which the Annual  Compensation of each such
               Participant and Former  Participant bears to the aggregate Annual
               Compensation of all such Participants and Former Participants.

          (ii) Forfeitures. Forfeitures during a Year attributable to the former
               Participants of each Employer,  subject to Section 10.5, shall be
               allocated  as of the  Anniversary  Date in such  Year  among  the
               Individual  Accounts  of the  remaining  Participants  and Former
               Participants employed by the same Employer in the same proportion
               that the Employer  contributions  are (or would be) allocated for
               such Year.



                                       25
<PAGE>


          (iii) Net Income (or Loss) of the Trust Fund. The net income (or loss)
               of the Trust  Fund  shall be  determined  as of each  Anniversary
               Date, or more frequently if the Trustee or the  Administrator  so
               desires.  Except as  provided  herein  with  respect  to  certain
               dividends and tax refunds,  the net income (or loss) of the Trust
               Fund which is attributable to assets held in a Participant's  and
               Former Participant's Other Investments Account shall be allocated
               to his Other  Investments  Account in the ratio which the balance
               of his Other  Investments  Account on the  preceding  Anniversary
               Date  bears  to the  sum of  such  balances  as of the  preceding
               Anniversary Date for all Participants and Former  Participants in
               the Plan on the subsequent Anniversary Date. Dividends (excluding
               dividends of Parent  Company  Stock) on Parent  Company Stock and
               tax  refunds  with  respect  to  Parent  Company  Stock  shall be
               allocated to the Other Investments Account of each Participant or
               Former  Participant  in the  ratio  that the  number of shares of
               Parent  Company  Stock  held  in  that  Participant's  or  Former
               Participant's  Parent  Company  Stock  Account bears to the total
               number  of  shares of Parent  Company  Stock  held in the  Parent
               Company   Stock   Accounts   of  all   Participants   and  Former
               Participants.  Likewise, dividends declared on any other security
               held  by  the  Trust  Fund  shall  be   allocated  to  the  Other
               Investments  Account of each Participant or Former Participant in
               the ratio that the number of shares of that security to which the
               dividend   relates   held  in  that   Participant's   or   Former
               Participant's Other Investments Account bears to the total number
               of shares of that security held in the Other Investments Accounts
               of all Participants and Former  Participants.  The net income (or
               loss) of the Trust Fund  includes the  increase (or  decrease) in
               the fair  market  value of assets of the Trust Fund  (other  than
               Parent Company Stock),  interest,  dividends,  tax refunds, other
               income and expenses since the preceding Anniversary Date.

     (d)  Special Rate for  Participants  in  Qualified  Military  Service.  For
          purposes of this  Section  4.3,  while a  Participant  is in qualified
          military service (within the meaning of chapter 43 of title 38, United
          States  Code),  he shall be  considered  to be in the  service  of the



                                       26
<PAGE>

          Employer and to receive Annual  Compensation during any such period of
          qualified   military   service  in  an  amount  equal  to  the  Annual
          Compensation  he would have received during such period if he were not
          in such  service,  determined  based on the rate of pay he would  have
          received  from the Employer  but for the absence  during the period of
          such  service;  provided,  however,  if the  Annual  Compensation  the
          Participant  would have received  during such period is not reasonably
          certain,  the  Participant's  average  Annual  Compensation  from  the
          Employer  during  the  12-month  period   immediately   preceding  the
          qualified  military service (or, if shorter,  the period of employment
          immediately preceding the qualified military service) shall be used.

     (e)  Equitable  Allocation.  The  Administrator  may  establish  accounting
          procedures for the purpose of making the  allocations,  valuations and
          adjustments  to  Individual   Accounts  of  Participants   and  Former
          Participants provided for in this Article IV. Should the Administrator
          determine that the strict  application  of its  accounting  procedures
          will not result in an equitable and nondiscriminatory allocation among
          the Other  Investments  Accounts and Parent  Company Stock Accounts of
          Participants and Former Participants, it may modify its procedures for
          the purpose of achieving an equitable and nondiscriminatory allocation
          in accordance with the general concepts of the Plan and the provisions
          of this  Article  IV;  provided,  however,  that such  adjustments  to
          achieve equity shall not reduce the vested portion of a Participant or
          Former  Participant and shall be consistent with the provisions of the
          Code.

     (f)  Computations.  All of the  computations  required to be made under the
          provisions  of this  Article  IV  shall  be made  in  accordance  with
          generally accepted accounting  principles and such computations,  when
          made,  shall be conclusive  with respect  thereto and shall be binding
          upon  all the  Participants  and  Former  Participants  and all  other
          persons  ever having an  interest  in the Trust  Fund,  subject to the
          provisions of Section 8.1.

     (g)  Dividends  After   Anniversary   Date.  If  a  Participant  or  Former
          Participant is to receive a distribution  or withdrawal  from the Plan
          based on the immediately  preceding  Anniversary Date and prior to the
          date of such  distribution or withdrawal a dividend is declared on any
          security held by that Participant's or Former Participant's Individual



                                       27
<PAGE>

          Account,  the amount of the distribution to such Participant or Former
          Participant shall be adjusted to reflect such dividend.

     Sec. 4.4 Included Individual Accounts. For the purposes of this Article IV,
references  to  the  Individual  Accounts  of  Participants  shall  include  the
Individual  Accounts  of  those  who  die,  become  disabled,  retire,  or whose
employment terminates during the Year in question.

     Sec.  4.5  Time  When  Contributions  are  Allocated.  If  directed  by the
Administrator,  an  Employer  contribution  for  a  Year  may  be  provisionally
allocated as of any  Allocation  Date prior to the  Anniversary  Date,  but such
allocation shall be subject to adjustment as of the Anniversary Date.

                                    ARTICLE V

                            LIMITATION ON ALLOCATIONS
                            -------------------------

     Sec. 5.1 Limitation on Allocations.  Notwithstanding any other provision of
the Plan, the following provisions shall be applicable to the Plan:

     (a)  If this Plan is the only plan  maintained by the Employer which covers
          the class of  Employees  eligible  to  participate  hereunder  and the
          Participant  does not  participate in and has never  participated in a
          Related Plan or a welfare  benefit fund, as defined in Section  419(e)
          of the Code,  maintained  by the Employer,  or an  individual  medical
          account,  as defined in Section  415(1)(2) of the Code,  maintained by
          the Employer,  which provides an Annual Addition as defined in Section
          5.2(a), the Annual Additions which may be allocated under this Plan to
          a  Participant's  Individual  Account for a Limitation  Year shall not
          exceed the lesser of:

          (i)  the Maximum Permissible Amount; or

          (ii) any other limitation contained in this Plan.

     (b)  If an Employer maintains, in addition to this Plan, (i) a Related Plan
          which  covers  the same class of  Employees  eligible  to  participate
          hereunder,  (ii) a welfare  benefit fund, as defined in Section 419(e)



                                       28
<PAGE>

          of the Code, or (iii) an  individual  medical  account,  as defined in
          Section 415(l)(2) of the Code, which provides an Annual Addition,  the
          Annual  Additions  which  may  be  allocated  under  this  Plan  to  a
          Participant's  Individual  Account  for a  Limitation  Year  shall not
          exceed the lesser of:

          (i)  the Maximum Permissible Amount,  reduced by the sum of any Annual
               Additions  allocated to the  Participant's  accounts for the same
               Limitation  Year under this Plan and such other  Related Plan and
               the welfare plans described in clauses (ii) and (iii) above; or

          (ii) any other limitation contained in this Plan.

     Sec. 5.2  Definitions.  For purposes of this Article V, the following terms
shall have the meanings set forth below:

     (a)  "Annual Additions" means the sum of the following amounts allocated to
          a Participant's Individual Account for a Limitation Year:

          (i)  all Employer contributions;

          (ii) all forfeitures;

          (iii) all Employee  contributions  other than  catch-up  contributions
               made pursuant to Section 414(v) of the Code; and

          (iv) amounts allocated to an individual medical account, as defined in
               Section  415(l)(2)  of the Code,  which is part of a  pension  or
               annuity plan  maintained by the Employer and amounts derived from
               contributions  which are attributable to post-retirement  medical
               benefits allocated to the separate account of a key employee,  as
               defined  in  Section  419A(d)(3)  of the  Code,  under a  welfare
               benefit  fund,  as  defined  in  Section   419(e)  of  the  Code,
               maintained by the Employer.

          For  purposes  of this  Article  V,  Employee  contributions  shall be
          determined without regard to any (i) rollover  contribution within the
          meaning  of  Section  402(c),  403(a)(4),   403(b)(8),  408(d)(3)  and
          457(e)(16)  of  the  Code,  (ii)  contribution  by the  Employee  to a



                                       29
<PAGE>

          simplified employee pension,  (iii) contribution by the Employee to an
          individual  retirement account or individual  retirement annuity,  and
          (iv) direct transfers of Employee  contributions from a plan described
          in Section 401(a) of the Code to the Plan.

          In  addition,   Annual   Additions  shall  include  "excess   elective
          deferrals" within the meaning of Treas. Reg.  ss.1.402(g)-1(e)(1)(iii)
          that  are not  distributed  by the  defined  contribution  plan to the
          participant  before April 15  following  the taxable year of deferral,
          "excess employee savings  contributions"  within the meaning of Treas.
          Reg.  ss.1.401(k)-1(g)(7),  and "excess matching contributions" within
          the meaning of Treas. Reg. ss.1.401(m)-1(f)(8).

     (b)  "Excess Amount" means the excess of the Annual Additions  allocated to
          a  Participant's  Individual  Account for the Limitation Year over the
          Maximum  Permissible  Amount,  less  loading and other  administrative
          charges allocable to such excess.

     (c)  "Limitation  Year" means a  twelve-consecutive  month period ending on
          the  last day of the  Year.  All  qualified  plans  maintained  by the
          Employer must use the same Limitation Year unless  different years are
          elected as allowed by procedures  established by the Internal  Revenue
          Service.   If  the   Limitation   Year  is  amended  to  a   different
          12-consecutive  month period,  the new Limitation Year must begin on a
          date within the Limitation Year in which the amendment is made.

     (d)  "Maximum Permissible Amount" for a Limitation Year with respect to any
          Participant shall be the lesser of:

          (i)  $45,000 [or,  beginning April 1, 2008, and each April thereafter,
               such other dollar  limitation  determined for the Limitation Year
               by  automatically   adjusting  the  $45,000   limitation  by  the
               cost-of-living  adjustment  factor prescribed by the Secretary of
               the Treasury  under Section  415(d) of the Code in such manner as
               the Secretary shall prescribe]; or

          (ii) 100% of the Participant's  Annual Compensation for the Limitation
               Year.



                                       30
<PAGE>


          The  compensation  limit  referred  to in clause  (ii) above shall not
          apply to any  contribution  for medical benefits after separation from
          service  (within the  meaning of Section  401(h) or  419(f)(2)  of the
          Code), which is otherwise treated as an Annual Addition.

     (e)  "Employer"  means for purposes of this Article V, any Employer and any
          Affiliated  Company  that adopts  this Plan;  provided,  however,  the
          determination  under Sections 414(b) and (c) of the Code shall be made
          as if the  phrase  "more than 50  percent"  were  substituted  for the
          phrase  "at  least 80  percent"  each  place it is  incorporated  into
          Section 414(b) and (c) of the Code.

     (f)  "Annual  Compensation"  means,  notwithstanding  Section  1.6, for the
          purposes of this  Article V, a  Participant's  earned  income,  wages,
          salaries,  fees for  professional  service and other amounts  received
          (without  regard to  whether  an amount is paid in cash) for  personal
          services  actually  rendered  in the  course  of  employment  with  an
          Employer  maintaining  the Plan to the  extent  that the  amounts  are
          includable in gross income [including, but not limited to, commissions
          paid salesmen,  compensation for services on the basis of a percentage
          of profits,  commissions on insurance premiums,  tips, bonuses, fringe
          benefits,  and  reimbursements,  or other expense  allowances  under a
          nonaccountable  plan, as described in Treas.  Reg.  ss.1.62-2(c)]  and
          excluding the following:

          (i)  Employer  contributions to a plan of deferred compensation to the
               extent  contributions  are not  included  in gross  income of the
               Employee for the taxable year in which contributed,  or on behalf
               of an  Employee  to a  simplified  employee  pension  plan to the
               extent such contributions are deductible by the Employee, and any
               distributions from a plan of deferred compensation whether or not
               includable in the gross income of the Employee when distributed;

          (ii) amounts  realized  from the  exercise  of a  non-qualified  stock
               option,  or  when  restricted  stock  (or  property)  held  by an
               Employee becomes freely transferable or is no longer subject to a
               substantial risk of forfeiture;



                                       31
<PAGE>


          (iii) amounts realized from the sale, exchange or other disposition of
               stock acquired under a qualified stock option; and

          (iv) other   amounts   which   receive   special  tax   benefits,   or
               contributions made by the Employer (whether or not under a salary
               reduction  agreement) towards the purchase of an annuity contract
               under   Section   403(b)  of  the  Code   (whether   or  not  the
               contributions  are  excludable  from  the  gross  income  of  the
               Employee).

         Annual Compensation for any Limitation Year is the Annual Compensation
         actually paid or includible in gross income during such Limitation
         Year. Annual Compensation shall include amounts contributed by an
         Employer pursuant to a salary reduction agreement which are excludable
         from the Participant's gross income under Sections 125, 402(e)(3),
         402(h)(1)(B), 408(p)(2)(A)(i), 457 or 403(b) of the Code, and elective
         amounts that are not includible in the gross income of the Participant
         by reason of Section 132(f)(4) of the Code.

     (g)  "Related Plan" means any other defined  contribution  plan [as defined
          in Section  415(k) of the Code]  maintained by any Employer as defined
          in Section 5.2(e).

     Sec.  5.3  Excess  Annual  Additions.  In the event  that,  notwithstanding
Section  5.4(a)  hereof,  the  limitations  with  respect  to  Annual  Additions
prescribed  hereunder  are  exceeded  with  respect to any  Participant  for the
Limitation  Year and such Excess Amount arises as a result of the  allocation of
forfeitures,   a  reasonable   error  in  estimating  a   Participant's   Annual
Compensation  [as defined in Section 5.2(f)] for the Year, a reasonable error in
determining the amount of Employer  contributions  and  forfeitures  that may be
allocated to the  Participant's  Individual  Account under the limits of Section
415 of the Code, or as a result of other facts and  circumstances as established
by the Commissioner of the Internal Revenue Service, the Excess Amount shall not
be deemed an Annual Addition in that Limitation  Year, to the extent such Excess
Amount is treated in accordance with any of the following:

     (a)  the  Excess  Amount  attributable  to  the  portion  of  the  Employer
          contribution  made pursuant to Section 3.1 which has been allocated to



                                       32
<PAGE>

          a Participant  under the Plan for a Year but which cannot be allocated
          to his Individual  Account  because of the limitation  imposed by this
          Section,  shall,  subject to the  limitations  of Section  5.1(a),  be
          allocated and reallocated in the current Limitation Year to Individual
          Accounts of the other  Participants  entitled to share in the Employer
          contributions and forfeitures for that Year in accordance with Section
          4.3.  Any  Excess  Amount  that  cannot  be  allocated  will  be  held
          unallocated in a suspense account. All amounts in the suspense account
          must be allocated  and  reallocated  to the  Participants'  Individual
          Accounts,  subject to the limitations of Section 5.1(a), in succeeding
          Limitation  Years before any Employer  contributions  which constitute
          Annual Additions may be made to the Plan; and

     (b)  in the event of termination  of the Plan,  the suspense  account shall
          revert to the  Employer to the extent it may not then be  allocated to
          any Participant's Individual Account.

     Sec. 5.4 Special Rules.

     (a)  Notwithstanding  any other  provision  of this  Article V, an Employer
          shall not  contribute any amount that would cause an allocation to the
          suspense account as of the date the contribution is allocated.  In the
          event the making of any Employer contribution,  or other contribution,
          or any part thereof, would result in the limitations set forth in this
          Article  V  being  exceeded,   the  Administrator   shall  cause  such
          contributions not to be made. If the contribution is made prior to the
          date as of which it is to be allocated,  then such contribution  shall
          not exceed an amount that would cause an  allocation  to the  suspense
          account if the date of the  contribution  were an Allocation Date. The
          Administrator  shall cause the  Recordkeeper to maintain records which
          reflect the contributions to be allocated to the Individual Account of
          each  Participant  in any  Limitation  Year.  In the event  that it is
          determined  prior to or within any Limitation  Year that the foregoing
          limitations  would be  exceeded  if the full  amount of  contributions
          otherwise  allocable would be allocated,  the Annual  Additions to the
          Plan for the  remainder  of the  Limitation  Year shall be adjusted by



                                       33
<PAGE>

          reducing any Employer contributions,  but only to the extent necessary
          to satisfy the limitations.

     (b)  If the Annual  Additions with respect to the  Participant  under other
          Related  Plans and welfare  plans  described in Section  5.1(b)(i) and
          (ii) are less than the  Maximum  Permissible  Amount and the  Employer
          contribution  that otherwise  would be contributed or allocated to the
          Participant's Individual Account under the Plan would cause the Annual
          Additions for the Limitation  Year to exceed the limitation of Section
          5.1(b),  the amount  contributed  or allocated will be reduced so that
          the Annual Additions under all such plans for the Limitation Year will
          equal the Maximum  Permissible  Amount.  If the Annual  Additions with
          respect to the  Participant  under the Related Plans and welfare plans
          described in Section  5.1(b)(i) and (ii) in the aggregate are equal to
          or greater  than the  Maximum  Permissible  Amount,  no amount will be
          contributed or allocated to the Participant's Individual Account under
          the Plan for the  Limitation  Year  unless the Annual  Additions  with
          respect to the  Participant  under the Related Plans are  sufficiently
          reduced.  If a Participant's  Annual  Additions under the Plan and all
          Related Plans result in an Excess Amount,  such Excess Amount shall be
          deemed to consist of the amounts  last  allocated,  except that Annual
          Additions   attributable  to  a  welfare  plan  described  in  Section
          5.1(b)(i)  and  (ii)  will be  deemed  to have  been  allocated  first
          regardless of the actual allocation date.

     (c)  If an Excess Amount was  allocated to a  Participant  on an allocation
          date of a Related Plan, the Excess Amount  attributed to the Plan will
          be the product of:

          (i)  the total Excess Amount  allocated as of such date [including any
               amount which would have been allocated but for the limitations of
               Section 5.1(b)],

         multiplied by:

          (ii) the ratio of:

               (A)  the  amount  allocated  to the  Participant  as of such date
                    under the Plan,

         divided by:



                                       34
<PAGE>


               (B)  the total  amount  allocated  as of such date under the Plan
                    and all Related Plans [determined  without regard to Section
                    5.1(b)].

     (d)  Prior  to  the  determination  of  the  Participant's   actual  Annual
          Compensation for a Limitation Year, the Maximum Permissible Amount may
          be  determined  on the  basis of the  Participant's  estimated  Annual
          Compensation   for  such  Limitation   Year.  Such  estimated   Annual
          Compensation  shall be determined  on a reasonable  basis and shall be
          uniformly  determined for all  Participants  similarly  situated.  Any
          Employer contributions  (including allocation of forfeitures) based on
          estimated Annual  Compensation  shall be reduced by any Excess Amounts
          carried over from prior Years.

     (e)  As  soon  as  is  administratively  feasible  after  the  end  of  the
          Limitation  Year, the Maximum  Permissible  Amount for such Limitation
          Year  shall be  determined  on the basis of the  Participant's  actual
          Annual Compensation for such Limitation Year.

                                   ARTICLE VI

                               INDIVIDUAL ACCOUNTS
                               -------------------

     Sec. 6.1 Participant Interest in Individual Accounts.  Each Participant and
Former  Participant  shall have such right,  title or interest in the balance of
his  Individual  Account  as  hereinafter   provided.  In  no  event  shall  his
nonforfeitable  interest  exceed  the  amount to the  credit  of his  Individual
Account as the same may be adjusted from time to time.

     Sec.  6.2  Periodic  Statements  to  Participant.  At least  annually,  the
Administrator shall advise each Participant,  Former Participant and Beneficiary
for whom an Individual  Account is held  hereunder of the then fair market value
of such Individual Account.



                                       35
<PAGE>


                                   ARTICLE VII

                                   RETIREMENT
                                   ----------

     Sec. 7.1 Normal Retirement. A Participant may retire from the employ of his
Employer and all Affiliated  Companies on or after his Normal Retirement Date. A
Participant's  Individual  Account  shall  become  nonforfeitable  on his Normal
Retirement Date.

     Sec. 7.2 Early Retirement.  A Participant may retire from the employ of his
Employer and all Affiliated Companies on or after his Early Retirement Date.

     Sec. 7.3 Other Retirement.  A Participant's retirement will commence on the
Anniversary  Date coinciding  with or next following the date the  Participant's
employment  with his  Employer and all  Affiliated  Companies  terminates  if he
retires  under the  provisions  of any other  qualified  retirement  plan of his
Employer.

     Sec. 7.4 Benefits on Retirement.  Upon the retirement of a Participant from
the  employment  of his  Employer and all  Affiliated  Companies on or after his
Normal  Retirement  Date or his Early  Retirement  Date,  his entire  Individual
Account shall be held for his benefit.  Said  Participant  shall receive payment
from his Individual  Account in a single lump sum in accordance  with Article XI
hereof as soon as administratively  practicable after his Individual Account has
been  credited and  adjusted  (as provided in Article IV) as of the  Anniversary
Date concurrent with or next following his retirement.  For  Participants in the
Plan as of March 31, 1994, the  Administrator  shall direct the Trustee to begin
distribution  prior to the  time set  forth  in the  preceding  sentence  if the
Participant directs the Administrator in writing.

     Sec. 7.5 Commencement of Benefits.  Notwithstanding  any other provision of
the Plan to the  contrary,  a  Participant  or Former  Participant  shall  begin
receiving  distributions  from the  Plan,  as  provided  in  Article  XI, by his
Required Beginning Date as defined in Section 11.4(d)(iii).

     Sec.  7.6  Final  Contribution   After  Distribution  of  Benefits.   If  a
Participant who has already  received a distribution  of his Individual  Account
under this  Article is entitled  to an  allocation  of an Employer  contribution



                                       36
<PAGE>

under  Section  4.3 for the Year in  which  such  distribution  was  made,  such
contribution  shall  be paid  to the  Participant  as  soon as  administratively
practicable  following the  completion of the  allocations  under Article IV for
such Year.

                                  ARTICLE VIII

                                      DEATH
                                      -----

     Sec. 8.1 Benefits on Death. Upon the death of a Participant who is employed
by an Employer or an Affiliated Company,  his entire Individual Account shall be
held for the benefit of his Beneficiary.  Upon the death of a Participant  whose
employment with his Employer and all Affiliated  Companies has  terminated,  his
nonforfeitable  interest  (determined  under  Section  10.2)  in his  Individual
Account which has not been  distributed  at the time of his death under Articles
VII-X shall be held for the benefit of his  Beneficiary.  His Beneficiary  shall
receive  payment from his Individual  Account in a single lump sum in accordance
with  Article  XI  hereof  as soon as  administratively  practicable  after  the
allocations have been completed and his Individual Account has been credited and
adjusted (as provided in Article IV) as of the Anniversary  Date concurrent with
or next  following  the  date on  which  the  Participant's  death  occurs.  The
Administrator  shall direct the Trustee to begin  distribution prior to the time
set forth in the preceding sentence if the Beneficiary directs the Administrator
in writing.

     Sec. 8.2 Final  Contribution  After Payment of Benefits.  If the Individual
Account of a deceased  Participant  whose  Beneficiary  has  already  received a
distribution  of the  Participant's  Individual  Account  under this  Article is
entitled to an allocation of an Employer  contribution under Section 4.3 for the



                                       37
<PAGE>

Year in which such distribution was made, such contribution shall be paid to the
Beneficiary as soon as administratively  practicable following the completion of
the allocations under Article IV for such Year.

                                   ARTICLE IX

                                   DISABILITY
                                   ----------

     Sec.  9.1  Benefits  on  Disability.  In  the  event  of  termination  of a
Participant's  employment with his Employer and all Affiliated  Companies due to
Disability,  his entire Individual Account shall be held for his benefit. If the
balance of the Participant's  Individual Account exceeds $5,000, the Participant
shall  receive  payment  from his  Individual  Account  in a single  lump sum in
accordance with Article XI hereof as soon as administratively  practicable after
the allocations have been completed and his Individual Account has been credited
and adjusted (as provided in Article IV) as of the  Anniversary  Date concurrent
with or next  following  the date his Normal  Retirement  Date or earlier  death
occurs.  The Administrator  shall direct the Trustee to begin distribution prior
to the time set forth in the preceding  sentence if the Participant  directs the
Administrator in writing. If the balance of the Participant's Individual Account
does not exceed $5,000,  the Participant's  entire  Individual  Account shall be
distributed to him in a single lump sum as soon as administratively  practicable
after the  allocations  have been completed and his Individual  Account has been
credited and adjusted (as provided in Article IV) as of the Anniversary  Date of
the Year in which the date of his Disability  occurs.  The  Administrator  shall
direct  the  Trustee  to begin  distribution  prior to the time set forth in the
preceding  sentence if the  Participant  directs the  Administrator  in writing.
Effective  with  respect  to  any  distribution  by  reason  of a  Participant's
Disability  on or after March 28,  2005,  the dollar  amount in this Section 9.1
shall automatically be reduced to $1,000.

     Sec. 9.2 Final Contribution After Payment of Benefits. If a Participant who
has already received a distribution of his Individual Account under this Article
is entitled to an allocation of an Employer  contribution  under Section 4.3 for
the Year in which the distribution was made, such contribution  shall be paid to
the Participant as soon as administratively practicable following the completion
of the allocations under Article IV for such Year.



                                       38
<PAGE>


                                    ARTICLE X

                              TERMINATION BENEFITS
                              --------------------

     Sec.  10.1  Termination  of  Employment  Other  than by  Reason  of  Death,
Disability or Retirement.  If the employment of a Participant  with his Employer
and all Affiliated  Companies  terminates  for any reason other than  retirement
(whether  normal or  early),  death or  Disability,  such  Participant  shall be
entitled to such  benefits as are  hereinafter  provided in Section  10.2 at the
time specified in Section 10.3.

     Sec. 10.2 Vested Interest.  A Participant to whom the provisions of Section
10.2 are  applicable  shall be  entitled  (as a vested  interest)  to  receive a
percentage  of  the  then  balance  to his  credit  in  his  Individual  Account
determined in accordance with the following schedule:

       Years of Service (Vesting)               Vested Interest
       --------------------------               ---------------
            Less than 5                                 0%
            5 or more                                 100%

     Notwithstanding  the preceding  provisions  of this Section 10.2,  any such
Participant  who (i) has credit  for less than five  Years of Service  (Vesting)
before April 1, 2007 and (ii) receives credit for an Hour of Service after March
31, 2007 shall be entitled (as a vested interest) to receive a percentage of the
then balance to his credit in his  Individual  Account  determined in accordance
with the following schedule:

       Years of Service (Vesting)               Vested Interest
       --------------------------               ---------------
            Less than 3                                 0%
            3 or more                                 100%

     Sec. 10.3 Time of Distribution. If the employment of a Participant with his
Employer  and all  Affiliated  Companies  terminates  for any reason  other than
retirement (whether normal or early), death or Disability,  and the value of the
vested portion of his Individual Account exceeds $5,000,  then the Administrator
shall direct the Trustee, with such Participant's written consent, to distribute
to such  Participant  the  portion  of his  Individual  Account  to  which he is
entitled  under Section 10.2 in a single lump sum in accordance  with Article XI



                                       39
<PAGE>

hereof as soon as administratively  practicable after his Individual Account has
been  credited and adjusted (as provided in Article IV) as of the earlier of (i)
the Anniversary  Date  immediately  following the date the Participant  incurs a
One-Year Break in Service following his termination of employment,  provided the
written  consent of the  Participant  to such  distribution  is  received by the
Administrator  not later than 60 days after such  Anniversary  Date, or (ii) the
Anniversary  Date  following  the date on which his  Normal  Retirement  Date or
earlier death occurs,  but not later than the time specified in Section 11.4. If
the  Participant  does not elect to receive  the  distribution  when he is first
eligible under the preceding sentence,  he may elect to receive the distribution
of his  Individual  Account  in a single  lump  sum as soon as  administratively
practicable  after his  Individual  Account has been  credited  and adjusted (as
provided in Article IV) as of any subsequent Anniversary Date if he has provided
written consent to such distribution to the Administrator not later than 60 days
after such Anniversary  Date. If, however,  the vested balance of the terminated
Participant's  Individual  Account does not exceed $5,000, the vested balance of
the  Participant's  Individual  Account shall be  distributed to him in a single
lump sum as soon as administratively practicable after the allocations have been
completed and his Individual Account has been credited and adjusted (as provided
in Article IV) as of the  Anniversary  Date of the Year in which the Participant
incurs a One-Year Break in Service.  Effective with respect to any  distribution
by reason of a  Participant's  termination  of  employment on or after March 28,
2005, the dollar amount in this Section 10.3 shall  automatically  be reduced to
$1,000.

     The balance to the credit of a  terminated  Participant  in his  Individual
Account  which  is not  vested  under  the  schedule  in  Section  10.2,  if not
previously  forfeited,  shall be forfeited as of the earlier of (i) the date his
entire vested  Individual  Account balance has been distributed under Article XI
or (ii) the last day of the Year in which such  Participant  incurs a  Five-Year
Break in  Service.  If the  Participant  is not  entitled  to any portion of his
Individual  Account  under  Section  10.2, he shall be deemed to have received a
distribution and shall forfeit the balance of his Individual Account on the date
of his incurring a One-Year  Break in Service.  The forfeited  amount under this
Section  10.3 shall remain in the Trust Fund and shall be applied as provided in
Section 10.5.  If a Former  Participant  is reemployed by an Affiliated  Company
without  incurring a Five-Year  Break in Service,  the portion of his Individual



                                       40
<PAGE>

Account  which was  forfeited  hereunder  shall be  restored  to his  Individual
Account in full. If currently unallocated forfeitures are not adequate to effect
the  restoration,  the  Company  or any  Employer  shall  make  such  additional
contribution to the Plan as is necessary to restore the forfeited portion of his
Individual Account.

     Sec.  10.4   Forfeiture   and  Return  to  Employment   Prior  to  Complete
Distribution.  After a Five-Year  Break in Service,  a Participant  to whom this
Article X is  applicable,  other than a  Participant  described in Section 10.3,
shall forfeit that portion of the amount of his  Individual  Account to which he
is not entitled under Section 10.2 and the amount thus forfeited shall remain in
the Trust Fund and shall be  applied as  provided  in Section  10.5.  The amount
forfeited by a Participant  hereunder shall be charged to his Individual Account
on the Anniversary Date as of which he shall incur a Five-Year Break in Service.
If the  Participant  returns to the employment of the Employer after a Five-Year
Break in  Service,  but  before  the full  payment  of his  Individual  Account,
allocations  of Employer  contributions  under Section 4.3 after such  Five-Year
Break in Service shall be allocated to a Parent  Company Stock Account and Other
Investments  Account established on behalf of such Participant which is separate
from the Parent Company Stock and Other Investments  Account of such Participant
to which is allocated his account  balance  attributable to service prior to the
Five-Year Break in Service.

     Sec. 10.5 Application of Forfeitures. The forfeitures occurring as provided
in  Articles  X and XI shall  first be used to restore  the  account of a Former
Participant  who has been located  during that Year as provided in Section 11.9.
If additional  forfeitures  remain after full  restorations  under Section 11.9,
then  remaining  forfeitures  shall  be  used  to  restore  accounts  of  Former
Participants  who are entitled to restorations for that Year under Section 10.3.
If  additional  forfeitures  remain  for a Year  after  application  of the  two
preceding  sentences,  the  remaining  forfeitures  may  be  used  to  (i)  make
corrective  allocations  and reduce  corrective  contributions  on behalf of any
Participant  or Former  Participant  for that Year, if any,  pursuant to Section
15.11  and (ii) pay  expenses  of the  Plan as  provided  in  Section  15.8.  If
additional forfeitures remain thereafter,  the forfeitures shall be allocated as
provided  in Section  4.3(c)(ii)  among the  appropriate  Parent  Company  Stock



                                       41
<PAGE>

Accounts and Other  Investments  Accounts on the Anniversary Date of the Year in
which the forfeiture occurs.

                                   ARTICLE XI

                          DISTRIBUTIONS AND WITHDRAWALS
                          -----------------------------

     Sec.  11.1 Form of  Payment.  Except as  provided  in Section  11.4(c)(ii),
whenever a  Participant,  Former  Participant  or  Beneficiary is entitled to or
required  to receive  benefits  hereunder  as  provided  in  Articles  VII to X,
inclusive,  the Administrator shall direct the Trustee to pay such benefits in a
lump  sum,  provided  that a life  annuity  may  not  be a  part  of a lump  sum
distribution.  Distribution  of  the  amounts  from a  Participant's  Individual
Account will be made  entirely in whole shares of Parent  Company  Stock and the
value of any  fractional  share will be paid in cash. The  distribution  which a
Participant  is entitled to receive from his Parent  Company Stock Account shall
be equal to the number of shares of Parent  Company Stock credited to his Parent
Company Stock Account as of the immediately  preceding  Allocation Date plus any
stock dividends to which he is entitled under Section 4.3(g). Any balance of his
Other Investments Account as of the immediately  preceding Allocation Date, plus
cash or in-kind  dividends to which the  Participant  is entitled  under Section
4.3(g) shall be used to purchase for  distribution  to him the maximum number of
whole  shares of Parent  Company  Stock at the fair market value per share as of
the date of purchase,  and any unexpended  balance will be distributed to him in
cash.

     Sec.  11.2  Consent  to   Distribution.   If  the  vested  balance  of  the
Participant's or Former Participant's  Individual Account exceeds $5,000 and any
part of the Individual Account could be distributed to the Participant or Former
Participant before the Participant or Former Participant  attains (or would have
attained if not deceased) his Normal  Retirement Date, the Participant or Former
Participant  must  consent  in writing to any  distribution  of such  Individual
Account.  The consent of the Participant or Former  Participant must be obtained
within the 90-day period prior to the date benefit payments are to commence. The
Administrator  shall notify the  Participant  or Former  Participant  of (i) the
right to defer any  distribution  until his Required  Beginning  Date,  and (ii)
effective for any such Notice provided after March 31, 2007, the consequences of



                                       42
<PAGE>

failing to defer such  receipt.  Such  Notice  shall be provided no less than 30
days and no more than 180 days before  benefit  payment is to commence and shall
include a general  description of the material  features,  and an explanation of
the relative  values of, the form of benefit  available  under Section 11.1 in a
manner that would satisfy the notice  requirements  of Section  417(a)(3) of the
Code and a description of his direct rollover rights under Section 11.11.  Prior
to April 1, 2007, the 180-day limitation  specified in the preceding sentence is
90 days. If the vested balance of the Participant's  Individual Account does not
exceed $5,000, the Participant, Former Participant, or Beneficiary does not have
a right to delay the  distribution,  but shall be provided  with a notice of his
direct rollover rights under Section 11.11.  Such distribution may commence less
than 30 days after the Notice required under Treas.  Reg.  ss.1.411(a)-11(c)  is
given,  provided that (i) the  Administrator  clearly informs the Participant or
Former  Participant that the Participant or Former  Participant has a right to a
period of at least 30 days after  receiving  the Notice to consider the decision
of whether or not to elect a  distribution  (and,  if  applicable,  a particular
distribution  option)  and (ii) the  Participant  or Former  Participant,  after
receiving  the Notice,  affirmatively  elects a  distribution  in writing to the
Administrator.  The  consent of the  Participant  or Former  Participant  is not
required to the extent that a distribution is required to satisfy either Section
401(a)(9) or Section 415 of the Code.  Effective for  distributions  on or after
March 28, 2005,  the dollar amount in this Section 11.2 shall  automatically  be
reduced to $1,000.

     Sec. 11.3 Minority or  Disability  of  Distributee.  During the minority or
disability of a person entitled to receive benefits hereunder, the Administrator
may, in its sole discretion, direct payment by the Trustee of all or any portion
of such benefits due such person  directly to him or to his spouse or a relative
or to any  individual or institution  having custody of such person.  Neither an
Employer, the Committee, the Administrator,  the Named Fiduciary nor the Trustee
shall be  required  to see to the  application  of any  payments so made and the
receipt of the payee  (including the  endorsement of a check or checks) shall be
conclusive as to all interested parties.  Any payment made pursuant to the power
herein conferred on the Administrator  shall operate as a complete  discharge of
all  obligations  of the  Administrator  and the  Trustee,  to the extent of the
distributions so made.



                                       43
<PAGE>


     Sec. 11.4 Additional  Requirements  Relating to Benefit  Payments and Death
Distributions.  Notwithstanding  any other provisions of the Plan, the following
provisions shall be applicable to the Plan for calendar years beginning with the
2003 calendar year:

     (a)  General Distribution Deadline. Distribution of benefits shall be made,
          unless the Participant  otherwise elects,  not later than the 60th day
          after  the last day of the Year in which the  latest of the  following
          events occurs:

          (i)  the  Participant  reaches  the  earlier  of age 65 or his  Normal
               Retirement Date;

          (ii) the  tenth  anniversary  of the  date on  which  the  Participant
               commenced  participation  in the Plan occurs,  but not later than
               the April 1 of the calendar  year  following the calendar year in
               which the Participant attains age 70 1/2 if such Participant is a
               Five-Percent Owner; or

          (iii) the date the Participant's  employment with his Employer and all
               Affiliated Companies  terminates,  but in no event later than the
               April 1 of the calendar year following the calendar year in which
               the  Participant  attains  age 70 1/2 if  such  Participant  is a
               Five-Percent Owner.

          If a  Participant  is entitled to receive a  distribution  of all or a
          portion of his Individual Account pursuant to Article VII, VIII, IX or
          X, he may elect to defer the date of distribution of that amount,  but
          not beyond his Required  Beginning Date. If the  Participant  fails to
          consent to a  distribution  at a time when any part of the  balance of
          the Individual Account could be distributed prior to the Participant's
          Normal Retirement Date, such failure shall be deemed to be an election
          to defer the date of  distribution  of any benefit  under this Section
          11.4(a);  provided that in no event shall he receive  distribution  of
          the vested portion of his  Individual  Account later than his Required
          Beginning Date.

     (b)  Required   Compliance   with  Code  and  Treasury   Regulations.   All
          distributions  required  under this Article XI shall be determined and



                                       44
<PAGE>

          made in accordance with Section 401(a)(9) of the Code and the Treasury
          regulations thereunder.

     (c)  Time and Manner of Distribution.

          (i)  Required  Beginning Date and Election to Defer Distribution Date.
               The Participant's  entire Individual Account shall be distributed
               to the  Participant  no  later  than the  Participant's  Required
               Beginning  Date.  An  election  of a  Participant  to  defer  the
               distribution   date   shall   be  made  by   submitting   to  the
               Administrator  a  written  statement  signed  by the  Participant
               describing  the  benefits  and the date on which the  Participant
               requests that the distribution of his benefits be made; provided,
               however, a Participant may not elect to defer receipt of benefits
               beyond his Required Beginning Date.

          (ii) Death  of  Participant   Before   Distribution  to  Him.  If  the
               Participant  dies  before  distribution  to  him  of  his  entire
               Individual  Account under Section 11.1, the Participant's  entire
               Individual Account shall be distributed no later than as follows:

               (A)  If the  Participant's  surviving spouse is the Participant's
                    sole Designated Beneficiary,  then, except as elected by the
                    surviving  spouse as  provided  below,  distribution  to the
                    surviving  spouse  shall  be  made  by  December  31 of  the
                    calendar  year  immediately  following  the calendar year in
                    which  the  Participant  died,  or by  December  31  of  the
                    calendar year in which the  Participant  would have attained
                    age 70 1/2, if later.

               (B)  If  the   Participant's   surviving   spouse   is  not   the
                    Participant's sole Designated  Beneficiary,  then, except as
                    provided below,  distribution to the Designated  Beneficiary
                    shall  be  made  by  December  31  of  the   calendar   year
                    immediately   following  the  calendar  year  in  which  the
                    Participant died.

               (C)  If there is no Designated  Beneficiary of the Participant as
                    of  September  30 of the  year  following  the  year  of the
                    Participant's  death, the  Participant's  entire  Individual



                                       45
<PAGE>

                    Account shall be  distributed by December 31 of the calendar
                    year containing the fifth  anniversary of the  Participant's
                    death.

               (D)  If the  Participant's  surviving spouse is the Participant's
                    sole Designated  Beneficiary  and the surviving  spouse dies
                    after  the  Participant  but  before   distribution  to  the
                    surviving  spouse has been made,  this Section  11.4(c)(ii),
                    other than  Section  11.4(c)(ii)(A),  shall  apply as if the
                    surviving spouse were the Participant.

          If the  Participant  dies  before  distribution  to him of his  entire
          Individual Account and there is a Designated Beneficiary, distribution
          to the  Designated  Beneficiary is not required to be made by the date
          specified  above in this Section  11.4(c)(ii),  but the  Participant's
          entire  Individual  Account  shall be  distributed  to the  Designated
          Beneficiary  by December 31 of the calendar year  containing the fifth
          anniversary of the Participant's death. If the Participant's surviving
          spouse is the  Participant's  Designated  Beneficiary,  the  surviving
          spouse  may elect to apply the  distribution  requirement  of  Section
          11.4(c)(ii) without regard to the prior sentence. If the Participant's
          surviving spouse is the Participant's sole Designated  Beneficiary and
          the   surviving   spouse  dies  after  the   Participant   but  before
          distribution  to either the  Participant  or the surviving  spouse has
          been made,  this election shall apply as if the surviving  spouse were
          the  Participant.  For  purposes of this Section  11.4(c)(ii),  unless
          Section  11.4(c)(ii)(D)  applies,  distributions  are considered to be
          made  on  the  Participant's   Required  Beginning  Date.  If  Section
          11.4(c)(ii)(D) applies, distributions are considered to be made on the
          date  distributions  are required to be made to the  surviving  spouse
          under Section 11.4(c)(ii)(A).

     (d)  Definitions.  For purposes of this Section 11.4,  the following  terms
          shall have the meanings set forth below:

          (i)  "Designated  Beneficiary"  means the individual who is designated
               as the  Beneficiary  under  Section  1.7  and  is the  designated



                                       46
<PAGE>

               beneficiary  under Section  401(a)(9) of the Code and Treas. Reg.
               ss.1.401(a)(9)-4, Q&A-1.

          (ii) "Five-Percent  Owner" means a Participant  who is a  five-percent
               owner   of  the   Company   within   the   meaning   of   Section
               416(i)(1)(B)(i)  of  the  Code  (determined  in  accordance  with
               Section 416 of the Code but without regard to whether the Plan is
               top heavy) at any time  during the Year ending with or within the
               calendar year in which such owner attains age 70 1/2.

          (iii) "Required  Beginning  Date"  of a  Participant  means  the  date
               determined as follows:

               (A)  if the  Participant is not a Five-Percent  Owner and has not
                    attained  age 70 1/2 prior to April 1,  2002,  his  Required
                    Beginning Date is the April 1 of the calendar year following
                    the later of (1) the calendar year in which the  Participant
                    attains  age 70 1/2 or (2) the  calendar  year in which  the
                    Participant retires; or

               (B)  if  the  Participant  is a  Five  Percent-Owner,  or if  the
                    Participant  has attained age 70 1/2 prior to April 1, 2002,
                    his Required  Beginning  Date is the April 1 of the calendar
                    year  following the calendar  year in which the  Participant
                    attains age 70 1/2 even if he has not retired.

     Sec. 11.5 Withdrawals.  Except as provided in this Section,  no amounts may
be  withdrawn  by  a  Participant   from  his   Individual   Account  until  the
Participant's  employment  with his Employer and all  Affiliated  Companies  has
terminated.  In the  event  of  financial  hardship,  a  Participant  or  Former
Participant may, with the consent of the Administrator, withdraw such portion of
his Individual Account as the Administrator may approve; provided, however, that
no amount in excess of the  vested  portion  of his  Individual  Account  may be
withdrawn from such  Individual  Account.  A request for  withdrawal  under this
Section 11.5 shall be made in writing to the Administrator,  and shall set forth
the particular circumstances  constituting the financial hardship and the amount
requested  to be  withdrawn.  The term  "financial  hardship"  shall  mean acute



                                       47
<PAGE>

financial  necessity  resulting  from illness or death of members of the family,
education  of  children  and  casualty  losses  not  covered by  insurance.  The
determination by the Administrator as to the existence of financial hardship and
the amount  permitted to be withdrawn shall be conclusive but shall be made on a
consistent and nondiscriminatory basis. All amounts not actually withdrawn shall
remain  credited  to  the  Individual  Account  of  the  Participant  or  Former
Participant. For the purposes of allocating appreciation,  depreciation, income,
expense,  gain and loss of the Trust Fund, any  withdrawals  shall be subtracted
from the Individual Account balance as of the beginning of the Year in which the
withdrawal is made.

     Sec. 11.6 Claims  Procedure.  The  Administrator  shall process all benefit
claims of Participants,  Former  Participants and Beneficiaries  pursuant to the
claims  procedure  specified  in the summary plan  description  for the Plan and
shall act in a manner which is consistent with  regulations  published from time
to time by the Department of Labor.

     Sec. 11.7  Administrator's  Duty to Trustee.  The Administrator will notify
the  Trustee  at the  appropriate  time  of all  facts  which  may be  necessary
hereunder  for the proper  allocation  of increases,  decreases,  expenses,  and
contributions for Participants,  the proper payment or distribution of benefits,
or the proper  performance  of any other act required of the Trustee  hereunder.
The  Administrator  will  notify the  Trustee of such facts as are needed by the
Trustee to perform its  functions  under the Plan and the Trust  Agreement.  The
Administrator will secure appropriate  elections,  directions,  and designations
for  Participants,  Former  Participants and  Beneficiaries  provided for in the
Plan.

     Sec.  11.8 Duty to Keep  Administrator  Informed of  Distributee's  Current
Address. Each Participant, Former Participant and Beneficiary must file with the
Administrator  from time to time in writing his mailing  address and each change
of mailing  address.  Any  communication,  statement  or Notice  addressed  to a
Participant, Former Participant or Beneficiary at his last mailing address filed
with the Administrator or if no address is filed with the Administrator  then at
his last mailing address as shown on an Employer's  records,  will be binding on
the Participant or Former Participant,  and his Beneficiaries,  for all purposes
of the Plan.  Neither the  Administrator  nor the  Trustee  shall be required to



                                       48
<PAGE>

search for or locate a Participant, Former Participant or Beneficiary.

     Sec.  11.9 Failure to Claim  Benefits.  If the  Administrator  notifies the
Participant,  Former  Participant or Beneficiary by registered or certified mail
at his  last  known  address  that he is  entitled  to a  distribution  and also
notifies him of the provisions of this Section 11.9, and the Participant, Former
Participant  or  Beneficiary  fails to claim his benefits under the Plan or make
his current  address known to the  Administrator  within a reasonable  period of
time after such notification,  the Administrator shall use reasonable efforts to
locate the Participant,  Former Participant or Beneficiary.  If those reasonable
efforts are unsuccessful, the Administrator shall direct that all unpaid amounts
which  would  have been  payable  to such  Participant,  Former  Participant  or
Beneficiary  will be forfeited  and applied as provided in Section  10.5. In the
event that the  Participant,  Former  Participant or Beneficiary is subsequently
located,  the  Participant's  Parent  Company Stock Account will be restored and
credited  with the number of whole shares of Parent  Company  Stock and cash for
any  fractional  share that have an  aggregate  fair  market  value equal to the
aggregate value of his Individual  Account as of the date his Individual Account
was  forfeited.  The shares of Parent  Company  Stock and cash  credited  to his
Parent  Company Stock Account shall be distributed  to the  Participant,  Former
Participant or Beneficiary,  and the Employer shall  contribute an amount to the
Plan which is equal to the amount  distributed  under the terms of this  Section
11.9 to the extent that such amount  cannot be  reinstated  through  forfeitures
occurring during the Year of payment.  Notwithstanding the preceding  sentences,
if the  Administrator is trying to locate a Participant,  Former  Participant or
Beneficiary in connection  with a minimum  required  distribution  under Section
11.4, and the Administrator determines that such Participant, Former Participant
or Beneficiary  cannot be located,  the Administrator  shall establish an escrow
account outside of the Plan in the name of that Participant,  Former Participant
or Beneficiary and direct the Trustee to distribute such amount to that account.

     Sec. 11.10  Distribution  Pursuant to Qualified  Domestic Relations Orders.
The Administrator shall establish policies and procedures for reviewing domestic
relations orders relating to a Participant's or Former Participant's interest in
the Plan. The  Administrator  or its delegate shall  determine  whether any such



                                       49
<PAGE>

domestic   relations   order   is  a   Qualified   Domestic   Relations   Order.
Notwithstanding  any  other  provision  of  the  Plan  to the  contrary,  if the
provisions of a Qualified  Domestic  Relations Order provide that  distributions
shall be made to an Alternate Payee prior to the time that the Participant  with
respect to whom the  Alternate  Payee's  benefits  are  derived is entitled to a
distribution  under the Plan,  the  Administrator  shall  direct the  Trustee to
commence payments to the Alternate Payee as soon as administratively practicable
following  the later of (i) the date the  Participant  attains  (or  would  have
attained) the Earliest  Retirement Age (as defined below) or (ii) the receipt of
such Qualified Domestic Relations Order by the Administrator. Until such time as
payment is made to an  Alternate  Payee  pursuant  to this  Section  11.10,  the
Administrator  shall direct the  Recordkeeper to identify the Alternate  Payee's
interest in the Trust Fund and the  Alternate  Payee shall have no rights  under
the  Plan  other  than  the  rights  of a  Beneficiary  and  the  right,  if the
Participant  or Former  Participant is a Qualified  Participant,  of a Qualified
Participant  pursuant to the  provisions of Section 18.2. A  distribution  to an
Alternate  Payee  who  is  the  former  spouse  of  the  Participant  or  Former
Participant shall be subject to the provisions of Section 11.11. For purposes of
this Section  11.10,  Earliest  Retirement Age shall mean the earlier of (i) the
date on which the  Participant is entitled to a distribution  under the Plan, or
(ii)  the  later  of (A) the date the  Participant  attains  age 50,  or (B) the
earliest date on which the Participant could begin receiving  benefits under the
Plan if his  employment  with his  Employer  and all  Affiliated  Companies  had
terminated.

     Sec.  11.11 Tax  Withholding  and  Participant's  Direct  Rollover.  Unless
provided otherwise in regulations  promulgated by Secretary of the Treasury,  to
the extent  required  under Section 3405 of the Code, if a  Participant,  Former
Participant or Beneficiary  receives a distribution  or withdrawal from the Plan
consisting  of cash or assets  other than Parent  Company  Stock with a combined
value  (excluding  the  value of  Parent  Company  Stock) in excess of $200 (the
"Non-Parent Company Stock Distribution"),  the Trustee shall withhold the lesser
of  (i)  100%  of  the  Non-Parent  Company  Stock  Distribution  made  to  that
Participant,  Former  Participant or Beneficiary or (ii) 20% of the value of the
taxable portion of the entire  distribution or withdrawal made to a Participant,
Former  Participant  or  Beneficiary  which  constitutes  an  Eligible  Rollover
Distribution  (as defined below).  Any amount withheld shall be deposited by the



                                       50
<PAGE>

Trustee  with the  Internal  Revenue  Service  for the  purpose  of  paying  the
distributee's  federal income tax liability  associated with the distribution or
withdrawal.  Notwithstanding  the  foregoing  provisions,  each Direct  Rollover
Distributee  (as defined  below)  shall be provided  with a Notice  described in
Section 11.2 and given the right to elect [pursuant to Section 401(a)(31) of the
Code and the applicable Treasury regulations  promulgated thereunder] during the
period  prescribed in Section 11.2 to rollover all or any portion of the taxable
amount of such person's  distribution or withdrawal  (subject to limitations and
restrictions, if any, adopted by the Administrator in accordance with applicable
Treasury regulations) directly to an Eligible Retirement Plan (as defined below)
and,  to the  extent  a  direct  rollover  is  elected  by any  Direct  Rollover
Distributee, the withholding requirements of this Section 11.11 shall not apply.
If permitted by the Code or applicable Treasury  regulations,  a direct rollover
as described in the preceding sentence may be accomplished by delivering a check
from the Plan to the  Direct  Rollover  Distributee  payable  to the  trustee or
custodian of the Eligible  Retirement  Plan. Each such direct rollover  election
shall be in writing on a form prescribed by the  Administrator  for such purpose
and given to the Direct Rollover  Distributee within a reasonable period of time
prior to the distribution or withdrawal.

     For  purposes of this Section  11.11,  the  following  terms shall have the
following meanings:

     (a)  "Direct  Rollover  Distributee"  shall  mean a  Participant,  a Former
          Participant, a spouse of a Participant or a Former Participant,  and a
          Participant's  or  Former  Participant's  former  spouse  who  is  the
          Alternate Payee under a Qualified Domestic Relations Order.  Effective
          April 1, 2007,  a Direct  Rollover  Distributee  shall also  include a
          Participant's   or   Former   Participant's    non-spouse   designated
          Beneficiary who receives an otherwise  qualifying  distribution  after
          March 31, 2007 from a Participant's or Former Participant's Individual
          Account,  provided  such  distribution  is directly  rolled over to an
          individual  retirement account described in Section 408(a) of the Code
          which is established  as an inherited IRA in accordance  with guidance
          issued by the Department of Treasury or the Internal Revenue Service.



                                       51
<PAGE>


     (b)  "Eligible Retirement Plan" shall mean an individual retirement account
          described  in Section  408(a) of the Code,  an  individual  retirement
          annuity  described  in  Section  408(b)  of the  Code  (other  than an
          endowment  contract),  an annuity plan  described in Section 403(a) of
          the Code, an annuity contract described in Section 403(b) of the Code,
          a qualified trust described in Sections 401(a) and 501(a) of the Code,
          and an  eligible  plan  under  Section  457(b)  of the  Code  which is
          maintained  by a state,  a political  subdivision  of a state,  or any
          agency or  instrumentality  of a state or political  subdivision  of a
          state, that will accept an Eligible Rollover Distribution, and, in the
          case of an eligible plan under Section 457(b) of the Code, that agrees
          to separately account for amounts  transferred into such plan from the
          Plan.

     (c)  "Eligible Rollover Distribution" shall mean any distribution of all or
          a  portion  of a  Participant's  or  Former  Participant's  Individual
          Account  to a  Direct  Rollover  Distributee;  provided,  however,  an
          Eligible Rollover  Distribution shall not mean any distribution of all
          or a portion of a  Participant's  or Former  Participant's  Individual
          Account (i) that is one of a series of  substantially  equal  periodic
          payments (not less  frequently  than  annually)  made for the life (or
          life expectancy) of the Direct Rollover Distributee or the joint lives
          (or joint life  expectancies)  of the Direct Rollover  Distributee and
          his designated  Beneficiary,  (ii) that is paid for a specified period
          of  ten  years  or  more,  (iii)  that  is  a  part  of  a  series  of
          distributions   during  a  calendar  year  to  the  extent  that  such
          distributions are expected to total less than $200 or a total lump sum
          distribution which is less than $200, as described in Q&A-11 of Treas.
          Reg.  ss.1.401(a)(31)-1,  (iv)  to the  extent  such  distribution  is
          required by under Section 401(a)(9) of the Code as provided in Section
          11.4,  or (v) to the extent such  distribution  is not  includable  in
          gross  income  (determined  without  regard to the  exclusion  for net
          annualized appreciation with respect to employer securities).



                                       52
<PAGE>


                                   ARTICLE XII

                                     NOTICES
                                     -------

     Sec.  12.1  Notice.  As soon as  practicable  after a  Participant,  Former
Participant or Beneficiary makes a request for payment,  the Administrator shall
notify the Trustee of the following  information and give such directions as are
necessary or advisable under the circumstances:

     (a)  name  and  address  of  the   Participant,   Former   Participant   or
          Beneficiary,

     (b)  amount to be distributed, and

     (c)  any other  information  required  by the  Trustee for federal or state
          income tax withholding and reporting purposes.

In  addition  to  the  information   described  above,  for   distributions  and
withdrawals the Administrator  shall notify the Recordkeeper and/or the Trustee,
if applicable,  as to the identity,  address and other pertinent  information of
Eligible  Retirement  Plans as  described  in Section  11.11 to which the Direct
Rollover  Distributee  (as  defined in  Section  11.11)has  elected to  rollover
directly such distribution or withdrawal pursuant to Section 11.11.

     Sec. 12.2  Modification of Notice.  At any time and from time to time after
giving the Notice as provided for in Section 12.1, the  Administrator may modify
such original  Notice or any  subsequent  Notice by means of a further Notice or
notices to the  Trustee  but any action  taken or  payments  made by the Trustee
pursuant to a prior Notice shall not be affected by a subsequent Notice.

     Sec.  12.3  Reliance on Notice.  Upon  receipt of any Notice as provided in
this Article XII, the  Recordkeeper  and/or the Trustee,  as  applicable,  shall
promptly take whatever action and make whatever payments are called for therein,
it being intended that the Recordkeeper and/or the Trustee,  as applicable,  may
rely on the  information  and  directions in such Notice  absolutely and without
question.  However, the Recordkeeper and/or the Trustee, as applicable, may call
to the attention of the  Administrator  any error or oversight which the Trustee
believes to exist in any Notice.



                                       53
<PAGE>


                                  ARTICLE XIII

                        AMENDMENT OR TERMINATION OF PLAN
                        --------------------------------

     Sec.  13.1  Amendment or  Termination  by Company.  At any time the Company
acting  through its  governing  body may amend or modify the Plan in whole or in
part,  retroactively or otherwise,  or may terminate or partially  terminate the
Plan, or  discontinue or modify  Employer  contributions  to the Plan,  subject,
however,  to the other  provisions of this Article XIII. Such termination may be
made without  consent being  obtained from the Trustee,  the  Recordkeeper,  any
Employer  or  Affiliated  Company,   the  Administrator,   the  Committee,   the
Participants  or their  Beneficiaries,  the  Employees  or any other  interested
person.  Also the Plan shall be  considered  terminated  if the  Company  ceases
business  operations  or if  there  is a  complete  discontinuance  of  Employer
contributions to the Plan.

     Sec. 13.2 Effect of Amendment.  No amendment or modification  hereof by the
Company,  unless  made to secure the  approval of the  Commissioner  of Internal
Revenue or other governmental bureau or agency, shall:

     (a)  operate  retroactively to reduce or divest the then vested interest in
          any Individual Account or to reduce or divest any benefit then payable
          hereunder; or

     (b)  change the  duties or  responsibilities  of the  Trustee  without  the
          written consent or approval of the Trustee.

Each such amendment  shall be in writing signed by duly  authorized  officers of
the Company with such consents or approval,  if any, as provided above and shall
become effective as designated in such amendment.

     Sec. 13.3  Distribution on Termination or  Discontinuance of Contributions.
Upon termination of the Plan or complete  discontinuance of contributions to the
Plan, any amount of the Trust Fund previously unallocated, including any amounts
in a suspense account  established  under Article V, shall be allocated  (unless
such  allocation  would violate  Article V), and the Individual  Accounts of all
Participants,  Former  Participants,  and  Beneficiaries  shall thereupon be and
become fully vested and  nonforfeitable  to the extent then funded.  The Trustee
shall deduct from the Trust Fund all unpaid charges and expenses including those
relating to said termination, except as the same may be paid by an Employer. The



                                       54
<PAGE>

Trustee shall then adjust the balance of all Individual Accounts on the basis of
the net value of the Trust Fund.  Subject to the  limitations  on  distributions
provided in this Section  13.3,  the  Administrator  shall direct the Trustee to
distribute the amount to the credit of each Participant,  Former Participant and
Beneficiary when all appropriate  administrative procedures have been completed.
If any  amount in a  suspense  account  shall not be  allocable  because  of the
provisions of Article V, such amount shall be returned to the Employer. Upon any
complete discontinuance of contributions by an Employer, the assets of the Trust
Fund  shall be held and  administered  by the  Trustee  for the  benefit  of the
Participants employed by such Employer  discontinuing  contributions in the same
manner and with the same powers,  rights, duties and privileges herein described
until the Trust Fund with respect to such  Employer has been fully  distributed.
Upon the partial  termination of the Plan,  the Individual  Accounts of affected
Participants,  Former  Participants  and  Beneficiaries  shall  thereupon be and
become  fully vested and  nonforfeitable  to the extent then funded and shall be
distributed to such Participants,  Former  Participants and Beneficiaries by the
Trustee when all appropriate  administrative procedures have been completed. The
Administrator  shall direct the Trustee to distribute each Participant's  entire
Individual  Account in a single lump sum  distribution to him in accordance with
and  subject  to the  consent  requirements  of  Article  XI, or to an  Eligible
Retirement Plan as defined in Section 11.11 pursuant to the Participant's direct
rollover  election  described  in  Section  11.11,  as soon as  administratively
practicable  after the later of (i) the termination date of the Plan or (ii) the
receipt  following  application  of a  favorable  determination  letter from the
Internal Revenue Service with respect to the termination of the Plan.

     Sec. 13.4  Reversion of  Contributions  to Employer.  Except as provided in
Section 3.3 and Section 13.3,  under no  circumstances  or conditions  shall the
Trust  Fund or any  portion  thereof  revert to any  Employer  or be used for or
diverted to the benefit of anyone other than Participants,  Former  Participants
and  Beneficiaries,  it being  understood  that the Trust  Fund shall be for the
exclusive benefit of Participants, Former Participants and Beneficiaries.

     Sec.  13.5  Amendment  of Vesting  Schedule.  At any time that the  vesting
schedule of the Plan is amended, or the Plan is amended in any way that directly
or  indirectly  affects  the  computation  of the  Participant's  nonforfeitable



                                       55
<PAGE>

interest in his Individual Account,  each Participant who has completed at least
three Years,  whether or not consecutive,  during each of which he has completed
not fewer than 1,000 Hours of Service,  may elect to have his vested interest in
his Individual  Account determined under the vesting schedule in effect prior to
such amendment. An election made under the preceding sentence may be made at any
time within 60 days after the later of the date:

     (a)  the amendment is adopted;

     (b)  the amendment becomes effective; or

     (c)  the  Participant  is issued  written  notice of the  amendment  by the
          Administrator.

An election under this Section shall be made in a written  instrument  delivered
to the  Administrator  and once made, shall be irrevocable.  For the purposes of
this  Section,  a Participant  shall be  considered to have  completed the three
Years  described in this Section if he shall have  completed such Years prior to
the end of the period during which he could make an election hereunder.

     Sec.  13.6 Merger or  Consolidation  of Plan. In the event of any merger or
consolidation  of the Plan with,  or  transfer in whole or in part of the assets
and  liabilities  of the Trust Fund to,  another trust fund held under any other
plan of deferred compensation maintained or to be established for the benefit of
all or some of the  Participants  in the Plan,  the  assets  of the  Trust  Fund
applicable to such  Participants  shall be  transferred  to the other trust fund
only if:

     (a)  each Participant  would (if either the Plan or the other plan had then
          terminated)   receive  a  benefit   immediately   after  the   merger,
          consolidation,  or  transfer  which is equal  to or  greater  than the
          benefit he would have been entitled to receive  immediately before the
          merger, consolidation,  or transfer (if the Plan had then terminated);
          and

     (b)  such other plan and trust fund are qualified  under Section  401(a) of
          the Code and exempt from tax under Section 501(a) of the Code.



                                       56
<PAGE>


     Sec.  13.7   Withdrawal  of  Employer.   If  an  Employer   withdraws  from
participation in the Plan or completely  discontinues  contributions to the Plan
without the immediate  establishment of a new retirement  plan,  distribution of
benefits  to  affected  Participants  will be made at the time and in the manner
provided  in  Section   13.3.   However,   pursuant  to  rules  applied  by  the
Administrator in a nondiscriminatory  manner to all employees similarly situated
or if the withdrawal or  discontinuance by an Employer is deemed to be a partial
termination of the Plan, the provisions of Section 13.3 hereof shall apply to an
Employer's  withdrawal  or  discontinuance  as if it were a part of the complete
termination of this Plan, but the  participation  of other  Employers  hereunder
shall not be affected nor shall the continuation of the Plan with respect to the
participation  therein by other  Employers  be  affected by such  withdrawal  or
discontinuance  by an  Employer.  The assets  attributable  to the  Participants
employed  by  the   withdrawing   or   discontinuing   Employer,   may,  in  the
Administrator's  discretion, be retained in and subject to the provisions of the
Plan or distributed in liquidation.

                                   ARTICLE XIV

                                    COMMITTEE
                                    ---------

     Sec.  14.1  Committee  Composition.  The  Company  may  appoint a Committee
consisting of any number of members as  determined  by the Company.  The Company
may remove any  member of the  Committee  at any time and a member may resign by
written  notice to the Company.  Any vacancy in the  membership of the Committee
shall be filled by appointment of the governing body of the Company, but pending
the  filling  of any such  vacancy  the then  members of the  Committee  may act
hereunder as though they alone constitute the full Committee.

     Sec.  14.2  Committee  Actions.  Any  and all  acts  and  decisions  of the
Committee shall be by at least a majority of the then members, or by a unanimous
written decision taken without a meeting,  but the Committee may delegate to any
one or more of its members the  authority to sign notices or other  documents on
its behalf or to perform ministerial acts for it, in which event the Trustee and
any other  person may accept such  notice,  document or act without  question as
having been authorized by the Committee.



                                       57
<PAGE>


     Sec. 14.3  Committee  Procedure.  The Committee  may, but need not, call or
hold formal  meetings and any decisions made or action taken pursuant to written
approval of a majority of the then members  shall be  sufficient.  The Committee
shall maintain  adequate records of its decisions which records shall be subject
to inspection by the Company, any Employer, any Participant,  Former Participant
or Beneficiary,  and any other person to the extent required by law, but only to
the extent that they apply to such person.  Also the Committee may designate one
of its members as Chairman and one of its members as Secretary and may establish
policies and  procedures  governing it as long as the same are not  inconsistent
with the terms of the Plan.

     Sec.  14.4   Delegation   to  Committee  and  Company's   Duty  to  Furnish
Information.  The Committee shall perform the duties and may exercise the powers
and  discretion  given to it in the Plan and its  decisions  and  actions may be
relied upon by all persons  affected  thereby.  The Trustee and the Recordkeeper
may rely without  question  upon any  notices,  directions,  or other  documents
received from the  Committee.  The Company and each  Employer  shall furnish the
Committee  with all data and  information  available  to the  Company  which the
Committee may reasonably  require in order to perform its duties.  The Committee
may rely without  question  upon any such data or  information  furnished by the
Company and each Employer.

     In  addition  to any other  powers and  responsibilities  allocated  to the
Committee  pursuant  to  the  terms  of  the  Plan,  the  following  powers  and
responsibilities shall be exercised by the Committee:

     (a)  To direct the Trustee as to investments in Parent Company Stock.

     (b)  To administer the Plan as provided in Section 14.5.

     (c)  To establish and  administer the Plan's claims  procedure  pursuant to
          Section  11.6  in a  uniform  and  nondiscriminatory  manner  and,  if
          appropriate in its sole discretion,  to designate  persons or entities
          to be responsible for initial claims and requests for review of claims
          decisions.

     (d)  To adopt such rules,  forms and  procedures as it shall deem necessary
          for the efficient  administration  of the Plan in accordance  with its



                                       58
<PAGE>

          terms and the terms of any applicable law.

     (e)  Effective for Years  beginning  after March 31, 2007, to establish and
          communicate  the  procedures to Qualified  Participants  to enable the
          Plan to satisfy the requirement of Section 401(a)(28)(B)(ii)(I) of the
          Code that each Qualified Participant be permitted during his Qualified
          Election  Period to direct the Trustee as to the  eligible  portion of
          such Qualified  Participant's  Individual Account to be distributed to
          him pursuant to Section 18.2.

     (f)  To prepare and submit to governmental agencies,  Participants,  Former
          Participants and  Beneficiaries  such Plan  descriptions,  reports and
          other  documents,   or  summaries  thereof,  as  may  be  required  by
          applicable law or necessary in the administration of the Plan.

     (g)  To  remedy  possible  ambiguities,  inconsistencies  or  omissions  in
          connection  with its power to interpret the Plan;  provided,  however,
          that all such  actions  and  decisions  shall be  applied in a uniform
          manner to all Employees similarly situated.

     (h)  To authorize  disbursements from the Trust Fund,  including refunds of
          contributions permitted by the Plan (any instructions of the Committee
          to the Trustee shall be evidenced in writing and signed by a member of
          the  Committee  delegated  with such  authority  by a majority  of the
          Committee).

     (i)  To appoint a  Recordkeeper  who shall perform,  without  discretionary
          authority or control, administrative functions within the framework of
          policies, interpretations,  rules, practices and procedures adopted by
          the Committee or the Administrator.

     (j)  To employ  such  advisors  (including  but not  limited to  attorneys,
          independent public accountants and investment advisors) and such other
          technical and clerical personnel as may be required in the Committee's
          discretion for the proper  administration  of the Plan, and to pay the
          reasonable expenses of such persons from the Trust Fund.



                                       59
<PAGE>


     (k)  To establish  and to instruct the Trustee and any  investment  manager
          with  respect  to  asset   administration   objectives   and  policies
          consistent with Plan requirements.

     (l)  To review from time to time,  but at least as often as  annually,  the
          investment  performance  of the Trustee and any  insurance  company or
          investment  manager  acting  with  respect to any portion of the Trust
          Fund.  The  Committee  may engage the services of such person it deems
          appropriate including, investment managers, to review investments held
          by the Plan and the financial condition of insurance companies issuing
          insurance contracts to the Plan.

     (m)  To supervise at least one audit of the Plan's assets for each Year and
          review the Trustee's annual accounting.

     (n)  Effective  April 1, 2007, to direct the Trustee with respect to voting
          shares of Parent  Company Stock in accordance  with the  provisions of
          Section 17.6.

     Sec. 14.5 Construction of Plan and Trustee's and Record-keeper's  Reliance.
Any and all matters involving the Plan, including but not limited to any and all
disputes  which may  arise  involving  Participants,  Former  Participants,  and
Beneficiaries  and/or the Trustee or the  Recordkeeper  shall be referred to the
Committee.  The Committee has the exclusive  discretionary authority to construe
the terms of the Plan and the  exclusive  discretionary  authority  to determine
eligibility   for  all   benefits   hereunder.   Any  such   determinations   or
interpretations  of the  Plan  adopted  by the  Committee  shall  be  final  and
conclusive and shall bind all parties. The Trustee and the Recordkeeper may rely
upon the decision of the Committee  with respect to any question  concerning the
meaning,  interpretation,  or  application  of any  provision  of the Plan.  The
Committee's  interpretations and determinations with respect to the Plan and the
Trust Agreement shall be based on such information as is reasonably available to
the Committee at the time a decision is made. In addition,  in administering the
Plan, the Committee may rely conclusively  upon an Affiliated  Company's payroll
and personnel records maintained in the ordinary course of business.

     Sec. 14.6  Committee  Member's  Abstention  in Cases  Involving Own Rights.
Notwithstanding  any other  provision of this  Article XIV, no Committee  member



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<PAGE>

shall  vote or act  upon any  matter  involving  his own  rights,  benefits,  or
participation in the Plan.

     Sec. 14.7 Counsel to  Committee.  The Committee may engage agents to assist
it and may engage legal  counsel who may be legal  counsel for the Company.  All
reasonable expenses incurred by the Committee may be paid from the Trust Fund.

     Sec. 14.8  Indemnification  of Employees and Directors.  The Company hereby
indemnifies each member of the Committee and each employee, officer and director
of an Affiliated Company who are delegated responsibilities under or pursuant to
the Plan against any and all  liabilities  and  expenses,  including  attorneys'
fees,   actually  and  reasonably  incurred  by  them  in  connection  with  any
threatened,  pending or  completed  legal  action or judicial or  administrative
proceeding  to  which  they may be a party,  or may be  threatened  to be made a
party,  by  reason  of  membership  on the  Committee  or  other  delegation  of
responsibilities,  except  with  regard to any matters as to which they shall be
adjudged  in such  action or  proceeding  to be liable for gross  negligence  or
willful misconduct in connection therewith. In addition, the Company may provide
appropriate  insurance  coverage  for the members of the  Committee or each such
other individual  indemnified pursuant to this Section 14.8 who is not otherwise
appropriately insured.

     Sec. 14.9 Action Taken in Good Faith. To the extent permitted by ERISA, the
members  of  the  Committee  and  each  employee,  officer  and  director  of an
Affiliated  Company  who are  fiduciaries  with  respect  to the  Plan  shall be
entitled to rely upon,  and be fully  protected with respect to any action taken
or  suffered  by them in good faith in reliance  upon,  all tables,  valuations,
certificates,  reports and opinions furnished by the Recordkeeper,  the Trustee,
or any accountant,  attorney,  insurance company or investment manager acting at
any time hereunder.

                                   ARTICLE XV

                                  MISCELLANEOUS
                                  -------------

     Sec. 15.1 No Employment or Compensation Agreement. Nothing contained in the
Plan shall be  construed  as giving any person or entity any legal or  equitable
right  against  the  Company,  any  Employer,   any  Affiliated  Company,  their
stockholders  or  partners,  officers or  directors,  the Named  Fiduciary,  the



                                       61
<PAGE>

Committee,  the  Administrator,  the Trustee or the Recordkeeper,  except as the
same shall be specifically provided in the Plan. The Plan shall not be deemed to
constitute  a contract  between  the  Employer  and any  Participant  or to be a
consideration  or an  inducement  for  the  employment  of  any  Participant  or
Employee.  Nor shall anything in the Plan give any Participant or other Employee
the right to be retained in the service of any Employer or to interfere with the
right of the  Employer  to  discharge  any  Participant  or Employee at any time
regardless  of  the  effect  which  such  discharge  shall  have  upon  him as a
Participant  in the Plan.  The  employment of all persons by any Employer  shall
remain subject to termination by that Employer to the same extent as if the Plan
had never been executed.

     Sec. 15.2 Spendthrift  Provision.  Except (i) as provided by the terms of a
domestic  relations  order which is  determined  to be qualified  under  Section
414(p) of the Code, or (ii) as permitted  pursuant to Section  401(a)(13) of the
Code and  Section  206(d) of  ERISA,  no  Participant,  Former  Participant,  or
Beneficiary  shall have the right to assign,  alienate or transfer  his interest
hereunder,  nor shall his  interest  be  subject to claims of his  creditors  or
others,  it being  understood  that all  provisions of the Plan shall be for the
exclusive benefit of those designated herein.

     Sec. 15.3 Construction.  It is the intention of each Employer that the Plan
be  qualified  under  Section  401 of the Code and  comply  with the  applicable
provisions  of ERISA,  and all  provisions  hereof  should be  construed to that
result.

     Sec.  15.4  Titles.   Titles  of  Articles  and  Sections  hereof  are  for
convenience only and shall not be considered in construing the Plan.

     Sec. 15.5 Texas Law Applicable.  The Plan and each of its provisions  shall
be construed and their validity  determined by the laws of the State of Texas to
the extent not preempted by ERISA or other applicable federal law.

     Sec.  15.6  Successors  and  Assigns.  The Plan shall be  binding  upon the
successors and assigns of the Company and each Employer and the Trustee and upon
the  heirs  and  personal   representatives  of  those  individuals  who  become
Participants hereunder.



                                       62
<PAGE>


     Sec. 15.7  Allocation of Fiduciary  Responsibility  by Named  Fiduciary.  A
fiduciary  with respect to the Plan,  as  described  in Section  3(21) of ERISA,
shall only have those specific powers, duties,  responsibilities and obligations
as are explicitly given such fiduciary under the terms of the Plan and the Trust
Agreement or allocated to such  fiduciary  pursuant to the  procedures set forth
herein. The Named Fiduciary may, by written instrument,  allocate some or all of
its  responsibilities to another fiduciary,  including the Trustee, or designate
another person to carry out some or all of its fiduciary responsibilities.  Each
fiduciary to whom  responsibilities are allocated by the Named Fiduciary will be
furnished a copy of the Plan and their acceptance of such responsibility will be
made by agreeing in writing to act in the  capacity  designated.  It is intended
that each fiduciary shall be responsible only for the proper exercise of his own
powers, duties, responsibilities and obligations under the Plan and shall not be
responsible  for any act or  failure  to act of  another  fiduciary.  The  Named
Fiduciary  shall not be liable  for an act or  omission  of any  person  (who is
allocated  a fiduciary  responsibility  or who is  designated  to carry out such
responsibility) in carrying out a fiduciary  responsibility except to the extent
that with respect to the allocation or  designation,  continuation  thereof,  or
implementation or establishment of the allocation or designation  procedures the
Named Fiduciary (i) did not perform all of his duties and  responsibilities  and
exercise his powers  hereunder  with the care,  skill,  prudence,  and diligence
under  the  circumstances  then  prevailing  that a prudent  man  acting in like
capacity  and  familiar  with  such  matters  would  use  in the  conduct  of an
enterprise of like character and with like aims, (ii) knowingly  participates in
or knowingly  undertakes  to conceal an act or omission of another  fiduciary of
the Plan,  with the knowledge that such act or omission is a breach of fiduciary
responsibility, (iii) did not make reasonable efforts under the circumstances to
remedy a breach of fiduciary  responsibility  of which the Named  Fiduciary  has
knowledge,  or  (iv)  did  not  carry  out  its  specific  responsibilities,  in
accordance  with the  standard set forth in (i) above,  and as a result,  it has
enabled another fiduciary of the Plan to commit a breach. Any person or group of
persons may serve in more than one fiduciary capacity with respect to the Plan.

     Sec.  15.8  Expenses  of  Administration.  Except to the extent  paid by an
Employer or prohibited by ERISA,  the  Administrator  shall cause the Trustee to
pay from the assets of the Plan,  including from the unallocated  forfeitures as



                                       63
<PAGE>

provided in Section 10.5,  all expenses  incurred in the  administration  of the
Plan,   including   expenses  of  the  Committee,   the   Recordkeeper  and  the
Administrator,  and expenses and compensation of the Trustee and the expenses of
counsel. The Employer shall pay all brokerage commissions, taxes and other costs
incident to the purchase and sale of securities.

     Sec. 15.9 Plan Controls. The Trust Agreement is a part of the Plan. In case
of any inconsistency between the terms of the Plan and the Trust Agreement,  the
provisions of the Plan shall control.  In the event of any conflict  between the
terms of the Plan and any summary  thereof or other document  relating  thereto,
from whatever source, the terms of the Plan shall govern.

     Sec. 15.10 Effect of Mistakes. In the event of a mistake or misstatement as
to  the  age or  eligibility  of  any  person,  or the  amount  of any  kind  of
contributions, withdrawals or distributions made or to be made to a Participant,
or other person, the Administrator shall, to the extent it deems possible,  make
such  adjustment  as will in its  judgment  afford to such  person the  credits,
distributions or other rights to which he is properly entitled under the Plan.

     Sec.  15.11  Operation  of the Plan;  Permitted  Corrections.  The  Company
intends to operate and administer the Plan as a  tax-qualified  retirement  plan
under Section 401(a) of the Code. In the event that the Administrator determines
that the operation of the Plan or the form of the Plan, or both, fails to comply
in any respect with the  applicable  requirements  of the Code,  the Company may
take whatever action it deems necessary and appropriate  under the circumstances
to comply with its intent to  maintain  the Plan as a  tax-qualified  retirement
plan,  including  corrections  made pursuant to, or consistent with the purposes
of, the Employee Plans  Compliance  Resolution  System,  as set forth in Revenue
Procedure  2006-27 issued by the Internal Revenue Service,  as the principles of
such Revenue  Procedure  may be modified or expanded  from time to time,  or any
other correction  procedures  available generally to the Company with respect to
the  Plan.  The  Administrator  also is  permitted  to take any  action it deems
necessary and appropriate  under the circumstances to make corrections under the
Voluntary  Fiduciary  Correction Program  established by the Department of Labor
and/or to assist  another  Plan  fiduciary  in  connection  with its  compliance
actions under such program.



                                       64
<PAGE>


                                   ARTICLE XVI

                        ADOPTION BY AFFILIATED COMPANIES
                        --------------------------------

     Sec. 16.1 Transfer of  Employment to Another  Employer.  When an Employee's
employment with any Employer is terminated,  but such Employee continues to be a
Participant  by  reason  of  continued  employment  by  another  Employer,   the
Participant  concerned  shall not be  considered  to have changed  Employers for
purposes  of  determining  the   Participant's   eligibility,   vesting  rights,
participation,  and Plan  benefits.  An Employee who was a  Participant  when so
transferred,  and who is otherwise  an eligible  Employee,  shall  continue as a
Participant  in the Plan as adopted by his new Employer  (whether the Company or
another  Employer) and shall continue  without any requirement or  re-enrollment
unless otherwise  required by the Plan. In such event,  all notices,  elections,
designations, directions and the like theretofore made shall continue in effect.
All  interests  then  credited to the  Participant  shall  constitute  interests
credited  to the  Participant  under  the Plan as  adopted  by his new  Employer
(whether the Company or another Employer). Employer contributions shall, subject
to  the  terms  and  limitations  of  the  Plan,  continue  to be  made  by  the
Participant's  new  Employer  (whether  the  Company or another  Employer).  Any
portion of his Individual  Account which is forfeited  shall be allocated to the
Individual  Accounts of  Participants  who are  Employees of the Employer  which
originally made the contributions so forfeited.

     Sec. 16.2  Contributions  and Forfeitures.  Each Participant shall have his
Individual   Account   credited   with  his  share  of  his  former   Employer's
contributions and with his share of his new Employer's contributions. The Annual
Compensation  received by such Participant from each Employer during the portion
of the  Year  employed  by an  Employer  shall  constitute  the  basis  for  his
allocation of that  particular  Employer's  contribution.  Forfeitures  shall be
applied as  provided in Section  10.5 only for the  benefit of the  Participants
employed by the  Employer for whom the  Participant  works or last worked at the
time the forfeiture occurs.

     Sec.  16.3  Transfers of Employment  Between  Affiliated  Companies.  If an
Employee  of one  Affiliated  Company  transfers  to the  employment  of another
Affiliated  Company and such Affiliated  Company has a comparable plan and trust
agreement,  the Trustee of each plan and trust shall make suitable  arrangements



                                       65
<PAGE>

for the transfer of the assets held in his  Individual  Account from the Plan of
the former employer to the plan of the successor employer.  The Employee will be
granted credit for Years of Service  (Vesting) with the former employer and will
not be deemed to have terminated his employment.  Annual  Compensation  from the
former employer will be considered to be Annual  Compensation from the successor
employer.

     If an Employee  participating in the Plan transfers to the employment of an
Affiliated  Company which does not have a comparable plan in force, he shall not
be deemed to have  terminated  employment  with the  Employer.  The value of his
Individual  Account will be held for his benefit until he terminates  employment
with all Affiliated  Companies,  dies or retires in accordance with Article VII,
at which time the value of his Individual  Account will be distributed to him or
his Beneficiary as provided elsewhere herein. No further Employer  contributions
will be made on his behalf,  but he will be granted  credit for Years of Service
(Vesting) with the Affiliated  Company. In the event that he is reemployed by an
Employer, he shall immediately become a Participant in the Plan.

     Sec.  16.4 Action by  Company.  The  Employers  delegate to the Company the
authority to amend the Plan, remove the Trustee,  Administrator and Recordkeeper
or a Committee member,  appoint a new or additional Trustee or Committee member,
appoint  a  new  Administrator  or  Recordkeeper,  or  take  all  other  actions
concerning the Plan without joinder or approval of the other Employers.

     Sec.  16.5  Termination  of  Employer's   Status  as  Affiliated   Company.
Termination  of an  Employer's  status as an  Affiliated  Company  other than by
merger or  liquidation  into the Company shall  terminate the Plan and the Trust
Agreement as adopted by such Employer unless, and except to the extent that, the
governing  body of the  Company  shall  adopt  a  resolution  consenting  to the
continuance  of the Plan and the Trust  Agreement  as adopted  by the  Employer,
specifying  conditions  therefor,  such as  amendments to the Plan and the Trust
Agreement as adopted by the  Employer  and the  investment  in,  disposition  or
distribution  of Parent  Company  Stock,  and the governing body of the Employer
shall consent to and adopt such conditions, investments and the like.



                                       66
<PAGE>


                                  ARTICLE XVII

                                   THE TRUSTEE
                                   -----------

     Sec.  17.1 Trust Fund. A Trust Fund has been created and will be maintained
for the  purposes  of the Plan,  and the  monies  thereof  will be  invested  in
accordance with the terms of the Plan and the Trust Agreement which forms a part
of the Plan.  All Employer  contributions  will be paid into the Trust Fund, and
all benefits under the Plan will be paid from the Trust Fund.

     Sec. 17.2 Trustee's Duties.  Except as otherwise  specifically  provided in
the Trust Agreement, the Trustee's obligations,  duties and responsibilities are
governed  solely  by the  terms of the Trust  Agreement,  reference  to which is
hereby made for all purposes.

     Sec. 17.3 Benefits Only from Trust Fund.  Any person having any claim under
the Plan will look solely to the assets of the Trust Fund for  satisfaction.  In
no event will any Employer or any of its officers, Employees, agents, members of
its governing body, the Trustee, any successor trustee,  the Administrator,  the
Recordkeeper  or any  member of the  Committee,  be  liable in their  individual
capacities  to any person  whomsoever,  under the  provisions of the Plan or the
Trust Agreement, absent a breach of fiduciary responsibility determined pursuant
to the applicable provisions of ERISA.

     Sec. 17.4 Trust Fund Applicable Only to Payment of Benefits. The Trust Fund
will be used and applied only in accordance  with the provisions of the Plan, to
provide the  benefits  thereof,  except as provided  in Section  15.8  regarding
payment of administrative  expenses,  and no part of the corpus or income of the
Trust  Fund  will be used for,  or  diverted  to,  purposes  other  than for the
exclusive benefit of the Participants and other persons  thereunder  entitled to
benefits.

     Sec.  17.5 Texas Trust Code.  Although  it is intended  that the  foregoing
powers of the Trustee be  applicable  hereunder,  it is also  intended  that all
provisions of the Texas Trust Code, and any amendments thereto, not inconsistent
with the above  enumerated  powers  or other  provisions  of the Plan,  shall be
applicable in the administration of the Trust Fund.

     Sec. 17.6 Voting Rights. Effective April 1, 2007, at each annual or special
meeting of the stockholders of Capital Southwest Corporation or by actions taken



                                       67
<PAGE>

without a meeting, each Participant, Former Participant and Beneficiary shall be
entitled  to direct the  Trustee  as to the  manner in which the Parent  Company
Stock  which is entitled to vote and which is  allocated  to the Parent  Company
Stock Account of such  Participant,  Former  Participant or Beneficiary is to be
voted.  If  the  Trustee  does  not  timely  receive  voting  directions  from a
Participant,  Former  Participant or  Beneficiary  with respect to any shares of
Parent Company Stock allocated to that  Participant's,  Former  Participant's or
Beneficiary's  Parent Company Stock Account,  the Trustee shall vote such shares
of Parent  Company Stock or refrain from voting any or all such shares of Parent
Company Stock held in the Trust Fund in such manner as deemed,  in the Trustee's
sole  discretion,  to be in  the  best  interest  of  the  Participants,  Former
Participants and Beneficiaries. Prior to April 1, 2007, the Trustee was entitled
to vote or refrain from voting any and all shares of Parent  Company  Stock held
in the Trust Fund in such manner as deemed, in the Trustee's sole discretion, to
be  in  the  best  interest  of  the  Participants,   Former   Participants  and
Beneficiaries.  The Administrator may from time to time direct the Trustee as to
the manner of voting such shares described in the preceding  sentences,  and the
Trustee shall follow such instructions and shall bear no responsibility  for the
propriety of the decisions of the Administrator.

                                  ARTICLE XVIII

                                   INVESTMENTS
                                   -----------

     Sec.  18.1  Investment  of  Contributions  and Trust  Assets.  All Employer
contributions in cash and any other cash received by the Trust Fund attributable
to Employer  contributions under the Plan,  including  dividends,  will first be
used to pay current  obligations  of the Trust Fund, and any excess will be used
either to pay other  obligations  of the Trust Fund, to buy Parent Company Stock
from holders of  outstanding  stock or newly issued or treasury stock or to make
other  prudent  investments;  provided,  however,  that at all times the Trustee
shall  attempt to invest 100% of the Trust Fund assets in Parent  Company  Stock
consistent with market availability or other conditions.  Qualified Participants
may direct  the  Trustee as to the  portion  of their  Individual  Account to be
distributed as provided in Section 18.2. The Administrator may from time to time



                                       68
<PAGE>

direct the Trustee as to the extent of  investment  in Parent  Company Stock and
the Trustee shall follow such instructions and shall bear no responsibility  for
the propriety of the investment decision of the Administrator.  All purchases of
Parent  Company  Stock  shall be made at a  price,  or at  prices,  which in the
judgment of the  Trustee do not exceed the fair  market  value of such shares of
Parent Company  Stock,  which may be above the quoted market price on a national
securities exchange or in the over-the-counter market. If no current obligations
of the Trust Fund are outstanding and unpaid and the Trustee  determines that it
is in the best  interest of the Trust Fund,  the Trustee may invest funds of the
Trust Fund  temporarily in securities  issued or guaranteed by the United States
of America or any agency thereof,  in certificates of deposit,  or in short-term
commercial paper, or such funds may be held temporarily in cash.

     Sec.  18.2  Diversification  of  Investments  by  Qualified   Participants.
Effective   for   Years   beginning   after   March   31,   2007,   based  on  a
non-discriminatory   policy  and  procedures  adopted  by  the  Committee,  each
Qualified  Participant may, subject to and in accordance with this Section 18.2,
elect within the 90-day period  immediately  after the close of each Year during
that  Qualified   Participant's  Qualified  Election  Period  to  diversify  the
investment  of up to 25 percent of the total number of shares of Parent  Company
Stock  acquired by or  contributed  to the Plan that have ever been allocated to
such Qualified  Participant's Parent Company Stock Account as of the last day of
each of the first five Years in his Qualified  Election  Period  (reduced by the
number  of  shares  of  Parent   Company  Stock  covered  by  his  prior  actual
diversification  election or  elections).  In each case the resulting  number of
shares  of  Parent  Company  Stock  determined  to  be  subject  to a  Qualified
Participant's   diversification  election  for  a  Year  during  that  Qualified
Participant's  Qualified  Election  Period shall be rounded to the nearest whole
integer. In the case of the election year in which the last election can be made
by the  Qualified  Participant,  the  preceding  sentence  shall be  applied  by
substituting "50 percent" for "25 percent."

     If a Qualified Participant timely elects to diversify the investment of the
eligible portion of his Parent Company Stock Account,  the  Administrator  shall
direct the Trustee to distribute to the Participant no later than 180 days after
the close of the Year to which such  diversification  election  applies from his
Parent  Company Stock Account the number of shares of Parent  Company Stock with
respect  to which  he is  eligible  to and  actually  elects  to  diversify  the
investment  of his  Parent  Company  Stock  Account.  The  Participant  shall be



                                       69
<PAGE>

notified of his direct  rollover  rights under Section 11.11 with respect to the
shares  of  Parent  Company  Stock  to be  distributed  to him  pursuant  to his
diversification election.

                                   ARTICLE XIX

                              TOP HEAVY PROVISIONS
                              --------------------

     Sec. 19.1 Minimum Allocation  Requirements.  Notwithstanding the provisions
of Section  4.3, for any Year in which the Plan is a Top Heavy Plan and no other
plan is  maintained  by an Employer or an  Affiliated  Company that provides the
minimum  benefit  applicable  to top heavy  plans  within the meaning of Section
416(g) of the Code, the  requirement  for 1,000 Hours of Service shall not apply
and Employer  contributions and forfeitures (excluding Employer contributions to
Social  Security)  which are allocated to any Participant who on the last day of
the Year is a Non-Key Employee who has satisfied the eligibility requirements of
Section  2.1,  shall not be less than the  lesser of (i) three  percent  of such
Participant's  Annual  Compensation  [as defined in Section  5.2(f)] or (ii) the
largest percentage of Employer  contributions,  as a percentage of the amount of
the Annual  Compensation  [as defined in Section 5.2(f)] of Participants who are
Key Employees,  but not in excess of the  Compensation  Limitation as defined in
Section 1.6  allocated  to any such  Participant  who is a Key Employee for that
Year; provided,  however, if the Employer maintains a defined benefit plan which
designates the Plan to satisfy  Section 401 or 410 of the Code, (ii) above shall
not apply.

     Sec. 19.2 Vesting Schedule. Notwithstanding the provisions of Section 10.2,
beginning  with the  first  Year in  which  the Plan is a Top  Heavy  Plan,  the
following provisions shall be applicable to Section 10.2:

(a)  Except as provided in Section  19.2(b)  below,  each  Participant  shall be
     entitled  (as a vested  interest)  to  receive  the  greater  of the vested
     interest  calculated  pursuant  to  Article X or a  percentage  of the then
     combined  balance to his credit in his Parent  Company  Stock  Account  and



                                       70
<PAGE>

     Other  Investments  Account  determined  in  accordance  with the following
     schedule:

       Years of Service (Vesting)               Vested Interest
       --------------------------               ---------------
            Less than 3                                 0%
            3 or more                                 100%

(b)  The  schedule in Section  19.2(a)  above shall not apply to the  Individual
     Account of any  Participant  who does not perform an Hour of Service  after
     the Determination Date on which the Plan first became a Top Heavy Plan; any
     such Participant's  vested interest in his Parent Company Stock Account and
     Other  Investments  Account shall be determined by applying the schedule in
     Section  10.2  of  the  Plan  as  applicable  to  the  Plan  prior  to  the
     Determination  Date on which the Plan first  became a Top Heavy Plan.  This
     Section 19.2 shall not apply for any Year beginning after March 31, 2007.

     Sec. 19.3 Definitions.

(a)  "Determination  Date"  means  for  any  Year  the  Anniversary  Date of the
     preceding  Year,  or in the  case  of the  first  Year  of  the  Plan,  the
     Anniversary Date of that Year.

(b)  "Key Employee"  means for Years  beginning  after March 31, 2007, as of any
     Determination Date, any Employee or former Employee (or Beneficiary of such
     Employee)  of an Employer  who, at any time during the Year which  includes
     the Determination Date, is:

     (i)  an officer of any Employer having Annual  Compensation  [as defined in
          Section  5.2(f)]  greater than  $145,000 [as  adjusted  under  Section
          416(i)(1) of the Code for Years beginning after March 31, 2008];

     (ii) a more than five-percent owner of any Employer; or

     (iii) a  more  than  one  percent  owner  of  any  Employer  having  Annual
          Compensation [as defined in Section 5.2(f)] from all Employers of more
          than $150,000.



                                       71
<PAGE>


     For  purposes  of  subsection  (b)(i),  no more than 50  Employees  (or, if
     lesser,  the  greater  of  three or ten  percent  of the  Employees  of all
     Employers) shall be treated as officers.  The constructive  ownership rules
     of Section 318 of the Code (or the principles of that section,  in the case
     of an  unincorporated  Employer) will apply to determine  ownership in each
     Employer.

(c)  "Non-Key Employee" means any Employee who is not a Key Employee.

(d)  "Permissive  Aggregation  Group" means the Required  Aggregation Group plus
     any other  qualified plan or plans  maintained by an Employer  which,  when
     considered as a group with the Required  Aggregation  Group, would continue
     to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.

(e)  "Required  Aggregation  Group" means (i) each qualified plan of an Employer
     in which at least one Key Employee participates or participated at any time
     during  the  determination  period  (regardless  of  whether  the  plan has
     terminated), and (ii) any other qualified plan of an Employer which enables
     a plan described in (i) to meet the  requirements of Sections  401(a)(4) or
     410 of the Code.

(f)  "Top Heavy  Plan"  means the Plan (i) if the Plan is not part of a Required
     Aggregation Group or a Permissive Aggregation Group and the Top Heavy Ratio
     for the Plan as of the Determination  Date exceeds 60 percent,  (ii) if the
     Plan is part of a Required  Aggregation  Group but not part of a Permissive
     Aggregation Group and the Top Heavy Ratio for the group of plans exceeds 60
     percent,  or (iii) if the Plan is part of a Required  Aggregation Group and
     part of a  Permissive  Aggregation  Group and the Top  Heavy  Ratio for the
     Permissive Aggregation Group exceeds 60 percent.

(g)  "Top Heavy Ratio" means"

     (i)  If the  Employer  maintains  one or more  defined  contribution  plans
          (including any simplified  employee pension plan) and the Employer has
          not  maintained  any defined  benefit  plan which  during the one-year
          period (five-year period in determining  whether the plan is top heavy
          for  Years   beginning   before   January  1,  2002)   ending  on  the
          Determination  Date(s) has or has had accrued benefits,  the Top Heavy



                                       72
<PAGE>

          Ratio  for the Plan  alone or for the  Required  Aggregation  Group or
          Permissive  Aggregation  Group,  as  appropriate,  is a fraction,  the
          numerator  of  which  is the sum of the  account  balances  of all Key
          Employees as of the Determination  Date(s)  (including any part of any
          account  balance  distributed  in the  one-year  period  ending on the
          Determination  Date in the  case of a  distribution  made for a reason
          other than  severance  from  employment,  death or  Disability  and in
          determining  whether the Plan is a Top Heavy Plan for Years  beginning
          before  January 1, 2002),  and the  denominator of which is the sum of
          all  account  balances  (including  any  part of any  account  balance
          distributed  in  the  one-year  period  ending  on  the  Determination
          Date(s))  (five-year  period ending on the  Determination  Date in the
          case of a  distribution  made for a reason other than  severance  from
          employment, death or Disability and in determining whether the Plan is
          a Top Heavy Plan for Years  beginning  before  January 1, 2002),  both
          computed in  accordance  with Section 416 of the Code and the Treasury
          regulations thereunder.  Both the numerator and denominator of the Top
          Heavy Ratio are  increased  to reflect any  contribution  not actually
          made as of the  Determination  Date, but which is required to be taken
          into  account  on that  date  under  Section  416 of the  Code and the
          Treasury regulations thereunder.

     (ii) If the  Employer  maintains  one or more  defined  contribution  plans
          (including  any  simplified  employee  pension  plan) and the Employer
          maintains or has  maintained  one or more defined  benefit plans which
          during the one-year period  (five-year  period in determining  whether
          the Plan is a Top Heavy  Plan for Years  beginning  before  January 1,
          2002) ending on the  Determination  Date(s) has or has had any accrued
          benefits,  the Top Heavy Ratio for any Required  Aggregation  Group or
          Permissive  Aggregation  Group,  as  appropriate,  is a fraction,  the
          numerator of which is the sum of account balances under the aggregated
          defined  contribution plan or plans for all Key Employees,  determined
          in accordance with subsection  (g)(i) above,  and the present value of



                                       73
<PAGE>

          accrued  benefits under the aggregated  defined  benefit plan or plans
          for  all  Key  Employees  as of the  Determination  Date(s),  and  the
          denominator  of which is the sum of the  account  balances  under  the
          aggregated  defined  contribution  plan or plans for all participants,
          determined in accordance with subsection (g)(i) above, and the present
          value of accrued  benefits under the defined benefit plan or plans for
          all participants as of the  Determination  Date(s),  all determined in
          accordance  with Section 416 of the Code and the Treasury  regulations
          thereunder.  The accrued benefits under a defined benefit plan in both
          the numerator and denominator of the Top Heavy Ratio are increased for
          any  distribution  of an accrued  benefit made in the one-year  period
          ending  on the  Determination  Date  (five-year  period  ending on the
          determination  date) in the case of a  distribution  made for a reason
          other than  severance  from  employment,  death or  Disability  and in
          determining  whether the Plan is a Top Heavy Plan for Years  beginning
          before January 1, 2002).

     (iii) For purposes of subsection (g)(i) and (ii) above the value of account
          balances and the present value of accrued  benefits will be determined
          as of the most recent  valuation  date that falls  within or ends with
          the  12-month  period  ending  on the  Determination  Date,  except as
          provided  in  Section  46 of the  Code  and the  Treasury  regulations
          thereunder  for the first and second  plan years of a defined  benefit
          plan of a Participant  (A) who is not a Key Employee but who was a Key
          Employee in a prior  year,  or (B) who has not been  credited  with at
          least one Hour of Service  with any Employer  maintaining  the Plan at
          any time during the one-year period  (five-year  period in determining
          whether  the Plan is a Top  Heavy  Plan  for  Years  beginning  before
          January 1, 2002) ending on the Determination Date will be disregarded.
          The  calculation  of the Top  Heavy  Ratio,  and the  extent  to which
          distributions, rollovers, and transfers are taken into account will be
          made in  accordance  with  Section  416 of the Code  and the  Treasury
          regulations thereunder.  Deductible employee contributions will not be
          taken into account for purpose of computing the Top Heavy Ratio.  When



                                       74
<PAGE>

          aggregating  plans the value of account  balances and accrued benefits
          will be calculated with reference to the Determination Dates that fall
          within the same calendar year.

          The accrued  benefit of a Participant  other than a Key Employee shall
          be determined under (A) the method, if any, that uniformly applies for
          accrual  purposes  under all defined  benefit plans  maintained by the
          Employer,  or (B) if  there  is not such  method,  as if such  benefit
          accrued not more rapidly than the slowest accrual rate permitted under
          the fractional rule of Section 411(b)(1)(C) of the Code.

     IN WITNESS WHEREOF, The RectorSeal Corporation,  the Company, acting by and
through its duly authorized officers,  has caused this revised and restated Plan
to be executed as of the day and year first above written.

                                                      THE RECTORSEAL CORPORATION



                                                      By
                                                        ------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>capital10ex102033107.txt
<TEXT>




                                                                    Exhibit 10.2


                        RETIREMENT PLAN FOR EMPLOYEES OF

                CAPITAL SOUTHWEST CORPORATION AND ITS AFFILIATES

                 As Amended and Restated Effective April 1, 2006
































                          Capital Southwest Corporation
                                  Dallas, Texas








<PAGE>

                                TABLE OF CONTENTS


Section                                                                     Page

         DEFINITIONS:  PARTICIPATION
1.1  -   Definitions.........................................................1-1
1.2  -   Participation......................................................1-21
1.3  -   Leave of Absence and Termination of Service........................1-22
1.4  -   Reemployment.......................................................1-25
1.5  -   Transfer to or From Status as an Eligible Employee.................1-34
1.6  -   Participation and Benefits for Former Leased Employees.............1-37
1.7  -   Rights of Other Employers to Participate...........................1-38
1.8  -   Service and Termination of Service.................................1-40


         NORMAL AMOUNT AND PAYMENT OF RETIREMENT INCOME
2.1  -   Normal Retirement and Retirement Income.............................2-1
2.2  -   Early Retirement and Retirement Income..............................2-5
2.3  -   Disability Retirement and Retirement Income.........................2-6
2.4  -   Benefits Other Than on Retirement..................................2-11


         SPECIAL PROVISIONS REGARDING PAYMENT OF BENEFITS
3.1  -   Optional Forms of Retirement Income.................................3-1
3.2  -   Lump-Sum Payment of Small Retirement Income.........................3-7
3.3  -   Benefits Applicable to Participant Who Has Been
         or Is Employed by Two or More Employers.............................3-8
3.4  -   No Duplication of Benefits..........................................3-9
3.5  -   Funding of Benefits Through Purchase of
         Life Insurance Contract or Contracts................................3-9


         GOVERNMENTAL REQUIREMENTS AFFECTING BENEFITS
4.1  -   Special Provisions Regarding Amount and
         Payment of Retirement Income........................................4-1
4.2  -   Limitations on Benefits Required
         by the Internal Revenue Service....................................4-20
4.3  -   Benefits Nonforfeitable if Plan Is Terminated......................4-22
4.4  -   Merger of Plan.....................................................4-23
4.5  -   Termination of Plan and Distribution of Trust Fund.................4-23
4.6  -   Special Provisions that Apply if Plan is Top-Heavy.................4-29
4.7  -   Transfers..........................................................4-37
4.8  -   Minimum Distribution Requirements..................................4-38


         MISCELLANEOUS PROVISIONS REGARDING PARTICIPANTS
5.1  -   Participants to Furnish Required Information........................5-1
5.2  -   Beneficiaries.......................................................5-2


<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

Section                                                                     Page


5.3  -   Contingent Beneficiaries............................................5-3
5.4  -   Participants' Rights in Trust Fund..................................5-4
5.5  -   Benefits Not Assignable.............................................5-4
5.6  -   Benefits Payable to Minors and Incompetents.........................5-5
5.7  -   Conditions of Employment Not Affected by Plan.......................5-6
5.8  -   Notification of Mailing Address.....................................5-6
5.9  -   Written Communications Required.....................................5-7
5.10 -   Benefits Payable at Office of Trustee...............................5-7
5.11 -   Appeal to Committee.................................................5-8


         MISCELLANEOUS PROVISIONS REGARDING THE EMPLOYER
6.1  -   Contributions.......................................................6-1
6.2  -   Employer's Contributions Irrevocable................................6-1
6.3  -   Forfeitures.........................................................6-2
6.4  -   Amendment of Plan...................................................6-2
6.5  -   Termination of Plan.................................................6-4
6.6  -   Expenses of Administration..........................................6-5
6.7  -   Formal Action by Employer...........................................6-5


         ADMINISTRATION
7.1  -   Administration by Committee.........................................7-1
7.2  -   Officers of Committee; Service Providers............................7-2
7.3  -   Action by Committee.................................................7-2
7.4  -   Rules and Regulations of Committee..................................7-3
7.5  -   Powers of Committee.................................................7-3
7.6  -   Duties of Committee.................................................7-4
7.7  -   Indemnification of Certain Fiduciaries..............................7-5
7.8  -   Actuary.............................................................7-5
7.9  -   Fiduciaries.........................................................7-6
7.10 -   Applicable Law......................................................7-8


         TRUST FUND
8.1  -   Purpose of Trust Fund...............................................8-1
8.2  -   Benefits Supported Only by Trust Fund...............................8-1
8.3  -   Trust Fund Applicable Only to Payment of Benefits...................8-1


         First Supplement


<PAGE>


                        RETIREMENT PLAN FOR EMPLOYEES OF
                CAPITAL SOUTHWEST CORPORATION AND ITS AFFILIATES
                 As Amended and Restated Effective April 1, 2006


                                  INTRODUCTION

     Capital  Southwest  Corporation  adopted and established a retirement plan,
called the Capital Southwest Corporation Retirement Plan, for the benefit of its
eligible employees effective as of April 1, 1966. Effective as of April 1, 1972,
the  Comprehensively  Amended Retirement Plan for Employees of Capital Southwest
Corporation  was adopted by Capital  Southwest  Corporation  as an amendment and
restatement of the aforementioned retirement plan and, in conjunction therewith,
the Retirement Trust for Employees of Capital Southwest  Corporation was adopted
as an amendment and restatement of the original trust agreement. Effective as of
January  1,  1974,  Capital  Southwest  Corporation  amended  and  restated  the
aforementioned  Comprehensively Amended Retirement Plan for Employees of Capital
Southwest Corporation in its entirety as set forth in an instrument known as the
Retirement  Plan  for  Employees  of  Capital  Southwest   Corporation  and,  in
conjunction  therewith,  the  aforementioned  Retirement  Trust for Employees of
Capital  Southwest  Corporation  was amended and restated in its entirety as set
forth in a trust  agreement  of the same  title.  The said  Retirement  Plan for
Employees of Capital Southwest Corporation and Retirement Trust for Employees of
Capital Southwest  Corporation were  subsequently  amended and restated in their
entirety  effective as of April 1, 1976, as set forth in instruments of the same
titles.  Capital Southwest Management  Corporation was formed as a subsidiary of
Capital  Southwest  Corporation in December of 1986, and effective as of January
1, 1987, the employees of Capital Southwest Corporation were transferred to, and


<PAGE>
                                      -2-



became  employees of, Capital  Southwest  Management  Corporation  which, as the
successor employer of such employees,  continued the  aforementioned  retirement
plan on their behalf.
     The Whitmore Manufacturing Company under date of July 14, 1961 entered into
a trust agreement whereby it established a retirement plan and trust for certain
of its  employees,  and under date of April 14, 1965 entered into another  trust
agreement  whereby it  established  a  different  retirement  plan and trust for
certain of its other  employees.  The  retirement  plans set forth in such trust
agreements were known as The Whitmore  Manufacturing Company Retirement Plan and
The  Whitmore  Manufacturing  Company  Hourly Rate Pension  Plan,  respectively.
Effective as of March 1, 1976, the trust agreements setting forth the provisions
of the  aforementioned  retirement  plans were  amended and  restated,  and such
amended and restated  retirement plans were  subsequently  known as The Whitmore
Manufacturing  Company Revised  Retirement  Plan and The Whitmore  Manufacturing
Company Revised Hourly Rate Pension Plan, respectively. Effective as of March 1,
1980, the said The Whitmore  Manufacturing  Company Revised  Retirement Plan and
The Whitmore  Manufacturing  Company Revised Hourly Rate Pension Plan were again
amended and restated,  and were consolidated into a single plan and trust, known
as the Retirement Plan for Employees of The Whitmore  Manufacturing  Company and
the Retirement Trust for Employees of The Whitmore Manufacturing Company.
     The Retirement Plan for Employees of The Rectorseal Corporation was adopted
by The RectorSeal Corporation effective as of April 1, 1976, as an amendment and
restatement of the retirement plan and trust which it had originally established
for the benefit of its eligible  employees  effective as of January 1, 1972. The
said   Retirement   Plan  for  Employees  of  The  Rectorseal   Corporation  was
subsequently amended and restated in its entirety effective as of April 1, 1984,
as set forth in an instrument of the same title.
     The  Retirement  Plan for  Employees  of  Jet-Lube,  Inc.  was  adopted  by
Jet-Lube,  Inc. effective as of April 1, 1976 as an amendment and restatement of

<PAGE>
                                      -3-


the  retirement  plan and  trust  which it had  originally  established  for the
benefit  of its  eligible  employees  effective  as of June 13,  1973.  The said
Retirement  Plan for Employees of Jet-Lube,  Inc. was  subsequently  amended and
restated  in its  entirety  effective  as of April 1,  1984,  as set forth in an
instrument of the same title.
     The  aforementioned  Retirement  Plan for  Employees  of Capital  Southwest
Corporation and Retirement Trust for Employees of Capital Southwest Corporation,
Retirement  Plan  for  Employees  of  The  Whitmore  Manufacturing  Company  and
Retirement Trust for Employees of The Whitmore Manufacturing Company, Retirement
Plan  for  Employees  of The  Rectorseal  Corporation  and  Retirement  Plan for
Employees of Jet-Lube,  Inc. have  subsequently  been amended from time to time,
and said retirement plans and trust agreements were further amended and restated
in their  entirety  effective as of April 1, 1989 as set forth in an  instrument
known as the Retirement Plan for Employees of Capital Southwest  Corporation and
Its Affiliates, and in a trust agreement,  titled Retirement Trust for Employees
of Capital  Southwest  Corporation and Its Affiliates.  In conjunction with such
amendment and restatement,  said retirement plans were  consolidated and merged,
effective  as of April 1,  1989,  into a "single  plan"  within  the  meaning of
Section  414(l) of the Internal  Revenue Code and  regulations  issued  pursuant
thereto.  Said retirement plan, as amended and restated effective as of April 1,
1989, contained special provisions for certain employees whose service commenced
prior to such date as set forth in a supplement  thereto which was identified as
the "First  Supplement  to Retirement  Plan for  Employees of Capital  Southwest
Corporation and Its Affiliates as Amended and Restated Effective April 1, 1989."
     The said Retirement Plan for Employees of Capital Southwest Corporation and
Its  Affiliates  has  subsequently  been  amended  from  time to time,  and said
retirement  plan is being further  amended and is being restated in its entirety
effective as of April 1, 2006 set forth in this instrument.

<PAGE>
                                      -4-


     The  aforementioned  First  Supplement to Retirement  Plan for Employees of
Capital  Southwest  Corporation and Its Affiliates as in effect on April 1, 1989
shall  be  attached  to and  made a part of the  plan as  amended  and  restated
effective  April 1, 2006,  and all  references to the "plan" in said  supplement
shall on and  after  April 1, 2006  refer to the plan as  amended  and  restated
effective  April 1, 2006 set forth herein and  references in said  supplement to
specified sections in the plan shall refer to the corresponding  sections in the
amended and restated plan even though the  corresponding  section in the amended
and restated plan may not have the same section number that is specified in said
supplement.
     Subject to receipt by the  aforementioned  Employers of a favorable  ruling
that the  qualified  status of the  Retirement  Plan for  Employees  of  Capital
Southwest  Corporation and Its Affiliates and the Retirement Trust for Employees
of Capital  Southwest  Corporation and Its Affiliates  under Sections 401(a) and
501(a) of the Internal Revenue Code is not adversely  affected by such amendment
and  restatement,  each  person who  becomes a  participant  hereunder  shall be
entitled upon his  retirement or  termination of service to such benefits as are
specified in the provisions which follow.


<PAGE>

                                       1-1

                                    SECTION 1

                           DEFINITIONS: PARTICIPATION

1.1 - DEFINITIONS

     (A) The following terms as used herein shall have the meanings stated below
unless a different meaning is plainly required by the context:

     (1)  "Accrued  Deferred  Monthly  Retirement  Income  Commencing  at Normal
          Retirement Date" shall mean the monthly retirement income,  payable in
          the  manner  described  in Section  2.1(C)  hereof  commencing  at the
          Participant's  Normal  Retirement  Date,  which he has accrued as of a
          given date and,  with  respect to any given date on or after  April 1,
          1998 and prior to April 1, 2007, shall be equal to the sum of:

          (a)  1.25% of his Final  Average  Monthly  Compensation  at such given
               date  multiplied  by his number of years of  Credited  Service at
               such given date that are not in excess of 35 years;

               plus

          (b)  0.65% of that  portion,  if any,  of his  Final  Average  Monthly
               Compensation  at such given date that is in excess of the Monthly
               Covered  Compensation  that  applies  to him at such  given  date
               multiplied  by his  number of years of  Credited  Service at such
               given date that are not in excess of 35 years;

          provided, however, that the Accrued Deferred Monthly Retirement Income
          Commencing at Normal  Retirement  Date which a Participant has accrued
          as of a given  date  shall not  exceed an amount  that is  actuarially
          equivalent  as of such given date to the maximum  amount of retirement
          income  permitted under Section 415 of the Internal  Revenue Code; and
          provided further,  however,  that the provisions of Section 4.6 hereof
          shall apply in determining  the Accrued  Deferred  Monthly  Retirement
          Income  Commencing at Normal  Retirement Date of a Participant who has
          accrued  Vesting  Service  during  any  Plan  Year  that  the  Plan is
          top-heavy.

          Notwithstanding  the foregoing  provisions of this Section  1.1(A)(1),
          the Accrued Deferred Monthly  Retirement  Income  Commencing at Normal
          Retirement  Date of a Participant  at any given date shall not be less
          than the Accrued  Deferred  Monthly  Retirement  Income  Commencing at
          Normal Retirement Date which the Participant has



<PAGE>
                                       1-2


          accrued as of March 31, 1998,  based upon the  Participant's  Credited
          Service,  Final  Average  Monthly  Compensation,  and Monthly  Covered
          Compensation  (or,  if  applicable,  the  corresponding  terms used to
          compute his accrued benefit under the Superseded  Plan)  determined as
          of the  earlier of March 31,  1998,  or the date of the  Participant's
          termination of service, under the provisions of the Plan and the First
          Supplement then in effect.

          Effective  April 1, 2007,  the  Accrued  Deferred  Monthly  Retirement
          Income  Commencing at Normal  Retirement  Date which a Participant has
          accrued as of a given date on or after  April 1, 2007,  shall be equal
          to the sum of:

          (a)  1.20% of his Final  Average  Monthly  Compensation  at such given
               date  multiplied  by his number of years of  Credited  Service at
               such given date that are not in excess of 35 years;

               plus

          (b)  0.65% of that  portion,  if any,  of his  Final  Average  Monthly
               Compensation  at such given date that is in excess of the Monthly
               Covered  Compensation  that  applies  to him at such  given  date
               multiplied  by his  number of years of  Credited  Service at such
               given date that are not in excess of 35 years.

          Notwithstanding  the foregoing  provisions of this Section  1.1(A)(1),
          the Accrued Deferred Monthly  Retirement  Income  Commencing at Normal
          Retirement  Date of a Participant  at any given date on or after April
          1,  2007,  shall  not  be  less  than  the  Accrued  Deferred  Monthly
          Retirement  Income  Commencing  at Normal  Retirement  Date  which the
          Participant  has  accrued  as  of  March  31,  2007,  based  upon  the
          Participant's  Credited Service,  Final Average Monthly  Compensation,
          and Monthly Covered Compensation determined as of the earlier of March
          31, 2007,  or the date of the  Participant's  termination  of service,
          under the provisions of the Plan and the Supplements then in effect.

     (2)  "Annuity  Starting  Date" shall have the  meaning  assigned in Section
          417(f)  of the  Internal  Revenue  Code and  regulations  issued  with
          respect  thereto  and shall be the first day of the first  period  for
          which an amount is payable  (not the  actual  date of  payment)  as an
          annuity or any other form. Any auxiliary  disability benefits shall be
          disregarded in determining the Annuity Starting Date.

<PAGE>
                                       1-3



          Unless  otherwise  qualified by the context,  the regularly  scheduled
          Annuity Starting Date of a Participant shall be:

          (a)  in the case of the benefit payable under Section 2.1 in the event
               of his normal  retirement,  the first day of the month coincident
               with or next following the date of his retirement or his Required
               Beginning Date, whichever is earlier;

          (b)  in the case of the benefit payable under Section 2.2 in the event
               of his early  retirement,  the first day of the month  coincident
               with or next following the date of his retirement;

          (c)  in the case of the benefit payable under Section 2.3 in the event
               of his disability retirement, the date as of which his disability
               retirement  income  payments are scheduled to start under Section
               2.3(F);

          (d)  in the case of the benefit  payable under  Section  2.4(A) in the
               event  of  termination  of  service  with a vested  benefit,  the
               Participant's Normal Retirement Date or, if applicable, the first
               day of the month  prior to his  Normal  Retirement  Date that the
               Participant  has elected in  accordance  with the  provisions  of
               Section  2.4(A) to start  receiving  the  benefits to which he is
               entitled under such section; and

          (e)  in the case of the benefit payable under Section 3.2 hereof,  the
               first day of the month coincident with or next following the date
               of termination of the Participant's service;  provided,  however,
               if payment is not made under  Section  3.2 as of the first day of
               the  month   coincident  with  or  next  following  the  date  of
               termination  of his service  but the  Committee  establishes,  in
               accordance with a uniform policy applied without  discrimination,
               a  subsequent  date as of  which  calculations  shall  be made to
               determine if voluntary or involuntary cashouts shall be permitted
               or required as of such  subsequent  date under the  provisions of
               Section 3.2, the Annuity  Starting Date shall be such  subsequent
               date  established  by the Committee if payment is made under such
               section as of such subsequent date;


<PAGE>
                                      1-4



               provided,  however,  if the  Participant  elects  pursuant to the
               provisions of Section 3.1 hereof to defer the commencement of the
               benefit to which he is entitled  to a date  beyond the  regularly
               scheduled  Annuity  Starting Date  described  above,  his Annuity
               Starting Date shall be such later date of commencement  specified
               in his election.

     (3)  "Beneficiary"  shall mean the  person or  persons  or other  entity on
          whose  behalf   benefits  may  be  payable  under  the  Plan  after  a
          Participant's death in accordance with the provisions hereof.

     (4)  "Break in Service"  shall mean a period of severance of 12 consecutive
          months  or longer  that  immediately  follows  an  employee's  date of
          termination of service and  immediately  precedes the date, if any, on
          which he next performs an Hour of Service.

     (5)  "Committee" shall mean the Retirement Committee appointed from time to
          time to administer  the Plan pursuant to the provisions of Section 7.1
          hereof.

     (6)  "Compensation" shall mean the sum of:

          (a)  the amounts  actually  paid to an employee  by the  Employer  for
               services  rendered,  as reported on the employee's Federal income
               tax withholding statement (Form W-2 or its subsequent equivalent)
               for  the  applicable  calendar  year,   exclusive,   however,  of
               reimbursements  and other  expense  allowances,  fringe  benefits
               (cash and  noncash),  including  but not  limited  to  automobile
               allowances,  taxable  group life  insurance  and amounts that are
               paid to the employee in cash in lieu of being  contributed on his
               behalf to a qualified defined contribution plan maintained by the
               Employer,  moving  expenses,  welfare  benefits,  and  all  other
               extraordinary compensation; and

          (b)  the  amounts,  if any,  that  would have been  includable  in the
               employee's Compensation under (a) above for such calendar year if
               they had not  been  contributed  on his  behalf  by the  Employer
               pursuant  to a  salary  reduction  agreement  and  had  not  been
               excluded  from his gross income under the  provisions  of Section
               125   (cafeteria    plans),    Section    132(f)(4)    (qualified
               transportation  fringes),  or Section 402(e)(3) (cash or deferred
               arrangements) of the Internal Revenue Code. Amounts under Section
               125 include any amounts not available to a Participant in cash in
               lieu of group health  coverage  because the Participant is unable
               to certify that he has other health coverage;  provided that such
               an amount shall be treated as an amount under Section 125 only if
               the Employer  does not request or collect  information  regarding

<PAGE>
                                      1-5


               such   Participant's   other  health  coverage  as  part  of  the
               enrollment process for the health plan.

     Any  provisions   above  to  the  contrary   notwithstanding,   the  annual
     Compensation  of a  Participant  for  any  given  calendar  year  or  other
     specified  12-consecutive-month  period,  which is taken into  account with
     respect to  contributions  to the Plan and to benefits  accruing  under the
     Plan shall not exceed the  maximum  annual  compensation  that may be taken
     into account  under  Section  401(a)(17)  of the Internal  Revenue Code and
     regulations issued with respect thereto (the "IRC Section 401(a)(17) Annual
     Compensation Limit").

     The IRC Section  401(a)(17) Annual  Compensation  Limit with respect to any
     given calendar year or other specified 12-consecutive-month period shall be
     equal to $200,000 or such  increased or decreased  amount,  as the case may
     be,  that  applies  as of the  January  1  coincident  with or  immediately
     preceding  the  beginning of such given  calendar  year or other  specified
     12-consecutive-month   period,   pursuant  to  the  provisions  of  Section
     401(a)(17)  of  the  Internal  Revenue  Code,  as  amended  and  rules  and
     regulations  issued with  respect  thereto.  The  $200,000  limit on annual
     Compensation shall be adjusted for  cost-of-living  increases in accordance
     with Section 401(a)(17)(B) of the Internal Revenue Code.

     Notwithstanding the foregoing, for purposes of determining benefit accruals
     in a Plan Year  beginning  after  December 31, 2001,  Compensation  for any
     given  calendar  year  or  other  specified   12-consecutive-month   period
     beginning before January 1, 2002 shall be limited to $200,000.

     In the event  that  Compensation  under the Plan is  determined  based on a
     period of time that contains fewer than 12 calendar months, the IRC Section
     401(a)(17) Annual Compensation Limit for that period of time shall be equal
     to the IRC Section  401(a)(17) Annual  Compensation  Limit for the calendar
     year during which such period of time begins  multiplied by the fraction in
     which the numerator is the number of full months in such period of time and
     the denominator is 12.

     Any  provisions  herein to the contrary  notwithstanding,  a  Participant's
     accrued  benefit as of March 31,  1989 shall not be reduced  due to the IRC
     Section  401(a)(17) Annual  Compensation  Limit which was imposed under the
     Superseded  Plan  effective  as of  April  1,  1989  on the  amount  of his
     Compensation.   In  the  event  that  the  IRC  Section  401(a)(17)  Annual
     Compensation  Limit  is  reduced  effective  as of any date  subsequent  to
     January 1, 1989, a Participant's  accrued benefit  immediately prior to the
     date that such reduction  becomes effective shall not be reduced due to the
     reduction in such limit.

<PAGE>
                                      1-6



     (7)  "Controlled Group Member" shall mean:

          (a)  the Employer;

          (b)  any  corporation or association  that is a member of a controlled
               group of  corporations  (within the meaning of Section 1563(a) of
               the Internal Revenue Code,  determined  without regard to Section
               1563(a)(4) and Section  1563(e)(3)(C) of said Code,  except that,
               for the  purposes of applying  the  limitations  on benefits  and
               contributions that are required under Section 415 of the Internal
               Revenue Code and are  described in Section  4.1(A)  hereof,  such
               meaning shall be determined by substituting the phrase "more than
               50%" for the  phrase "at least 80%" each place that it appears in
               Section  1563(a)(1)  of said  Code)  with  respect  to which  the
               Employer is a member;

          (c)  any trade or business (whether or not incorporated) that is under
               common control with the Employer as determined in accordance with
               Section  414(c)  of the  Internal  Revenue  Code and  regulations
               issued thereunder;

          (d)  any  service  or  other  organization  that  is a  member  of  an
               affiliated service group (within the meaning of Section 414(m) of
               the Internal  Revenue Code) with respect to which the Employer is
               a member; and

          (e)  any other  entity  required to be  aggregated  with the  Employer
               pursuant to  regulations  under  Section  414(o) of the  Internal
               Revenue Code.

     (8)  "Credited  Service"  shall  mean the  total  period  of an  employee's
          service with the Employer,  computed in completed  months,  during the
          period  beginning  on his Last Date of  Commencement  of  Service  and
          ending on the date of his  retirement  or  termination  of service or,
          where applicable, ending on such other date as is specified hereunder;
          provided,  however,  that the  following  provisions  shall apply with
          respect  to any  period of such an  employee's  service  that would be
          included in his Credited  Service in  accordance  with the  provisions
          above:

          (a)  any complete  calendar month that the employee is absent from the
               service  of the  Employer  will be  excluded  from  his  Credited
               Service unless he receives regular Compensation from the Employer

<PAGE>
                                      1-7


               for all or any  portion  of such  calendar  month  and  except as
               otherwise provided below; and

          (b)  any absence due to the employee's  engagement in military service
               will,  except as provided  below,  be  included  in his  Credited
               Service if such absence is covered by a leave of absence  granted
               by the Employer or is by reason of  compulsory  military  service
               and provided that such employee  returns from such absence within
               the period of time prescribed in Section 1.3 hereof; and

          (c)  any  service  that the  employee  accrued  prior to April 1, 1976
               while he was employed on a part-time basis or for a temporary job
               will be excluded from his Credited Service;

          and provided  further,  however,  that the  provisions  of Section 1.4
          hereof shall apply in the case of an employee who is reemployed with a
          reinstatement  of Credited  Service  accrued prior to his Last Date of
          Commencement of Service and the provisions of Section 1.5 hereof shall
          apply in the case of an  employee  who is  transferred  to or from his
          status as an eligible Employee.

          Any period of an employee's service prior to the Effective Date of the
          Plan that was either  included  with or excluded from the service used
          to determine his accrued  retirement  income under the Superseded Plan
          for any reason  specified under the terms of the Superseded Plan as in
          effect on the day immediately preceding the Effective Date of the Plan
          shall be  included  with or  excluded  from,  as the case may be,  his
          Credited  Service under the  provisions  of the Plan,  except that any
          such period of service shall not be excluded on or after April 1, 1988
          from a Participant's  Credited Service solely because of the fact that
          it was accrued after his Normal Retirement Date.

     (9)  "Designated Nonparticipating Employer" shall mean:

          (a)  any  Controlled  Group  Member that is not an Employer as defined
               herein; and

          (b)  any other corporation, association,  proprietorship,  partnership
               or other  business  organization  that (i) is not an  Employer as
               defined herein and (ii) the Sponsoring Employer, by formal action
               on its  part in the  manner  described  in  Section  6.7  hereof,
               designates  on the  basis of a  uniform  policy  applied  without
               discrimination  as a "Designated  Nonparticipating  Employer" for
               the purposes of the Plan.

<PAGE>
                                      1-8



     (10) "Earliest Annuity Commencement Date" shall mean:

          (a)  the first day of the month  coincident with or next following the
               date  of  termination  of  the  Participant's  service  if he has
               satisfied the age and service  requirements  to be eligible for a
               normal or early retirement benefit under the provisions hereof as
               of such termination date; or

          (b)  the  earliest  date as of which the  Participant  could  elect to
               start receiving  retirement  income payments under the provisions
               of Section  2.4(A) hereof if his service were  terminated  and he
               had not satisfied the age and service requirements to be eligible
               for a normal or early  retirement  benefit  under the  provisions
               hereof as of such termination date.

     (11) "Effective  Date of the Plan"  shall  mean April 1, 2006 or such later
          date as of which the Plan first became  effective  with respect to the
          particular Employer concerned.

     (12) "Eligibility  Computation Period" shall mean the  12-consecutive-month
          period that is used for the purpose of  determining  a year of service
          for eligibility to participate in the Plan. Initially, the Eligibility
          Computation Period shall be the 12-consecutive-month  period beginning
          on the Employee's Last Date of Commencement of Service and ending with
          the first  anniversary  of his Last Date of  Commencement  of Service;
          provided,  however,  if the Employee  fails to complete 1,000 Hours of
          Service  during  such  initial  Eligibility  Computation  Period,  the
          Eligibility Computation Period shall mean the Plan Year, and the first
          of such Plan Year  Eligibility  Computation  Periods shall be the Plan
          Year that overlaps the first  anniversary of the Employee's  Last Date
          of Commencement of Service.

     (13) "Employee"  shall mean any person on the payroll of the Employer whose
          wages from the Employer are subject to withholding for the purposes of
          Federal  income  taxes and for the  purposes of the Federal  Insurance
          Contributions  Act;  provided,  however,  that  such  term  shall  not
          include:

          (a)  any such person who is employed at any  division or branch of any
               Employer  that is  formed  or  acquired  by or  merged  into  the
               Employer  after  the  Effective  Date  of  the  Plan  unless  the
               Employer, by formal action on its part in the manner described in
               Section 6.7 hereof,  provides  that such persons who are employed
               at such  division or branch shall,  subject to the  provisions of

<PAGE>
                                      1-9


               (b), (c) and (d) below, be eligible for participation in the Plan
               in accordance with the provisions hereof;

          (b)  any such person who is a participant and is accruing benefits (or
               who, upon his  satisfaction  of any age and service  requirements
               specified  thereunder  as a condition of  participation,  will be
               eligible to become a participant  and accrue  benefits) under any
               other  qualified  defined  benefit pension plan maintained by the
               Employer  or to which the  Employer  makes  contributions  on his
               behalf based upon his employment with the Employer;

          (c)  any such person who is included in a unit of persons  employed by
               the Employer who are covered by an agreement  which the Secretary
               of Labor finds to be a collective  bargaining  agreement  between
               employee  representatives and the Employer if retirement benefits
               were the subject of good faith  bargaining  between such employee
               representatives  and  the  Employer  and  such  persons  are  not
               required by that agreement to be covered in the Plan;

          (d)  any  individual who by contract is not classified by the Employer
               as a common law employee of the Employer, even if such individual
               is included  on the  Employer's  payroll  for Federal  income tax
               withholding  purposes or whether such person is later  classified
               as an employee by the Internal Revenue Service, the Department of
               Labor, a court, an administrative agency, or an Employer;

          (e)  the   Director  of  Business   Development   of  Cargo   Chemical
               Corporation;

          (f)  any such person who is a  nonresident  alien and who  receives no
               earned  income  (within  the  meaning  of  Section  911(b) of the
               Internal Revenue Code) from the Employer which constitutes income
               from  sources  within the United  States  (within  the meaning of
               Section 861(a)(3) of the Internal Revenue Code); or

          (g)  any such  person who is treated by an Employer at the time of his
               performance  of  services  for such  Employer  as either a leased
               employee  (within the meaning of Section  414(n) of the  Internal
               Revenue Code) or an independent contractor for Federal income tax
               purposes.

<PAGE>
                                      1-10



          A person in the  employment  of the  Employer  shall be deemed for the
          purposes of the Plan to be  included in a unit of persons  employed by
          the Employer who are covered by an  agreement  which the  Secretary of
          Labor finds to be a collective  bargaining  agreement between employee
          representatives and the Employer as long as he is permanently assigned
          to a job  or  job  classification  covered  by  the  terms  of  such a
          collective  bargaining  agreement.  In the event  any such  collective
          bargaining agreement expires or is terminated, it shall be deemed that
          such collective bargaining agreement continues to cover all persons in
          the employment of the Employer who are permanently assigned to jobs or
          job classifications covered thereby, in accordance with the provisions
          thereof,  during the period of time  subsequent  to the  expiration or
          termination thereof, but in no case to exceed 12 months, provided that
          negotiations commence and ensue between the parties to such expired or
          terminated  agreement  for  the  purpose  of  entering  into  a new or
          modified  collective  bargaining  agreement  to replace the expired or
          terminated  agreement.  In the  event  of the  complete  cessation  of
          negotiations  without the  adoption  of a new or  modified  collective
          bargaining  agreement  prior to the lapse of a 12-month period of time
          from the date of the  expiration  or  termination  of such  collective
          bargaining agreement,  then such expired or terminated agreement shall
          for the  purposes of the Plan be deemed to cease  covering the persons
          in the employment of the Employer who are permanently assigned to jobs
          or  job  classifications  covered  thereby  as of  the  date  of  such
          cessation and not before.

     (14) "Employer" shall mean,  collectively or  distributively as the context
          may  indicate,  the  Sponsoring  Employer and any other  corporations,
          associations, joint ventures,  proprietorships,  partnerships or other
          business  organizations that have adopted and are participating in the
          Plan in accordance with the provisions of Section 1.7 hereof.

     (15) "Final  Average  Monthly  Compensation"  shall mean the  Participant's
          average  monthly rate of  Compensation  from the Employer for the five
          successive  calendar  years,  out of the 10 completed  calendar  years
          immediately  preceding the first day of the month  coincident  with or
          next following the date on which his service terminates for any reason
          (or,  where  applicable,  immediately  preceding such other date as is
          specified  hereunder),  that give the highest  average monthly rate of
          Compensation  for the  Participant.  If a Participant  completes fewer
          than five  successive  calendar years of employment  with the Employer
          preceding such date, his actual number of calendar years of employment
          shall  be  substituted  for  such  five-calendar-year  period  for the
          purpose of determining his Final Average Monthly Compensation.

<PAGE>
                                      1-11



          The  Participant's  average  monthly  rate  of  Compensation  will  be
          determined by dividing the total  Compensation  received by him during
          such five-calendar-year period (or such lesser period described above)
          by the number of months for which he  received  Compensation  from the
          Employer  in such  five-calendar-year  period (or such  lesser  period
          described  above).   The  number  of  months  for  which  he  received
          Compensation  from the Employer may be computed,  to the extent he was
          paid on other than a monthly basis,  by determining  the number of pay
          periods ending within such  five-calendar-year  period (or such lesser
          period  described above) for which he received  Compensation  from the
          Employer and  converting  such pay periods into months by dividing the
          number thereof,  if weekly,  by 4-1/3, if biweekly,  by 2-1/6, and, if
          semi-monthly, by 2.

          In computing Final Average Monthly  Compensation for a Participant who
          has returned to the active  service of the  Employer  following a full
          calendar  year or calendar  years  during which he did not receive any
          regular  Compensation  from the Employer because of a leave of absence
          granted  by  the  Employer  or  because  of  his  reemployment  with a
          reinstatement  of his prior  Vesting  Service and Credited  Service as
          described in Section 1.4 hereof,  such full  calendar year or calendar
          years  during which he did not receive any regular  Compensation  from
          the  Employer  shall be  ignored or  excluded  in  determining  the 10
          completed  calendar years and the five  successive  calendar years (or
          such lesser  period  described  above) to be used in  determining  the
          Participant's Final Average Monthly Compensation at a subsequent date.

          Anything  above to the contrary  notwithstanding,  if a  Participant's
          service  is  terminated  for any reason  and he has not  received  any
          Compensation  during any preceding  calendar years, his "Final Average
          Monthly   Compensation"   shall  mean  his  average  monthly  rate  of
          Compensation  received  from the Employer  during the calendar year in
          which  his  service  was  terminated.  Such  average  monthly  rate of
          Compensation  will be  determined  in  accordance  with the  procedure
          described above,  based upon the total  Compensation  that he received
          and the number of months for which he received  Compensation  from the
          Employer during such calendar year.

          Notwithstanding  any  provision  of  this  Section  1.1(A)(15)  to the
          contrary,  for purposes of determining a Participant's average monthly
          rate of  Compensation  on or after April 1, 1998 and prior to April 1,
          2007,  the  Participant's  Compensation  for a calendar year shall not
          include the portion of any bonus or  aggregated  bonuses  paid in such
          calendar  year which exceeds (a) 40% of the  Participant's  total base

<PAGE>
                                      1-12


          pay in the calendar  year, for years prior to 2003, and (b) 25% of the
          Participant's  total base pay in the  calendar  year,  for years after
          2002. Provided,  however,  that the Participant's  retirement benefits
          under the Plan on and after January 1, 2003 shall not be less than the
          Accrued  Deferred  Monthly  Retirement  Income  Commencing  at  Normal
          Retirement  Date that the  Participant  has accrued as of December 31,
          2002 using 'Final Average Monthly Compensation'  determined as of such
          date without regard to clause (b) of the preceding sentence.


          Notwithstanding  any  provision  of  this  Section  1.1(A)(15)  to the
          contrary,  for purposes of determining a Participant's average monthly
          rate of  Compensation  on or after  April 1, 2007,  the  Participant's
          Compensation  for a calendar year shall not include the portion of any
          bonus,  aggregated bonuses, or sales commissions paid in such calendar
          year  which  exceeds  25% of the  Participant's  total base pay in the
          calendar  year,  for years after  2006.  Provided,  however,  that the
          Participant's benefits under the Plan on and after April 1, 2007 shall
          not be less  than  the  Accrued  Deferred  Monthly  Retirement  Income
          Commencing at Normal  Retirement Date that the Participant has accrued
          as of March  31,  2007  using  "Final  Average  Monthly  Compensation"
          determined as of such date.


     (16) "Highly  Compensated  Employee"  shall  mean any  "highly  compensated
          active employee" or "highly compensated former employee."

          (a)  A "highly  compensated active employee" includes any employee who
               performs  service  for an  Employer or  Controlled  Group  Member
               during the determination year and who, during the look-back year,
               received  compensation  from the  Employer  or  Controlled  Group
               Member in excess of  $80,000  (as  adjusted  pursuant  to Section
               415(d)  of the  Internal  Revenue  Code)  and was a member of the
               top-paid group for such year. The term "highly compensated active
               employee"  also  includes an employee who is a "5-percent  owner"
               (within the  meaning of Section  414(q) of the  Internal  Revenue
               Code) any time  during the  look-back  year or the  determination
               year. An employee is in the  "top-paid  group" for a year if such
               employee  is in  the  group  consisting  of  the  top  20% of the
               employees  of all  Controlled  Group  Members  when ranked on the
               basis of compensation paid during such year.

          The  "determination  year"  shall be the Plan Year and the  "look-back
          year"  shall be the  twelve-month  period  immediately  preceding  the
          determination  year. The calendar year which begins with or within the
          look-back  year shall be treated as the look-back year for purposes of

<PAGE>
                                      1-13


          determining  whether an employee is a highly  compensated  employee on
          account of the  employee's  compensation  for a  look-back  year under
          Section 414(q)(1)(B) of the Internal Revenue Code.

          (b)  A "highly  compensated former employee" includes any employee who
               separated from service (or was deemed to have separated) prior to
               the determination year, performs no service for the Employer or a
               Controlled Group Member during the determination  year, and was a
               highly compensated active employee for either the separation year
               or any determination  year ending on or after the employee's 55th
               birthday.

          (c)  The  determination  of  who  is a  Highly  Compensated  Employee,
               including  the  determinations  of the  number  and  identity  of
               employees  in the  top-paid  group and the  compensation  that is
               considered,  shall be made in accordance  with Section  414(q) of
               the Internal Revenue Code and regulations thereunder.  The method
               of  determination  set forth above in this Section shall apply to
               all plans (both retirement and nonretirement) of the Employer for
               which  the  definition  of  "highly   compensated   employee"  is
               applicable.

     (17) "Hour of  Service"  shall  mean  each hour for  which an  employee  is
          directly  or  indirectly  paid,  or is  entitled  to  payment,  by the
          Employer (including any predecessor  business of an Employer conducted
          as  a  corporation,   partnership  or  proprietorship)   for  (a)  the
          performance  of duties or (b) reasons  other than the  performance  of
          duties,  including  but not limited to vacation,  holidays,  sickness,
          disability,  paid layoff and similar paid periods of nonworking  time.
          Such Hours of Service shall be credited to the employee for the period
          in which such duties were  performed  or in which  occurred the period
          during  which  no  duties  were  performed.  An Hour of  Service  also
          includes  each  hour,   not  credited   above,   for  which   backpay,
          irrespective  of  mitigation  of damages,  has been either  awarded or
          agreed to by the Employer. These Hours of Service shall be credited to
          the employee for the period to which the award or agreement  pertains.
          The number of Hours of Service to be credited  to an employee  for any
          period shall be governed by Sections 2530.200b-2(b) and 2530.200b-2(c)
          of Part 2530 of Subchapter C of Chapter XXV of Title 29 of the Code of
          Federal  Regulations  (Department  of Labor  regulations  relating  to
          minimum standards for employee pension benefit plans).

<PAGE>
                                      1-14



     (18) "Initial  Vesting  Date"  shall  mean  the  earlier  to  occur  of the
          following dates:

          (a)  the date on which the  Participant  has  completed  five years of
               Vesting Service;

               or

          (b)  the date on which the Participant  attains his Normal  Retirement
               Age;

          provided,  however,  that the  provisions  of Section 4.6 hereof shall
          apply in determining the Initial Vesting Date of a Participant who has
          accrued  Vesting  Service  during  any  Plan  Year  that  the  Plan is
          top-heavy;  and provided  further  that the Initial  Vesting Date of a
          Participant shall not be earlier than the Effective Date of the Plan.

     (19) "Internal  Revenue Code" shall mean the Internal Revenue Code of 1986,
          as amended from time to time.

     (20) "IRC 414(l) Single Plan" shall mean a "single plan" within the meaning
          of Section 414(l) of the Internal Revenue Code and regulations  issued
          pursuant thereto.

     (21) "Last Date of Commencement of Service" shall mean:

          (a)  if the employee's  service has not been previously  terminated in
               accordance with the provisions hereof, the date on which he first
               performs an Hour of Service; or

          (b)  if the  employee's  service  has been  previously  terminated  in
               accordance  with the provisions  hereof,  the first day following
               his last  termination  of service on which he performs an Hour of
               Service;

          provided,  however, that the provisions of Section 1.4(A) hereof shall
          apply in determining  the Last Date of  Commencement of Service of any
          employee whose service is terminated and who is reemployed on or after
          the  Effective  Date of the Plan and prior to his incurring a Break in
          Service.

          An  Employer  may at the  time of its  initial  adoption  of the  Plan
          provide,  with respect to all or any specified  classification  of its
          employees,  that the Last Date of Commencement of Service for purposes
          of  determining  the  Credited  Service  and  Vesting  Service of such

<PAGE>
                                      1-15


          employees shall not be earlier than a specified  date,  which is later
          than the otherwise  applicable  date described  above but is not later
          than the date as of which the Plan first became effective with respect
          to such  Employer,  and may provide that such  specified  date will be
          different  for  the  purposes  of  determining   the   eligibility  to
          participate in the Plan, the Credited  Service and the Vesting Service
          of such employees;  provided,  however,  that the date  established to
          determine  the Vesting  Service of such  employees  shall not be later
          than the date as of which  such  Employer  became a  Controlled  Group
          Member of any other Employer  maintaining  the Plan or Superseded Plan
          or, if later,  the date as of which the Plan or Superseded  Plan first
          became effective with respect to such other Employer.

          The  Last  Date  of  Commencement  of  Service  of  an  employee  by a
          predecessor or acquired business shall not be earlier than the date of
          such  merger  or  acquisition  unless  the  Employer  provides  that a
          uniformly  applied earlier date or dates will be used for the purposes
          of the Plan.

     (22) "Monthly  Covered  Compensation"  shall be equal to one-twelfth of the
          "covered  compensation," within the meaning of Section 401(l)(5)(E) of
          the Internal  Revenue Code and regulations and rulings issued pursuant
          thereto,  that applies to the  Participant  during any specified  Plan
          Year  based  upon his year of birth.  The  amount of  Monthly  Covered
          Compensation shall be automatically adjusted each Plan Year; provided,
          however, that any changes in the amount of "covered compensation" that
          become effective after the first day of the Plan Year during which the
          date of the Participant's  retirement or termination of service occurs
          shall be ignored.

     (23) "Normal Retirement Age" shall mean the older of:

          (a)  age 65 years; or

          (b)  the  Participant's  age on the fifth  anniversary  of the date of
               commencement of his Vesting Service.

     (24) "Normal  Retirement  Date" shall have the meaning  assigned in Section
          2.1 hereof.

     (25) "Participant" shall mean:

          (a)  any active Employee who has satisfied the requirements of Section
               1.2 hereof;

<PAGE>
                                      1-16



          (b)  any former Employee who has satisfied the requirements of Section
               1.2 hereof,  whose  service has not been  terminated  but who has
               subsequently  been  transferred  from his  status as an  eligible
               Employee as described in Section 1.5 hereof; and

          (c)  any  retired or  terminated  Employee  who has  vested  rights to
               benefits under the provisions of the Plan.

     (26) "Plan"  shall  mean the  Retirement  Plan  for  Employees  of  Capital
          Southwest  Corporation  and Its  Affiliates,  as amended and  restated
          effective as of April 1, 2006, as set forth in this document and as it
          may hereafter be amended from time to time.

     (27) "Plan  Year" shall mean the  calendar,  policy or fiscal year on which
          the records of the Plan are kept as reported  from time to time by the
          plan  administrator to the Internal  Revenue  Service.  The Plan Year,
          unless  subsequently  changed in accordance  with rules or regulations
          issued by the Internal  Revenue Service or Department of Labor,  shall
          be the 12-month period beginning April 1 of each calendar year.

     (28) "Post Payment  Recalculation  Date" shall have the meaning assigned in
          Section 2.1(D) hereof.

     (29) "Qualified  Joint and Survivor  Annuity"  means an annuity that (a) is
          payable  for  the  life of the  Participant  with a  survivor  annuity
          payable  for the life of his spouse  which is not less than 50% and is
          not greater  than 100% of the amount of the  annuity  which is payable
          during the joint  lives of the  Participant  and his spouse and (b) is
          the actuarial  equivalent of the monthly  retirement income payable to
          the Participant for life under the provisions of the Plan.

     (30) "Qualified  Joint and 50%  Survivor  Annuity  Option"  shall  have the
          meaning assigned in Section 3.1 hereof.

     (31) "Qualified  Preretirement  Survivor  Annuity"  shall mean the  minimum
          death benefit,  if any, described in Section 4.1(D) hereof that may be
          payable to the spouse of a  Participant  who dies prior to his Annuity
          Starting Date.

     (32) "Required  Beginning Date" shall have the meaning  assigned in Section
          401(a)(9) of the Internal Revenue Code and shall mean the later of:

          (a)  April 1 of the calendar  year that next follows the calendar year
               in which the Participant attains or will attain the age of 70 1/2
               years; or

<PAGE>
                                      1-17



          (b)  April 1 of the calendar  year that next follows the calendar year
               in which he retires or his service is terminated;

          provided, however, that the Required Beginning Date of any Participant
          who is a  5-percent  owner  (within  the meaning of Section 416 of the
          Internal  Revenue  Code) with  respect to the Plan Year  ending in the
          calendar year in which the Participant attains age 70 1/2 shall not be
          later than April 1 of the calendar year that next follows the calendar
          year in which he attains or will attain the age of 70 1/2 years.

          For purposes of this Section 1.1(A)(32), a Participant is treated as a
          5-percent  owner after  December 31, 1996,  if such  Participant  is a
          5-percent  owner,  as defined in Section 416 of the  Internal  Revenue
          Code,  with  respect to the Plan Year ending in the  calendar  year in
          which the Participant attains age 70 1/2.

     (33) "Sponsoring  Employer"  shall mean Capital  Southwest  Corporation,  a
          Texas corporation, and its successor or successors.

     (34) "Superseded Plan" shall mean,  collectively or distributively,  as the
          context may indicate,  the qualified retirement plan, if any, that was
          maintained  by an Employer  for its  eligible  employees  prior to the
          Effective  Date of the Plan and that the Plan  represents an amendment
          and restatement  thereof.  References to the Superseded Plan as of any
          given date shall refer to the  provisions as set forth under the terms
          of the applicable document  describing such qualified  retirement plan
          as amended  and in effect on such  given  date prior to the  Effective
          Date of the Plan.

     (35) "Supplement"  shall mean any supplement that is attached to and made a
          part of the Plan and that describes  provisions of the Plan that apply
          only to  employees  of an  Employer  or  Employers  specified  in such
          Supplement.  The term "Supplement" shall specifically include, but not
          be limited to, the First  Supplement to Retirement  Plan for Employees
          of Capital  Southwest  Corporation and Its Affiliates,  as amended and
          restated effective April 1, 1989, which was attached to the Superseded
          Plan and shall be attached to the Plan as of April 1, 2006.

     (36) "Trust"  and  "Trust  Fund"  shall  mean the  trust  fund  established
          pursuant to the terms of the Trust Agreement.

     (37) "Trust  Agreement"  shall mean the  Retirement  Trust for Employees of
          Capital  Southwest  Corporation  and Its  Affiliates,  as amended  and
          restated  effective  as of April 1,  1989,  as set  forth in the trust
          agreement of that title,  and as such trust  agreement  may be amended
          from time to time.

<PAGE>
                                      1-18



     (38) "Trustee"  shall  mean  the  corporate  trustee  or  trustees  or  the
          individual  trustee or trustees,  as the case may be,  appointed  from
          time to time  pursuant to the  provisions  of the Trust  Agreement  to
          administer the Trust Fund maintained for the purposes of the Plan.

     (39) "Vested  Percentage"  shall mean the  percentage  specified in Section
          2.4(A)(1) hereof in which the Participant has a  nonforfeitable  right
          to his accrued benefit attributable to Employer  contributions,  based
          upon his number of years of Vesting Service and his age as of the date
          that such percentage is being determined;  provided, however, that the
          Vested  Percentage of a Participant  who has accrued  Vesting  Service
          during  any Plan Year that the Plan is  top-heavy  shall be subject to
          the provisions of Section 4.6 hereof.

     (40) "Vesting  Service"  shall  mean the  total  period  of  elapsed  time,
          computed  in years  and  days,  during  the  period  beginning  on the
          employee's  Last Date of  Commencement  of Service,  and ending on his
          date of retirement or  termination of service,  or, where  applicable,
          ending  on  such  other  date  as is  specified  hereunder;  provided,
          however, that:

          (a)  the first 12 months of any continuous  absence during such period
               will  be  included  in the  employee's  Vesting  Service  but the
               portion,  if any, of such  absence that is in excess of 12 months
               will be excluded from his Vesting Service, except that any period
               of such  absence  that is included in his  Credited  Service will
               also be included in his Vesting Service;

          (b)  the  provisions  of Section 1.3 hereof shall apply in the case of
               an  employee  who  has a  maternity  or  paternity  absence,  the
               provisions  of Section  1.4 hereof  shall apply in the case of an
               employee  who is  reemployed  with  a  reinstatement  of  Vesting
               Service  accrued  prior  to his  Last  Date  of  Commencement  of
               Service,  the provisions of Section 1.5 hereof shall apply in the
               case of an employee who is  transferred  to or from his status as
               an eligible  Employee  and the  provisions  of Section 1.6 hereof
               shall apply in the case of an employee  who has  previously  been
               employed as a leased employee;

               and

          (c)  with  respect to any  Participant  in the Plan whose Last Date of
               Commencement  of  Service is prior to the  Effective  Date of the
               Plan  and  who was a  participant  in the  Superseded  Plan as in
               effect on the day immediately preceding the Effective Date of the

<PAGE>
                                      1-19


               Plan,  the Vesting  Service that he has accrued under the Plan as
               of the  Effective  Date of the Plan  shall  not be less  than the
               service that he had accrued for the purposes of  determining  his
               nonforfeitable  right  as of  such  date  to the  portion  of his
               accrued benefit attributable to employer  contributions under the
               terms of the Superseded  Plan as in effect on the day immediately
               preceding the Effective Date of the Plan.

     (B) The  terms  "actuarially  equivalent,"  "equivalent  actuarial  value,"
"actuarial  equivalent"  and similar terms as used herein mean equality in value
of the  aggregate  amounts  expected to be  received  under  different  forms of
payment based upon the same mortality and interest rate assumptions, which shall
be determined as follows.

          (1)  Unless  specifically  provided  otherwise  under  the  provisions
               hereof,  the  mortality  and interest  rate  assumptions  used in
               computing  benefits  payable on behalf of a Participant  upon his
               retirement or  termination of employment and upon the exercise of
               optional  forms of  retirement  income under the Plan shall be as
               follows:

               (a)  the  mortality  assumptions  shall be based upon the "Unisex
                    Pension   Mortality   Table   Projected  to  1984"  (UP-1984
                    Mortality Table); and

               (b)  the interest rate assumption shall be 6%;

               provided,  however,  that for the  purposes  of  determining  the
               maximum  retirement  income  permitted  under the  provisions  of
               Section 415 of the  Internal  Revenue  Code,  the  mortality  and
               interest rate assumptions used to determine actuarial equivalence
               for early  retirement shall be the assumptions that would produce
               the early  retirement  adjustment  factors  that apply  under the
               provisions hereof in the event of early retirement.

          (2)  Any   provisions  of   Subsection   (1)  above  to  the  contrary
               notwithstanding, if payment is in a form of distribution which is
               subject to Section  417(e)(3) of the Internal Revenue Code, which
               shall  include   lump-sum   distributions   and  other  forms  of
               distribution  that  provide  payments in the form of a decreasing
               annuity or that  provide  payments  that may be for a period less
               than the life of the recipient,  (an "IRC Section  417(e)(3) form
               of  distribution")  the amount of any such IRC Section  417(e)(3)
               form of  distribution  to a  Participant  shall  be  equal to the
               actuarial  equivalent  of  the  Participant's  "accrued  benefit"
               (within the meaning of Section  411(a)(7) of the Internal Revenue

<PAGE>
                                      1-20


               Code and regulations  issued with respect thereto)  commencing at
               his  Normal  Retirement  Age or the  date of  termination  of his
               service, whichever is later, determined using:

               (a)  the "applicable mortality table" prescribed by the Secretary
                    of Treasury  pursuant to Section  417(e)(3)  of the Internal
                    Revenue  Code  (which as of April 1,  2006,  is based upon a
                    fixed blend of 50% of the unloaded male mortality  rates and
                    50% of the unloaded female  mortality  rates  underlying the
                    mortality rates in the 1994 Group Annuity  Reserving  Table,
                    projected to 2002); and

               (b)  the annual rate of interest on 30-year  Treasury  securities
                    for the second full calendar month immediately preceding the
                    first day of the Plan Year during which the Annuity Starting
                    Date occurs.

          (3)  For the purposes of  Subsection  (2) above,  a joint and survivor
               annuity form of payment  which may decrease upon the death of the
               Participant  or his  joint  pensioner  shall  be  deemed  to be a
               non-decreasing annuity.

     (C) The term  "single-sum  value" as used herein shall mean the actuarially
computed  present value,  as of a given date, of the retirement  income payments
for which it is  determined  based upon the interest and  mortality  assumptions
specified in the provisions of the Plan. Unless specifically  provided otherwise
under  the  provisions  hereof,  the  single-sum  value as of a given  date of a
Participant's  accrued  benefit  that is  scheduled  to commence at a later date
shall  be  discounted  for both  interest  and  mortality  from  such  scheduled
commencement date to such given date.

     (D)The terms  "herein",  "hereof",  "hereunder"  and similar terms refer to
this document,  including the Trust  Agreement of which this document is a part,
unless otherwise qualified by the context.

     (E)The pronouns "he",  "him" and "his" used in the Plan shall also refer to
similar  pronouns of the  feminine  gender  unless  otherwise  qualified  by the
context.

<PAGE>
                                      1-21



1.2 - PARTICIPATION

     (A)  Continuation of Participation  of Superseded Plan  Participants:  Each
person who was a participant in the Superseded  Plan, if any, of the Employer as
of the day  immediately  preceding the Effective  Date of the Plan will become a
Participant  in the Plan on the Effective Date of the Plan;  provided,  however,
that any such  Participant  who had retired or whose service had been terminated
prior to the Effective Date of the Plan and who is not an active  employee of an
Employer or in the employment of a Designated  Nonparticipating Employer or on a
leave of absence granted by an Employer or Designated  Nonparticipating Employer
as of the  Effective  Date of the  Plan  shall  be  entitled  on and  after  the
Effective  Date of the  Plan to only  those  benefits,  if any,  to  which he is
entitled on and after the Effective Date of the Plan under the provisions of the
Superseded  Plan,  and he and his  Beneficiaries  shall not be  entitled  to any
additional  benefits  under the Plan as set forth herein  unless he reenters the
service of an Employer and becomes an Employee  after the Effective  Date of the
Plan or unless the Plan is amended  on or after the  Effective  Date of the Plan
specifically to provide otherwise;  provided, however, that if the benefits that
are  payable  on behalf of any such  Participant  under  the  provisions  of the
Superseded Plan require  modification to permit benefits to be paid to specified
individuals  other than the  Participant  in order to comply with any  qualified
domestic  relations order under Section 414(p) of the Internal  Revenue Code, or
to comply with any other  provisions of said Code, the terms and benefits of the
Superseded  Plan will be  considered  to have been  modified with respect to the
Participant  affected to the extent  necessary to comply with such provisions of
said Code.

     (B)  Participation of Other Employees:  Each Employee who does not become a
Participant in accordance with the provisions of Section 1.2(A) above and who is
in the service of the Employer on or after the  Effective  Date of the Plan will
become a Participant in the Plan on the latest to occur of the following dates:

          (1)  the date on which he attains the age of 21 years;

          (2)  the  date  that   immediately   follows  the  first   Eligibility
               Computation  Period (as defined  below) during which he completes
               at least 1,000 Hours of Service;

               or

<PAGE>
                                      1-22



          (3)  the Effective Date of the Plan;

provided, however, that any such Employee whose service has not been terminated
but who is absent from the active service of the Employer on such date that he
is first eligible to become a Participant in the Plan as described above will
become a Participant hereunder as of the date of his return to active service
with the Employer.

     (C)  Participation  Following  Reemployment:  The above  provisions of this
Section 1.2  describe  the date on which an  eligible  Employee  will  initially
become a Participant  in the Plan.  In the event that an  Employee's  service is
terminated and he subsequently reenters the service of the Employer, the date on
or after the date of his reentry as of which he will become a Participant in the
Plan is subject to the provisions of Section 1.4 hereof.

1.3 - LEAVE OF ABSENCE AND TERMINATION OF SERVICE

     Any  absence  from the  active  service  of the  Employer  by  reason of an
approved  absence granted by the Employer because of accident,  illness,  layoff
with the  right of  recall,  or for any  other  reason on the basis of a uniform
policy  applied by the Employer  without  discrimination,  will be  considered a
leave of  absence  for the  purposes  of the Plan  and  will  not  terminate  an
employee's  service provided he returns to the active service of the Employer at
or prior to the expiration of his leave or, if not specified therein, within the
period  of time  which  accords  with the  Employer's  policy  with  respect  to
permitted absences.

     Absence from the active  service of the Employer  because of  engagement in
military  service  will not  terminate  the service of an  employee  and will be
treated  under the Plan as a leave of absence  granted by the Employer if (1) he
is entitled under the Uniformed Services  Employment and Reemployment Rights Act
of 1994  ("USERRA") to  reemployment  by the Employer  upon his  discharge  from
active duty, and (2) he returns to the active service of the Employer within the
period  of time  during  which he has  reemployment  rights  under  USERRA.  The
following special  provisions,  which are intended to comply with Section 414(u)
of the  Internal  Revenue  Code,  shall apply to an employee of an Employer  who

<PAGE>
                                      1-23


returns to active  service in  accordance  with the  reemployment  provisions of
USERRA  following a period of qualifying  military  service (as determined under
USERRA):

          (A)  Each period of qualifying  military service served by an employee
               shall, upon such reemployment,  be counted toward determining the
               employee's  service  with the  Employer  for all  purposes of the
               Plan, including determining the amount of a Participant's Accrued
               Deferred   Monthly   Retirement   Income   Commencing  at  Normal
               Retirement Date and the Vested Percentage in his Accrued Deferred
               Monthly Retirement Income Commencing at Normal Retirement Date.

          (B)  For all purposes  under the Plan, a Participant  shall be treated
               as having  received  Compensation  from the Employer based on the
               rate of Compensation  the Participant  would have received during
               the period of qualifying military service, or if that rate is not
               reasonably  certain,  on the basis of the  Participant's  average
               rate of  Compensation  during  the  12-month  period  immediately
               preceding such period.

          (C)  With respect to any Employer contribution made in accordance with
               the foregoing provisions of this paragraph:

               (i)  such  contribution  shall not be  subject  to any  otherwise
                    applicable  limitation  under Sections  404(a) or 415 of the
                    Internal  Revenue Code, and shall not be taken in account in
                    applying such  limitations to other  Participant or Employer
                    contributions under the Plan or any other plan, with respect
                    to the year in which  such  contribution  is made,  and such
                    contribution shall be subject to these limitations only with
                    respect to the year to which such  contribution  relates and
                    only  in  accordance  with  regulations  prescribed  by  the
                    Internal Revenue Service; and

               (ii) the  Plan  shall  not be  treated  as  failing  to meet  the
                    requirements of Sections 401(a)(4),  401(a)(26),  410(b), or
                    416  of  the  Internal   Revenue  Code  by  reason  of  such
                    contribution.

     If the employee does not return to the active service of the Employer at or
prior to the  expiration of his leave of absence as above  defined,  his service
will be  considered  terminated  as of the  earliest to occur of (i) the date on
which his leave of absence  expired,  (ii) the first  anniversary of the date on
which his leave of  absence  began or (iii) the date of his  resignation,  quit,
discharge or death;  provided,  however,  that if any such  employee,  who was a
participant in the Plan or Superseded Plan on the date on which his leave began,

<PAGE>
                                      1-24


is  prevented  from his  timely  return to the active  service  of the  Employer
because of his total and permanent  disability or because of his death, he shall
be treated as though he returned to active  service  immediately  preceding  his
total and permanent disability or his death, except that:

          (1)  if he  becomes  totally  and  permanently  disabled  prior to his
               Normal  Retirement  Date while he is on a leave of absence due to
               military service, Section 2.4(A) hereof shall be used, in lieu of
               Section 2.3, to determine the benefit  (which shall be determined
               as though his Initial Vesting Date has occurred prior to the date
               of  termination  of his  service  and  assuming  that his  Vested
               Percentage is 100%),  if any, that is payable on his behalf,  but
               such benefit  will be payable  only if a benefit  would have been
               payable on his behalf under the  provisions of Section 2.3 hereof
               if he had been in the service of the  Employer on the date of his
               total and permanent disability; or

          (2)  if his  death  occurs  while he is on a leave of  absence  due to
               military  service,  Subsection (b) of Section 2.4(B)(1) shall not
               apply in  determining  the amount of the death  benefit,  if any,
               that is payable on his behalf.

     If an employee has an absence from the service of the Employer which begins
on or after April 1, 1985 and is due to the pregnancy of the employee, the birth
of a child of the  employee  or the  placement  of a child with the  employee in
connection  with  the  adoption  of such  child by such  employee  or is for the
purpose of caring for such child for a period  beginning  immediately  following
such  birth  or  placement  (hereinafter  referred  to in  this  paragraph  as a
"maternity or paternity  absence"),  the rights of such employee  under the Plan
shall not be less favorable to the employee than those rights that he would have
had if he had been granted a one-year leave of absence  beginning on the date on
which his maternity or paternity  absence began. If the length of such maternity
or paternity  absence extends beyond the first  anniversary of the date on which
such absence began and the service of such  employee is  terminated  during such
maternity  or  paternity  absence,  the date of  termination  of service of such
employee for purposes of determining his accrued Vesting Service shall be deemed
to be the first  anniversary  of the date on which  such  absence  began and the
rights of such employee under Section 1.4 hereof to resume  participation in the

<PAGE>
                                      1-25


Plan and to a reinstatement of his previous Credited Service and Vesting Service
upon his  reemployment  shall not be less  favorable to the employee  than those
corresponding  rights  that he would  have  under  such  section  if the date of
termination of his service had been the second  anniversary of the date on which
his maternity or paternity  absence  began and if the length of such  employee's
Break in Service were based on that termination date.

     In the event that an  employee's  service with the Employer is  interrupted
because of any  absence  from the active  service of the  Employer  which is not
deemed a leave of absence as  defined  above,  his  service  will be  considered
terminated as of the date of his  retirement,  quit,  discharge,  resignation or
death  or,  if  earlier,  as of the  first  anniversary  of  the  date  of  such
interruption for any other reason.

     Transfers of an  employee's  service  among the  Employers  and  Designated
Nonparticipating  Employers shall not be deemed interruptions of his service and
shall not constitute a termination of service for the purposes of the Plan.

1.4 - REEMPLOYMENT

     (A)  Reemployment  Prior to Incurring a Break in Service:  If any employee,
whose service is terminated on or after the Effective Date of the Plan, reenters
the active  service of the Employer  and performs an Hour of Service  within the
12-month period immediately following the date of termination of his service, he
shall not incur a Break in Service, and his Last Date of Commencement of Service
shall be determined as though his service had not previously been terminated. On
and after such  reentry,  any such  employee  shall be treated under the Plan as
though he had been on an unpaid leave of absence  granted by the Employer during
the period between such date that his service was previously terminated and such
date of reentry.  However,  if any such employee was entitled to a benefit under
Section 2.1,  2.2, 2.3 or 2.4(A)  hereof prior to his reentry,  his rights under
the Plan on and after his date of  reentry  shall be  determined  under  Section
1.4(B), 1.4(C), 1.4(D) or 1.4(E) below, whichever is applicable, except that his

<PAGE>
                                      1-26


reinstated  Vesting  Service  shall not be less than that  determined  under the
above provisions of this Section 1.4(A).

     (B) Reemployment of Vested Terminated  Participant Prior to Commencement of
Payments:  If a  Participant's  service is  terminated  on or after his  Initial
Vesting Date for a reason other than his normal retirement,  early retirement or
disability  retirement  as  described  in  Sections  2.1,  2.2 and  2.3  hereof,
respectively,  and he  subsequently  reenters the active service of the Employer
prior to his Annuity  Starting Date, he will become a Participant  upon the date
of such reentry and will be entitled to a  reinstatement  of the Vesting Service
and  Credited  Service  that he had  accrued on the date of  termination  of his
service in lieu of the benefits to which he was entitled under the Plan prior to
his reentry; provided, however, that such Participant's Accrued Deferred Monthly
Retirement  Income  Commencing at Normal Retirement Date (or his accrued monthly
normal retirement  income, if applicable)  determined as of any given date after
the date of his reentry shall be reduced on an actuarially  equivalent basis, if
applicable,  to take into account any death benefit  coverage that was in effect
under  Section  2.4(A) hereof after the date of  termination  of his service and
prior  to the date of his  reentry;  and  provided  further,  however,  that the
benefit  payable  to  such  Participant   upon  his  subsequent   retirement  or
termination  of service  shall not be less than the  benefit  that he would have
been entitled to receive under the provisions of Section 2.4(A) hereof if he had
not reentered the service of the Employer.

     (C)  Reemployment  of  Retired  or  Vested  Terminated   Participant  After
Commencement of Payments:

     (1) If a Participant, whose service is terminated on or after the Effective
Date of the Plan and who has  received a portion  but not all of the  retirement
income to which he is  entitled  under the  provisions  of Section  2.1,  2.2 or
2.4(A)(1) hereof, subsequently reenters the active service of the Employer on or
after his Annuity  Starting Date, he shall become a Participant upon the date of
such reentry and the following provisions shall apply.

<PAGE>
                                      1-27



               (a)  If the  date  of  his  reentry  is  prior  to  his  Required
                    Beginning  Date,  subject  to  the  provisions  of  Sections
                    1.4(C)(2) and 2.1(D) hereof,  no retirement  income payments
                    shall be made during the period of such  reemployment.  Upon
                    the subsequent  retirement or termination of service of such
                    a   Participant,   his  benefit  under  the  Plan  shall  be
                    determined in the same manner as that of a vested terminated
                    Participant   whose  retirement  income  payments  have  not
                    commenced and who  subsequently  reenters the service of the
                    Employer as described in Section  1.4(B) above,  except that
                    the benefit  payable  under the Plan to or on behalf of such
                    Participant upon his subsequent retirement or termination of
                    service shall be reduced on an actuarially  equivalent basis
                    by an amount equal to the sum of the  retirement  income and
                    other benefit payments that he received under the provisions
                    of Section  2.1,  2.2,  2.4(A) or 3.1 hereof,  whichever  is
                    applicable,  prior to such  reentry  into the service of the
                    Employer; provided, however, that the amount of such monthly
                    retirement income that is payable to him upon his subsequent
                    retirement or  termination of service shall not be less than
                    the  actuarial  equivalent  of a monthly  retirement  income
                    payable to him at that time as a straight life annuity in an
                    amount equal to the amount of the monthly  retirement income
                    that  was  payable  to  him  as  a  straight   life  annuity
                    immediately prior to his reentry.  (If the retirement income
                    payable to the Participant  immediately prior to his reentry
                    was not payable as a straight life annuity,  the amount that
                    was payable to him as a straight  life  annuity  immediately
                    prior to his reentry shall be  determined by converting  the
                    income  that was  payable  to him  immediately  prior to his
                    reentry to its  actuarial  equivalent  payable as a straight
                    life annuity).  If any such Participant  reenters the active
                    service of the  Employer  on or after his Normal  Retirement
                    Date,  the monthly  retirement  income  payable on behalf of
                    such  Participant  in  accordance  with  the  provisions  of
                    Section 2.1 upon his subsequent retirement shall not be less
                    than the  amount  that  can be  provided  on an  actuarially
                    equivalent  basis by the single-sum  value  required,  as of
                    such date of reentry,  to provide the retirement income that
                    otherwise  would have been  payable on his behalf after such
                    date of reentry, accumulated with interest from such date of
                    reentry  to  the  date  of  his  subsequent   retirement  or
                    termination of service.

               (b)  If the  date of his  reentry  is on or  after  his  Required
                    Beginning Date, he shall continue to receive the benefits to
                    which he is entitled on and after such date,  and any future

<PAGE>
                                      1-28


                    benefits that he accrues after his Required  Beginning  Date
                    shall be  determined in  accordance  with the  provisions of
                    Section  411(b)(1)(H)  of  the  Internal  Revenue  Code  and
                    regulations  issued with respect thereto in a manner similar
                    to that described in Section 2.1(D) hereof.

     (2) In lieu of having his retirement  income payments  discontinued and his
benefit  payable upon his  subsequent  retirement or  termination  determined in
accordance with the provisions of Section 1.4(C)(1) above, any such Participant,
whose Vested  Percentage at the date of his retirement or termination of service
was 100%,  who is receiving  retirement  income  payments under the Plan and who
reenters the active service of the Employer on less than a full-time  basis, may
upon such  reentry  elect in writing  filed with the  Committee  to  continue to
receive his retirement income payments after his reemployment in the same manner
as though he had not reentered the service of the Employer. Any such Participant
whose retirement income payments are continued in accordance with the provisions
above shall be treated as if he then first  entered the service of the  Employer
except that:

               (a)  upon  the date  after  his  reentry  that he  satisfies  the
                    requirements  to become a Participant  in the Plan, he shall
                    become a Participant,  retroactively,  as of the date of his
                    reentry;  provided,  however,  if either (i) the date of his
                    reentry  is  during  the Plan  Year in which the date of his
                    retirement  or  termination  of service  occurred  and he is
                    credited with at least 501 Hours of Service during such Plan
                    Year or (ii) the date of his reentry is during the Plan Year
                    next  following  the  Plan  Year in  which  the  date of his
                    retirement  or  termination  of service  occurred  and he is
                    credited with at least 501 Hours of Service  during both the
                    Plan Year in which the date of his retirement or termination
                    of service  occurred and the next  following  Plan Year,  he
                    shall,  upon the date of his reentry or upon such later date
                    that such Hours of Service  requirement  has been satisfied,
                    become a Participant, retroactively if applicable, as of the
                    date of his reentry;

               (b)  upon his becoming a  Participant,  he shall be entitled to a
                    reinstatement  of the Vesting Service that he had accrued as
                    of the date of his previous  retirement  or  termination  of
                    service; and

<PAGE>
                                      1-29



               (c)  he shall not accrue any additional  Credited  Service during
                    any "reemployment  benefit accrual  computation period" that
                    he is credited  with less than 1,000  Hours of Service.  The
                    "reemployment  benefit  accrual  computation  period" of any
                    such Participant shall mean the 12-month period beginning on
                    the  date of his  reentry  and on each  anniversary  of such
                    date.

The benefit  which any such  Participant  accrues  after the date of his reentry
(including  any disability  retirement or death benefit  payable on his behalf),
which is payable to such  Participant  or his  Beneficiary  upon his  subsequent
retirement or termination of service, shall be limited to the amount that can be
provided by the actuarial  equivalent of the monthly  retirement income, if any,
that he  accrues  subsequent  to such date of reentry  based  upon his  Credited
Service and Final Average Monthly Compensation  determined in the same manner as
though he then first entered the service of the Employer on the date on or after
his reentry that he commences to accrue additional  Credited Service;  provided,
however, that such income that such a Participant accrues subsequent to his date
of reentry shall not cause the actuarial  equivalent of the total income payable
on behalf of the Participant under the Plan to exceed the amount that would have
been payable if he had not elected to continue to receive his retirement  income
after his  reemployment  and if the Credited  Service that he accrues  after his
reentry were restricted as provided under (c) above. The retirement  income that
is continued  during the period of reemployment  of any such  Participant who is
reemployed  on  less  than  a  full-time  basis  shall  be  discontinued  if the
Participant is employed on a full-time  basis at any time after his reentry.  If
the retirement income of any such Participant is subsequently discontinued,  his
benefit  under the Plan shall be determined  under this Section  1.4(C) (and not
under  Section  1.4(A)  above) as though his service had been  terminated on the
date that his retirement  income was discontinued and as though he had reentered
the service of the Employer immediately thereafter.

<PAGE>
                                      1-30



     (D) Reemployment  After Disability  Retirement:  If a Participant,  who has
retired  on or after the  Effective  Date of the Plan  under the  provisions  of
Section 2.3 and who has not prior to his reentry  received the full  actuarially
equivalent  value of the disability  retirement  income to which he was entitled
under  Section 2.3 hereof,  recovers  from  disability  and  reenters the active
service of the  Employer  within one year  after the date of his  recovery  from
disability  by accepting  reemployment  offered by the  Employer  within 30 days
after such offer, his service will be deemed to have been continuous and he will
be  treated  under  the  Plan in the  same  manner  as  though  he had  received
Compensation, at the rate he was receiving at the time of his disability, during
the period that he was considered  totally and permanently  disabled as provided
herein.

     (E) Reemployment After Full Settlement: If a Participant's service has been
terminated on or after the Effective  Date of the Plan for any reason and he was
entitled,  upon such  termination,  to a  monthly  retirement  income  under the
provisions  of Section 2.1,  2.2,  2.3 or  2.4(A)(1)  hereof and he reenters the
active service of the Employer after the full  actuarially  equivalent  value of
such  retirement  income  has  been  paid  on his  behalf,  he  shall  become  a
Participant on the date of his reentry and shall be entitled to a  reinstatement
of the  Vesting  Service  and  Credited  Service  that he had accrued as of such
previous date of  termination,  but the benefit  payable under the Plan to or on
behalf of such  Participant  upon his  subsequent  retirement or  termination of
service shall be reduced by the actuarial  equivalent of such retirement  income
that  has  been  previously  paid  on his  behalf  (where  the  amount  of  such
actuarially  equivalent  reduction shall be determined  using the same mortality
and interest  assumptions  that were used to calculate  such benefit  previously
paid on his behalf).

<PAGE>
                                      1-31



     (F) Reemployment of Other  Employees:  Any other former employee who is not
included  under the  provisions of Section  1.4(A),  1.4(B),  1.4(C),  1.4(D) or
1.4(E) above and who  subsequently  reenters the active  service of the Employer
following  his  termination  of service  will be treated as though he then first
entered the service of the Employer; provided, however, that:

     (1)  with respect to any such employee in the service of the Employer on or
          after  the  Effective  Date  of  the  Plan  whose  service  is or  was
          terminated  on or after  April 1,  1976  and who  incurred  a Break in
          Service  prior  to the  date of his  reentry,  the  following  special
          provisions shall apply:

          (a)  if such  employee  had  completed  five or more  years of Vesting
               Service as of the date of  termination  of his  service or if the
               number of years and days included in his Break in Service is less
               than  either  five  years or the  number of years and days of his
               Vesting Service that he had accrued as of the date of termination
               of his service, such employee shall be entitled, upon the date as
               of which he becomes a Participant in the Plan, to a reinstatement
               of the Credited  Service and Vesting  Service that he had accrued
               as of such previous date of termination of service;

          (b)  if such employee was a Participant in the Plan or Superseded Plan
               as of the date of  termination  of his service and he is entitled
               to a reinstatement  of his previous  Credited Service and Vesting
               Service  under (a) above,  he shall become a  Participant  in the
               Plan as of the date of his reentry or the  Effective  Date of the
               Plan, whichever is later; and

          (c)  if such employee was not a Participant in the Plan as of the date
               of   termination   of  his  service  but  he  is  entitled  to  a
               reinstatement  of  his  previous  Credited  Service  and  Vesting
               Service  under  (a)  above  or if such  employee  (regardless  of
               whether or not he was a Participant in the Plan as of the date of
               termination of his service)  reenters the service of the Employer
               prior to the elapse of five full Plan Years following the date of
               termination of his service, the date on which he will be eligible
               to become a Participant in the Plan following his date of reentry
               shall  not be later  than the  date on which he would  have  been
               eligible  to  become a  Participant  if he had been on a leave of
               absence  during  the  period  between  the  date of his  previous
               termination of service and the date of his reentry; and

<PAGE>
                                      1-32



     (2)  with respect to any such employee whose service was  terminated  prior
          to the Effective  Date of the Plan (while the  Superseded  Plan was in
          effect with  respect to the  Employer by which he was  employed at the
          date of  termination  of his service) and who had reentered the active
          service of the Employer prior to the Effective Date of the Plan or who
          reenters the active  service of the Employer on or after the Effective
          Date of the Plan, his rights under the Plan with respect to the period
          of his service  prior to such date of reentry  into the service of the
          Employer shall be determined  under the  applicable  provisions of the
          Superseded  Plan as in effect on the date of his prior  termination of
          service;  provided,  however, if any such employee,  whose service was
          terminated  prior to April 1, 1985 and whose next  succeeding  date of
          reentry into the service of the Employer is on or after the  Effective
          Date of the Plan, would have been entitled under the provisions of the
          Superseded  Plan to a  reinstatement  of the service used to determine
          his  nonforfeitable  right to benefits if he had reentered the service
          of the Employer on April 1, 1985,  the rights upon such reentry of any
          such  employee  shall not be less  favorable to the employee  than the
          corresponding  rights of an employee whose service is terminated on or
          after the Effective Date of the Plan as described above.

     (G)  Reemployment  of Employee Who Does Not Qualify as an  "Employee":  The
rights of any  terminated  employee of the  Employer  who was not an Employee as
defined  herein on the date of  termination of his service and who is reemployed
in a status in which he  qualifies  as an  Employee as defined  herein  shall be
determined in accordance  with the  provisions of the Plan as though he had been
an Employee as defined  herein on the date of  termination  of his service.  The
rights of any  terminated  employee  of an  Employer  who is  reemployed  by the
Employer  in a status in which he does not  qualify  as an  Employee  as defined
herein shall be  determined  in  accordance  with the  provisions of the Plan as
though he had been  reemployed by the Employer as an Employee as defined  herein
and had immediately  thereafter been  transferred from his status as an Employee
as defined herein. A Participant shall not accrue any benefits under the Plan or
Superseded  Plan  solely  because of the  assumption  that he was an Employee as
defined  herein on the date of  termination  of his  service  or the date of his
reemployment, as the case may be.

<PAGE>
                                      1-33



     (H)  Employment  of  Terminated  Employee  of  Designated  Nonparticipating
Employer by an Employer and  Employment  of  Terminated  Employee of Employer by
Designated Nonparticipating Employer: The rights of any terminated employee of a
Designated  Nonparticipating  Employer who was not an Employee as defined herein
on the date of termination of his service and who is subsequently employed by an
Employer in a status in which he  qualifies  as an  Employee  as defined  herein
shall be determined in accordance  with the  provisions of the Plan as though he
had  been an  Employee  as  defined  herein  on the date of  termination  of his
service.   The  rights  of  any  terminated  Employee  of  an  Employer  who  is
subsequently  employed  by  a  Designated  Nonparticipating  Employer  shall  be
determined in accordance  with the  provisions of the Plan as though he had been
reemployed by the Employer as an Employee as defined herein and had  immediately
thereafter been  transferred to such  Designated  Nonparticipating  Employer.  A
Participant  shall not accrue any  benefits  under the Plan or  Superseded  Plan
solely  because of the  assumption  that he was an Employee as defined herein on
the date of  termination  of his service or the date of his  employment,  as the
case may be, with a Designated Nonparticipating Employer.

     (I) Employment with Former Employer or Former  Designated  Nonparticipating
Employer:  In  determining  the rights  under the Plan of any  employee  who was
previously  employed (either before, on or after the Effective Date of the Plan)
by an  employer,  which was  formerly an Employer  participating  in the Plan or
Superseded Plan or was formerly a Designated Nonparticipating Employer but which
is not currently an Employer or Designated Nonparticipating Employer, the period
of such  employee's  employment  with such employer  while it was an Employer or
Designated Nonparticipating Employer, as the case may be, shall be recognized in
determining  the Vesting  Service of such  employee in the same manner as though
such  employment  during  such  period  had  been  with a  current  Employer  or
Designated  Nonparticipating  Employer,  but any period of employment  with such

<PAGE>
                                      1-34


employer  after  the  date  that  it  ceased  to be an  Employer  or  Designated
Nonparticipating  Employer  shall not be  recognized  and his  service  shall be
deemed to have been  terminated  during such period that such employer is not an
Employer or Designated Nonparticipating Employer.

1.5 - TRANSFER TO OR FROM STATUS AS AN ELIGIBLE EMPLOYEE

     An employee will be deemed to be transferred from his status as an eligible
Employee in the event that he remains in the service of the  Employer  but has a
change in his employee  status so that he no longer  qualifies as an Employee as
defined herein or in the event that he is transferred to and becomes an employee
of a  Designated  Nonparticipating  Employer.  Conversely,  an  employee  of  an
Employer  who is not  an  Employee  as  defined  herein  will  be  deemed  to be
transferred  to the status of an eligible  Employee in the event that he remains
in the service of the Employers but has a change in his employee  status so that
he becomes an  Employee  as defined  herein,  and an  employee  of a  Designated
Nonparticipating  Employer will be deemed to be  transferred to the status of an
eligible  Employee in the event that he is  transferred to an Employer from such
Designated  Nonparticipating Employer and becomes an Employee as defined herein.
The  service of such a person  described  above  shall not be  considered  to be
interrupted  by reason of any such  transfer,  and service  with the  Designated
Nonparticipating  Employer  or with  the  Employer  while  not  qualified  as an
Employee as defined  herein  shall be  terminated  in the same manner as service
with  the  Employer  while  qualified  as  an  Employee  as  defined  herein  is
terminated.  Any  provisions  of  Section  2.1,  2.2,  2.3 or 2.4  hereof to the
contrary  notwithstanding,  the  benefits of any such  Participant  who has been
transferred  to or from the status as an eligible  Employee on or after the date
that the Plan or  Superseded  Plan first  became  effective  with respect to his
Employer shall be determined in accordance with the following provisions of this
Section 1.5.

     (A)  Eligibility  for Benefits:  In determining  the eligibility of such an
          employee to whom the provisions of this Section 1.5 are applicable for
          participation  in the Plan and in determining  his eligibility for the
          benefits  provided  under the Plan,  his Vesting  Service and Hours of
          Service  shall be  determined in the same manner as though his service
          with the Designated  Nonparticipating Employers and with the Employers
          while not qualified as an Employee as defined  herein had been accrued

<PAGE>
                                      1-35


          with the Employers  while  qualified as an Employee as defined herein.
          Any such employee who is  transferred  to the status of an Employee as
          defined herein shall become a Participant in the Plan on the date that
          he becomes an Employee as defined herein if he has otherwise satisfied
          the  requirements  to become a Participant in the Plan as described in
          Section  1.2 hereof  prior to such date that he becomes an Employee as
          defined herein.

     (B)  Computation of Benefits:  A Participant to whom the provisions of this
          Section 1.5 are  applicable  shall be entitled upon his  retirement or
          termination  of service (or his  Beneficiary  shall be entitled in the
          event his service is terminated  by reason of his death),  if he meets
          all  requirements  necessary  to  qualify  for  a  benefit  under  the
          provisions  of  Section  2.1,  2.2,  2.3 or 2.4  hereof  or under  the
          provisions of any  applicable  section of any  Supplement  hereto that
          specifically  applies  to the  Participant,  as the case may be,  to a
          benefit payable in accordance with the provisions of Section 2.1, 2.2,
          2.3  or  2.4  hereof  or in  accordance  with  the  provisions  of any
          applicable section of any Supplement hereto that specifically  applies
          to the Participant, whichever section is applicable, but the amount of
          the monthly  retirement income that is payable on his behalf under the
          Plan shall,  subject to the  provisions of Section  1.5(C)  below,  be
          computed  using only the  Credited  Service  that he accrued  with the
          Employers while qualified as an Employee as defined herein.

     (C)  Special Provisions Applicable to Benefits: The monthly income computed
          under this Section 1.5 shall be subject to the following:

          (1)  there shall be no  duplication  of service in computing  benefits
               under  the Plan and under any  other  qualified  defined  benefit
               pension  or  annuity  plan to which any  Employer  or  Designated
               Nonparticipating  Employer makes  contributions  on behalf of its
               employees  who are not  Employees  as  defined  herein,  and,  if
               service  accrued while qualified as an Employee as defined herein
               is used in  determining  the accrued  benefit of the  Participant
               under any such other qualified defined benefit pension or annuity
               plan,  then the  portion of the  benefit  payable  under the Plan
               based on such duplicated  service shall be reduced (but not so as
               to  produce a  negative  amount)  by the  actuarially  equivalent
               amount of the benefit payable under such other qualified  defined
               benefit pension or annuity plan based on such duplicated service;

          (2)  all  compensation  that  a  Participant,  who is an  Employee  as
               defined  herein on the date of his  retirement or  termination of
               service, received from the Designated  Nonparticipating Employers
               and from the  Employers  while not  qualified  as an  Employee as
               defined herein shall be treated in determining  his Final Average
               Monthly   Compensation   in  the  same   manner  as  though  such
               compensation  had been received from the Employer while qualified
               as an Employee as defined herein;

<PAGE>
                                      1-36



          (3)  all  compensation  that a Participant,  who is not an Employee as
               defined  herein on the date of his  retirement or  termination of
               service, received after the date on which he last qualified as an
               Employee as defined herein from the  Designated  Nonparticipating
               Employers  and from  the  Employers  while  not  qualified  as an
               Employee  as  defined  herein  shall be ignored  or  excluded  in
               determining his Final Average Monthly Compensation and the period
               during which he received  such  compensation  shall be ignored or
               excluded in determining  the 10 completed  calendar years and the
               five  successive  calendar years that are used in determining his
               Final Average Monthly Compensation;

          (4)  in the  case of a  Participant  who has been  transferred  to the
               status of an Employee as defined herein, who has a nonforfeitable
               right to an accrued  benefit  under any other  pension or annuity
               plan to which an Employer or Designated Nonparticipating Employer
               has made  contributions  on his behalf and whose combined service
               used in the  computation  of his accrued  benefits under the Plan
               and such other pension or annuity plan or plans exceeds 35 years,
               the amount of the monthly retirement income that is payable under
               the Plan on his behalf  shall not be greater than an amount equal
               to the excess, if any, of:

               (a)  the monthly  retirement  income that would have been payable
                    on behalf of such  Participant  under the  provisions of the
                    Applicable  Section of the Plan or Supplement if the service
                    used to compute his  accrued  benefit  under such  qualified
                    pension or  annuity  plan or plans  were  included  with the
                    Credited  Service that he accrued with the  Employers  while
                    qualified as an Employee as defined herein;

                    over

               (b)  the  actuarial  equivalent  of the accrued  benefit to which
                    such  Participant  has a  nonforfeitable  right  under  such
                    qualified pension or annuity plan or plans;

          (5)  the  Participant's  employee status at the date of termination of
               his service due to disability  shall be deemed to have  continued
               without change in determining the monthly  retirement income that
               may become  payable on his behalf under the provisions of Section
               2.3 hereof; and

          (6)  the benefit  determined under Section  2.4(B)(1)(b)  hereof shall
               apply only if the Participant is an Employee as defined herein on
               the date of his death and in that event:

<PAGE>
                                      1-37



               (a)  the benefit under Section  2.4(B)(1)(b)(i)  shall be reduced
                    by the actuarial equivalent of the benefit payable on behalf
                    of such  Participant  under each other qualified  pension or
                    annuity  plan,  if any, to which an  Employer or  Designated
                    Nonparticipating  Employer  has  made  contributions  on his
                    behalf; and

               (b)  the limitation equal to 100 times the Participant's  monthly
                    normal    retirement    income,    described    in   Section
                    2.4(B)(1)(b)(ii),  shall  include  the  anticipated  monthly
                    retirement  income based on his service accrued prior to his
                    death to which such  Participant  would be  entitled  at his
                    Normal  Retirement Date or the date of his death,  whichever
                    is later,  under  each  other  qualified  pension or annuity
                    plan,   if  any,  to  which  an   Employer   or   Designated
                    Nonparticipating  Employer  has  made  contributions  on his
                    behalf.

     (D)  Payments  From One Trust Fund:  In lieu of the  payment of  retirement
          income or other benefits to such a Participant  from the trust fund of
          more than one qualified defined benefit pension plan of the Designated
          Nonparticipating  Employers and the Employers,  the  administrators of
          the pension plans may, by mutual agreement, provide for payment of the
          entire  monthly  income  or other  benefit  from one  trust  fund with
          appropriate  reimbursement to the trustee of the trust fund from which
          the  benefits  are to be  paid  by  transfer  of  funds  equal  to the
          single-sum  value of the  benefits  payable  under the other  plan (or
          plans) to the trust fund from which benefits actually will be paid.

1.6  -   PARTICIPATION AND BENEFITS FOR FORMER LEASED EMPLOYEES

     A Leased  Employee of an Employer or Designated  Nonparticipating  Employer
shall not be  deemed  for any  purposes  of the Plan to be an  employee  of such
Employer or Designated Nonparticipating Employer. However, in the event that any
former Leased  Employee  qualifies as an Employee as defined  herein on or after
the  Effective  Date of the  Plan,  unless  the Plan is  otherwise  excluded  by
applicable  regulations  from the requirements of Section 414(n) of the Internal
Revenue  Code,  the total  period that he provided  services to the  Employer or
Designated Nonparticipating Employer as a Leased Employee shall be treated under
the Plan in determining his nonforfeitable right to his accrued benefits and his
eligibility  to become a  Participant  in the Plan in the  manner  described  in
Section  1.5(A)  hereof  as  though  he had  been an  employee  of a  Designated
Nonparticipating  Employer during such period of service (but such service shall
not be included in the service  that is used to calculate  any benefits  that he
accrues under the Plan). A "Leased  Employee" as defined under Section 414(n) of

<PAGE>
                                      1-38


the  Internal  Revenue  Code  is any  person  (other  than  an  employee  of the
recipient)  who pursuant to an  agreement  between the  recipient  and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Internal Revenue
Code Section  414(n)(6)) on a  substantially  full-time basis for a period of at
least 1 year,  and such services are  performed  under the  recipient's  primary
direction or control.

1.7 - RIGHTS OF OTHER EMPLOYERS TO PARTICIPATE

     Capital Southwest  Corporation,  Capital Southwest Management  Corporation,
Jet-Lube, Inc., The RectorSeal Corporation,  The Whitmore Manufacturing Company,
Smoke Guard, Inc. and Blue Magic, Inc. are participating  Employers in the Plan.
Any other corporation,  association, joint venture, proprietorship,  partnership
or other business  organization may, in the future,  adopt the Plan on behalf of
all or  certain  of its  Employees  by formal  action on its part in the  manner
described in Section 6.7 hereof provided that the Sponsoring Employer, by formal
action on its part in the  manner  described  in  Section  6.7  hereof,  and the
Committee both approve such participation.

     The  administrative  powers and  control  of the  Sponsoring  Employer,  as
provided in the Plan, shall not be deemed diminished under the Plan by reason of
the  participation  of any other Employers in the Plan, and such  administrative
powers and control  specifically  granted herein to the Sponsoring Employer with
respect to the  appointment  of the  Committee,  amendment of the Plan and other
matters shall apply only with respect to the Sponsoring Employer.

     The Plan is an IRC 414(l) Single Plan with respect to all Employers  unless
the Sponsoring Employer, by formal action on its part in the manner described in
Section 6.7 hereof,  specifically provides that the Plan shall be a separate IRC
414(l)  Single  Plan with  respect to any  Employer  or to any  division  of any
Employer or with  respect to any group of  Employers  and/or  divisions.  In the
event that the Plan does not  represent  one IRC 414(l) Single Plan with respect
to all  divisions of any  Employer,  the  division or divisions  with respect to
which the Plan  represents a separate IRC 414(l) Single Plan shall be considered

<PAGE>
                                      1-39


for the purposes of this section and treated  under the Plan as one Employer and
its other  division or divisions  shall be  considered  for the purposes of this
section and treated under the Plan as a separate Employer or, if applicable,  as
separate Employers.

     The  contributions of any Employer that is a member of a group of Employers
with  respect to which the Plan  represents  an IRC 414(l)  Single Plan shall be
available to provide benefits on behalf of any Participants who are employees of
any other Employers that are members of such group but shall not be available to
provide  benefits  on  behalf  of any  Participants  who  are  employees  of any
Employers that are not members of such group. The  contributions of any Employer
with  respect to which the Plan  represents  an IRC 414(l)  Single Plan for only
that Employer shall be available to provide  benefits on behalf of  Participants
who are its employees  but shall not be available to provide  benefits on behalf
of Participants who are employees of any other Employers.

     Any Employer may withdraw from the Plan at any time by formal action on its
part,  in  the  manner   described  in  Section  6.7  hereof,   specifying   its
determination  to withdraw.  Any such  withdrawing  Employer  shall  furnish the
Committee   and  the  Trustee  with   evidence  of  the  formal  action  of  its
determination  to  withdraw.  Any such  withdrawal  may be  accompanied  by such
modifications  to the Plan as such  Employer  shall  deem  proper to  continue a
retirement plan for its Employees separate and distinct from the retirement plan
herein set forth.  Withdrawal from the Plan by any Employer shall not affect the
continued  operation of the Plan with respect to the other Employers;  provided,
however,  in the event of the  withdrawal  of an Employer  that is a member of a
group of  Employers  with  respect  to which the Plan  represents  an IRC 414(l)
Single Plan and in the event that  provision is made for the  continuation  of a
retirement plan for its Employees separate and distinct from the retirement plan
herein set forth,  the share,  if any, of the assets of the Trust Fund allocable
to such group of Employers  that is  transferred  on behalf of such  withdrawing

<PAGE>
                                      1-40


Employer to such other  retirement  plan  shall,  subject to the  provisions  of
Section  414(l) of the Internal  Revenue Code and  regulations  issued  pursuant
thereto,  be equal to the  assets,  if any,  that would have been  allocated  on
behalf of the employees of such  withdrawing  Employer  under the  provisions of
Section 4.5 hereof if such withdrawing Employer had terminated its participation
in the  Plan  on the  date of  such  withdrawal;  provided,  however,  that  the
Sponsoring  Employer,  by formal  action on its part in the manner  described in
Section 6.7 hereof, may, in its absolute  discretion,  direct that an additional
amount of assets be transferred on behalf of such  withdrawing  Employer to such
other  retirement plan provided that the transfer of such  additional  amount of
assets  would not lower the  amount of the  distributions  that would be made on
behalf of the  Participants  who are employees of the other  Employers  that are
members of such group of Employers with respect to which the Plan  represents an
IRC 414(l) Single Plan if the Plan were  terminated as of the effective  date of
such  transfer  with  respect to all of the  Employers  that are members of such
group of Employers.

     The  Sponsoring  Employer,  by  formal  action  on its  part in the  manner
described in Section 6.7 hereof,  may in its absolute  discretion  terminate any
Employer's participation in the Plan at any time, and the provisions of the Plan
shall be applied with  respect to such  Employer in the same manner as though it
had voluntarily withdrawn as a participating Employer.

1.8 - SERVICE AND TERMINATION OF SERVICE

     For purposes of the Plan, an Employee or Participant shall be considered to
be in the service of the Employer and shall not be considered to have incurred a
termination  of his service  until the date of his early,  normal or  disability
retirement, death, resignation, discharge or other termination of his employment
with an Employer,  notwithstanding any payment or agreement to pay severance pay
in connection with the termination of his employment.




<PAGE>

                                       2-1

                                    SECTION 2

                 NORMAL AMOUNT AND PAYMENT OF RETIREMENT INCOME


2.1 - NORMAL RETIREMENT AND RETIREMENT INCOME

     Normal  retirement  under the Plan is  retirement  from the  service of the
Employer on or after the date that the Participant attains his Normal Retirement
Age. No provision of this section or the Plan shall require the  retirement of a
Participant  upon his attainment of his Normal  Retirement  Age. In the event of
normal retirement, payment of retirement income will be governed, subject to the
provisions of Section 4 hereof, by the following provisions of this Section 2.1.

     (A) Normal  Retirement Date: The Normal Retirement Date of each Participant
will be the first day of the month coincident with or next following the date on
which he attains his Normal  Retirement  Age. Any  Participant who retires after
attaining his Normal  Retirement Age but prior to his Normal Retirement Date and
who is  surviving  on his Normal  Retirement  Date shall be  considered  for the
purposes of the Plan to have retired on his Normal Retirement Date

     (B) Amount of Retirement  Income:  The monthly retirement income payable in
the manner  described in Section  2.1(C) hereof to a Participant  who retires on
and after April 1, 1998,  bur prior to April 1, 2007, and on or after his Normal
Retirement Date shall be an amount equal to the sum of:

          (1)  1.25% of his Final Average Monthly Compensation multiplied by his
               number of years of Credited  Service that are not in excess of 35
               years;

               plus

          (2)  0.65% of that  portion,  if any,  of his  Final  Average  Monthly
               Compensation   that  is  in   excess  of  the   Monthly   Covered
               Compensation  that  applies  to him  multiplied  by his number of
               years of Credited Service that are not in excess of 35 years.

     Notwithstanding  the  foregoing  provisions  of this  Section  2.1(B),  the
monthly  retirement  income of a  Participant  who  retires on or after April 1,
1998,  and on or after his  Normal  Retirement  Date  shall not be less than the

<PAGE>
                                      2-2


monthly  retirement  income  which the  Participant  has accrued as of March 31,
1998,  based upon the  Participant's  Credited  Service,  Final Average  Monthly
Compensation,   and  Monthly  Covered  Compensation  (or,  if  applicable,   the
corresponding  terms used to compute his accrued  benefit  under the  Superseded
Plan)  determined as of March 31, 1998, under the provisions of the Plan and the
First Supplement then in effect, adjusted on an actuarially equivalent basis, if
applicable, to his Annuity Starting Date in accordance with the above provisions
of this Section 2.1(B).

     Effective as of April 1, 2007, the monthly  retirement  income payable to a
Participant  who retires on and after April 1, 2007,  and on or after his Normal
Retirement Date shall be an amount equal to the sum of:

          (1)  1.20% of his Final Average Monthly Compensation multiplied by his
               number of years of Credited  Service that are not in excess of 35
               years;

               plus

          (2)  0.65% of that  portion,  if any,  of his  Final  Average  Monthly
               Compensation   that  is  in   excess  of  the   Monthly   Covered
               Compensation  that  applies  to him  multiplied  by his number of
               years of Credited Service that are not in excess of 35 years.

     Notwithstanding  the  foregoing  provisions  of this  Section  2.1(B),  the
monthly  retirement  income of a  Participant  who  retires on or after April 1,
2007,  and on or after his  Normal  Retirement  Date  shall not be less than the
monthly  retirement  income  which the  Participant  has accrued as of March 31,
2007,  based upon the  Participant's  Credited  Service,  Final Average  Monthly
Compensation and Monthly Covered  Compensation  determined as of March 31, 2007,
under the provisions of the Plan and Supplements then in effect.

     The  monthly  amount of  retirement  income  payable to a  Participant  who
retires after his Normal Retirement Date,  however,  shall not be less than that
amount that can be provided on an actuarially equivalent basis by the sum of (i)
the  single-sum  value as of his Normal  Retirement  Date of the normal  monthly
retirement  income that would have been payable to him under the  provisions  of
the Plan or Superseded Plan, whichever is applicable, as in effect on his Normal
Retirement Date if he had retired on his Normal  Retirement Date, based upon his

<PAGE>
                                      2-3


Credited  Service,  Final  Average  Monthly  Compensation  and  Monthly  Covered
Compensation  (or, if applicable,  the  corresponding  terms used to compute his
accrued benefit under the Superseded  Plan) determined as though he had actually
retired on his Normal  Retirement  Date, and (ii) the amount of interest on such
single-sum value in (i) above,  where the interest shall be compounded  annually
from the Participant's  Normal Retirement Date to his Annuity Starting Date. All
computations to determine such minimum monthly  retirement  income payable to or
on  behalf  of such a  Participant  shall be on the  basis of the  interest  and
mortality  assumptions that were being used as of his Normal  Retirement Date to
determine actuarially equivalent non-decreasing annuities.

     (C) Payment of Retirement  Income: The monthly retirement income payable in
the event of normal  retirement  will be payable on the first day of each month.
The first payment will be made on the Participant's  Normal Retirement Date, or,
if the Participant  retires after his Normal  Retirement Date, the first payment
will be made on the first day of the month coincident with or next following the
date  of his  actual  retirement.  The  last  payment  will be the  payment  due
immediately preceding the retired Participant's death.

     Where a Participant's  monthly  retirement  income  commences after April 1
following  the calendar year in which such  Participant  attains age 70 1/2, the
accrued benefit of such Participant shall be actuarially increased in accordance
with  regulations  or other  official  pronouncements  of the  Internal  Revenue
Service to take into  account  the period  beginning  on April 1  following  the
calendar year in which the Participant attains age 70 1/2 and ending on the date
on which  benefits  under  the  Plan  commence  after  retirement  in an  amount
sufficient to satisfy Section 401(a)(9) of the Internal Revenue Code.

     (D) Special  Provisions  Applicable to Participants Who Receive  Retirement
Income  Payments  While  Continuing  in Employment  of Employer  After  Required
Beginning Date: Any of the above  provisions of this Section 2.1 to the contrary
notwithstanding, but subject to the provisions of Sections 4.1 and 4.8 hereof, a
Participant  who continues in the employment of the Employer beyond his Required

<PAGE>
                                      2-4


Beginning  Date  shall  begin  receiving  monthly   retirement  income  payments
commencing as of his Required Beginning Date.

     The monthly  retirement  income  payments of a Participant who continues in
the  employment of the Employer  beyond his Required  Beginning  Date and begins
receiving  monthly  retirement  income  payments  commencing  as of his Required
Beginning Date shall be determined in the same manner as though the  Participant
had  actually  retired on his Required  Beginning  Date and shall be paid in the
form specified in Section 2.1(C) above. The retirement  income payable to such a
Participant  shall  thereafter  be subject to  adjustment as of the first day of
each calendar year which begins after his Required  Beginning  Date and prior to
the date of his actual  retirement  and shall be subject to adjustment as of the
first day of the month  coincident with or next following the date of his actual
retirement  (each such  adjustment day is herein  referred to as a "Post Payment
Recalculation  Date") to reflect  the  additional  accruals,  if any,  that such
Participant is entitled to receive because of his employment  after his Required
Beginning Date. The additional  retirement  income,  if any, payable to any such
Participant on and after an applicable Post Payment  Recalculation Date shall be
determined in accordance  with the  provisions  of Section  411(b)(1)(H)  of the
Internal  Revenue  Code and  regulations  issued with respect  thereto,  and the
actuarial  equivalent of the retirement income payments that the Participant has
received  under the  provisions  of this  Section 2.1 on and after his  Required
Beginning Date and prior to the applicable Post Payment Recalculation Date shall
be used as an offset in the  determination of such additional  income,  but such
offset  shall not result in the  retirement  income  payable to the  Participant
being reduced below the amount that was payable on his behalf  immediately prior
to such Post  Payment  Recalculation  Date.  The  additional  amount of  monthly
retirement  income,  if any,  that a  Participant  accrues  after  his  Required
Beginning Date shall be converted to an actuarially equivalent amount of monthly
retirement  income  that is payable in the same  manner and form as the  monthly
retirement  income  that is  payable  on his  behalf  immediately  prior  to the
applicable  Post Payment  Recalculation  Date, and such  additional  actuarially

<PAGE>
                                      2-5


equivalent  income  shall be payable  to the  Participant  commencing  as of the
applicable Post Payment Recalculation Date. Upon the actual retirement of such a
Participant,  the Participant's remaining retirement income shall continue to be
paid,  commencing  as of the  first  day of the  month  coincident  with or next
following the date of his actual retirement,  in the manner specified in Section
2.1(C)  above,  except that the  Participant  shall be entitled to elect another
form of payment in accordance with Section 3.1.

2.2 - EARLY RETIREMENT AND RETIREMENT INCOME

     Early  retirement  under the Plan is  retirement  from the  service  of the
Employer prior to the  Participant's  Normal Retirement Date and on or after the
date as of which he has both attained the age of 55 years and completed 10 years
of Vesting Service. In order to retire under the provisions of this section, the
written consent of the Participant to the commencement of his retirement  income
payments in  accordance  with the  provisions  of this Section 2.2 must be filed
with the Committee within 90 days of the date as of which his retirement  income
payments  are  to  commence.  In the  event  of  early  retirement,  payment  of
retirement  income  will be  governed,  subject to the  provisions  of Section 4
hereof, by the following provisions of this Section 2.2.

     (A) Early  Retirement Date: The Early Retirement Date will be the first day
of the month  coincident  with or next following the date a Participant  retires
from the service of the Employer  under the provisions of this Section 2.2 prior
to his Normal Retirement Date.

     (B) Amount of Retirement  Income:  The monthly amount of retirement  income
payable in the manner  described in Section  2.2(C) hereof to a Participant  who
retires prior to his Normal Retirement Date under the provisions of this Section
2.2 shall be equal to the product of:

          (1)  the Accrued  Deferred  Monthly  Retirement  Income  Commencing at
               Normal  Retirement  Date which the  Participant has accrued as of
               his Early Retirement Date;

               multiplied by

<PAGE>
                                      2-6

<TABLE>
<CAPTION>


          (2)  the early  retirement  reduction factor specified in the schedule
               below,  based upon the  number of years and full  months by which
               the  Participant's  Early  Retirement  Date  precedes  his Normal
               Retirement Date:

                                            Early Retirement Reduction Factors By Years and Months
                                        By Which Early Retirement Date Precedes Normal Retirement Date
                                                                           Months
Years      0          1         2          3          4         5          6         7         8          9          10         11
- -----    -----      -----     -----      -----      -----     -----      -----     -----     -----      -----      -----       -----
<S>      <C>        <C>       <C>        <C>        <C>       <C>        <C>       <C>       <C>        <C>        <C>         <C>

 0       1.000      0.994     0.989      0.983      0.978     0.972      0.967     0.961     0.956      0.950      0.944       0.939
 1       0.933      0.928     0.922      0.917      0.911     0.906      0.900     0.894     0.889      0.883      0.878       0.872
 2       0.867      0.861     0.856      0.850      0.844     0.839      0.833     0.828     0.822      0.817      0.811       0.806
 3       0.800      0.794     0.789      0.783      0.778     0.772      0.767     0.761     0.756      0.750      0.744       0.739
 4       0.733      0.728     0.722      0.717      0.711     0.706      0.700     0.694     0.689      0.683      0.678       0.672


 5       0.667      0.664     0.661      0.658      0.656     0.653      0.650     0.647     0.644      0.642      0.639       0.636
 6       0.633      0.631     0.628      0.625      0.622     0.619      0.617     0.614     0.611      0.608      0.606       0.603
 7       0.600      0.597     0.594      0.592      0.589     0.586      0.583     0.581     0.578      0.575      0.572       0.569
 8       0.567      0.564     0.561      0.558      0.556     0.553      0.550     0.547     0.544      0.542      0.539       0.536
 9       0.533      0.531     0.528      0.525      0.522     0.519      0.517     0.514     0.511      0.508      0.506       0.503

 10      0.500

</TABLE>


     (C) Payment of Retirement  Income:  The  retirement  income  payable in the
event of early  retirement  will be payable  on the first day of the month.  The
first payment will be made on the  Participant's  Early  Retirement Date and the
last  payment  will  be  the  payment  due  immediately  preceding  the  retired
Participant's death.

2.3 - DISABILITY RETIREMENT AND RETIREMENT INCOME

     A  Participant  may retire from the service of the Employer  under the Plan
if:

          (1)  his service is terminated prior to his Normal Retirement Date and
               on or  after  the  Effective  Date of the Plan by  reason  of his
               becoming  totally and permanently  disabled as defined in Section
               2.3(A) below; and

          (2)  he applies for a disability retirement benefit under the Plan, or
               under  any  other  formal  plan of the  Employer  which  provides
               specific disability benefits, within six months after the date of
               termination of his service due to disability;  provided, however,
               that such six-month period for application may be extended by the
               Committee when, in its sole  discretion,  reasonable cause exists
               for so doing.

Such  retirement from the service of the Employer shall herein be referred to as
disability  retirement.  In the event of  disability  retirement,  uniformly and
consistently  applied  rules shall be used with respect to all  Participants  in

<PAGE>
                                      2-7


similar circumstances and payment of retirement income will be governed, subject
to the  provisions  of Section 4 hereof,  by the  following  provisions  of this
Section 2.3.

     (A) Total and  Permanent  Disability:  A  Participant  shall be  considered
totally and permanently disabled for the purposes of the Plan if, in the opinion
of the Committee,  he is disabled, due to sickness or injury, from a cause other
than specified in Section 2.3(B) hereof, and, as a result of such disability, he
is eligible for and is receiving (after any specified waiting period) either (a)
disability  benefits under the Social  Security Act or (b) payments  (other than
workers' compensation  payments or medical or hospitalization  payments) payable
directly  or  indirectly  by the  Employer  or its  insurer  as a result  of the
Participant's   sickness  or  injury  under  any  long-term  disability  program
maintained by the Employer.

     (B) Nonadmissible Causes of Disability:  A Participant will not be entitled
to receive any disability retirement income if, in the opinion of the Committee,
the disability is a result of:

          (1)  excessive  and  habitual  use  by  the   Participant   of  drugs,
               intoxicants or narcotics;

          (2)  injury or disease  sustained by the  Participant  while willfully
               and illegally participating in fights, riots, civil insurrections
               or while committing a felony;

          (3)  injury or disease  sustained by the Participant  while serving in
               any armed forces;

          (4)  injury  or  disease   sustained  by  the  Participant  which  was
               diagnosed or discovered subsequent to the date his employment was
               terminated;

          (5)  injury or disease  sustained by the Participant while working for
               anyone   other  than  the   Employer  and  arising  out  of  such
               employment; or

          (6)  injury or disease  sustained by the Participant as a result of an
               act of war,  whether  or not  such  act  arises  from a  formally
               declared state of war.

     (C) Proof of Disability:  The Participant,  in order to be eligible for the
benefits  provided  under this Section 2.3,  shall  furnish  satisfactory  proof
(which may be in the form of evidence  satisfactory  to the  Committee  that the
Participant is receiving  disability  benefits under the Social  Security Act or

<PAGE>
                                      2-8


under any long-term  disability  program maintained by the Employer) that he has
become totally and  permanently  disabled as provided  herein.  Every six months
after the date of termination of the Participant's service due to disability, or
more  frequently,  the Committee  may  similarly  require proof of the continued
disability of the Participant.

     (D)  Disability   Retirement  Income   Commencement  Date:  The  Disability
Retirement  Income  Commencement  Date of a  Participant  who retires  under the
provisions  of this Section 2.3 will be his Normal  Retirement  Date;  provided,
however, if the Participant receives payments (other than workers'  compensation
payments or medical or  hospitalization  payments)  after his Normal  Retirement
Date that are payable directly or indirectly by the Employer or its insurer as a
result of the  Participant's  sickness or injury under any long-term  disability
program   maintained  by  the  Employer,   the  Disability   Retirement   Income
Commencement  Date  of  such  Participant  will be the  first  day of the  month
coincident  with or next  following (a) the date as of which such payments under
such long-term disability program maintained by the Employer are discontinued or
(b) his Required Beginning Date, whichever is earlier.

     (E) Disability  Retirement  Income: The monthly amount of retirement income
payable in the manner  described in Section  2.3(F) hereof to a Participant  who
retires from the service of the Employer  under the  provisions  of this Section
2.3 due to total and permanent  disability and who attains his Normal Retirement
Date without  recovering from his total and permanent  disability shall be equal
to the anticipated monthly retirement income to which the Participant would have
been  entitled  on  his  Disability   Retirement  Income  Commencement  Date  in
accordance with the provisions of Section 2.1(B) hereof if:

          (1)  his  employment  had  not  been   terminated  but  had  continued
               uninterrupted  from the date of termination of his service due to
               disability to his Disability Retirement Income Commencement Date;

          (2)  his last regular rate of monthly  Compensation  prior to the date
               of  termination  of his service due to  disability  had continued
               without change to his Disability  Retirement Income  Commencement
               Date;

<PAGE>
                                      2-9



          (3)  the amount of the Monthly  Covered  Compensation  that applies at
               his Disability  Retirement Income Commencement Date were the same
               as  the  corresponding  amount  determined  as  of  the  date  of
               termination of his service due to disability; and

          (4)  the  provisions  of  the  Plan  as  in  effect  on  the  date  of
               termination  of his  service  due  to  disability  had  continued
               without   change   until   his   Disability   Retirement   Income
               Commencement Date.

     (F) Payment of Disability  Retirement Income: The monthly retirement income
to which a  Participant  is entitled in the event of his  disability  retirement
will be payable on the first day of each month.  The first  payment will be made
on the Participant's  Disability  Retirement Income  Commencement Date, provided
that he attains his Normal Retirement Date without recovering from his total and
permanent  disability and provided that  application has been made in writing by
the Participant or his authorized representative for disability retirement under
the  provisions  of this  Section  2.3. The last payment will be the payment due
immediately preceding the date of his death.

     (G) Benefit Payable in the Event of Death of Disabled  Participant Prior to
Disability  Retirement Income Commencement Date: In the event that a Participant
dies after he has been determined to be totally and permanently  disabled by the
Committee and prior to his Disability  Retirement Income  Commencement Date, and
prior to his  recovery  from his total and  permanent  disability  if he has not
attained his Normal  Retirement Age as of the date of his death, his Beneficiary
will receive, in lieu of all other benefits payable on behalf of the Participant
under  the  Plan,  the death  benefit,  determined  and  payable  in the  manner
described in Section 2.4(B)  hereof,  which would have been payable on behalf of
the Participant under the provisions of Section 2.4(B) if:

          (1)  his  employment  had  not  been   terminated  but  had  continued
               uninterrupted  from the date of termination of his service due to
               disability until the date of his death;

          (2)  his last regular monthly rate of  Compensation  prior to the date
               of  termination  of his service due to  disability  had continued
               without change to the date of his death;

<PAGE>
                                      2-10



          (3)  the amount of the Monthly  Covered  Compensation  that applies at
               the date of his death were the same as the amount  determined  as
               of the date of termination of his service due to disability; and

          (4)  the  provisions  of  the  Plan  as  in  effect  on  the  date  of
               termination  of his  service  due  to  disability  had  continued
               without change to the date of his death.

     (H) Recovery from  Disability:  If the Committee finds that any Participant
who is entitled to receive a disability  retirement  income under the provisions
of this Section 2.3 commencing at his Disability  Retirement Income Commencement
Date has, at any time prior to his Normal  Retirement  Date,  recovered from his
total and permanent  disability,  such Participant and his Beneficiary shall not
be  entitled to any  benefits  under this  Section  2.3 unless he  reenters  the
service of the Employer and his service is subsequently  terminated by reason of
his total and permanent  disability in accordance with the provisions  hereof. A
Participant  shall be deemed  to have  recovered  from his  total and  permanent
disability  for the  purposes of the Plan if the  disability  benefits,  if any,
which he is receiving  under the Social  Security Act and the payments,  if any,
which he is receiving  under the  Employer's  long-term  disability  program are
discontinued.  However,  any such  Participant  who recovers  from his total and
permanent  disability  shall accrue Vesting Service during the period that he is
considered  by the  Committee to have been totally and  permanently  disabled as
provided  herein,  and, if the date of his recovery from his total and permanent
disability  is on or after his Initial  Vesting Date and he does not reenter the
service of the Employer,  he shall be entitled to the vested  retirement  income
determined  and payable in  accordance  with the  provisions  of Section  2.4(A)
hereof,  computed as though his service had been  terminated  on the date of his
recovery  from his total and  permanent  disability  but based upon his Credited
Service,  Final Average Monthly  Compensation  and Monthly Covered  Compensation
determined as of the date of termination of his service due to disability.

     (I)  Election  of Vested  Benefit  on  Termination  of  Service  in Lieu of
Disability Retirement: A Participant whose service is terminated on or after his
Initial Vesting Date by reason of his total and permanent  disability may elect,
in writing  filed with the  Committee  prior to his Normal  Retirement  Date, to

<PAGE>
                                      2-11


receive  the  benefits  provided  under  Section  2.4(A)  hereof  in lieu of the
disability  retirement  benefits  provided  under this Section 2.3. The benefits
payable  hereunder  to or on behalf of any such  Participant  who makes  such an
election  shall be determined as though the  Participant's  service had not been
terminated by reason of total and  permanent  disability.  The  Committee  shall
require the consent of the  Participant's  spouse,  if any,  before any election
under this Section 2.3(I) will become effective.

2.4 - BENEFITS OTHER THAN ON RETIREMENT

     (A) Benefit on  Termination  of Service and on Death After  Termination  of
Service:

     (1) In the event that a  Participant's  service is terminated  prior to his
Normal  Retirement  Date and on or after his Initial Vesting Date for any reason
other than his death,  early  retirement  as  described in Section 2.2 hereof or
disability retirement as described in Section 2.3 hereof, he will be entitled to
a  monthly  retirement  income,  payable  in the  manner  described  in  Section
2.4(A)(2) hereof, equal to:

          (a)  an amount equal to either:

                    (i)  if the  Participant has not both attained the age of 55
                         years and  completed 10 years of Vesting  Service as of
                         the date of  termination  of his  service,  the Accrued
                         Deferred Monthly Retirement Income Commencing at Normal
                         Retirement  Date  that he has  accrued  to the  date of
                         termination of his service;

                         or

                    (ii) if the  Participant  has  both  attained  the age of 55
                         years and  completed 10 years of Vesting  Service as of
                         the date of  termination  of his  service,  the monthly
                         retirement  income,  payable in the manner described in
                         Section  2.4(A)(2)  hereof  commencing  at  his  Normal
                         Retirement  Date, if he shall then be living,  which is
                         the actuarial  equivalent  (ignoring the actuarial cost
                         of any death benefit coverage provided between the date
                         of termination of his service and his Normal Retirement
                         Date) of the monthly early retirement income that would
                         have been payable on his behalf in accordance  with the
                         provisions  of  Section  2.2  hereof if he had  retired


<PAGE>
                                      2-12


                         under the  provisions  of that  section  on the date of
                         termination of his service;

                                    multiplied by

          (b)  his Vested  Percentage,  which  shall be equal to the  percentage
               specified in the schedule  below,  based upon his number of years
               (ignoring  fractions)  of  Vesting  Service  as of  the  date  of
               termination of his service:

                          Years of                      Vested
                       Vesting Service                Percentage
                       ---------------                ----------
                         Less than 5                       0%
                          5 or more                      100%;

               provided,  however, that the Vested Percentage of any Participant
               who has  attained  his  Normal  Retirement  Age as of the date of
               termination of his service shall be 100%;

               with the resulting product multiplied by

          (c)  a factor,  which is based upon the period, if any, that the death
               benefit coverage described in Section 2.4(A)(3) below has been in
               effect after the date of  termination of his service and prior to
               his Annuity  Starting  Date,  that will reduce the product of (a)
               and (b), if  applicable,  to reflect the cost,  determined  on an
               actuarially  equivalent  basis,  of providing  such death benefit
               coverage during such period;

               with the resulting product multiplied by

          (d)  a factor that will convert, if applicable,  the amount of monthly
               retirement  income  that is  payable  to the  Participant  in the
               manner described in Section  2.4(A)(2)  hereof  commencing at his
               Normal  Retirement  Date to an actuarially  equivalent  amount of
               monthly  retirement  income that is payable to the Participant in
               the manner described in Section  2.4(A)(2)  hereof  commencing on
               his Annuity Starting Date.

All actuarial computations to determine the monthly retirement income payable to
or on behalf of such a terminated  Participant  (including any  computations  to
determine  the monthly  retirement  income  payable on his behalf under  Section
2.4(A)(3) or 3.1 hereof)  shall be on the basis of the  interest  and  mortality
assumptions  that are being used as of the date of termination of his service to
determine actuarially equivalent non-decreasing annuities.

<PAGE>
                                      2-13



     (2) The  retirement  income payable under Section  2.4(A)(1)  above will be
payable on the first day of each month.  The first  payment will be made, if the
Participant shall then be living, as of:

          (a)  if he does not elect an earlier commencement date pursuant to the
               provisions of (b) below, his Normal Retirement Date;

               or

          (b)  if he had  completed  at least 10 years of Vesting  Service as of
               the  date of  termination  of his  service  and he so  elects  in
               writing filed with the Committee at least 30 but not more than 90
               days prior to the effective  date thereof (or if the  Participant
               waives  the  30-day  notice  period  with  any  required  spousal
               consent, then more than 7 days but not more than 90 days prior to
               the effective date thereof), the first day of any month, which is
               prior to his Normal  Retirement  Date and is on or after the date
               on which he attained  the age of 55 years,  that he  specifies in
               his written election filed with the Committee.

The last payment will be the payment due immediately preceding his death.

     (3) In the event that the terminated  Participant dies prior to his Annuity
Starting Date (without his having waived,  in accordance  with the provisions of
Section  2.4(A)(4) below, the benefit provided under this Section  2.4(A)(3) and
without his having  received,  prior to his death,  the  actuarially  equivalent
value of the benefit provided on his behalf under Section 2.4(A)(1) above),  his
Beneficiary  will receive,  subject to the  provisions of Section  4.1(D) hereof
regarding the Qualified  Preretirement  Survivor Annuity, the monthly retirement
income,  beginning  on the  first  day of the  month  coincident  with  or  next
following the date of the terminated  Participant's death, which can be provided
on an  actuarially  equivalent  basis by the  single-sum  value  of the  benefit
determined in accordance  with Section  2.4(A)(1)  above to which the terminated
Participant  was  entitled  as of  the  date  of  termination  of  his  service,
accumulated  with interest from such date to the date of his death.  The monthly
retirement  income payments under this Section  2.4(A)(3) shall,  subject to the
provisions  of  Section  2.4(B)(4)  hereof,  be  payable  for  the  life  of the
Beneficiary  designated  or selected  under  Section 5.2 hereof to receive  such
benefit,  and, in the event of such  Beneficiary's  death  within a period of 10

<PAGE>
                                      2-14


years after the Participant's death, the same monthly amount that was payable to
the Beneficiary shall be payable for the remainder of such 10-year period in the
manner and subject to the provisions of Section 5.3 hereof;  provided,  however,
in lieu of payment  of such  benefit  in the form of  monthly  income  described
above,  the  single-sum  value  of such  benefit  may be paid on an  actuarially
equivalent  basis to the  Participant's  designated  Beneficiary  in such  other
manner and form  permitted  under Section  2.4(B) hereof and  commencing on such
other date permitted under Section 2.4(B) hereof as the Participant may elect in
writing filed with the  Committee or, in the event that a specific  election has
not been made by the  Participant  and  filed  with the  Committee  prior to his
death, as the Beneficiary may elect in writing filed with the Committee.

     (4) A terminated  Participant may, with the consent of his spouse,  if any,
elect in writing  filed with the Committee at any time (and any number of times)
prior to his Annuity  Starting  Date, to waive  prospectively  the death benefit
provided  under  Section  2.4(A)(3)  above and, in lieu  thereof,  an  increased
retirement income, which reflects on an actuarially  equivalent basis the period
that the death  benefit  coverage  under  Section  2.4(A)(3) is waived,  will be
payable to the Participant under the provisions of Section 2.4(A)(1) if he shall
be  living on his  Annuity  Starting  Date.  Within  one year  after the date of
termination  of service of a Participant  who is entitled to a benefit under the
provisions of this Section 2.4(A), or as soon thereafter as is  administratively
practicable,   the  Committee  shall  furnish  the   Participant   with  written
notification  informing  him of his right to waive the  death  benefit  provided
under  Section  2.4(A)(3)  above  and the  consequences  of such a  waiver.  Any
Participant  who has waived the death benefit  provided under Section  2.4(A)(3)
may subsequently  revoke such waiver at any time (and any number of times) prior
to his Annuity  Starting Date by filing written notice of such  revocation  with
the Committee prior to the date on which such revocation is to become effective.
Any  Participant  who has  waived  the  death  benefit  provided  under  Section
2.4(A)(3) and who subsequently  marries or remarries after such waiver and prior

<PAGE>
                                      2-15


to his Annuity  Starting Date shall  automatically be deemed to have revoked his
prior waiver of such death benefit  effective as of the first anniversary of the
date of such marriage or remarriage  unless his spouse  (following such marriage
or remarriage) consents to the waiver of such death benefit.

     (5) Any  Participant,  who is entitled to a benefit under the provisions of
Section  2.4(A)(1) above and who is married on his Annuity  Starting Date or who
is  married  on the date of his death and on whose  behalf a benefit  is payable
under Section 2.4(A)(3) above, shall be assumed for the purposes of this Section
2.4(A) to have been married for the total  period of time  beginning on the date
of  termination  of his service and ending on his Annuity  Starting  Date or the
date of his death,  whichever is earlier,  except for such portions,  if any, of
such period of time for which evidence is furnished to the Committee  which,  in
the opinion of the Committee, satisfactorily proves that the Participant was not
married.

     (6) The  provisions  of  Sections  3.1 and 4 hereof are  applicable  to the
benefits provided under this Section 2.4(A).

     (7) Except as specifically  provided otherwise in any Supplement hereto and
except as provided  in Section 2.3 with  respect to  disability  retirement  and
unless  specifically  provided  otherwise  in the Plan,  the  Participant  whose
service is terminated prior to his Initial Vesting Date shall not be entitled to
any benefit under the Plan whatever, and the value of such Participant's accrued
benefit shall be forfeited as of the date of termination of his service and used
to reduce Employer contributions.

     (B) Benefit Payable in Event of Death While in Service:

     (1) If the service of a Participant is terminated by reason of his death on
and  after  April 1,  1998,  but  prior to April 1,  2007,  and on and after his
Initial Vesting Date and prior to his Required  Beginning  Date,  there shall be
payable to the  Participant's  designated  Beneficiary  the  monthly  retirement
income,  beginning  on the  first  day of the  month  coincident  with  or  next
following  the  date of the  Participant's  death,  that can be  provided  on an
actuarially equivalent basis by the greater of:

          (a)  an amount equal to:



<PAGE>
                                      2-16



               (i)  if the Participant's  service is terminated by reason of his
                    death prior to his Normal  Retirement  Date,  the single-sum
                    value,  determined  as of  the  date  of his  death,  of the
                    Accrued Deferred  Monthly  Retirement  Income  Commencing at
                    Normal  Retirement  Date that the Participant has accrued to
                    the date of his death;

                    or

               (ii) if the Participant's  service is terminated by reason of his
                    death on or after his Normal Retirement Date, the single-sum
                    value,  determined  immediately  prior to the  Participant's
                    death, of the monthly retirement income that the Participant
                    would have been entitled to receive under the  provisions of
                    Section  2.1(B) hereof if he had retired from the service of
                    the Employer on the date of his death;

               or

          (b)  an amount equal to the smaller of:

               (i)  either:

                    (aa) 24  times  the  Participant's   Final  Average  Monthly
                         Compensation  at the  date of his  death  if he had not
                         completed 10 years of Vesting Service as of the date of
                         his death;

                         or

                    (bb) 36  times  the  Participant's   Final  Average  Monthly
                         Compensation  at  the  date  of  his  death  if he  had
                         completed 10 years of Vesting Service as of the date of
                         his death;

                    or

               (ii) 100  times  the  monthly  retirement  income  to  which  the
                    Participant   would  have  been   entitled   on  his  Normal
                    Retirement Date in accordance with the provisions of Section
                    2.1(B)  hereof  if he had  remained  in the  service  of the
                    Employer, with no change in his last regular monthly rate of
                    Compensation,  until his  Normal  Retirement  Date and based
                    upon the Monthly Covered Compensation that applies to him as
                    of  the  date  of his  death  instead  of as of  his  Normal
                    Retirement Date or, if his Normal  Retirement Date was on or

<PAGE>
                                      2-17


                    prior  to the  date of his  death,  100  times  the  monthly
                    retirement  income  that the  Participant  would  have  been
                    entitled to receive under the  provisions of Section  2.1(B)
                    hereof if he had retired from the service of the Employer on
                    the date of his death.

     If the service of a Participant is terminated by reason of his death on and
after April 1, 2007 and on and after his Initial  Vesting  Date and prior to his
Required Beginning Date, there shall be payable to the Participant's  designated
Beneficiary  the monthly  retirement  income,  beginning on the first day of the
month  coincident  with or next following the date of the  Participant's  death,
that can be provided on an actuarially equivalent basis by the greater of:

          (a)  an amount equal to:

               (i)  if the Participant's  service is terminated by reason of his
                    death prior to his Normal  Retirement  Date,  the single-sum
                    value,  determined  as of  the  date  of his  death,  of the
                    Accrued Deferred  Monthly  Retirement  Income  Commencing at
                    Normal  Retirement  Date that the Participant has accrued to
                    the date of his death;

                    or

               (ii) if the Participant's  service is terminated by reason of his
                    death on or after his Normal Retirement Date, the single-sum
                    value,  determined  immediately  prior to the  Participant's
                    death, of the monthly retirement income that the Participant
                    would have been entitled to receive under the  provisions of
                    Section  2.1(B) hereof if he had retired from the service of
                    the Employer on the date of his death;

               or

          (b)  an amount equal to the smaller of:

               (i)  24   times   the   Participant's   Final   Average   Monthly
                    Compensation at the date of his death;

                    or

               (ii) 100  times  the  monthly  retirement  income  to  which  the
                    Participant   would  have  been   entitled   on  his  Normal
                    Retirement Date in accordance with the provisions of Section

<PAGE>
                                      2-18


                    2.1(B)  hereof  if he had  remained  in the  service  of the
                    Employer, with no change in his last regular monthly rate of
                    Compensation,  until his  Normal  Retirement  Date and based
                    upon the Monthly Covered Compensation that applies to him as
                    of  the  date  of his  death  instead  of as of  his  Normal
                    Retirement Date or, if his Normal  Retirement Date was on or
                    prior  to the  date of his  death,  100  times  the  monthly
                    retirement  income  that the  Participant  would  have  been
                    entitled to receive under the  provisions of Section  2.1(B)
                    hereof if he had retired from the service of the Employer on
                    the date of his death;

provided,  however, that the provisions of Section 4.1(D) hereof relating to the
Qualified  Preretirement  Survivor Annuity shall apply with respect to a married
Participant  whose  service is terminated by reason of his death on or after his
Initial Vesting Date and whose designated Beneficiary is not his spouse.

     (2)  Except as  provided  in  Section  2.4(B)(3)  below and  subject to the
provisions of Section  2.4(B)(4) below, the monthly  retirement  income payments
under  this  Section  2.4(B)  shall be payable  for the life of the  Beneficiary
designated or selected under Section 5.2 hereof to receive such benefit, and, in
the event of such  Beneficiary's  death  within a period  of 10 years  after the
Participant's death, the same monthly amount that was payable to the Beneficiary
shall be payable  for the  remainder  of such  10-year  period in the manner and
subject to the provisions of Section 5.3 hereof.

     (3) A Participant may elect, or, in the event that a specific  election has
not been made by the  Participant  and  filed  with the  Committee  prior to his
death,  his  designated  Beneficiary  may  elect,  in  writing  filed  with  the
Committee,  that, in lieu of payment of the benefit  provided under this Section
2.4(B) (or, if  applicable,  under  Section  2.3(G) or 2.4(A)(3)  hereof) in the
manner described above,  such benefit will be paid on an actuarially  equivalent
basis to the  designated  Beneficiary  commencing  on the first day of any month
that is on or after  the date of the  Participant's  death and is on or prior to
the Participant's  Required Beginning Date and is payable in accordance with one
of the options described below:

<PAGE>
                                      2-19



                           Option A:    A  monthly  retirement  income  in equal
                                        amounts   that   is   payable   to   the
                                        Beneficiary for his lifetime.

                           Option B:    A  retirement  income  in equal  amounts
                                        that is payable for a period  certain of
                                        five or 10 years  whichever is specified
                                        by the  Participant or his  Beneficiary,
                                        as the  case  may  be,  in  his  written
                                        election  filed with the  Committee.  In
                                        the  event  of the  Beneficiary's  death
                                        prior   to  the   expiration   of   such
                                        specified   period  certain,   the  same
                                        amount   shall   be   payable   for  the
                                        remainder   of  the   specified   period
                                        certain in the manner and subject to the
                                        provisions of Section 5.3 hereof.

                           Option C:    A combination of Option A and Option B.


Provided,  however,  that  payment of any such  benefit  shall be subject to the
provisions of Section 2.4(B)(4) below.

     (4) Any form of payment applicable to the death benefit provided under this
Section  2.4(B) (or, if applicable,  under Section 2.3(G) or 2.4(A)(3)  hereof),
which has been  designated by a  Participant  prior to January 1, 1984 under the
terms of the  Superseded  Plan and  which  satisfies  the  transitional  rule in
Section 242(b)(2) of the Tax Equity and Fiscal  Responsibility Act of 1982 (P.L.
97-248),  will  continue in effect on and after the  Effective  Date of the Plan
with respect to the death  benefits  provided  under this Section 2.4(B) (or, if
applicable,  under Section 2.3(G) or 2.4(A)(3)  hereof)  unless such  designated
form of  payment  has been or is  subsequently  revoked  or changed (a change of
Beneficiaries under the designation will not be considered to be a revocation or
change of such form of payment so long as the change in  Beneficiaries  does not
alter,  directly or indirectly,  the period over which  distributions  are to be
made under such form of payment);  provided,  however,  if a Participant,  whose
death  occurs on or after his  Initial  Vesting  Date,  had been  married to his
spouse throughout the one-year period immediately preceding his death and he had
designated a person other than his spouse as his Beneficiary and such spouse has
not consented to such other person being  designated,  the provisions of Section
4.1(D) hereof shall apply with respect to payments due his surviving  spouse, if
any.

<PAGE>
                                      2-20



     In the event that the  Beneficiary  to receive  the death  benefit  payable
under  Section  2.3(G),  2.4(A)(3) or 2.4(B)  hereof on behalf of a  Participant
whose death occurs prior to his Normal  Retirement Date is his surviving spouse,
the retirement  income payable to such  surviving  spouse under Section  2.3(G),
2.4(A)(3) or 2.4(B)  hereof  shall be deferred and be payable on an  actuarially
equivalent basis to such surviving spouse commencing on the Participant's Normal
Retirement  Date,  if such  surviving  spouse  is then  living,  unless  (i) the
surviving  spouse  consents  or  elects  in  writing  to  receive  such  benefit
commencing  as of a date that is prior to the  Participant's  Normal  Retirement
Date and is on or after the date of the  Participant's  death,  (ii) the date of
death of the  Participant  is prior  to his  Initial  Vesting  Date,  (iii)  the
Participant had not been married to his surviving spouse throughout the one-year
period immediately  preceding his death or (iv) a lump-sum payment is payable to
his surviving spouse under the provisions of Section 3.2 hereof.

     (5) If the service of a Participant is terminated by reason of his death on
or after his Initial  Vesting Date and on or after his Required  Beginning Date,
there shall be payable to the Participant's  designated  Beneficiary the monthly
retirement  income,  payable in the manner  described  in Section  2.4(B)(2)  or
2.4(B)(3) above beginning on the first day of the month  coincident with or next
following  the  date of the  Participant's  death,  that can be  provided  on an
actuarially equivalent basis by an amount equal to the excess, if any, of:

          (a)  the  amount   described  in  Section   2.4(B)(1)(a)   or  Section
               2.4(B)(1)(b), whichever is applicable;

               over

          (b)  the sum of:

               (i)  the  single-sum  value,  determined as of the  Participant's
                    Required  Beginning Date, of the retirement  income that was
                    payable on his behalf  commencing on his Required  Beginning
                    Date,  accumulated with interest from his Required Beginning
                    Date until the date of his death;

                    plus

<PAGE>
                                      2-21



               (ii) the  sum of the  single-sum  values,  determined  as of each
                    applicable Post Payment  Recalculation  Date occurring after
                    the Participant's Required Beginning Date, of the additional
                    retirement  income,  if any,  payable  to  such  Participant
                    commencing  on such  applicable  Post Payment  Recalculation
                    Date,  accumulated  with interest from the  applicable  Post
                    Payment Recalculation Date to the date of his death.

Additional  retirement  income  payments may be payable after the  Participant's
death to his joint  pensioner or other  Beneficiary,  depending upon the form of
payment of the retirement income that the Participant was receiving  immediately
prior to his death and taking into account the increase, if any, that would have
applied  under  the  provisions  of  Section  2.1(D)  hereof  to the  amount  of
retirement  income payable to the Participant  commencing as of the first day of
the month coincident with or next following the date of the Participant's  death
if the Participant had retired  immediately  prior to his death and had survived
to such day.


<PAGE>

                                       3-1

                                    SECTION 3

                SPECIAL PROVISIONS REGARDING PAYMENT OF BENEFITS


3.1 - OPTIONAL FORMS OF RETIREMENT INCOME

     In lieu of the  amount  and form of  retirement  income  commencing  on the
Participant's  regularly  scheduled  Annuity  Starting  Date  which is  payable,
subject to the  provisions  of Section  4.1  hereof,  in the event of his normal
retirement,  early retirement,  disability retirement or termination of service,
as determined and specified in Section 2.1, 2.2, 2.3 or 2.4(A) hereof, whichever
is  applicable,  such  Participant  may,  subject  to the  requirements  of this
section,  elect,  in writing filed with the  Committee,  to receive a retirement
income or benefit of equivalent  actuarial  value which is payable in accordance
with one of the options  described below  commencing on his regularly  scheduled
Annuity Starting Date or commencing on such later date, which shall not be later
than his Required  Beginning Date, as the Participant may specify in his written
election filed with the Committee.

         Option 1:          A retirement  income of modified monthly amount that
                            is   payable  in  equal   monthly   amounts  to  the
                            Participant for his lifetime, and, in the event that
                            the   Participant   predeceases  a  joint  pensioner
                            designated by him, a  percentage,  which is not less
                            than 50% nor greater  than 100% and is  specified by
                            the  Participant in his written  election filed with
                            the Committee,  of such modified monthly amount will
                            be  payable  after the death of the  Participant  to
                            such designated  joint pensioner for the lifetime of
                            such joint  pensioner.  This  option is  referred to
                            herein  as the  "Qualified  Joint  and 50%  Survivor
                            Annuity  Option" when the spouse of the  Participant
                            is the designated  joint pensioner and the specified
                            percentage is 50%.

         Option 2:          A retirement  income of modified monthly amount that
                            is   payable  in  equal   monthly   amounts  to  the
                            Participant   during  the  joint   lifetime  of  the
                            Participant and a joint pensioner designated by him,
                            and,  following  the  death of  either  of  them,  a
                            percentage,  which is not less than 50% nor  greater
                            than 100% and is specified by the Participant in his
                            written  election filed with the Committee,  of such
                            modified  monthly  amount  will  be  payable  to the
                            survivor for the lifetime of the survivor.

<PAGE>
                                      3-2



         Option 3:          A retirement income that is payable in equal monthly
                            amounts to the  Participant  for his  lifetime or in
                            the  manner  described  under  Option 1 or Option 2,
                            whichever  is elected by the  Participant,  with the
                            added  provision  that payments will be made for the
                            remainder  of a  period  certain,  specified  by the
                            Participant  in his written  election filed with the
                            Committee,   in  the  event  of  the  death  of  the
                            Participant  and, if applicable,  his Beneficiary or
                            joint  pensioner  prior  to the  expiration  of such
                            specified period certain.

     The amount of retirement  income determined under any of the above optional
forms of payment must satisfy the requirements of Section 4.8 hereof and Section
401(l) and/or  Section  401(a)(4) of the Internal  Revenue Code.  Any provisions
hereof to the contrary notwithstanding, any optional form of payment which would
otherwise be  permitted  under the  provisions  of this Section 3.1 shall not be
available to a Participant if:

     (1)  the amount of  retirement  income  payable  under such option does not
          satisfy the required  distribution and incidental benefit requirements
          of Section 4.8 hereof; or

     (2)  the amount of retirement income payable under such option would result
          in  the  amount  of  retirement  income  payable  on  behalf  of  such
          Participant  under the Plan being increased by a percentage that would
          cause the disparity in the rate of employer-derived benefits under the
          Plan to exceed the maximum disparity permitted under Section 401(l) of
          the  Internal  Revenue  Code and rulings and  regulations  issued with
          respect  thereto;  provided,  however,  that the  restriction  of this
          Subparagraph  (2) shall not apply if there is no disparity  within the
          meaning of Section 401(l) of said Code included in the  calculation of
          the  Participant's  accrued  benefit or if it has been determined that
          the accrued  benefits  under the Plan  satisfy  the  general  test for
          nondiscrimination in amount of benefits (or any acceptable alternative
          test that may be available)  under  Section  401(a)(4) of the Internal
          Revenue Code and rulings and regulations issued with respect thereto.

     A  Participant  who is not  permitted to elect an optional  form of payment
otherwise  permitted  under the  provisions  of this  Section 3.1 because of the
incidental  benefit  requirements  of Section  4.8 hereof  and/or the  permitted
disparity  requirements of said Section 401(l) of the Internal  Revenue Code may
elect  in  accordance  with  the  provisions  above to  receive  an  actuarially
equivalent  form of  payment  which is  similar  in form to the  non-permissible
option but which is modified by  increasing or  decreasing,  as the case may be,

<PAGE>
                                      3-3


the period  certain for which  payments  will be made and/or the  percentage  of
income payable to the survivor, but not to exceed 100%, so that the requirements
of Section 4.8 hereof  and/or  Section  401(l) of the Internal  Revenue Code are
satisfied.

     Any optional form of payment  designated by a Participant  prior to January
1, 1984, which satisfies the transitional  rule in Section  242(b)(2) of the Tax
Equity and Fiscal  Responsibility  Act of 1982 (P.L.  97-248),  will continue in
effect on and after the Effective  Date of the Plan unless such optional form of
payment  has  been  or  is   subsequently   revoked  or  changed  (a  change  of
Beneficiaries under the designation will not be considered to be a revocation or
change of such optional  form of payment so long as the change in  Beneficiaries
does not alter, directly or indirectly,  the period over which distributions are
to be made under such form of payment);  provided,  however, that the provisions
of Section 4.1(C) hereof shall apply if the Participant has a spouse at the date
on which his initial payment under such optional form is due and his spouse does
not consent to such optional form of payment.  Subject to the preceding sentence
but notwithstanding any other provision of this Section 3.1 to the contrary, any
option  elected under this Section 3.1 must provide that the entire  interest of
the  Participant  will be expected to be distributed to the  Participant and his
Beneficiaries and joint pensioners,  in a manner that satisfies the restrictions
of Section 4.8 of the Plan, over one or a combination of the following periods:

     (a)  the life of the Participant;

     (b)  the lives of the Participant  and his designated  Beneficiary or joint
          pensioner;

     (c)  a period  certain  not  extending  beyond the life  expectancy  of the
          Participant;

          or

     (d)  a period certain not extending beyond the joint life and last survivor
          expectancy of the Participant and his designated  Beneficiary or joint
          pensioner.

Any amount that is payable to the child of a Participant  under an optional form
of payment  hereunder  shall be  treated  for the  purposes  of  satisfying  the
requirements of this paragraph as if it had been payable to the surviving spouse

<PAGE>
                                      3-4


of the  Participant  if such  amount  that is payable  to the child will  become
payable to such surviving  spouse upon such child's  reaching  majority (or upon
the occurrence of such other designated event permitted under regulations issued
with respect to Section 401(a)(9) of the Internal Revenue Code).

     If a Participant's  retirement income benefits have commenced in either the
form and amount  specified in Section 2 hereof or under an optional form elected
under the  provisions  of this  Section  3.1,  upon his  written  request to the
Committee  at least 30 but not more  than 90 days  prior to the  effective  date
thereof (or if the Participant waives the 30-day notice period with any required
spousal  consent,  then more than 7 days but not more than 90 days  prior to the
effective  date thereof),  he may elect to discontinue  receiving his retirement
income under such form and amount of payment and, in lieu thereof, to receive on
and after such  effective  date a  retirement  income or  benefit of  equivalent
actuarial value that is payable to him for life or is payable in accordance with
one of the options  provided above;  provided,  however,  that (a) only one such
change may be made by any Participant  after his retirement income payments have
commenced (b) a change after the Annuity  Starting Date will not be permitted if
the retirement  income or benefit  payments are being made under the terms of an
annuity  contract  purchased  on behalf  of the  Participant  from an  insurance
company.  A  Participant  who  elects to change  his form of  payment  after his
Annuity  Starting  Date must submit to the  Committee  such evidence of his good
health as the Committee  requires and, if the Participant is receiving  payments
in a form in which a joint  pensioner  is  involved,  such  evidence of the good
health of his joint  pensioner as the  Committee  requires;  and any such change
will not be permitted if, in the opinion of the Committee,  such Participant or,
if applicable,  such joint  pensioner is not in good health.  The consent of the
Participant's  spouse (which shall include, if applicable,  his former spouse to
whom he was married on his Annuity  Starting  Date),  if any,  shall be required

<PAGE>
                                      3-5


before any such change in a form of payment that involves such spouse may become
effective,  including  any change that  represents a change in a form of payment
that was previously consented to by such spouse, unless, to the extent permitted
by law, the previous  consent  acknowledged  that the Participant may change the
form of payment without the further consent of said spouse.

     The Participant upon electing any option of this section will designate the
joint pensioner or Beneficiary to receive the benefit, if any, payable under the
Plan in the  event  of his  death  and  will  have  the  power  to  change  such
designation  from time to time,  subject to the provisions of this section.  Any
such   designation   will  name  a  joint  pensioner  or  one  or  more  primary
Beneficiaries  where  applicable.  Any  change  in a joint  pensioner  after the
Participant's  retirement  income payments have commenced will be considered and
treated  under the Plan in the same  manner  as, and will be subject to the same
restrictions that apply to, a change in the form of payment.  The consent of the
Participant's  spouse (which shall include, if applicable,  his former spouse to
whom he was married on his Annuity  Starting  Date),  if any,  shall be required
before any such change in a Beneficiary or joint  pensioner,  under an option in
which such spouse is not the primary Beneficiary or joint pensioner,  may become
effective,  unless,  to the extent  permitted by law, such spouse has previously
consented to and acknowledged  that the Participant may change  Beneficiaries or
joint  pensioners  without the further consent of said spouse. A Participant who
wants to change any  designated  joint  pensioner  after his  retirement  income
payments  have started must submit to the  Committee  such  evidence of the good
health of any joint  pensioner that is being removed as the Committee  requires,
and any such change  shall be denied if, in the opinion of the  Committee,  such
joint pensioner is not in good health.  The amount of retirement  income payable
to the  Participant  upon the  designation  of a new  joint  pensioner  shall be
actuarially  redetermined,  taking  into  account  the age of the  former  joint
pensioner,  the new joint pensioner and the  Participant.  Each such designation
will be made in writing on a form prepared by the  Committee.  In the event that

<PAGE>
                                      3-6


no designated Beneficiary survives the Participant, such benefits as are payable
in the event of the death of the Participant  subsequent to his retirement shall
be paid as provided in Section 5.2 hereof.

     Retirement  income  payments  will be made  under  the  option  elected  in
accordance  with the  provisions  of this  section  and will be  subject  to the
following limitations:

          (A)  If a  Participant's  service is terminated by reason of his death
               prior to his Annuity  Starting  Date,  no benefit will be payable
               under the option to any  person,  but a benefit may be payable on
               his behalf in accordance  with the  provisions of Section  2.4(B)
               hereof.

          (B)  If a terminated Participant dies after the date of termination of
               his service and prior to his Annuity  Starting  Date,  no benefit
               will be payable under the option to any person, but a benefit may
               be  payable  on  his  behalf  under  the  provisions  of  Section
               2.4(A)(3) hereof.

          (C)  In the case of a  Participant  who is  married  and who elects an
               option under which the  commencement of payment of his retirement
               income  is  deferred  beyond  his  regularly   scheduled  Annuity
               Starting  Date,  the  option  elected  by such  Participant  must
               provide that a monthly lifetime income equal to or greater than a
               qualified  preretirement  survivor annuity (within the meaning of
               Section  417(c) of the Internal  Revenue Code) will be payable to
               his  surviving  spouse  in the  event  of his  death  after  such
               regularly  scheduled  Annuity  Starting  Date  and  prior  to his
               elected  Annuity  Starting Date unless his spouse consents to the
               option not providing such an income.

          (D)  If the designated  Beneficiary or joint pensioner dies before the
               Participant's  Annuity  Starting Date, the option elected will be
               cancelled  automatically and the retirement income payable to the
               Participant  will be paid in the  applicable  form  described  in
               Section 2 hereof unless a new election is made in accordance with
               the  provisions  of this section or unless a new  Beneficiary  or
               joint  pensioner is  designated by the  Participant  prior to the
               date that his retirement income commences under the Plan.

          (E)  If the  Participant  and, if applicable,  his joint pensioner and
               his  designated  Beneficiary  all  die  after  the  Participant's
               Annuity  Starting  Date  but  before  the full  payment  has been
               effected  under any option  providing  for  payments for a period
               certain and if the commuted  value of the  remaining  payments is
               equal to or less than the maximum  amount that is  permissible as
               an  involuntary  cash-out  of  accrued  benefits  under  Sections
               411(a)(11)   and  417(e)  of  the   Internal   Revenue  Code  and
               regulations  issued with respect  thereto,  the commuted value of
               the  remaining  payments  shall,  subject  to the  provisions  of
               Section 3.2 hereof,  be paid in a lump sum in accordance with the
               provisions of Section 5.3 hereof.

<PAGE>
                                      3-7



          (F)  If the Participant dies after his Annuity Starting Date,  payment
               of his remaining interest,  if any, shall be distributed,  to the
               extent required by Section 401(a)(9) of the Internal Revenue Code
               and  regulations  issued  thereunder,  at  least  as  rapidly  as
               provided  under the  method  of  payment  in effect  prior to his
               death.

3.2 - LUMP-SUM PAYMENT OF SMALL RETIREMENT INCOME

     Notwithstanding  any  provision  of  the  Plan  to  the  contrary,  if  the
single-sum value of the retirement  income or other benefit payable on behalf of
any Participant hereunder whose retirement income or other benefit payments have
not commenced does not exceed $5,000,  the following  provisions  shall apply. A
distribution  under this  Section  3.2 will not be  permitted  after the Annuity
Starting  Date and will not be  permitted  in the case of a  Participant  who is
entitled to disability retirement income payments. For the purposes of the Plan,
a payment  shall not be  considered  to occur  after the Annuity  Starting  Date
merely  because  actual  payment is reasonably  delayed for  calculation  of the
benefit amount if all payments due are actually made. Once a  determination  has
been made by the  Committee  as to  whether  or not a  lump-sum  payment  may be
payable as of the date of  termination  of the  Participant's  service under the
provisions  of this  Section 3.2,  calculations  shall not be required as of any
subsequent  date to determine  whether or not a lump-sum amount is payable under
this Section 3.2;  provided,  however,  that the Committee  shall have the right
(but shall be under no  obligation)  to establish,  on a  nondiscriminatory  and
uniformly applied basis, subsequent dates as of which calculations shall be made
to determine whether or not (due to changes in the actuarial assumptions used to
compute  lump-sum  distributions  or due to a change in the maximum  permissible
involuntary cash-out amount) lump-sum amounts are payable under this Section 3.2
as of any such subsequent date on behalf of those Participants whose service had
been terminated prior to such date but whose retirement  income or other benefit
payments have not commenced.


<PAGE>
                                      3-8


     (A) Involuntary Cash-Out: If the single-sum value of the benefit payable to
the  Participant  does not  exceed  $1,000,  or if the  benefit  is payable to a
Beneficiary  and the  single-sum  value does not exceed  $5,000,  the  actuarial
equivalent of such benefit shall be paid in a lump sum.

     (B) Voluntary  Cash-Out:  If the single-sum value of the benefit payable to
the  Participant  is  greater  than  $1,000  but does  not  exceed  $5,000,  the
Participant may elect to receive the actuarial equivalent  (determined using the
interest  and  mortality  assumptions  that  are  being  used as of the  Annuity
Starting Date to determine  actuarially  equivalent  lump-sum  distributions) of
such benefit in a lump-sum  distribution.  Such  election must be in writing and
must be filed with the  Committee  within 90 days after the date as of which the
Committee  informs him in writing of the  actuarially  equivalent  value of such
benefits. Payment of the elected benefit must be made or commence within 90 days
after such election.

     (C) Lump-Sum Cash-Out of Zero Vested Accrued Benefits:  For the purposes of
the Plan, if the present value of the vested accrued  benefit that is payable on
behalf  of any  Participant  whose  service  is or has been  terminated  (either
before,  on or after the Effective  Date of the Plan) is zero,  the  Participant
shall be deemed to have received a distribution  of such vested accrued  benefit
as of the date of  termination  of his  service.

3.3 - BENEFITS  APPLICABLE TO PARTICIPANT  WHO HAS BEEN OR IS EMPLOYED BY TWO OR
MORE EMPLOYERS

     In the event that a Participant's  service is terminated for any reason and
such  Participant  has been or is  employed  by any two or more  Employers,  his
retirement or  termination  benefit,  if any,  shall be computed by applying the
benefit  formulas  as if all the  Employers  were a single  Employer;  provided,
however,  if the Plan does not  represent an IRC 414(l) Single Plan with respect
to all such Employers,  there shall be a proper allocation  (taking into account
the Credited  Service and  Compensation  applicable to each Employer or group of
Employers  with respect to which the Plan  represents an IRC 414(l) Single Plan)

<PAGE>
                                      3-9


of the costs of the  resulting  benefits  among the  Employers  (with respect to
which the Plan does not  represent  an IRC  414(l)  Single  Plan) by which  such
Participant has been or is employed.

3.4 - NO DUPLICATION OF BENEFITS

     Unless  the  context  clearly  provides   otherwise,   there  shall  be  no
duplication of benefits under the Plan or under any Supplement  hereto,  and the
benefits  payable under any section of the Plan to or on behalf of a Participant
shall be inclusive of the benefits, if any, concurrently payable to or on behalf
of the same  Participant  under  all  other  sections  of the Plan and under any
Supplement hereto.

3.5 - FUNDING  OF  BENEFITS  THROUGH  PURCHASE  OF LIFE  INSURANCE  CONTRACT  OR
CONTRACTS

     In lieu of paying  benefits  from the Trust  Fund to a  Participant  or his
Beneficiary,  upon direction of the Committee with specific prior  authorization
in writing  from the  Employer,  the  Trustee  shall  enter  into a contract  or
contracts,  or an agreement or  agreements,  with one or more legal reserve life
insurance  companies for the purchase,  with funds in the Trust, of a retirement
annuity or other form of life  insurance  contract  which,  as far as  possible,
provides benefits equal to (or actuarially  equivalent to) those provided in the
Plan for such  Participant  or  Beneficiary,  but  provides no optional  form of
retirement  income or benefit  which would not be  permitted  under  Section 3.1
hereof,  whereupon  such  contract  shall  thereafter  govern the payment of the
amount of benefit, if any, represented by such contract,  which is payable under
the Plan upon the  Participant's  retirement or termination of service,  and the
liability  of the Trust  Fund and of the Plan  will  cease  and  terminate  with
respect to such  benefits that are purchased and for which the premiums are duly
paid.

     Any policy or contract  issued under this  section  shall be subject to the
provisions  hereof  pertaining to the Qualified  Joint and 50% Survivor  Annuity
Option and to the Qualified Preretirement Survivor Annuity.

<PAGE>
                                      3-10



     Any policy or contract  issued under this section prior to the  termination
of the  Plan or  prior  to the  distribution  of the  policy  or  contract  to a
Participant or Beneficiary hereunder shall provide that the Trustee shall retain
all rights of  ownership  at all times  except the right,  unless such policy or
contract  provides  otherwise,  to  designate  the  Beneficiary  to receive  any
benefits  payable upon the death of the  Participant  and shall further  provide
that all dividends or experience rating credits shall be paid to the Trustee and
applied to reduce future Employer contributions to the Plan.

     Any  annuity  contract  distributed  by the  Trustee  to a  Participant  or
Beneficiary  hereunder shall contain a provision to the effect that the contract
may not be sold, assigned,  discounted or pledged as collateral for a loan or as
security for the  performance of an obligation or for any other purpose,  to any
person other than the issuer thereof.


<PAGE>

                                       4-1

                                    SECTION 4

                  GOVERNMENTAL REQUIREMENTS AFFECTING BENEFITS


4.1 - SPECIAL PROVISIONS REGARDING AMOUNT AND PAYMENT OF RETIREMENT INCOME

     The amount and payment of retirement  income determined under Sections 2.1,
2.2, 2.3 and 2.4 hereof  shall be subject to the  following  provisions  of this
Section 4.1.

     (A) Limitations Imposed by Section 415 of Internal Revenue Code:

     (1) Maximum  Amount of  Retirement  Income:  Any  provisions  herein to the
contrary  notwithstanding,  in no event shall the monthly retirement income that
is payable on or after the first day of the limitation year beginning in 1987 to
a  Participant  hereunder  exceed the maximum  amount of  retirement  income for
defined  benefit plans as specified in Section 415 of the Internal  Revenue Code
and regulations and rulings issued pursuant thereto; provided, however, that:

               (a)  the maximum  amount of  retirement  income  applicable  to a
                    Participant who was a participant in the Superseded Plan, if
                    any,  before the limitation year beginning in 1983 and whose
                    Credited  Service includes service that was accrued prior to
                    such  limitation  year,  shall not be less than his  current
                    accrued  benefit within the meaning of Section  235(g)(4) of
                    the Tax Equity and Fiscal Responsibility Act of 1982;

                    and

               (b)  such maximum  amount of  retirement  income  applicable to a
                    Participant who was a participant in the Superseded Plan, if
                    any,  before the limitation year beginning in 1987 and whose
                    Credited  Service includes service that was accrued prior to
                    such  limitation  year,  shall not be less than his  current
                    accrued benefit within the meaning of Section  1106(i)(3)(B)
                    of the Tax Reform Act of 1986.

<PAGE>
                                      4-2



In determining  the maximum monthly  retirement  income payable on behalf of any
Participant,  all  defined  benefit  plans  (whether or not  terminated)  of the
Controlled  Group  Members are to be treated as one defined  benefit  plan.  The
proportion  of the maximum  monthly  retirement  income  applicable  to all such
defined  benefit plans of the Controlled  Group Members shall be determined on a
pro rata basis  depending upon the actuarially  equivalent  amount of retirement
income otherwise accrued under each such defined benefit plan.

Under Section 415 of the Internal  Revenue Code,  the amount of a  Participant's
"annual  benefit" (as such term is defined in Section 415),  payable in the form
of a straight  life  annuity,  for any  limitation  year that is produced by the
amount of such  Participant's  monthly  retirement  income  shall not exceed the
lesser of:

               (c)  $160,000  (as adjusted for  cost-of-living  increases  under
                    Section 415(d) of the Internal Revenue Code), or

               (d)  100% of the  Participant's  average IRC 415 Compensation for
                    his highest three consecutive years of service or the actual
                    number of consecutive years if less than three.

     (2)  Actuarial  Assumptions  and  Related  Adjustments:   For  purposes  of
determining  the  actuarially  equivalent  maximum  amount of retirement  income
permitted  under  this  Section  4.1(A)  with  respect to any  Participant,  the
interest and mortality tables specified below shall control.

               (a)  For purposes of this Section 4.1(A)(2),  the "Plan Mortality
                    Table"  is the  mortality  table  determined  under  Section
                    1.1(B)(1)(a)  without  regard  to this  section.  The  "Plan
                    Interest  Rate" is the  rate of  interest  determined  under
                    Section  1.1(B)(1)(b)  without  regard to this section.  The
                    "Applicable   Mortality   Table"  is  the  mortality   table
                    specified by the  Secretary of Treasury  pursuant to Section
                    415(b)(2)(E)  of the Internal  Revenue  Code  (which,  as of
                    April 1,  2006,  is based  upon a fixed  blend of 50% of the
                    unloaded male mortality rates and 50% of the unloaded female
                    mortality  rates  underlying the mortality rates in the 1994
                    Group  Annuity  Reserving  Table,  projected  to 2002).  The

<PAGE>
                                      4-3


                    "Applicable Interest Rate" is the annual rate of interest on
                    30-year  Treasury  securities  as determined by the Internal
                    Revenue   Service  for  the  second  full   calendar   month
                    immediately  preceding the first day of the Plan Year during
                    which the Annuity Starting Date occurs.

               (b)  For the purposes of determining  whether any benefit payable
                    under the Plan in any form  which is not  subject to Section
                    417(e)(3) of the  Internal  Revenue Code exceeds the maximum
                    retirement  income under Section 4.1(A),  such benefit shall
                    be  converted to an  actuarially  equivalent  straight  life
                    annuity  beginning at the same age.  The  interest  rate and
                    mortality table used in such calculation shall be either (i)
                    the Plan Interest Rate and the Plan Mortality  Table or (ii)
                    5% and the Applicable Mortality Table,  whichever yields the
                    greater amount.

               (c)  For the purposes of determining  whether any benefit payable
                    under  the Plan in any  form  which is  subject  to  Section
                    417(e)(3) of the Internal Revenue Code, (which shall include
                    lump-sum  distributions and other forms of distribution that
                    provide payments in the form of a decreasing annuity or that
                    provide  payments  for a  period  less  than the life of the
                    recipient)  exceeds  the  maximum  retirement  income  under
                    Section  4.1(A),  such  benefit  shall  be  converted  to an
                    actuarially  equivalent  straight life annuity  beginning at
                    the same age. The interest rate and mortality  table used in
                    such calculation  shall be either (i) the Plan Interest Rate
                    and the Plan Mortality Table or (ii) the Applicable Interest
                    Rate and the Applicable  Mortality  Table,  whichever yields
                    the greater amount.

               (d)  If the benefit of a Participant begins after the Participant
                    attains  age  65,  the  defined  benefit  dollar  limitation
                    applicable to the  Participant at the later age shall be the
                    annual  benefit  payable  in the  form  of a  straight  life
                    annuity  beginning  at the  later  age  that is  actuarially
                    equivalent  to  the  defined   benefit   dollar   limitation
                    applicable to the  Participant at age 65 (adjusted under (f)
                    below, if required). The actuarial equivalent of the defined
                    benefit dollar limitation  applicable at an age after age 65
                    shall  be  determined  as the  lesser  of (i) the  actuarial
                    equivalent  (at  such  age) of the  defined  benefit  dollar
                    limitation  computed  using the Plan  Interest  Rate and the
                    Plan Mortality Table, and (ii) the actuarial  equivalent (at
                    such age) of the defined benefit dollar limitation  computed
                    using  a  5  percent   interest  rate   assumption  and  the
                    Applicable  Mortality Table.  For these purposes,  mortality
                    between age 65 and the age at which benefits  commence shall
                    be ignored.

<PAGE>
                                      4-4



               (e)  If the benefit of a Participant  begins prior to age 62, the
                    defined   benefit  dollar   limitation   applicable  to  the
                    Participant  at such earlier age shall be an annual  benefit
                    payable in the form of a straight life annuity  beginning at
                    the  earlier  age that is the  actuarial  equivalent  of the
                    defined   benefit  dollar   limitation   applicable  to  the
                    Participant  at  age  62  (adjusted   under  (f)  below,  if
                    required).  The defined benefit dollar limitation applicable
                    at an age prior to age 62 is determined as the lesser of (i)
                    the  actuarial  equivalent  (at  such  age)  of the  defined
                    benefit dollar  limitation  computed using the Plan Interest
                    Rate and the Plan  Mortality  Table,  and (ii) the actuarial
                    equivalent  (at  such  age) of the  defined  benefit  dollar
                    limitation  computed using a 5 percent interest rate and the
                    Applicable  Mortality  Table.  Any  decrease  in the defined
                    benefit dollar limitation determined in accordance with this
                    paragraph  (e) shall not  reflect a mortality  decrement  if
                    benefits   are  not   forfeited   upon  the   death  of  the
                    Participant.  If any benefits are forfeited upon death,  the
                    full mortality decrement shall be taken into account.

               (f)  If the Participant has less than ten years of  participation
                    in the Plan,  the maximum  dollar  limitation  under Section
                    415(b)(1)(A)   of  the  Internal   Revenue  Code   otherwise
                    applicable  to the  Participant  shall  be  multiplied  by a
                    fraction  the  numerator of which is the number of years (or
                    part  thereof)  of   participation  in  the  Plan,  and  the
                    denominator  of which is ten.  In the case of a  Participant
                    who has less than ten years of service  with the  Controlled
                    Group  Members,  the percentage of  compensation  limitation
                    under  Section  415(b)(1)(B)  of the  Internal  Revenue Code
                    shall be  multiplied by a fraction the numerator of which is
                    the number of the  Participant's  years (or part thereof) of
                    service  with  the  Controlled   Group   Members,   and  the
                    denominator of which is ten.

     (3)  Cost-of-Living  Adjustments:  In the event that the maximum  amount of
retirement  income  permitted under Section 415 of the Internal  Revenue Code is
increased after the date of commencement  of a Participant's  retirement  income
due to any cost-of-living  adjustment  announced by the Internal Revenue Service
pursuant to the provisions of Section  415(d) of the Internal  Revenue Code, the
amount of monthly  retirement  income  payable  under the Plan to a  Participant
whose  retirement  income is restricted due to the provisions of such section of
the Internal Revenue Code shall be increased, effective as of January 1st of the

<PAGE>
                                      4-5


calendar year for which such increase becomes effective or, if applicable, as of
such other date as the  Secretary of the Treasury or his delegate may  prescribe
as the date on which such  increase  shall  become  effective,  to  reflect  the
increase in the amount of  retirement  income that may be payable under the Plan
as a  result  of  such  cost-of-living  adjustment;  provided,  however,  if the
Employer  maintains a plan for the purpose of  restoring  benefits  that certain
Participants  may  not  receive  under  the  Plan  due  to  the  limitations  on
contributions  and benefits  imposed by Section 415 of the Internal Revenue Code
and/or due to the limitations  imposed on Compensation  under Section 401(a)(17)
of said Code and if the Participant or his Beneficiary  receives or has received
a benefit or benefits under such  restoration plan and a portion of such benefit
or benefits would be duplicated by the cost-of-living  adjustment provided under
this  paragraph,  then such  cost-of-living  adjustment  that would  represent a
duplication of benefits shall not apply to the Participant or Beneficiary unless
the value of the benefit payable from the restoration plan that would cause such
duplication  of  benefits  under this Plan is  returned  to the  Employer by the
Participant  or  Beneficiary  within  60  days  of the  effective  date  of such
cost-of-living  adjustment  or the date that such  cost-of-living  adjustment is
announced by the Internal Revenue Service, whichever date is later; and provided
further,  however,  that such 60-day period may be extended by the Committee if,
in its opinion, reasonable cause exists for such an extension.

     (4) IRC Section 415 Definitions:  Following are certain terms that are used
herein for the  purposes of the  limitations  under  Section 415 of the Internal
Revenue Code and that shall have the meanings assigned to them in Section 415 of
said Code and regulations and rulings issued with respect thereto:

               (a)  The term  "defined  benefit  plan"  shall  have the  meaning
                    assigned in Section 414(j) of the Internal Revenue Code.

               (b)  The term "IRC 415  Compensation"  shall  include  (i) wages,
                    salaries,  fees for professional services, and other amounts
                    received (without regard to whether or not an amount is paid
                    in cash) for  personal  services  actually  rendered  in the

<PAGE>
                                      4-6


                    course of  employment  with the  Employer to the extent that
                    the amounts are includable in gross income  (including,  but
                    not limited to, commissions paid salesmen,  compensation for
                    services   on  the  basis  of  a   percentage   of  profits,
                    commissions on insurance  premiums,  tips,  bonuses,  fringe
                    benefits,   reimbursements  and  expense  allowances),  (ii)
                    earned  income (as  described  in Section  401(c)(2)  of the
                    Internal Revenue Code and the regulations thereunder), (iii)
                    amounts described in Sections  104(a)(3),  105(a) and 105(h)
                    of the Internal  Revenue  Code,  but only to the extent that
                    these  amounts  are  includable  in the gross  income of the
                    Participant, (iv) amounts paid or reimbursed by the Employer
                    for moving expenses incurred by the Participant, but only to
                    the extent  that these  amounts  are not  deductible  by the
                    Participant  under Section 217 of the Internal Revenue Code,
                    (v) the value of a non-qualified stock option granted to the
                    Participant by the Employer, but only to the extent that the
                    value of the stock option is  includable in the gross income
                    of the  Participant  for the taxable year in which  granted,
                    (vi)  the  amount  includable  in the  gross  income  of the
                    Participant  upon making the  election  described in Section
                    83(b) of the  Internal  Revenue  Code and (vii) any  amounts
                    received  by  the   Participant   pursuant  to  an  unfunded
                    non-qualified  plan in the year such amounts are  includable
                    in  the  gross  income  of  the  Participant.   The  amounts
                    described in (i) and (ii) above shall include foreign earned
                    income as defined in Section 911(b) of the Internal  Revenue
                    Code,  whether or not  excludable  from gross  income  under
                    Section  911 of said Code.  The term "IRC 415  Compensation"
                    shall also include (i) any  elective  deferral as defined in
                    Section 402(g)(3) of the Internal Revenue Code, and (ii) any
                    amount which is  contributed  or deferred by the Employer at
                    the election of the Employee and which is not  includible in
                    the gross  income of the  Employee by reason of Section 125,
                    Section  132(f)(4),  or Section 457 of the Internal  Revenue
                    Code. Such  compensation  shall exclude (1) contributions by
                    the  Employer to a plan of deferred  compensation  which are
                    not  included  in the  Participant's  gross  income  for the
                    taxable year in which contributed  (except as provided above
                    in this subsection  (b)), (2)  contributions by the Employer
                    under a simplified  employee pension plan to the extent such
                    contributions  are  deductible by the  Participant,  (3) any
                    distribution  from  a plan  of  deferred  compensation,  (4)
                    amounts realized from the exercise of a non-qualified  stock
                    option,  (5)  amounts  realized  when  restricted  stock (or
                    property)  held by the  Participant  either  becomes  freely
                    transferable  or is no longer subject to a substantial  risk
                    of forfeiture,  (6) amounts realized from the sale, exchange

<PAGE>
                                      4-7


                    or other  disposition  of stock  acquired  under a qualified
                    stock option,  (7) other amounts which received  special tax
                    benefits and (8) contributions made by the Employer (whether
                    or not  under a  salary  reduction  agreement)  towards  the
                    purchase of an annuity  described  in Section  403(b) of the
                    Internal  Revenue  Code  (whether  or not  the  amounts  are
                    actually   excludable   from  the   gross   income   of  the
                    Participant).  Amounts under Section 125 include any amounts
                    not  available  to a  Participant  in cash in lieu of  group
                    health coverage because the Participant is unable to certify
                    that he has other  health  coverage;  provided  that such an
                    amount shall be treated as an amount under  Section 125 only
                    if the  Employer  does not  request or  collect  information
                    regarding such  Participant's  other health coverage as part
                    of the enrollment process for the health plan.

               (c)  The term  "limitation  year" is the 12-month period which is
                    used for application of the limitations under Section 415 of
                    the Internal  Revenue Code and, unless a different  12-month
                    period has been elected by the Employer in  accordance  with
                    rules or regulations  issued by the Internal Revenue Service
                    or the Department of Labor, shall be the calendar year.

     (B)  Minimum  Benefits on Normal or Early  Retirement:  Any  provisions  of
Section 2.1 or 2.2 hereof to the contrary  notwithstanding,  in the event of the
normal  retirement or early  retirement of a Participant in accordance  with the
provisions  of  Section  2.1  or  2.2  hereof,  his  monthly  retirement  income
determined in accordance with the provisions of Section 2.1(B) or 2.2(B) hereof,
whichever is applicable,  shall not be less than the monthly  retirement income,
if any, determined in accordance with the provisions of Section 2.1(B) or 2.2(B)
hereof that such  Participant  would have  received  as of any  earlier  date of
retirement if he had retired  under the  provisions of Section 2.1 or 2.2 at any
time prior to his actual date of retirement.

     (C)  Requirement  With  Respect to Form of  Payment:  The  Committee  shall
provide each Participant, during the period beginning 90 days before his Annuity
Starting  Date and ending 30 days before his Annuity  Starting  Date (or as soon
after the  expiration  of such  period as is  administratively  practicable),  a
written notification of his optional forms of payment. Such written notification
shall set forth an explanation of:

<PAGE>
                                      4-8



     (1)  if the Participant is married:

               (a)  the  terms and  conditions  of the  Qualified  Joint and 50%
                    Survivor Annuity form of payment;

               (b)  the  Participant's   right  to  elect,  and  the  effect  of
                    electing,  to waive the  Qualified  Joint  and 50%  Survivor
                    Annuity form of payment;

               (c)  the rights of the Participant's spouse; and

               (d)  the right to revoke, and the effect of revoking, an election
                    to waive the Qualified  Joint and 50% Survivor  Annuity form
                    of payment;

     (2)  the eligibility conditions and material features of the optional forms
          of payment available under the Plan;

     (3)  the financial effect of electing each optional form of payment;

     (4)  in the event the  notification  described  herein is  required  and is
          provided to the  Participant  after his  Annuity  Starting  Date,  the
          Participant's right to elect a retroactive Annuity Starting Date;

     (5)  the relative  values of the optional forms of payment  available under
          the Plan; and

     (6)  such  other   information   as  may  be  required   under   applicable
          regulations.

The written notification described above shall not be required if the single-sum
value of the Participant's retirement income is less than or equal to $5,000.

     In the event the written  notification  described  above is required and is
provided to the Participant after the  Participant's  Annuity Starting Date, the
Participant's  Annuity  Starting  Date  shall be deemed  to be his  "retroactive
Annuity Starting Date," and the provisions of Section 4.1(J) shall apply.

     Any  provisions  of  Section  2.1,  2.2,  2.3,  2.4(A) or 3.1 hereof to the
contrary notwithstanding, if a Participant does not elect, in writing filed with
the  Committee  during the  election  period  described  below,  to receive  the
retirement  income payable on his behalf on and after his Annuity  Starting Date
either  (i) under the form of  payment  that is  specified  in  Section  2.1(C),

<PAGE>
                                      4-9


2.2(C), 2.3(F) or 2.4(A)(2),  whichever is applicable, or (ii) under an optional
form of payment  described  in and  subject  to the  provisions  of Section  3.1
hereof,  such  Participant  shall be deemed to have elected,  and the retirement
income  payable on and after his Annuity  Starting Date shall  automatically  be
paid in accordance with the provisions of, either:

     (1)  if he does not have a spouse at his Annuity Starting Date, the form of
          payment  that is  specified  in  Section  2.1(C),  2.2(C),  2.3(F)  or
          2.4(A)(2), whichever is applicable; or

     (2)  if he has a spouse at his Annuity  Starting Date, the Qualified  Joint
          and 50% Survivor Annuity Option.

Any  Participant  may make an election  under this  section at any time (and any
number of times) prior to the  commencement  of his  retirement  income or other
benefit  payments  and during the period  beginning on the date which is 90 days
prior to his Annuity  Starting Date and ending on the latest to occur of (i) his
Annuity Starting Date, (ii) the date which is 90 days after the date on which he
was provided with the general written  explanation  described above or (iii) the
date which is 90 days after the date on which he was provided  with any specific
detailed  information  concerning the payment of his  retirement  income that is
required  to be  furnished  due to the request of the  Participant.  If any such
Participant  does  not  file  his  election  with  the  Committee  prior  to the
expiration of the election  period  described  above,  the  commencement  of his
retirement income will be delayed until the end of such election period,  but he
will be entitled  to a  retroactive  payment  with  respect to those  retirement
income  payments which were delayed.  If any  Participant  has elected a form of
payment other than the automatic form provided  above and his retirement  income
or other benefit payments have not commenced,  he may  subsequently  revoke such
election,  in  writing  filed with the  Committee  within  the  election  period
described above, in order to receive his retirement income payable in accordance
with the automatic form provided above.  Any provisions of Section 3.1 hereof to

<PAGE>
                                      4-10


the  contrary  notwithstanding,  if any  Participant  is not  provided  with the
written notification described in the first sentence of this section at least 30
days  before  his  Annuity   Starting  Date  but  is  provided  in  the  written
notification  a period of at least 30 days in which to make his  election  under
this  section,  he may waive such notice  period  (with any  applicable  spousal
consent) and file his election with the Committee,  and his retirement income or
other  benefit  may  commence  within  30 days  after  the  date on which he was
provided with such written  notification,  but more than 7 days after such date.
Any provisions  herein to the contrary  notwithstanding,  the written consent of
the Participant's spouse during the applicable election period shall be required
in order for the  Participant to receive his  retirement  income in a form other
than that provided under a Qualified Joint and Survivor Annuity.

     (D) Qualified  Preretirement  Survivor Annuity: If a deceased  Participant,
whose death occurs on or after his Initial Vesting Date and prior to his Annuity
Starting  Date, had been married to his spouse  throughout  the one-year  period
immediately  preceding  his death and he had  designated a person other than his
spouse as his  Beneficiary  and such  spouse has not validly  consented  to such
other person being  designated  as the  Beneficiary,  the  Participant  shall be
deemed to have:

     (1)  revoked his prior designation of Beneficiary;

     (2)  designated  such spouse as his Beneficiary to receive a portion of the
          death benefit payable on his behalf under Section 2.3(G), 2.4(A)(3) or
          2.4(B), whichever is applicable;

     (3)  specified  that the  portion of the  benefit  provided  under  Section
          2.3(G),  2.4(A)(3) or 2.4(B) that is payable to his  surviving  spouse
          will be payable as an actuarially equivalent monthly income payable on
          the first day of each month with the first  payment being due (only if
          said spouse is then  living) on the  Participant's  Normal  Retirement
          Date or the first day of the month  coincident  with or next following
          the date of the Participant's death,  whichever is later, and with the
          last payment being the payment due immediately preceding such spouse's
          death;

     (4)  specified  that the  portion of the  benefit  provided  under  Section
          2.3(G),  2.4(A)(3) or 2.4(B) that is payable to the  surviving  spouse
          shall have an actuarially  equivalent single-sum value,  determined as

<PAGE>
                                      4-11


          of the date of his death, equal to the single-sum value, determined as
          of the date of his death, of the monthly  retirement income that would
          be payable to his surviving  spouse,  commencing on the  Participant's
          Earliest Annuity  Commencement Date, under the Qualified Joint and 50%
          Survivor Annuity Option if:

          (a)  the Participant's  service had been terminated on the date of his
               death for a reason other than disability retirement or death (or,
               if the Participant is a vested terminated Participant entitled to
               a benefit under  Section  2.4(A)  hereof,  he had survived to the
               Earliest Annuity Commencement Date);

          (b)  the  Participant  had (for the purposes of determining the amount
               of such  monthly  retirement  income  commencing  at his Earliest
               Annuity  Commencement  Date)  waived the death  benefit  coverage
               under Section 2.4(A)(3) hereof, if applicable,  during the period
               beginning  on the date of his  death and  ending on his  Earliest
               Annuity Commencement Date; and

          (c)  the Participant had died immediately  after such  commencement of
               payments  (one-half of the initial  payment which would have been
               due the  Participant on his Earliest  Annuity  Commencement  Date
               shall be included in the determination of such single-sum value);
               and

     (5)  designated  such  other  person  (or  persons)  that was  named as his
          Beneficiary  under such  revoked  designation  as the  Beneficiary  to
          receive the  remaining  portion of such benefit  payable on his behalf
          under  and in  accordance  with  the  provisions  of  Section  2.3(G),
          2.4(A)(3) or 2.4(B) hereof.

In lieu of the payment of such benefit to the surviving  spouse of a Participant
in the  form  of  the  monthly  income  described  in  Section  4.1(D)(3)  above
commencing at the Participant's Normal Retirement Date, such benefit may be paid
on an actuarially  equivalent  basis to the  Participant's  spouse in such other
manner and form  permitted  under Section  2.4(B) hereof and  commencing on such
other date  permitted  under Section  2.4(B) hereof as the surviving  spouse may
elect in  writing  filed  with  the  Committee.  For the  purposes  of  Sections
4.1(D)(3) and  4.1(D)(4)  above,  the Earliest  Annuity  Commencement  Date of a
deceased  disabled  Participant on whose behalf a death benefit is payable under
Section 2.3(G) hereof and the monthly retirement income that would be payable to

<PAGE>
                                      4-12


his surviving  spouse,  commencing on his Earliest  Annuity  Commencement  Date,
under the Qualified Joint and 50% Survivor  Annuity Option,  shall be determined
as though such Participant had recovered from his total and permanent disability
and had reentered the service of the Employer immediately prior to his death.

     Except to the extent that it is otherwise  permissible under the provisions
of Section 417 (or any other applicable section) of the Internal Revenue Code or
regulations  or rulings  issued  pursuant  thereto for such a spouse to elect to
waive his right to the qualified  preretirement survivor annuity, the consent of
the  Participant's  spouse to another person being designated as the Beneficiary
of the  Participant  shall be valid for the purposes of this Section 4.1(D) only
if such consent  satisfies  the  requirements  of Section  4.1(E) hereof and the
Participant  was  given a written  explanation  of the  Qualified  Preretirement
Survivor Annuity  (containing the information  described in the paragraph below)
prior to  obtaining  such  consent;  provided,  further,  in the event  that the
Participant's  death occurs on or after the  beginning of the Plan Year in which
he  attained  the age of 35 years,  such  consent in order to be valid must have
been given on or after the  beginning of the Plan Year in which the  Participant
attained the age of 35 years or after his separation from service.

     The Committee  shall  provide each  Employee,  who is a Participant  in the
Plan, within the one-year period immediately  following (a) the beginning of the
Plan Year in which he will  attain  the age of 32 years or (b) the date on which
he becomes a Participant in the Plan,  whichever is later, or, if his service is
terminated  on or after his Initial  Vesting Date and prior to his attaining the
age of 32 years,  within the one-year period  immediately  following the date of
termination  of  his  service,  or as  soon  thereafter  as is  administratively
practicable,  with written  notification  of (i) the terms and  conditions  upon
which the  Qualified  Preretirement  Survivor  Annuity  described  above will be
payable to his surviving spouse,  (ii) the  Participant's  right to designate at

<PAGE>
                                      4-13


any time prior to his death a person  other  than his spouse as his  Beneficiary
and the effect that such a designation will have on the Qualified  Preretirement
Survivor Annuity, (iii) the rights of the Participant's spouse in the event that
the  spouse  does not  consent  to such  designation  and (iv) the  right of the
Participant  to  change  his  Beneficiary  designation  in  accordance  with the
provisions  of Section  5.2 hereof at any time prior to his death and the effect
that such a change will have upon the Qualified Preretirement Survivor Annuity.

     If the  Beneficiary  of a  Participant  is his spouse  but the  Participant
elects,  pursuant  to the  provisions  of Section  2.4(A)(3)  or 2.4(B)  hereof,
whichever  is  applicable,  an  actuarially  equivalent  form of  payment of the
benefit provided under such applicable section that does not provide for monthly
payments during the lifetime of his spouse in an amount at least as great as the
minimum qualified  preretirement  survivor annuity required under Section 417 of
the Internal Revenue Code, the Committee shall inform such Participant that such
election  will  constitute  an election  not to receive a benefit  which has the
effect of a qualified  preretirement survivor annuity provided under a qualified
joint and survivor  annuity as described in Section 417 of the Internal  Revenue
Code, and the consent of the Participant's spouse shall be required in order for
such an election to become effective.

     There shall be no duplication  between the benefits provided under Sections
2.3(G),  2.4(A)(3)  and 2.4(B) and under the  Qualified  Preretirement  Survivor
Annuity  described in this Section 4.1(D),  but the benefits under each shall be
inclusive of the benefits under the other.

     (E) Spousal Consent  Requirement and Waiver:  Any provisions  herein to the
contrary  notwithstanding,  if the consent of the spouse of the  Participant  is
required for any reason under the provisions hereof, such consent in order to be
effective must be in writing and witnessed by a Plan  representative or a notary
public. In the event that such consent is with respect to the election of a form
of payment other than a Qualified Joint and Survivor  Annuity or the designation
of a person other than the spouse as the Participant's Beneficiary, such consent

<PAGE>
                                      4-14


must  acknowledge  the  specific  form of payment  that has been  elected or the
person  who has been  designated  as  Beneficiary,  as the case may be, and must
acknowledge  the  effect  of such  consent.  Any of the  above  to the  contrary
notwithstanding,  such spousal consent for any reason  hereunder  shall,  unless
otherwise  required by the  Committee  or by  applicable  law, be waived for the
purposes of the Plan if:

          (1)  the spouse has previously  consented to such specified  action in
               accordance  with the provisions  above and such previous  consent
               (a) permits changes with respect to such specified action without
               any  requirement  of  further  consent  by  such  spouse  and (b)
               acknowledges the effect of such consent by the spouse;

               or

          (2)  it is established to the  satisfaction of the Committee that such
               consent may not be obtained  because there is no spouse,  because
               the   spouse   cannot  be   located  or  because  of  such  other
               circumstances  as the  Secretary  of the Treasury or his delegate
               may prescribe by  regulations  as reasons for waiving the spousal
               consent requirement.

Once spousal consent, which satisfies the requirements of this section, has been
given,  such consent may not be revoked by the spouse without the consent of the
Participant.

     (F) Latest Date of Commencement of Payments: Except to the extent otherwise
permissible  under rules or regulations  issued by the Internal Revenue Service,
distribution of the accrued benefit to which a Participant has a  nonforfeitable
interest must commence on a date not later than the earlier to occur of:

          (1)  his Required Beginning Date;

               or

          (2)  the later of:

               (a)  the date that is no later  than the 60th day after the close
                    of the Plan Year during which (i) his service is  terminated
                    for any reason, (ii) he attains the age of 65 years or (iii)
                    the  tenth  anniversary  of the date on  which he  initially
                    commenced  participation  in the  Plan or  Superseded  Plan,
                    whichever is latest, occurs; or

<PAGE>
                                      4-15



               (b)  the date that the Participant  elects in accordance with the
                    provisions of Section 3.1 hereof as the date of commencement
                    of his retirement income;

provided,  however,  if an  election  of a form of  payment  has been  made by a
Participant  prior to January 1, 1984 that provides for the  commencement of his
benefit at a date later than the date applicable under (1) or (2) above and such
election both (i) satisfies the  transitional  rule in Section  242(b)(2) of the
Tax Equity and Fiscal  Responsibility Act of 1982 (P.L. 97-248) and (ii) has not
been  subsequently  revoked  or  changed  (a change of  Beneficiaries  under the
designation  will not be considered to be a revocation or change of such form of
payment  so long as the change in  Beneficiaries  does not  alter,  directly  or
indirectly,  the period over which  distributions are to be made under such form
of payment),  distribution  of the  Participant's  accrued  benefit shall not be
required  to  commence  prior  to the  date of  commencement  specified  in such
election.

     (G) No Benefit  Reduction Due to Post Termination  Social Security Changes:
Benefits  under the Plan shall not be decreased by reason of any increase in the
benefit levels payable under Title II of the Social Security Act or by reason of
any increase in the wage base under such Title II, if such increase  takes place
after  September 2, 1974 or (if later) the earlier of the date of first  receipt
of such benefits or the date of the  Participant's  separation from service,  as
the case may be.

     (H) Minimum Preserved Benefit Due to Certain Amendments:  In the event that
the Plan or Superseded Plan has been or is amended  effective as of a date on or
after July 30, 1984 to eliminate or reduce a retirement-type subsidy or an early
retirement  benefit or to change the  actuarial  assumptions  used to  determine
actuarially  equivalent  benefits  payable  thereunder,  the monthly  retirement
income or other  benefit,  if any,  payable under the provisions of Section 2.1,
2.2, 2.3 or 2.4 (and Section 3.1 if an optional  form of payment is  applicable)
to a Participant, who was a participant in the Plan or Superseded Plan as of the

<PAGE>
                                      4-16


day  immediately  preceding the date that the  elimination,  reduction or change
becomes effective or the date of adoption of such amendment, whichever is later,
(herein referred to as the "Preservation Date") and who retires or whose service
is  terminated  after  the  Preservation  Date,  shall be at least  equal to the
corresponding  amount of the monthly retirement income or other benefit, if any,
payable to him under the provisions of such applicable  section of the Plan (or,
if  applicable,  the section of the  Superseded  Plan that  corresponds  to such
applicable  section of the Plan) as in effect on the Preservation  Date computed
using his Credited  Service,  Final  Average  Monthly  Compensation  and Monthly
Covered Compensation (or, if applicable, the corresponding terms used to compute
his accrued benefit under the Superseded Plan) determined as of the Preservation
Date under the provisions of the Plan (or, if applicable,  the Superseded  Plan)
as in effect on such date and using,  if  applicable,  the  mortality  table and
interest rate  assumptions that applied under the provisions of the Plan (or, if
applicable,  the  Superseded  Plan) as in  effect  on the  Preservation  Date to
compute actuarially  equivalent benefits payable to a Participant who retired or
whose service was terminated on the Preservation Date; provided,  however,  such
preservation  shall not be required  if,  under  regulations  or other  official
pronouncements of the Internal Revenue Service, such reduction or elimination or
such change in assumptions  (without the  preservation  described  above in this
subsection)  may be made  without  violating  the  anticutback  rules of Section
411(d)(6) of the Internal Revenue Code.

     (I)  Direct   Rollover   Options  for  Eligible   Rollover   Distributions:
Notwithstanding  any provision of the Plan to the contrary that would  otherwise
limit a distributee's  election under this section,  a distributee may elect, at
the time and in the manner  prescribed  by the plan  administrator,  to have any
portion of an  eligible  rollover  distribution  paid  directly  to an  eligible
retirement plan specified by the distributee in a direct rollover. The following
definitions apply to this section:

<PAGE>
                                      4-17



     (1)  Eligible rollover  distribution:  An eligible rollover distribution is
          any distribution of all or any portion of the balance to the credit of
          the distributee,  except that an eligible  rollover  distribution does
          not include:

          (a)  any distribution  that is one of a series of substantially  equal
               periodic  payments (not less  frequently  than annually) made for
               the life (or life  expectancy)  of the  distributee  or the joint
               lives (or joint life  expectancies)  of the  distributee  and the
               distributee's  designated beneficiary,  or for a specified period
               of 10 years or more; and

          (b)  any  distribution  to the extent  such  distribution  is required
               under Section 401(a)(9) of the Internal Revenue Code.

     (2)  Eligible retirement plan: An eligible retirement plan is an individual
          retirement account described in Section 408(a) of the Internal Revenue
          Code, an individual  retirement annuity described in Section 408(b) of
          said Code,  an annuity plan  described in Section  403(a) or 403(b) of
          said Code, an eligible  governmental  plan described in Section 457(b)
          of said Code, or a qualified trust described in Section 401(a) of said
          Code, that accepts the distributee's  eligible rollover  distribution.
          However,  in  the  case  of an  eligible  rollover  distribution  that
          includes after-tax employee contributions, an eligible retirement plan
          is an individual  retirement  account or annuity  described in Section
          408(a) or (b) of the Internal  Revenue  Code,  or a qualified  defined
          contribution  plan  described in Section 401(a) or 403(a) of said Code
          that  agrees  to  account   separately  for  amounts  so  transferred,
          including  separately  accounting for the portion of such distribution
          which  is   includible  in  gross  income  and  the  portion  of  such
          distribution  which is not so  includible.  The definition of eligible
          retirement  plan shall also apply in the case of a  distribution  to a
          surviving spouse, or to a spouse or former spouse who is the alternate
          payee under a qualified domestic relation order, as defined in Section
          414(p) of said Code.

     (3)  Distributee: A distributee includes an employee or former employee. In
          addition, the employee's or former employee's surviving spouse and the
          employee's  or former  employee's  spouse or former  spouse who is the
          alternate payee under a qualified domestic relations order, as defined
          in Section 414(p) of the Internal Revenue Code, are distributees  with
          regard to the interest of the spouse or former spouse.

     (4)  Direct  rollover:  A direct  rollover  is a payment by the Plan to the
          eligible retirement plan specified by the distributee.

<PAGE>
                                      4-18



Any options set forth in this section shall automatically become inoperative and
of no effect upon a ruling by the Treasury Department that the options set forth
herein are no longer required.

     (J)   Provisions    Concerning    Retroactive   Annuity   Starting   Dates:
Notwithstanding  any  provision  hereof to the  contrary,  in the event that the
written notification  described in Section 4.1(C) is required and is provided to
the Participant after the Participant's Annuity Starting Date, the Participant's
Annuity  Starting Date shall be deemed to be his  "retroactive  Annuity Starting
Date" and payment of the Participant's retirement income under Section 2.1, 2.2,
2.3,  2.4(A) or 3.1 hereof shall be made or commence in accordance  with Section
417(a) of the Internal Revenue Code, and regulations and rulings issued pursuant
thereto, and the following provisions of this Section 4.1(J).

        (1)  Notification  requirement:  In the event of a  retroactive  Annuity
Starting Date, the written  notification to the Participant  required by Section
4.1(C) shall set forth the  information  described in Section  4.1(C) both as of
his retroactive Annuity Starting Date and as of a date which is not more than 90
days  after the date on which  such  written  notification  is  provided  to the
Participant.

        (2) Election of  retroactive  Annuity  Starting  Date: In the event of a
retroactive Annuity Starting Date, the Participant's  retirement income shall be
determined  and  payable  as of a date  which is not more than 90 days after the
date on which the written notification required by Section 4.1(C) is provided to
the Participant,  unless the Participant  elects to have such retirement  income
determined  and  payable  as of such  retroactive  Annuity  Starting  Date.  The
Participant  may make such  election  on the  appropriate  form  provided by the
Committee and filed with the Committee  within the election period  described in
Section 4.1(C).

<PAGE>
                                      4-19



        (3) Spousal  consent  requirement:  In the event that (a) a  Participant
elects to receive his retirement  income under Section 2.1, 2.2, 2.3, 2.4(A), or
3.1 hereof  determined as of a retroactive  Annuity Starting Date, and (b) under
the form of payment  elected by such  Participant,  the  benefit  payable to the
Participant's spouse upon the Participant's death would be less than the benefit
payable  to  such  surviving  spouse  after  the  Participant's   death  if  the
Participant  had elected to receive a Qualified  Joint and 50% Survivor  Annuity
determined  and payable as of the date on which his retirement  income  payments
actually commence,  then the Participant's spouse must consent in writing to the
Participant's  election of such retroactive  Annuity Starting Date. Such spousal
consent  requirement shall be satisfied if the Participant's  spouse consents in
the manner provided in Section 4.1(C) to the  Participant's  election to receive
his retirement income in a form other than that provided under a Qualified Joint
and Survivor Annuity.

        (4) Make-up  payments  with  interest:  In the event that a  Participant
elects (with spousal  consent,  if applicable) to receive his retirement  income
under  Section  2.1,  2.2,  2.3,  2.4(A),  or  3.1  hereof  determined  as  of a
retroactive  Annuity  Starting  Date,  the  Participant  shall receive a make-up
payment  to reflect  any missed  payment  or  payments  for the period  from the
retroactive  Annuity  Starting Date to the date of the actual  make-up  payment,
with an appropriate  adjustment for interest from the date the missed payment or
payments  would  have been made  (including,  if  applicable,  a payment  of the
single-sum  value of the  Participant's  retirement  income)  to the date of the
actual make-up payment.

        (5) Future  payment  amount:  If the  Participant  elects (with  spousal
consent,  if  applicable) to receive his  retirement  income  determined as of a
retroactive  Annuity  Starting Date and the Participant  receives his retirement
income in a form other than a single-sum payment, the retirement income payments
that commence after he has received the notification required by Section 4.1(C),
other than any required make-up payment,  shall be in an amount that is equal to

<PAGE>
                                      4-20


the amount that would have been paid to the  Participant  had payments  actually
commenced on his retroactive Annuity Starting Date.

        (6)  Section  415  compliance:  Except in the case where  payment of the
Participant's retirement income (other than a form of payment that is subject to
Section 417(e) of the Internal Revenue Code,  including  lump-sum  distributions
and  other  forms  of  distribution  that  provide  payments  in the  form  of a
decreasing  annuity  or for a  period  less  than  the  life  of the  recipient)
commences no more than 12 months after the  retroactive  Annuity  Starting Date,
payment  of  the  Participant's   retirement  income,   including  any  interest
adjustments,  shall  satisfy the  requirements  of Section  415 of the  Internal
Revenue  Code if the  date  retirement  income  payments  actually  commence  is
substituted  for  the  retroactive  Annuity  Starting  Date  for  all  purposes,
including  for purposes of  determining  the  applicable  interest  rate and the
applicable mortality table described in Section 4.1(A)(2) hereof.

        (7) Section 417(e) compliance:  If the retirement income received by the
Participant  is in a form of payment  that  would  have been  subject to Section
417(e)  of  the  Internal  Revenue  Code  if  payment  had  commenced  as of the
retroactive  Annuity  Starting Date, then the amount of payment as of the actual
commencement  date  shall be no less than the  amount  of  payment  produced  by
applying  the  applicable  interest  rate  and the  applicable  mortality  table
(described  in Section  4.1(A)(2)  hereof),  determined  as of the date  payment
actually commences, to the annuity form that was used to determine the amount of
retirement income as of the Participant's retroactive Annuity Starting Date.

4.2 - LIMITATIONS ON BENEFITS REQUIRED BY THE INTERNAL REVENUE SERVICE

     (A) Limitation in the Event of Plan Termination: In the event that the Plan
is  terminated,  the  benefit  of any  Participant  who is a Highly  Compensated
Employee shall be limited to a benefit that is  nondiscriminatory  under Section
401(a)(4)  of the  Internal  Revenue  Code and  regulations  issued with respect
thereto.

<PAGE>
                                      4-21



     (B) Limitation on Annual Payments:

        (1) The  provisions of this Section  4.2(B) shall apply during each Plan
Year to those  Participants who during such Plan Year (a) are Highly Compensated
Employees and (b) are among the 25 nonexcludable  employees and former employees
of the Controlled  Group Members with the largest amount of  compensation in the
current  or any prior  year and  whose  annual  payments  under the Plan must be
restricted  due to the provisions of Section  401(a)(4) of the Internal  Revenue
Code and regulations issued with respect thereto.

        (2) To the extent required by Section  401(a)(4) of the Internal Revenue
Code and  regulations  issued with respect  thereto,  the annual benefit payable
under the Plan to any such  Participant  to whom the  provisions of this Section
4.2(B) are  applicable  shall not exceed an amount  equal to the  payments  that
would be made on his behalf under a single life  annuity  that is the  actuarial
equivalent of the sum of his accrued  benefit and his other  benefits  under the
Plan; provided, however, that such restriction shall not apply if:

          (a)  after  payment  of  the  "benefits"  (as  defined  below)  to the
               Participants  to whom the  provisions of this Section  4.2(B) are
               applicable,  the remaining value of Plan assets equals or exceeds
               110% of the value of current  liabilities  within the  meaning of
               Section  412(l)(7) of the Internal  Revenue Code and  regulations
               issued with respect thereto;

          (b)  the  value  of  the   "benefits"  (as  defined  below)  for  such
               Participant  is less than 1% of the value of current  liabilities
               within the meaning of Section  412(l)(7) of the Internal  Revenue
               Code and regulations issued with respect thereto;

          (c)  the  value  of the  Participant's  benefit  does not  exceed  the
               maximum amount that is permissible as an involuntary  cash-out of
               accrued  benefits  under  Sections  411(a)(11)  and 417(e) of the
               Internal  Revenue  Code  and  regulations   issued  with  respect
               thereto;

          (d)  an  agreement,   which  is  expressly   permitted  under  Section
               401(a)(4) of the Internal  Revenue Code or regulations or rulings
               issued with  respect  thereto,  is entered into with the Trustee,

<PAGE>
                                      4-22


               adequately  secured in conformity  with the  requirements of said
               Code  section,  regulations  or rulings,  which  provides for the
               repayment,  if applicable  and to the extent  required under said
               Code section,  regulations  or rulings,  to the Trust Fund of any
               part of the distribution which is restricted under the provisions
               of said Code section, regulations or rulings;

               or

          (e)  in the event of the termination of the Plan, there are sufficient
               assets  to  satisfy  all  benefit  liabilities  of  the  Plan  to
               Participants and their Beneficiaries.

        (3) For the purposes of this Section  4.2(B),  the term "benefit"  shall
have the meaning assigned in Treasury  Regulation Section  1.401(a)(4)-5(b)  and
shall include loans in excess of the amounts set forth in Section 72(p)(2)(A) of
the Internal Revenue Code, any periodic income, any withdrawal values payable to
a living  employee,  and any death benefits not provided for by insurance on the
employee's life.

4.3 - BENEFITS NONFORFEITABLE IF PLAN IS TERMINATED

     In the event of the  termination  or partial  termination  of the Plan, the
rights of each affected Participant in the Plan to benefits accrued to such date
of termination,  to the extent then funded, shall be nonforfeitable,  where such
benefits shall be determined and  distributed as provided in Section 4.5 hereof;
provided,  however,  if the participation in the Plan is terminated with respect
to one or more but not all  Employers  that are members of a group of  Employers
with respect to which the Plan  represents an IRC 414(l)  Single Plan,  the Plan
shall not be considered to have been terminated for the purposes of this Section
4.3  (although  a partial  termination  of the Plan may  result  because of such
termination of participation).  Unless specifically required otherwise by law or
by rules or  regulations of the Internal  Revenue  Service,  the  nonforfeitable
rights  granted to  Participants  under the provisions of this section shall not
apply with  respect to (i) any benefits  (or  portions  thereof)  that have been
cashed out, whether  voluntarily or  involuntarily,  under the provisions hereof
and that have not been  reinstated  (by  repayment  or by the  reinstatement  of

<PAGE>
                                      4-23


Credited  Service accrued prior to the date of such cash-out) in accordance with
the  provisions  hereof  prior  to  the  date  of  the  termination  or  partial
termination  of the Plan or (ii) any  nonvested  benefits that are deemed cashed
out and  forfeited  at the date of  termination  of service of a  terminated  or
retired   Participant  whose  service  was  terminated  prior  to  the  date  of
termination or partial termination of the Plan.

4.4 - MERGER OF PLAN

     In the  case of the  merger  or  consolidation  of the  Plan  with,  or the
transfer of assets or liabilities to, another  qualified  retirement  plan, each
Participant  must be entitled  to receive a benefit,  upon  termination  of such
other retirement plan after such merger,  consolidation or transfer, which is at
least  equal to the  benefit  which he  would  have  been  entitled  to  receive
immediately  before the merger,  consolidation  or transfer if the Plan had been
terminated at that time.

4.5 - TERMINATION OF PLAN AND DISTRIBUTION OF TRUST FUND

     Upon termination of the Plan in accordance with the provisions  hereof, the
share of the assets of the Trust Fund available for distribution to the affected
Participants and Beneficiaries  shall be allocated and distributed in accordance
with the following procedure.

     (A) The Committee shall determine the date of distribution and the share in
the value of the assets of the Trust Fund that is  attributable to each Employer
or group of Employers  with respect to which the Plan  represents  an IRC 414(l)
Single Plan.

     (B) The distribution of the asset value will,  subject to the provisions of
Section  417(e)(1) of the Internal  Revenue Code, be provided by the purchase of
insured annuities from a company or companies selected by the Committee for each
class of Participants  and other persons entitled to benefits under the Plan, as
specified in (C) below.  Any annuities  purchased  pursuant to the provisions of
this  Section 4.5 will be subject to the  provisions  hereof  pertaining  to the

<PAGE>
                                      4-24


Qualified   Joint  and  50%  Survivor   Annuity  Option  and  to  the  Qualified
Preretirement Survivor Annuity.

     (C)  The  Committee   shall   determine  the  asset  value   available  for
distribution  on behalf of each  Employer or group of Employers  with respect to
which the Plan  represents  an IRC 414(l)  Single Plan after taking into account
the  expenses of such  distribution.  After having  determined  such asset value
available for  distribution to each such Employer or group of Employers,  as the
case may be, and subject to the applicable  provisions of any Supplement  hereto
pertaining to the  distribution  of assets upon the termination of the Plan, the
Committee shall allocate such asset value (allocated to the particular  Employer
or group of Employers) as of the date of  termination  of the Plan in the manner
set  forth  below to  determine  the  amount,  if any,  to which  each  affected
Participant or Beneficiary is entitled.  Such allocation shall be made using the
methods  and  actuarial  assumptions  that  are  being  used  as of the  date of
termination  of  the  Plan  by  the  Pension  Benefit  Guaranty  Corporation  in
determining  the  value of plan  benefits  under  terminating  non-multiemployer
pension plans covered by Title IV of the Employee Retirement Income Security Act
of 1974,  as  amended,  or, at the  option of the  Committee,  using  such other
methods and actuarial assumptions that are mutually acceptable to the Committee,
the Pension Benefit Guaranty  Corporation and the Internal  Revenue Service.  In
cases where an annuity is purchased to provide any given retirement  income, the
single premium  payable for such annuity shall be deemed for the purposes of the
allocations  described  below to be the  single-sum  or present value of, or the
amount  otherwise   required  to  provide,   the  amount  of  retirement  income
represented by such annuity.

          (1)  Allocation  shall  first be made  with  respect  to each  active,
               retired or terminated  Participant  and to each  Beneficiary of a
               deceased  Participant  in an amount equal to the present value of
               the portion,  if any, of such individual's  accrued benefit which
               is derived from the Participant's  employee  contributions to the
               Plan which were not mandatory employee  contributions;  provided,
               however,  that if the asset value is less than the  aggregate  of
               such  amounts,  such amounts shall be reduced pro rata among such
               individuals so that the aggregate of such reduced amounts will be

<PAGE>
                                      4-25


               equal to the asset value; and provided further, however, that the
               benefits on which the allocations specified below are based shall
               exclude any portion  thereof  attributable  to the  Participant's
               contributions to the Plan which were not mandatory.

          (2)  If there is any asset value remaining after the allocation  under
               (1) above,  allocation  shall  next be made with  respect to each
               active, retired or terminated Participant and to each Beneficiary
               of a deceased Participant in an amount equal to the present value
               of the  portion,  if any, of such  individual's  accrued  benefit
               which  is  derived  from  the  Participant's  mandatory  employee
               contributions  to the  Plan;  provided,  however,  that  if  such
               remaining  asset value is less than the  aggregate of the amounts
               thus  allocated  hereunder,  such latter amounts shall be reduced
               pro rata among such  individuals  so that the  aggregate  of such
               reduced amounts will be equal to the remaining asset value.

          (3)  If there is any asset value remaining after the allocations under
               (1) and (2) above,  allocations  shall next be made with  respect
               to:

               (a)  each  retired or  terminated  Participant  whose  retirement
                    income payments  commenced at least three years prior to the
                    date of  termination  of the Plan in an amount  equal to the
                    excess, if any, of (i) the amount required to provide (after
                    the date of termination of the Plan) the smallest  amount of
                    income payable to such  Participant  during such  three-year
                    period immediately  preceding the date of termination of the
                    Plan,  based  upon the  provisions  of the Plan as in effect
                    during the five-year period  immediately  preceding the date
                    of  termination  of the Plan that would  result in the least
                    amount of income being payable to such Participant over (ii)
                    the amount of his allocation, if any, under (2) above;

               (b)  each person  receiving a  retirement  income on such date of
                    termination on account of a deceased  Participant or retired
                    or  terminated  (but  since  deceased)   Participant   whose
                    retirement income payments commenced,  either to such person
                    or to  such  retired  or  terminated  (but  since  deceased)
                    Participant,  at  least  three  years  prior  to the date of
                    termination of the Plan in an amount equal to the excess, if
                    any, of (i) the amount  required to provide  (after the date
                    of  termination  of the Plan) the smallest  amount of income
                    payable  to  such  person  during  such  three-year   period
                    immediately  preceding the date of  termination of the Plan,
                    based upon the  provisions  of the Plan as in effect  during
                    the  five-year  period  immediately  preceding  the  date of
                    termination  of the Plan  that  would  result  in the  least

<PAGE>
                                      4-26


                    amount of income being  payable to such person over (ii) the
                    amount of his allocation, if any, under (2) above; and

               (c)  each other active, retired or terminated Participant who, at
                    least three years  prior to the date of  termination  of the
                    Plan either had become  eligible for normal  retirement  but
                    had not yet retired or had satisfied the  applicable age and
                    service  requirements to be eligible for an early retirement
                    benefit, or the Beneficiary of any such eligible Participant
                    whose  service was  terminated by reason of his death during
                    such three-year period, in an amount equal to the excess, if
                    any, of (i) the amount  required to provide  (after the date
                    of  termination of the Plan) the monthly  retirement  income
                    that would have been  payable on behalf of such  Participant
                    if  he  had  retired  three  years  prior  to  the  date  of
                    termination  of the Plan,  based upon the  provisions of the
                    Plan as in effect  during the five-year  period  immediately
                    preceding  the date of  termination  of the Plan which would
                    result in the least amount of income  being  payable to such
                    Participant  or  Beneficiary  over  (ii) the  amount  of his
                    allocation, if any, under (2) above;

          provided, however, that if such remaining asset value is less than the
          aggregate of the amounts thus allocated hereunder, such latter amounts
          shall be reduced pro rata among such individuals so that the aggregate
          of such reduced amounts will be equal to the remaining asset value.

     (4)  If there is any asset value remaining after the allocations under (1),
          (2) and (3) above,  allocation shall next be made with respect to each
          active,  retired or  terminated  Participant  and to each  Beneficiary
          under the Plan in an amount  equal to the  excess,  if any, of (a) the
          amount required to provide that portion of the single-sum value of the
          Accrued  Deferred  Monthly  Retirement  Income  Commencing  at  Normal
          Retirement  Date that he had accrued as of the date of  termination of
          the Plan or, if  applicable,  that he was  receiving as of the date of
          termination  of the Plan,  which is not in  excess of the  actuarially
          equivalent  single-sum  value of the benefit  guaranteed on his behalf
          under the termination  insurance provisions of the Employee Retirement
          Income  Security  Act of 1974  determined  without  regard to Sections
          4022(b)(5)  and  4022(b)(6) of said Act, over (b) the aggregate of the
          allocations,  if any,  made on his  behalf  under  (2) and (3)  above;
          provided, however, that if such remaining asset value is less than the
          aggregate of the amounts thus allocated hereunder, such latter amounts
          shall be reduced pro rata among such individuals so that the aggregate
          of such reduced amounts will be equal to the remaining asset value.

<PAGE>
                                      4-27



     (5)  If there is any asset value remaining after the allocations under (1),
          (2), (3) and (4) above,  allocation shall next be made with respect to
          each retired or terminated  Participant  receiving a retirement income
          hereunder on such date, each person  receiving a retirement  income on
          such  date on  account  of a  deceased  Participant  or a  retired  or
          terminated (but since deceased)  Participant and each  Participant who
          has, by such date,  become eligible for normal  retirement but has not
          yet  retired,  in an amount  equal to the  excess,  if any, of (a) the
          amount required to provide the retirement income that such Participant
          or other person is receiving or is entitled to receive  under the Plan
          over (b) the  aggregate  of the  allocations  made on  behalf  of such
          Participant  or other person  under (2), (3) and (4) above;  provided,
          however, that if such remaining asset value is less than the aggregate
          of the amounts thus allocated hereunder,  such latter amounts shall be
          reduced pro rata among such  individuals so that the aggregate of such
          reduced amounts will be equal to the remaining asset value.

     (6)  If there is any asset value remaining after the allocations under (1),
          (2),  (3),  (4) and (5)  above,  allocation  shall  next be made  with
          respect to:

          (a)  each  Participant  in the service of the  Employer on the date of
               termination of the Plan whose Initial Vesting Date is on or prior
               to such date and who is not entitled to an  allocation  under (5)
               above,  in an  amount  equal to the  excess,  if any,  of (i) the
               amount required to provide the actuarially  equivalent single-sum
               value of the  vested  retirement  income  that he would have been
               entitled to receive  under the  provisions  of Section  2.4(A)(1)
               hereof  if  his  service  had  been  terminated  on the  date  of
               termination   of  the  Plan  over  (ii)  the   aggregate  of  the
               allocations made on behalf of such Participant under (2), (3) and
               (4) above;

          (b)  each  disabled  Participant  then entitled to a benefit under the
               provisions  of Section  2.3  hereof,  who has not,  by such date,
               reached his Disability Retirement Income Commencement Date, in an
               amount equal to the excess, if any, of (i) the amount required to
               provide the actuarially equivalent single-sum value of the vested
               retirement  income  that he would have been  entitled  to receive
               under the  provisions  of Section 2.1,  2.2 or 2.4(A)(1)  hereof,
               whichever would be applicable, if he had recovered from his total
               and permanent  disability,  reentered the service of the Employer
               on the date of  termination  of the Plan and his service had been
               terminated  immediately after his reentry over (ii) the aggregate
               of the allocations made on behalf of such Participant  under (2),
               (3) and (4) above; and

<PAGE>
                                      4-28



          (c)  each terminated  Participant then entitled to a benefit under the
               provisions of Section  2.4(A)(1)  hereof,  whose  monthly  income
               payments  have not  commenced by such date, in an amount equal to
               the  excess,  if any,  of (i) the amount  required to provide the
               actuarially  equivalent  single-sum  value of the vested deferred
               retirement income to which he is entitled under Section 2.4(A)(1)
               hereof over (ii) the aggregate of the allocations  made on behalf
               of such Participant under (2), (3) and (4) above;

          provided, however, that if such remaining asset value is less than the
          aggregate of the amounts thus allocated hereunder, such latter amounts
          shall be reduced pro rata among such individuals so that the aggregate
          of such reduced amounts will be equal to the remaining asset value.

     (7)  If there is any asset value remaining after the allocations under (1),
          (2), (3), (4), (5) and (6) above, allocation shall lastly be made with
          respect to each Participant in the service of the Employer on the date
          of termination of the Plan who is not entitled to an allocation  under
          (5) above, in an amount equal to the excess, if any, of (a) the amount
          required to provide the actuarially equivalent single-sum value of the
          Accrued  Deferred  Monthly  Retirement  Income  Commencing  at  Normal
          Retirement  Date that he had accrued as of the date of  termination of
          the  Plan  (assuming  his  Vested  Percentage  is  100%)  over (b) the
          aggregate of the allocations made on behalf of such Participant  under
          (2), (3), (4) and (6) above; provided, however, that if such remaining
          asset value is less than the  aggregate of the amounts thus  allocated
          hereunder,  such latter  amounts  shall be reduced pro rata among such
          individuals  so that the  aggregate  of such  reduced  amounts will be
          equal to such remaining asset value.

     (8)  In the  event  that  there is asset  value  remaining  after  the full
          allocations  specified in (1),  (2), (3), (4), (5), (6) and (7) above,
          such residual  assets shall be  distributed  to the  Employer,  except
          that,  in the case of a group of  Employers  with respect to which the
          Plan  represents an IRC 414(l) Single Plan, such residual assets shall
          remain in the  Trust  Fund if the Plan is not  being  terminated  with
          respect to all of such Employers.

     (D) The order of  priorities  for,  and the  amounts  and  methods  of, the
distributions  set forth in (C) above and the rights of  Participants  and their
Beneficiaries   to  benefits  under  the  Plan  shall  be  subject  (i)  to  the
distribution  rules set forth in the Plan, (ii) to the  limitations  provided by
Section 4.2 of the Plan,  (iii) to any changes,  including  the recapture of any

<PAGE>
                                      4-29


prior  distributions to  Participants,  as may be ordered by the Pension Benefit
Guaranty  Corporation and (iv) to any changes  required by the Internal  Revenue
Service as a condition for issuing a favorable determination letter stating that
the  distribution  of assets will not adversely  affect the continued  qualified
status of the Plan under Section 401(a) of the Internal Revenue Code.

     (E) As soon as  practicable  after both (a) the date that the assets may be
distributed  under the rules and  regulations  of the Pension  Benefit  Guaranty
Corporation and (b) the date that a favorable  determination  letter is received
from the  Internal  Revenue  Service  stating  that in its opinion the method of
distribution  will not adversely  affect the continued  qualified  status of the
Plan under  Section  401(a) of the Internal  Revenue Code,  the Committee  shall
direct  the  Trustee  to  distribute  the  assets  to the  affected  parties  in
accordance with such method.

4.6 - SPECIAL PROVISIONS THAT APPLY IF PLAN IS TOP-HEAVY

     The  provisions of this Section 4.6 shall apply if the Plan is a "top-heavy
plan"  within the meaning of Section  416(g) of the  Internal  Revenue Code with
respect to any Plan Year beginning  after December 31, 1983.  Unless a different
meaning is plainly  required  by the  context,  the term  "Plan" as used in this
Section 4.6 shall include the Retirement Plan for Employees of Capital Southwest
Corporation  and Its  Affiliates  as in effect  during the Plan Years  beginning
after December 31, 1983 and before the Effective Date of the Plan.

     (A) Determination of Plan Years in Which Plan Is Top-Heavy:  The Plan shall
be top-heavy with respect to an applicable Plan Year if:

          (1)  either:

               (a)  any  Participant,  former  Participant or Beneficiary in the
                    Plan is a "key  employee"  within the  meanings  of Sections
                    416(i)(1)  and  416(i)(5)  of  the  Internal   Revenue  Code
                    (hereinafter   referred   to  in   this   Section   4.6   as
                    "Key-Employees"); or

               (b)  the Plan is  required  to be  combined  with any other plan,
                    which is  included  in the  Aggregation  Group  (as  defined
                    below) and which has a participant who is a Key Employee, in
                    order to enable such other plan to meet the  requirements of

<PAGE>
                                      4-30


                    Section  401(a)(4)  or Section 410 of the  Internal  Revenue
                    Code;

               and

          (2)  the ratio  (determined  in  accordance  with  Section  416 of the
               Internal  Revenue Code) as of the last day of the preceding  Plan
               Year or, in the case of the first Plan Year, the last day of such
               first Plan Year (such day,  whether  applicable to the first Plan
               Year or to subsequent Plan Years,  is hereinafter  referred to in
               this Section 4.6 as the "Determination Date") of:

               (a)  the sum of (i) the present value of the  cumulative  accrued
                    benefits  for all Key  Employees  under all defined  benefit
                    plans  included  in the  Aggregation  Group  plus  (ii)  the
                    aggregate of the  individual  accounts of all Key  Employees
                    under  all  defined  contribution  plans  included  in  such
                    Aggregation Group;

                    to

               (b)  a  similar  sum  determined  for  all  Participants,  former
                    Participants  and  Beneficiaries  under all defined  benefit
                    plans  and  defined  contribution  plans  included  in  such
                    Aggregation  Group,  but excluding any such  Participant  or
                    former  Participant  (or  his  Beneficiary)  who  was  a Key
                    Employee for any prior Plan Year but who is not  currently a
                    Key Employee and also  excluding,  for Plan Years  beginning
                    after   December  31,  1984,   any   Participant  or  former
                    Participant  (or his  Beneficiary)  who has not at any  time
                    during the one-year period ending on the Determination Date,
                    or during the five-year  period ending on the  Determination
                    Date with respect to Plan Years  beginning  prior to January
                    1, 2002,  performed services for any employer  maintaining a
                    plan included in the Aggregation Group;

               is greater than 60%.

     For the purposes of this Section 4.6, the Aggregation  Group shall mean the
Plan  plus all  other  defined  benefit  plans and  defined  contribution  plans
(including any such plans that terminated  during the five-year period ending on
the  Determination  Date), if any,  maintained by the Controlled  Group Members;
provided, however, that any defined benefit plan or defined contribution plan of
any Controlled  Group Member that (i) does not have any participant who is a Key
Employee and (ii) is not required to be combined  with any other plan,  which is

<PAGE>
                                      4-31


included  in the  Aggregation  Group and which  has a  participant  who is a Key
Employee, in order to enable such other plan to meet the requirements of Section
401(a)(4) or Section 410 of the Internal  Revenue Code, shall be included in the
Aggregation  Group only if such  defined  benefit  plan or defined  contribution
plan,  together with the other plans that are included in the Aggregation Group,
as a combined group satisfy the  requirements  of Sections  401(a)(4) and 410 of
the Internal  Revenue Code. In  determining  Key Employees  under the Plan,  the
compensation taken into account shall be "IRC 415 Compensation" as defined above
in Section 4.1(A).

     The  present  value of an accrued  benefit  under the Plan  shall,  for the
purposes of this Section 4.6, be determined as of the most recent valuation date
that (i) is used for the Plan Year for computing Plan costs for minimum  funding
purposes (regardless of whether a valuation is actually performed for that year)
and (ii) is within the 12-month  period ending on the  applicable  Determination
Date (such  valuation  date is herein  referred  to in this  Section  4.6 as the
"Valuation  Date").  The present  value of accrued  benefits  under the Plan and
under each other defined benefit plan included in the aggregation group shall be
computed  using 5% interest and the mortality  table used for such Plan Year for
computing Plan costs for minimum funding purposes.

         The present value of the cumulative accrued benefits under the other
defined benefit plans included in the Aggregation Group and the aggregate of the
individual accounts under the defined contribution plans included in such
Aggregation Group shall be determined separately for each such plan in
accordance with Section 416 of the Internal Revenue Code and regulations issued
with respect thereto as of the "determination date" that is applicable to each
such separate plan and that falls within the same calendar year that the
Determination Date applicable to the Plan falls.

<PAGE>
                                      4-32



     Unless required  otherwise  under Section 416 of the Internal  Revenue Code
and regulations  issued thereunder,  a Participant's (or Beneficiary's)  accrued
benefit under the Plan shall be equal to the sum of:

          (a)  an amount equal to either:

               (i)  if his  service  has  not  been  terminated  and he has  not
                    reached his Normal Retirement Date as of the Valuation Date,
                    the Accrued Deferred Monthly Retirement Income Commencing at
                    Normal  Retirement  Date  that  he  has  accrued  as of  the
                    Valuation Date;

               (ii) if his  service has not been  terminated  and he has reached
                    his Normal  Retirement  Date as of the Valuation  Date,  the
                    monthly  retirement  income  to  which he  would  have  been
                    entitled under the normal retirement  provisions of the Plan
                    if he had retired on the Valuation Date;

                    or

               (iii) if his  service  has been  terminated  as of the  Valuation
                    Date, the amount of retirement  income or other benefit that
                    is  payable  on his  behalf  under the Plan on and after the
                    Valuation Date;

               plus

          (b)  the  aggregate  distributions  made  on  his  behalf  during  the
               one-year  period  ending  on the  Determination  Date  (five-year
               period  ending on the  Determination  Date,  with  respect to any
               distribution made for any reason other than death, disability, or
               separation from service);

provided, however, that his estimated accrued benefit between the Valuation Date
and  Determination  Date  applicable to the first Plan Year shall be included as
part of his  accrued  benefit  with  respect to the first  Plan Year  only.  Any
provisions hereof to the contrary  notwithstanding and solely for the purpose of
determining  if the Plan is top-heavy  with respect to an  applicable  Plan Year
beginning  after December 31, 1986,  the accrued  benefit of any employee who is
not a Key  Employee  shall be  determined  under  the  method  which is used for
accrual purposes for all defined benefit plans included in the Aggregation Group
or,  if a single  method is not used for all such  defined  benefit  plans,  the
accrued  benefit of such  employee  shall be determined as though it accrued not

<PAGE>
                                      4-33


more  rapidly  than the slowest  accrual  rate  permitted  under the  fractional
accrual rule of Section 411(b)(1)(C) of the Internal Revenue Code.

     (B)  Minimum  Vesting  Provisions  if Plan  Becomes  Top-Heavy:  Any  other
provision of the Plan to the contrary notwithstanding,  the Initial Vesting Date
of a Participant in the Plan, who has accrued an Hour of Service during any Plan
Year that is subsequent  to the last Plan Year that the Plan was not  top-heavy,
for the purpose of determining his  eligibility  for the benefit  provided under
Section  2.4(A)  hereof during any Plan Year that is subsequent to the last Plan
Year that the Plan was not top-heavy, shall not be later than (i) the date as of
which he  completes  two years of  Vesting  Service or (ii) the first day of the
Plan  Year  immediately  following  the  last  Plan  Year  that the Plan was not
top-heavy,  whichever is later, but the Vested Percentage of the Participant for
the purposes of Section  2.4(A)(1)  shall be 100% with respect to the portion of
his Accrued Deferred Monthly  Retirement  Income Commencing at Normal Retirement
Date that is  attributable  to his own  contributions,  if any, and shall not be
less  than the  percentage  specified  in the  schedule  below,  based  upon the
Participant's  number of years (ignoring fractions) of Vesting Service as of the
date of termination  of his service,  with respect to the portion of his Accrued
Deferred Monthly  Retirement Income Commencing at Normal Retirement Date that is
attributable to employer contributions:

                 Years of                     Vested
              Vesting Service               Percentage
              ---------------               ----------
                Less than 2                     0%
                     2                         20%
                     3                         40%
                     4                         60%
                 5 or more                    100%

In the event that the Plan ceases to be top-heavy with respect to any subsequent
Plan Year,  the  following  provisions  will apply with  respect to the  minimum

<PAGE>
                                      4-34


benefits to which such a Participant  is entitled  under  Section  2.4(A) hereof
during such subsequent Plan Years that the Plan is not top-heavy:

          (1)  if the  Participant  had not  completed  at  least  two  years of
               Vesting  Service as of the last day of the last Plan Year  during
               which the Plan was  top-heavy,  his  nonforfeitable  right to the
               benefits  to which he is entitled  under  Section  2.4(A)  hereof
               shall be determined as though the Plan had never been top-heavy;

          (2)  if the  Participant  had  completed  at  least  two  but  had not
               completed at least three years of Vesting  Service as of the last
               day of the last Plan Year during which the Plan was top-heavy, he
               shall be eligible for a minimum  benefit  payable  under  Section
               2.4(A)  hereof;  such  minimum  benefit  provided  under  Section
               2.4(A)(1)  shall be based  upon  (a) 100% of the  portion  of his
               Accrued Deferred Monthly  Retirement  Income Commencing at Normal
               Retirement Date that he has accrued as of the date of termination
               of his service that is attributable to his own contributions,  if
               any,  plus (b) the  product  of (i) the  portion  of the  Accrued
               Deferred   Monthly   Retirement   Income   Commencing  at  Normal
               Retirement Date that he had accrued as of the date of termination
               of his service  that is  attributable  to employer  contributions
               multiplied  by (ii) his Vested  Percentage  determined  as of the
               last  day of the  last  Plan  Year  during  which  the  Plan  was
               top-heavy;

          (3)  if the  Participant had completed at least three years of Vesting
               Service as of the last day of the last Plan Year during which the
               Plan was top-heavy, he shall be eligible for the benefit provided
               under  Section  2.4(A)  hereof,  but  the  Participant's   Vested
               Percentage  shall be  determined in the same manner as though the
               Plan had remained top-heavy; and

          (4)  the Accrued  Deferred  Monthly  Retirement  Income  Commencing at
               Normal Retirement Date that a Participant,  whose Vesting Service
               includes  service that was accrued on or prior to the last day of
               the last Plan Year that the Plan was top-heavy, has accrued as of
               any given date shall not be less than the actuarial equivalent of
               (a) the benefit  provided on his behalf under  Section  4.6(C)(1)
               below as of such given date plus (b) the benefit  provided on his
               behalf under Section 4.6(C)(2)(a) below as of the last day of the
               last Plan Year during which the Plan was  top-heavy  less (c) the
               amount  of the  benefit  provided  on his  behalf  under  Section
               4.6(C)(2)(b) below as of such given date.

     (C)  Minimum  Benefit  If Plan  Becomes  Top-Heavy:  In the event  that the
service of a Participant,  who is not a Key Employee,  is terminated on or after
his Initial  Vesting Date for any reason,  the retirement  income payable to the

<PAGE>
                                      4-35


Participant  under the  provisions of Section 2.1, 2.2, 2.3 or 2.4(A) hereof or,
if the service of the  Participant  is  terminated  by reason of his death,  the
retirement  income which he has accrued as of the date of his death that is used
to determine the benefit  payable on his behalf under the  provisions of Section
2.4(B) hereof,  whichever is  applicable,  shall not be less than that amount of
retirement  income which is actuarially  equivalent (based upon the interest and
mortality  assumptions  that are being used under the Plan as of the date of his
retirement  or  termination  of  service  to  determine  actuarially  equivalent
non-decreasing annuities) to an amount equal to:

          (1)  100% of the portion of his Accrued  Deferred  Monthly  Retirement
               Income  Commencing at Normal  Retirement Date that he has accrued
               as of the date of his  retirement or  termination of service that
               is attributable to his own contributions, if any;

               plus

          (2)  the excess, if any, of:

               (a)  a monthly  retirement  income payable to the Participant for
                    life (with no ancillary  benefits)  commencing at his Normal
                    Retirement Date in an amount equal to (i) 2% of his "IRC 416
                    Final Average Monthly  Compensation"  multiplied by (ii) his
                    number  of years of  Vesting  Service,  not in  excess of 10
                    years,  that were  accrued  during those Plan Years in which
                    the Plan was  top-heavy,  with the resulting  product of (i)
                    and (ii)  multiplied  by (iii) his Vested  Percentage at the
                    date of his retirement or termination of service;  provided,
                    however,   if  the  Participant  retires  after  his  Normal
                    Retirement Date, the amount of the monthly retirement income
                    determined  under  this  Subparagraph  (a) shall not be less
                    than the  actuarial  equivalent  of the  monthly  retirement
                    income  determined in accordance with this subparagraph that
                    would have been payable to the Participant if he had retired
                    on his Normal Retirement Date;

                    over

               (b)  the monthly retirement income payable to the Participant for
                    life (with no ancillary  benefits)  commencing at his Normal
                    Retirement Date in an amount equal to the sum of:

<PAGE>
                                      4-36



                    (i)  such  amount  of  income,   if  any,   that  he  has  a
                         nonforfeitable   right   to   receive   and   that   is
                         attributable to employer  contributions  and is payable
                         to the  Participant  under  the other  defined  benefit
                         plans,  if any,  which are included in the  Aggregation
                         Group;

                         plus

                    (ii) such  amount  of  income  that  can be  provided  on an
                         actuarially  equivalent  basis (based upon the interest
                         and mortality assumptions that are being used under the
                         Plan as of the date of his retirement or termination of
                         service    to    determine    actuarially    equivalent
                         non-decreasing  annuities) by the amounts, if any, that
                         he has a  nonforfeitable  right to receive and that are
                         attributable to employer  contributions and forfeitures
                         that are  credited  to his  account  under the  defined
                         contribution plans, if any, included in the Aggregation
                         Group;

provided,  however,  if the  Aggregation  Group  includes  one or  more  defined
contribution  plans  and if,  with  respect  to each  Plan Year that the Plan is
top-heavy,  the Participant has received an allocation of employer contributions
and  forfeitures  to his account under such defined  contribution  plan or plans
which  is  equal  to or  greater  than 5% of the IRC  415  Compensation  that he
received during such Plan Year from the employers  maintaining plans included in
the  Aggregation  Group,  the minimum  benefit  described  above in this Section
4.6(C) shall not apply to such Participant. For purposes of Section 4.6(C)(2)(a)
above,  a  Participant's  service  with a  Controlled  Group Member which occurs
during a Plan Year in which the Plan does not  benefit  (within  the  meaning of
Section  410(b) of the  Internal  Revenue  Code) any Key  Employee or former Key
Employee shall be ignored or excluded in determining such Participant's  Vesting
Service.

     For the  purposes of this Section  4.6(C),  subject to the  limitations  of
Section  401(a)(17) of the Internal Revenue Code, a Participant's "IRC 416 Final
Average Monthly  Compensation" shall be equal to his average monthly rate of IRC
415 Compensation for the five consecutive calendar years, which are prior to the

<PAGE>
                                      4-37


January 1st immediately  following (i) the date of the Participant's  retirement
or  termination  of service or (ii) the close of the last Plan Year in which the
Plan is  top-heavy,  whichever is earlier,  during which he received the highest
aggregate IRC 415 Compensation.  Such average monthly rate will be determined by
dividing  the total of such IRC 415  Compensation  that he received  during such
five-consecutive-calendar  year  period  from the  employers  maintaining  plans
included in the Aggregation Group by the product equal to 12 times the number of
years of Vesting Service which he accrued during such five-calendar-year period.
In the event that the Participant does not receive both IRC 415 Compensation and
Vesting Service during a calendar year or calendar years,  such calendar year or
calendar  years during which he did not receive  both IRC 415  Compensation  and
Vesting   Service  shall  be  ignored  and  excluded  in  determining  the  five
consecutive  calendar  years during which he received the highest  aggregate IRC
415 Compensation.

4.7 TRANSFERS

     Notwithstanding any provision in this Plan to the contrary,  assets held by
the Trust may be  transferred  between  the Trust and any other  trust  which is
exempt from tax under Section  501(a) of the Internal  Revenue Code and which is
used in connection with a plan that complies with the qualification requirements
of Section 401(a) of the Internal  Revenue Code,  provided that proper notice is
given to the Internal  Revenue  Service as may be required.  The Committee shall
determine whether to allow any such transfer and shall inform the Trustee of the
determination  made by the Committee  regarding any such transfer and direct the
Trustee  accordingly.  If any assets are transferred from the Trust on behalf of
Participants  pursuant  to a direction  described  in this  section,  the assets
transferred shall be determined based upon the requirements of Section 414(l) of
the Internal Revenue Code and the accrued benefits of those  Participants  under
the Plan shall be reduced to zero.  In the event of a transfer  received  by the
Trust,  the Committee shall take all necessary steps to ensure that any optional

<PAGE>
                                      4-38


form of  benefit  applicable  to the assets  subject  to such a transfer  remain
applicable  to  the  transferred  assets  after  the  transfer  pursuant  to the
requirements  of Section  411(d)(6)  of the  Internal  Revenue  Code and Section
1.411(d)-4  of the  Treasury  Regulations.  Any  transfer  made  pursuant to the
provisions  of this  section  shall  be made in a  manner  consistent  with  the
requirements  of Sections  401(a)(12)  and 414(l) of the Internal  Revenue Code,
Section 208 of the Employee  Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.  Any transfer of assets or liabilities will, for
purposes of Section  414(l) of the Internal  Revenue  Code,  be  considered as a
combination  of  separate  mergers  and  spinoffs  using  the  rules of  Section
1.414(l)-1 of the Treasury Regulations.

4.8 - MINIMUM DISTRIBUTION REQUIREMENTS

     (A) General Rules:

     (1)  Effective  Date:  The  provisions  of this  Section 4.8 will apply for
purposes of  determining  required  minimum  distributions  for  calendar  years
beginning with the 2006 calendar year.

     (2) Precedence:  The  requirements of this Section 4.8 will take precedence
over any inconsistent provisions of the Plan.

     (3) Requirements of Treasury  Regulations  Incorporated:  All distributions
required under this Section 4.8 will be determined  and made in accordance  with
Sections  1.401(a)(9)-1  through 1.401(a)(9)-9 of the Treasury regulations under
Section 401(a)(9) of the Internal Revenue Code.

     (4) TEFRA Section 242(b)(2) Elections: Notwithstanding the other provisions
of this Section 4.8, other than Section  4.8(A)(3) above,  distributions  may be
made under a designation made before January 1, 1984, in accordance with Section
242(b)(2)  of the Tax Equity  and  Fiscal  Responsibility  Act  (TEFRA)  and the
provisions of the Plan that relate to Section 242(b)(2) of TEFRA.

     (B) Time and Manner of Distribution:

<PAGE>
                                      4-39



     (1) Required  Beginning  Date: The  Participant's  entire  interest will be
distributed,  or begin to be  distributed,  to the Participant no later than the
Participant's Required Beginning Date.

     (2) Death of Participant  Before  Distributions  Begin:  If the Participant
dies before  distributions  begin,  the  Participant's  entire  interest will be
distributed, or begin to be distributed, no later than as follows:

          (a) If the Participant's  surviving spouse is the  Participant's  sole
     designated  Beneficiary,  then  distributions  to the surviving spouse will
     begin  by  December  31 of the  calendar  year  immediately  following  the
     calendar  year in which the  Participant  died,  or by  December  31 of the
     calendar year in which the  Participant  would have attained age 70 1/2, if
     later.

          (b) If the  Participant's  surviving  spouse is not the  Participant's
     sole  designated  Beneficiary  as of September 30 of the year following the
     year of the  Participant's  death,  then  distributions  to the  designated
     Beneficiary  will begin by December  31 of the  calendar  year  immediately
     following the calendar year in which the Participant died.

          (c) If there is no  designated  Beneficiary  as of September 30 of the
     year  following  the year of the  Participant's  death,  the  Participant's
     entire  interest  will be  distributed  by December 31 of the calendar year
     containing the fifth anniversary of the Participant's death.

          (d) If the Participant's  surviving spouse is the  Participant's  sole
     designated Beneficiary as of September 30 of the year following the year of
     the   Participant's   death,  and  the  surviving  spouse  dies  after  the
     Participant but before  distributions to the surviving  spouse begin,  this
     Section 4.8(B)(2),  other than Section  4.8(B)(2)(a),  will apply as if the
     surviving spouse were the Participant.

For purposes of this Section  4.8(B)(2) and Section  4.8(E),  distributions  are
considered to begin on the Participant's Required Beginning Date (or, if Section
4.8(B)(2)(d)  applies,  the  date  distributions  are  required  to begin to the
surviving spouse under Section  4.8(B)(2)(a)).  If annuity payments  irrevocably
commence to the Participant before the Participant's Required Beginning Date (or
to the Participant's surviving spouse before the date distributions are required
to  begin  to  the  surviving  spouse  under  Section  4.8(B)(2)(a)),  the  date
distributions  are  considered  to  begin  is the  date  distributions  actually
commence.  Any  amount  payable to the  surviving  child of the  Participant  in

<PAGE>
                                      4-40


accordance  with the  requirements  of Q&A-15 of  Section  1.401(a)(9)-6  of the
Treasury  regulations shall be treated for purposes of this Section 4.8 as if it
had been paid to such  Participant's  surviving spouse to the extent such amount
that is payable to the child will become payable to the Participant's  surviving
spouse upon such child  reaching  majority (or upon the occurrence of such other
event specified in Q&A-15 of Section  1.401(a)(9)-6 of the Treasury  regulations
or otherwise  specified in IRS guidance under Section  401(a)(9) of the Internal
Revenue Code.)

     (3) Form of Distribution:  Unless the Participant's interest is distributed
in the form of an annuity purchased from an insurance company or in a single sum
on or before the Required Beginning Date, as of the first distribution  calendar
year distributions will be made in accordance with Sections 4.8(C), (D), and (E)
hereof. If the  Participant's  interest is distributed in the form of an annuity
purchased from an insurance  company,  distributions  thereunder will be made in
accordance with the  requirements of Section  401(a)(9) of the Internal  Revenue
Code and the Treasury regulations.  Any part of the Participant's interest which
is in the form of an  individual  account  described  in  Section  414(k) of the
Internal   Revenue  Code  will  be  distributed  in  a  manner   satisfying  the
requirements of Section  401(a)(9) of the Internal Revenue Code and the Treasury
regulations that apply to individual accounts.

     (4) Change in Annuity Payment  Period:  Once payments have commenced over a
period,  the period may only be changed  in  accordance  with  Q&A-13 of Section
1.401(a)(9)-6 of the Treasury regulations under the following circumstances,  or
as may be expressly  permitted in other IRS guidance under Section  401(a)(9) of
the Internal Revenue Code, if permitted under applicable provisions of the Plan:

          (a)  at  the  time  the  Participant  retires  or in  connection  with
     termination of the Plan;

          (b) where  distribution  prior to the change is being made in the form
     of a period-certain-only annuity without life contingencies; or

<PAGE>
                                      4-41



          (c) where the  annuity  payments  after the  change  are paid  under a
     Qualified  Joint  and  Survivor   Annuity  over  the  joint  lives  of  the
     Participant and a designated  beneficiary,  the Participant's spouse is the
     sole designated  beneficiary,  and the change occurs in connection with the
     Participant becoming married to such spouse.

     (C) Determination of Amount to be Distributed Each Year:

     (1) General Annuity Requirements:  If the Participant's interest is paid in
the form of annuity  distributions  under the Plan,  payments  under the annuity
will satisfy the following requirements:


          (a) the annuity  distributions  will be paid in periodic payments made
     at intervals not longer than one year;

          (b) the  distribution  period will be over a life (or lives) or over a
     period  certain not longer than the period  described in Section  4.8(D) or
     (E) below;

          (c) once payments have begun over a period certain, the period certain
     will not be changed even if the period  certain is shorter than the maximum
     permitted; and

          (d) payments will either be nonincreasing or increase only as follows:

                    (i) by an annual  percentage  increase  that does not exceed
               the annual  percentage  increase  in an  eligible  cost-of-living
               index,  as defined in Q&A-14(b) of Section  1.401(a)(9)-6  of the
               Treasury  regulations,  for a 12-month  period ending in the year
               during which the increase occurs or the prior year, that is based
               on  prices  of all  items  and  issued  by the  Bureau  of  Labor
               Statistics;

                    (ii) by a  percentage  increase  that  occurs  at  specified
               times,  such as at  specified  ages,  and  does  not  exceed  the
               cumulative  total of annual  percentage  increases in an eligible
               cost-of-living  index as defined  in clause  (i) above  since the
               annuity  starting date or, if later,  the date of the most recent
               percentage  increase,  provided  that in cases  providing  such a
               cumulative  increase an actuarial increase may not be provided to
               reflect the fact that  increases were not provided in the interim
               years;

                    (iii) to the  extent of the  reduction  in the amount of the
               Participant's  payments  to provide for a survivor  benefit  upon
               death,  but only if the Beneficiary  whose life was being used to

<PAGE>
                                      4-42


               determine the  distribution  period  described in Section  4.8(D)
               dies or is no longer the Participant's  Beneficiary pursuant to a
               qualified  domestic relations order within the meaning of Section
               414(p) of the Internal Revenue Code;

                    (iv)  to pay  increased  benefits  that  result  from a Plan
               amendment;

                    (v) to allow a beneficiary  to convert the survivor  portion
               of a joint and survivor  annuity  into a single-sum  distribution
               upon the employee's death; or

                    (vi) to the extent  increases  are  permitted in  accordance
               with paragraph (c) or (d) of Q&A-14 of Section  1.401(a)(9)-6  of
               the Treasury regulations.

     (2) Amount  Required to be  Distributed  by Required  Beginning  Date:  The
amount  that  must  be  distributed  on or  before  the  Participant's  Required
Beginning Date (or, if the Participant dies before distributions begin, the date
distributions  are required to begin under Section  4.8(B)(2)(a)  or (b)) is the
payment that is required for one payment  interval.  The second payment need not
be made until the end of the next payment interval even if that payment interval
ends in the next  calendar  year.  Payment  intervals  are the periods for which
payments are received, e.g., bi-monthly,  monthly,  semi-annually,  or annually.
All of the  Participant's  benefit  accruals  as of the  last  day of the  first
distribution  calendar year will be included in the calculation of the amount of
the annuity payments for payment  intervals ending on or after the Participant's
Required Beginning Date.

     (3)  Additional  Accruals  After  First  Distribution  Calendar  Year:  Any
additional  benefits  accruing to the  Participant  in a calendar year after the
first  distribution  calendar year will be distributed  beginning with the first
payment interval ending in the calendar year immediately  following the calendar
year in which such amount accrues.

<PAGE>
                                      4-43



          (D)  Requirements  for  Annuity  Distributions  That  Commence  During
     Participant's Lifetime:

     (1) Joint Life Annuities  Where the  Beneficiary  Is Not the  Participant's
Spouse:  If the  Participant's  interest is being  distributed  in the form of a
joint  and  survivor  annuity  for the  joint  lives  of the  Participant  and a
nonspouse Beneficiary, annuity payments to be made on or after the Participant's
Required  Beginning Date to the designated  Beneficiary  after the Participant's
death  shall not at any time  exceed the  applicable  percentage  of the annuity
payment for such period that would have been  payable to the  Participant  using
the  table  set  forth  in  Q&A-2  of  Section  1.401(a)(9)-6  of  the  Treasury
regulations.  If the form of distribution  combines a joint and survivor annuity
for the joint lives of the Participant and a nonspouse  Beneficiary and a period
certain annuity, the requirement in the preceding sentence will apply to annuity
payments to be made to the  designated  Beneficiary  after the expiration of the
period certain.

     (2) Period Certain Annuities:  Unless the Participant's  spouse is the sole
designated  Beneficiary  and the form of distribution is a period certain and no
life annuity, the period certain for an annuity  distribution  commencing during
the Participant's  lifetime shall not exceed the applicable  distribution period
for the  Participant  under the  Uniform  Lifetime  Table  set forth in  Section
1.401(a)(9)-9  of the Treasury  regulations  for the calendar year that contains
the Annuity  Starting  Date.  If the Annuity  Starting Date precedes the year in
which the Participant reaches age 70, the applicable distribution period for the
Participant  is the  distribution  period for age 70 under the Uniform  Lifetime
Table set forth in Section  1.401(a)(9)-9  of the Treasury  regulations plus the
excess of 70 over the age of the Participant as of the Participant's birthday in
the year that contains the Annuity Starting Date. If the Participant's spouse is
the Participant's sole designated  Beneficiary and the form of distribution is a
period certain and no life annuity, the period certain may not exceed the longer
of the Participant's  applicable  distribution  period, as determined under this
Section  4.8(D)(2),  or the  joint  life and  last  survivor  expectancy  of the
Participant and the Participant's  spouse as determined under the Joint and Last

<PAGE>
                                      4-44


Survivor Table set forth in Section  1.401(a)(9)-9 of the Treasury  regulations,
using the  Participant's  and spouse's attained ages as of the Participant's and
spouse's birthdays in the calendar year that contains the Annuity Starting Date.

          (E)  Requirements  for Minimum  Distributions  Where  Participant Dies
     Before Date Distributions Begin:

     (1) Participant Survived by Designated Beneficiary: If the Participant dies
before  the date  distribution  of his or her  interest  begins  and  there is a
designated  Beneficiary,  the Participant's entire interest will be distributed,
beginning no later than the time described in Section  4.8(B)(2),  over the life
of the designated Beneficiary or over a period certain not exceeding:

               (a)  unless  the  Annuity  Starting  Date  is  before  the  first
          distribution  calendar  year,  the life  expectancy of the  designated
          Beneficiary   determined  using  the   Beneficiary's  age  as  of  the
          Beneficiary's  birthday in the calendar year immediately following the
          calendar year of the Participant's death; or

               (b) if the Annuity Starting Date is before the first distribution
          calendar  year,  the life  expectancy  of the  designated  Beneficiary
          determined  using  the  Beneficiary's  age  as  of  the  Beneficiary's
          birthday in the calendar year that contains the Annuity Starting Date.

     (2) No  Designated  Beneficiary:  If the  Participant  dies before the date
distributions begin and there is no designated Beneficiary as of September 30 of
the year  following the year of the  Participant's  death,  distribution  of the
Participant's  entire  interest will be completed by December 31 of the calendar
year containing the fifth anniversary of the  Participant's  death.

     (3) Death of Surviving  Spouse  Before  Distributions  to Surviving  Spouse
Begin:  If the  Participant  dies  before  the date  distribution  of his or her
interest begins,  the Participant's  surviving spouse is the Participant's  sole
designated  Beneficiary,  and the surviving spouse dies before  distributions to
the surviving  spouse begin,  this Section 4.8(E) will apply as if the surviving
spouse were the Participant,  except that the time by which  distributions  must
begin will be determined without regard to Section 4.8(B)(2)(a).

          (F) Definitions:

     (1)  Designated  Beneficiary:  The  individual  who  is  designated  as the
Beneficiary  under  Section  5.2  or  5.3 of  the  Plan  and  is the  designated
beneficiary  under  Section  401(a)(9) of the Internal  Revenue Code and Section
1.401(a)(9)-4, Q&A-1, of the Treasury regulations.

     (2)  Distribution  calendar  year:  A  calendar  year for  which a  minimum
distribution is required.  For distributions  beginning before the Participant's
death,  the first  distribution  calendar year is the calendar year  immediately
preceding the calendar year which contains the Participant's  Required Beginning
Date. For  distributions  beginning  after the  Participant's  death,  the first
distribution  calendar  year is the  calendar  year in which  distributions  are
required to begin pursuant to Section 4.8(B)(2).

     (3) Life expectancy:  Life expectancy as computed by use of the Single Life
Table in Section 1.401(a)(9)-9 of the Treasury regulations.

     (4) Required  Beginning  Date:  The date specified in Section 1.1(A) of the
Plan.



<PAGE>




                                       5-1

                                    SECTION 5

                 MISCELLANEOUS PROVISIONS REGARDING PARTICIPANTS


5.1 - PARTICIPANTS TO FURNISH REQUIRED INFORMATION

     Each  Participant,  his spouse and his  Beneficiaries  and joint pensioners
will  furnish to the  Committee  such  information  as the  Committee  considers
necessary  or  desirable  for  purposes  of  administering  the  Plan,  and  the
provisions of the Plan respecting any payments  thereunder are conditional  upon
the Participant's,  Beneficiary's or joint pensioner's  furnishing promptly such
true, full and complete information as the Committee may request.

     Each  Participant will submit proof of his age and marital status and proof
of the age and continued life of each Beneficiary and joint pensioner designated
or selected by him to the  Committee at such time as required by the  Committee.
The Committee  will, if such proof of age,  marital  status or continued life is
not submitted as required,  use as conclusive evidence thereof, such information
as is deemed by it to be reliable, regardless of the source of such information.
Any adjustment  required by reason of lack of proof or the  misstatement  of the
age of persons entitled to benefits hereunder,  by the Participant or otherwise,
will be in such manner as the Committee deems equitable.

     Any notice or information which,  according to the terms of the Plan or the
rules of the  Committee,  must be filed with the  Committee,  shall be deemed so
filed at the time that it is actually received by the Committee.

     The  Employer,  the  Committee,  and any person or persons  involved in the
administration  of the Plan shall be  entitled  to rely upon any  certification,
statement,  or  representation  made  or  evidence  furnished  by  an  employee,
Participant,  Beneficiary  or joint  pensioner  with respect to his age or other
facts  required to be  determined  under any of the  provisions  of the Plan and
shall not be liable on account of the  payment of any monies or the doing of any
act or failure to act in reliance thereon.  Any such  certification,  statement,
representation  or  evidence,  upon  being  duly  made or  furnished,  shall  be

<PAGE>
                                      5-2


conclusively  binding  upon the  person  furnishing  same;  but it shall  not be
binding  upon the  Employer,  the  Committee,  or any other  person  or  persons
involved in the  administration  of the Plan, and nothing herein contained shall
be  construed  to  prevent  any  of  such  parties  from   contesting  any  such
certification, statement, representation or evidence or to relieve the Employee,
Participant,  Beneficiary  or  joint  pensioner  from  the  duty  of  submitting
satisfactory proof of any such fact.

     Any Participant,  Beneficiary, joint pensioner or other person who receives
an incorrect payment from the Trust Fund (whether an erroneous benefit amount, a
payment made after a  Participant's  death or other reason) shall be responsible
to notify the Committee or the Trustee of such receipt of incorrect  payment and
to promptly return such payment to the Trustee.

5.2 - BENEFICIARIES

     Subject to the provisions of the following paragraphs of this section, each
Participant may, on a form provided for that purpose,  signed and filed with the
Committee,  designate a Beneficiary to receive the benefit, if any, which may be
payable to his  Beneficiary  under the Plan in the event of his death,  and each
designation  may be revoked by such  Participant  by signing and filing with the
Committee a new designation of Beneficiary form.

     If a deceased  Participant,  who has been married to his spouse  throughout
the one-year  period  immediately  preceding his death,  has designated a person
other  than his  spouse  as his  Beneficiary  and such  spouse  has not  validly
consented in accordance with the provisions of Sections 4.1(D) and 4.1(E) hereof
to such other person being  designated  as the  Beneficiary,  the  provisions of
Section 4.1(D) hereof,  relating to the Qualified Preretirement Survivor Annuity
payable  to his  surviving  spouse,  will  apply in the event of his death on or
after his Initial Vesting Date, and the Participant will automatically be deemed

<PAGE>
                                      5-3


to have changed his designation of Beneficiary to the extent necessary to comply
with the provisions of Section 4.1(D).

     If a deceased  Participant who had a spouse at the date of his death failed
to designate a Beneficiary in accordance with the provisions of this section, he
shall be deemed to have designated his spouse as his Beneficiary.  If a deceased
Participant  who had no spouse at the date of his death  failed to  designate  a
Beneficiary  in accordance  with the  provisions  of this section,  or if such a
deceased  Participant had previously  designated a Beneficiary but no designated
Beneficiary is surviving at the date of his death,  the death  benefit,  if any,
that may be payable  under the Plan with  respect to such  deceased  Participant
shall be paid to the estate of such deceased Participant.  In any of such cases,
if the commuted value of the remaining  monthly  income  payments is equal to or
less than the maximum amount that is  permissible as an involuntary  cash-out of
accrued  benefits under Sections  411(a)(11) and 417(e) of the Internal  Revenue
Code and  regulations  issued with respect  thereto,  the commuted  value of the
remaining  payments shall,  subject to the provisions of Section 3.2 hereof,  be
paid in a lump sum. Any payment made to any person pursuant to the provisions of
this Section 5.2 shall operate as a complete  discharge of all obligations under
the Plan with respect to such deceased  Participant  and shall not be subject to
review by anyone but shall be final,  binding and conclusive on all persons ever
interested hereunder.

5.3 - CONTINGENT BENEFICIARIES

     In the event of the death of a Beneficiary who survives the Participant and
who,  at  the  Beneficiary's  death,  is  receiving  benefits  pursuant  to  the
provisions of the Plan within any certain period  specified  under the Plan with
respect  to  which  death   benefits  are  payable  under  the  Plan  after  the
Participant's  death,  the same  amount of monthly  retirement  income  that the
Beneficiary  was receiving  shall be payable for the remainder of such specified
certain period to a person designated by the Participant (in the manner provided
in Section 5.2) to receive the remaining death benefits,  if any, payable in the
event of such  contingency  or,  if no  person  was so  named,  then to a person
designated  by the  Beneficiary  (in the manner  provided in Section 5.2) of the
deceased Participant to receive the remaining death benefits, if any, payable in
the  event  of  such  contingency;  provided,  however,  that  if no  person  so

<PAGE>
                                      5-4


designated is living upon the  occurrence of such  contingency,  or if there has
been no such  designation,  then the remaining death benefits,  if any, shall be
payable for the remainder of such specified certain period to the estate of such
deceased  Beneficiary,  or the Committee may elect to have a court of applicable
jurisdiction  determine to whom a payment or payments  shall be paid.  In any of
such cases,  if the commuted  value of the monthly  income  payments due for the
remainder of the specified  certain  period is equal to or less than the maximum
amount that is permissible as an involuntary  cash-out of accrued benefits under
Sections  411(a)(11)  and 417(e) of the Internal  Revenue  Code and  regulations
issued with respect thereto, the commuted value of the remaining payments shall,
subject to the  provisions  of Section  3.2 hereof,  be paid in a lump sum.  Any
payments made to any person pursuant to the provisions of this Section 5.3 shall
operate as a complete  discharge of all obligations  under the Plan with respect
to such  deceased  Beneficiary  and shall not be subject to review by anyone but
shall be final, binding and conclusive on all persons ever interested hereunder.

5.4 - PARTICIPANTS' RIGHTS IN TRUST FUND

     No  Participant or other person shall have any interest in or any right in,
to or under the Trust Fund, or any part of the assets held thereunder, except as
to the extent expressly provided in the Plan.

5.5 - BENEFITS NOT ASSIGNABLE

     Except to the extent required to comply with a qualified domestic relations
order as described  in Sections  401(a)(13)  and 414(p) of the Internal  Revenue
Code,  no  benefits,  rights or  accounts  shall  exist under the Plan which are
subject in any manner to  voluntary  or  involuntary  anticipation,  alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to
anticipate,  alienate,  sell, transfer,  assign, pledge,  encumber or charge the

<PAGE>
                                      5-5


same shall be null and void; nor shall any such benefit,  right or account under
the  Plan be in any  manner  liable  for or  subject  to the  debts,  contracts,
liabilities,  engagements,  torts or other obligations of the person entitled to
such benefit,  right or account;  nor shall any benefit,  right or account under
the Plan constitute an asset in case of the bankruptcy,  receivership or divorce
of any person entitled to a benefit under the Plan; and any such benefit,  right
or account under the Plan shall be payable only directly to the  Participant  or
Beneficiary,  as the case may be. Where a qualified domestic relations order has
been  received  by the  Committee,  the terms and  benefits  of the Plan will be
considered to have been modified with respect to the Participant affected to the
extent that such order  requires  benefits to be paid to  specified  individuals
other than the Participant.

5.6 - BENEFITS PAYABLE TO MINORS AND INCOMPETENTS

     Whenever any person entitled to payments under the Plan shall be a minor or
under other legal  disability  or in the sole  judgment of the  Committee  shall
otherwise  be  unable  to  apply  such  payments  to his own best  interest  and
advantage (as in the case of illness,  whether mental or physical,  or where the
person not under legal  disability  is unable to preserve his estate for his own
best interest),  the Committee may in the exercise of its discretion  direct all
or any portion of such  payments to be made in any one or more of the  following
ways  unless  claim  shall  have  been made  therefor  by an  existing  and duly
appointed guardian, tutor, conservator,  committee or other duly appointed legal
representative, in which event payment shall be made to such representative:

     (A)  directly to such person unless such person shall be an infant or shall
          have been legally adjudicated incompetent at the time of the payment;

     (B)  to the spouse, child, parent or other blood relative to be expended on
          behalf of the person  entitled or on behalf of those  dependents as to
          whom the person entitled has the duty of support; or

     (C)  to a recognized charity or governmental institution to be expended for
          the  benefit  of the  person  entitled  or for the  benefit  of  those
          dependents as to whom the person entitled has the duty of support.

<PAGE>
                                      5-6



     The decision of the Committee will, in each case, be final and binding upon
all  persons,  and the  Committee  shall  not be  obliged  to see to the  proper
application or expenditure of any payments so made. Any payment made pursuant to
the power  herein  conferred  upon the  Committee  shall  operate  as a complete
discharge of the obligations of the Trustee and of the Committee.

5.7 - CONDITIONS OF EMPLOYMENT NOT AFFECTED BY PLAN

     The  establishment  and  maintenance  of the Plan will not be  construed as
conferring  any legal rights upon any  Participant  to the  continuation  of his
employment with the Employer,  nor will the Plan interfere with the right of the
Employer to discipline,  lay off or discharge any Participant.  The adoption and
maintenance of the Plan shall not be deemed to constitute a contract between the
Employer  and any  employee  or to be a  consideration  for,  inducement  to, or
condition of employment of any person.

5.8 - NOTIFICATION OF MAILING ADDRESS

     Each Participant and other person entitled to benefits hereunder shall file
with the Committee  from time to time, in writing,  his post office  address and
each change of post office address, and any check representing payment hereunder
and any  communication  addressed  to a  Participant,  a former  Participant,  a
Beneficiary  or a  pensioner  hereunder  at his  last  address  filed  with  the
Committee  (or, if no such  address has been filed,  then at his last address as
indicated  on the records of the  Employer)  shall be binding on such person for
all purposes of the Plan,  and neither the  Committee  nor the Trustee  shall be
obliged to search for or ascertain the location of any such person.

     If the  Committee,  for any  reason,  is in doubt as to whether  retirement
income  payments are being received by the person entitled  thereto,  it may, by
registered  mail  addressed  to  such  person  and to such  person's  designated
Beneficiary,  if any, at their address last known to the Committee,  notify such
person  and his  Beneficiary  that all  unmailed  and future  retirement  income
payments  shall be  henceforth  withheld  until the  Committee is provided  with

<PAGE>
                                      5-7


evidence of such person's  continued life and his proper mailing address or with
evidence of such  person's  death.  In the event that (i) such  notification  is
mailed to such person and his designated Beneficiary,  (ii) the Committee is not
furnished  with  evidence of such  person's  continued  life and proper  mailing
address  or with  evidence  of his  death  within  three  years of the date such
notification  was mailed and (iii) the Committee is unable to find any person to
whom payment is due under the  provisions  of the Plan within three years of the
date such  notification  was mailed,  all  retirement  income and other  benefit
payments due shall be forfeited at the end of such three-year  period  following
the date such  notification  was  mailed;  provided,  however,  if claim for any
forfeited benefit is subsequently made by any such person to whom payment is due
under the Plan, such forfeited benefits due such person shall be reinstated.

     Notwithstanding  any  provision of the Plan to the  contrary,  in the event
that the Plan is terminated,  the benefits of any missing  participants shall be
transferred  to the Pension  Benefit  Guaranty  Corporation  in accordance  with
Section 4050 of the Employee Retirement Income Security Act of 1974, as amended.

5.9 - WRITTEN COMMUNICATIONS REQUIRED

     Any notice,  request,  instruction,  or other  communication to be given or
made  hereunder  shall  be in  writing  and may be  delivered  to the  addressee
personally,  may be delivered to the addressee by a commercial  delivery service
at the last  address  for notice  shown on the  Committee's  records,  or may be
deposited in the United  States mail fully  postpaid  and properly  addressed to
such addressee at the last address for notice shown on the Committee's records.

5.10 - BENEFITS PAYABLE AT OFFICE OF TRUSTEE

     All benefits hereunder,  and installments thereof,  shall be payable at the
office of the Trustee.

<PAGE>
                                      5-8



5.11 - APPEAL TO COMMITTEE

     A Participant  or  Beneficiary  who feels he is being denied any benefit or
right provided under the Plan must file a written claim with the Committee.  All
such claims shall be submitted on a form provided by the  Committee  which shall
be signed by the claimant and shall be considered filed on the date the claim is
received by the Committee.

     The  Committee  shall  establish  claims   procedures  in  compliance  with
applicable  law,  and such claims  procedures  shall be set forth in the summary
plan description for the Plan.



<PAGE>

                                       6-1

                                    SECTION 6

                 MISCELLANEOUS PROVISIONS REGARDING THE EMPLOYER


6.1 - CONTRIBUTIONS

     No  contributions  shall  be  required  of or  permitted  to be made by any
Participant.  The  Employer  intends,  but does not  guarantee,  to make  annual
contributions in amounts at least equal to the amounts, if any, required to meet
the minimum funding requirements of Section 412 of the Internal Revenue Code, as
specified in the actuary's valuation reports for the applicable periods of time.
Subject to  applicable  provisions  of law,  neither the Employer nor any of its
officers, agents or employees, nor any member of its board of directors, nor any
partner or sole  proprietor,  guarantees,  in any manner the payment of benefits
under the Plan.

6.2 - EMPLOYER'S CONTRIBUTIONS IRREVOCABLE

     The Employer shall have no right, title or interest in the Trust Fund or in
any part thereof, and no contributions made thereto shall revert to the Employer
except such part of the Trust  Fund,  if any,  that  remains  therein  after the
satisfaction of all  liabilities to persons  entitled to benefits under the Plan
and except as provided in the following paragraph.

     All  contributions to the Plan are made subject to the qualification of the
Plan under Section 401 of the Internal  Revenue Code and to their  deductibility
under  Section  404 of said Code.  In the event that (1) the Plan  represents  a
newly  established  retirement  plan  (and  not  an  amendment  of  an  existing
retirement  plan)  with  respect  to an  Employer,  (2) an  application  for the
determination of the qualification of the Plan is made by the time prescribed by
law for filing the Employer's  return for the taxable year in which the Plan was
adopted by such Employer, or by such later date as the Secretary of Treasury may
prescribe,  and  (3)  such  qualification  of the  Plan  is  denied,  the  total
contributions of the Employer,  adjusted for any earnings or losses of the Trust
Fund attributable thereto,  shall be returned to the Employer within one year of
the date of denial of qualification.  In the event that a contribution either is

<PAGE>
                                      6-2


made  by a good  faith  mistake  of fact or is  disallowed  as a tax  deductible
expense under Section 404 of the Internal Revenue Code, the excess of the amount
contributed over either the amount that would have been contributed if there had
not been  such a mistake  or the  amount  that is  allowed  as a tax  deductible
expense, as the case may be, with such excess reduced by the net losses, if any,
of the Trust Fund attributable  thereto (but without any increase due to the net
earnings, if any, of the Trust Fund attributable thereto),  shall be returned to
the  Employer  within  one  year of the  date  of the  mistaken  payment  or the
disallowance of the deduction, as the case may be.

6.3 - FORFEITURES

     Forfeitures shall not be used to increase the benefits that any Participant
would  otherwise  receive under the Plan at any time prior to the termination of
the Plan but shall be anticipated in determining the costs under the Plan.

6.4 - AMENDMENT OF PLAN

     The Plan may be amended from time to time in any respect whatever by formal
action on the part of the Sponsoring Employer in the manner described in Section
6.7 hereof specifying such amendment, subject only to the following limitations:

     (A)  Under no condition shall such amendment result in or permit the return
          or repayment  to any Employer of any property  held or acquired by the
          Trustee  hereunder or the proceeds  thereof or result in or permit the
          distribution of any such property for the benefit of anyone other than
          the Participants and their  Beneficiaries or joint pensioners,  except
          to  the  extent  provided  in  Section  6.2  hereof  with  respect  to
          contributions  that are  returnable  to the Employer  because they are
          made  by a  mistake  of  fact or are  disallowed  as a tax  deductible
          expense under Section 404 of the Internal  Revenue Code or because the
          Plan is denied  qualification  under  Section  401(a) of said Code and
          except to the extent  provided  by Section  4.5 and Section 6.6 hereof
          with   respect   to   termination   of  the  Plan  and   expenses   of
          administration, respectively.

     (B)  Under  no  condition  shall  such  amendment   change  the  duties  or
          responsibilities of the Trustee hereunder without its written consent.

     (C)  No amendment shall be effective to the extent it eliminates or reduces
          any Plan benefits or rights that are protected under Section 411(d)(6)
          of the Internal Revenue Code unless such protected  benefits or rights

<PAGE>
                                      6-3


          are  preserved  with  respect to benefits  accrued to the date of such
          amendment  or  unless  such  reduction  or  elimination  is  otherwise
          permitted by the Internal Revenue Service.

     Except to the extent  permissible to comply with any laws or regulations of
the  United  States or of any state to  qualify  this as a  tax-exempt  plan and
trust,  no  amendment  may be made that would result in a slower rate of vesting
under the Plan for any  Participant  who has  completed  at least three years of
Vesting  Service as of the effective date of such amendment or, if later,  as of
the date such  amendment is adopted,  unless such  amendment  provides that each
such  Participant may elect,  during the period  described  below, to retain the
rate of vesting in effect under the Plan prior to such  amendment in lieu of the
new rate of vesting.  The period  during  which the  election  described  in the
preceding  sentence  may be made  shall  begin no  later  than the date the Plan
amendment  is adopted  and shall end no earlier  than 60 days after (i) the date
the amendment is adopted, (ii) the effective date of such amendment or (iii) the
date the  Participant  is notified in writing of the amendment by the Committee,
whichever is the latest date to occur.

     Subject  to  the   foregoing   limitations,   any  amendment  may  be  made
retroactively which, in the judgment of the Committee, is necessary or advisable
provided that such retroactive amendment does not deprive a Participant, without
his consent,  of a right to receive benefits hereunder which have already vested
and matured in such Participant,  except such modification or amendment as shall
be necessary to comply with any laws or  regulations  of the United States or of
any state to qualify this as a tax-exempt plan and trust.

     The  participation  in the Plan of  Employers  other  than  the  Sponsoring
Employer  shall  not  limit  the  power of the  Sponsoring  Employer  under  the
foregoing provisions,  and all amendments by the Sponsoring Employer to the Plan
shall be binding upon all other Employers. The Sponsoring Employer, on behalf of
an Employer,  may modify the  provisions of the Plan as it pertains only to such
Employer's Employees by the adoption, by formal action on its part in the manner

<PAGE>
                                      6-4


described in Section 6.7 hereof,  of a Supplement  to the Plan  specifying  such
modifications  that shall pertain only to such  Employer's  Employees.  Any such
Supplement to the Plan shall not affect the continued operation of the Plan with
respect to any other Employers.

6.5 - TERMINATION OF PLAN

     The Plan may be terminated by the Sponsoring Employer at any time by formal
action,  in the manner described in Section 6.7 hereof,  specifying (a) that the
Plan is being  terminated and (b) the date as of which the  termination is to be
effective.  In the event the Plan is to be terminated,  the Sponsoring  Employer
shall notify the Committee and the Trustee of such termination.

     The  Plan or  participation  in the Plan may be  terminated  in the  manner
described above with respect to one or more, but less than all, of the Employers
theretofore  parties hereto and the Plan continued for the remaining Employer or
Employers.  The Plan or participation in the Plan shall automatically  terminate
as to a particular  Employer only upon  dissolution of such Employer or upon its
liquidation,  merger  or  consolidation  without  provisions  being  made by its
successor, if any, for the continuation of the Plan.

     In the event of the  liquidation,  dissolution,  merger or consolidation of
the Employer under such  circumstances  that there shall be a successor  person,
firm or corporation  continuing and carrying on all or a substantial part of its
business,  such successor may be substituted for the Employer under the terms of
the Plan by formal action on the part of such successor in the manner  described
in Section 6.7 hereof specifying its election to continue the Plan.

     Any  provisions  herein to the  contrary  notwithstanding,  in the event of
termination of the Plan the following will apply:

     (a)  a disability  retirement benefit shall not be payable on behalf of any
          Participant  whose  service  is  terminated  on or  after  the date of
          termination  of  the  Plan  by  reason  of  his  total  and  permanent
          disability; and

<PAGE>
                                      6-5



     (b)  the death  benefits  provided  under  Sections  2.3(G),  2.4(A)(3) and
          2.4(B) hereof (or under any  Supplements  hereto) shall not be payable
          on behalf of any  Participant  whose death occurs on or after the date
          of termination  of the Plan;  provided,  however,  if the death of the
          Participant occurs after the date of termination of the Plan and prior
          to (i) the date as of which an annuity is  purchased  on his behalf to
          provide  the  benefit  to which  he is  entitled  as a  result  of the
          termination of the Plan or (ii) the date as of which  distribution  is
          made on his behalf in some other manner as a result of the termination
          of the Plan,  as the case may be, the amount  required  to provide the
          distribution to which he is entitled as a result of termination of the
          Plan shall, subject to the provisions hereof relating to the Qualified
          Preretirement  Survivor  Annuity,  be used to provide a benefit to his
          Beneficiary;  and provided  further,  however,  the minimum  qualified
          preretirement  survivor  annuity  required  under  Section  417 of the
          Internal  Revenue  Code  shall  be  provided  on  behalf  of any  such
          Participant who is married and whose death occurs prior to his Annuity
          Starting  Date and on or after the date on which an  annuity  has been
          purchased  to provide  the benefit to which he is entitled as a result
          of termination of the Plan.

6.6 - EXPENSES OF ADMINISTRATION

     The  Employer  may pay  all  expenses  incurred  in the  establishment  and
administration of the Plan,  including expenses and fees of the Trustee,  but it
shall  not be  obligated  to do so,  and any  such  expenses  not so paid by the
Employer shall be paid from the Trust Fund. The Trustee, upon direction from the
Committee,  shall reimburse the Employer for expenses properly and actually paid
by the Employer on behalf of the Plan.

6.7 - FORMAL ACTION BY EMPLOYER

     Any formal action  herein  permitted or required to be taken by an Employer
shall be:

     (a)  if and when a partnership,  by written  instrument  executed by one or
          more of its general  partners or by written  instrument  executed by a
          person  or  group  of  persons  who has  been  authorized  by  written
          instrument  executed  by  one  or  more  general  partners  as  having
          authority to take such action;

     (b)  if and when a proprietorship,  by written  instrument  executed by the
          proprietor or by written  instrument  executed by a person or group of
          persons who has been authorized by written instrument  executed by the
          proprietor as having authority to take such action;

<PAGE>
                                      6-6



     (c)  if and when a corporation,  by resolution of its board of directors or
          other governing board, or by written  instrument  executed by a person
          or group of persons who has been authorized by resolution of its board
          of directors or other governing board as having authority to take such
          action; or

     (d)  if and when a joint venture, by formal action on the part of the joint
          venturers in the manner described above.


<PAGE>

                                       7-1

                                    SECTION 7

                                 ADMINISTRATION


7.1 - ADMINISTRATION BY COMMITTEE

     The Plan will be administered by the Retirement  Committee appointed by the
Sponsoring  Employer  by formal  action on its part in the manner  described  in
Section 6.7 hereof.  Such  Committee will consist of (a) a chairman and at least
two  additional  members or (b) a single  individual.  Each member may, but need
not, be a director,  proprietor,  partner,  officer or employee of any Employer,
and each such member  shall be  appointed  by the  Sponsoring  Employer to serve
until  his  successor  shall be  appointed  in like  manner.  Any  member of the
Committee may resign by delivering  his written  resignation  to the  Sponsoring
Employer and to the other  members,  if any, of the  Committee.  The  Sponsoring
Employer  by formal  action on its part in the manner  described  in Section 6.7
hereof may remove any member of the  Committee  by so  notifying  the member and
other Committee members, if any, in writing. Vacancies on the Committee shall be
filled by formal  action on the part of the  Sponsoring  Employer  in the manner
described in Section 6.7 hereof.

     The  Committee,  in its  discretion,  may  delegate  all or any part of its
responsibilities of administering the provisions of the Plan with respect to any
Employer or group of  Employers  to an  administrative  committee  which will be
appointed  by such  Employer or group of  Employers  by formal  action on its or
their part in the  manner  described  in  Section  6.7  hereof.  In such  event,
references to the "Committee" in any provisions  hereof which apply with respect
to such delegated  responsibilities shall refer to such administrative committee
instead of the Retirement Committee


<PAGE>
                                      7-2


..

7.2 - OFFICERS AND EMPLOYEES OF COMMITTEE

     The Committee may appoint a secretary who may, but need not, be a member of
the Committee  and may employ such agents,  clerical and other  services,  legal
counsel,  accountants  and  actuaries  as may be  required  for the  purpose  of
administering  the Plan.  Any person or firm so employed may be a person or firm
then,  theretofore  or  thereafter  serving the  Employer in any  capacity.  The
Committee and any individual member of the Committee and any agent thereof shall
be fully  protected  when relying in good faith upon the advice of the following
professional  consultants or advisors employed by the Employer or the Committee:
any  attorney  insofar as legal  matters are  concerned,  any  certified  public
accountant  insofar as accounting matters are concerned and any enrolled actuary
insofar as actuarial matters are concerned.

7.3 - ACTION BY COMMITTEE

         A majority of the members of the Committee shall constitute a quorum
for the transaction of business and shall have full power to act hereunder. The
Committee may act either at a meeting at which a quorum is present or by a
writing subscribed by at least a majority of the members of the Committee then
serving. Any written memorandum signed by the secretary or any member of the
Committee who has been authorized to act on behalf of the Committee shall have
the same force and effect as a formal resolution adopted in open meeting.
Minutes of all meetings of the Committee and a record of any action taken by the
Committee shall be kept in written form by the secretary appointed by the
Committee or, if no secretary has been appointed by the Committee, by an
individual member of the Committee. The Committee shall give to the Trustee any
order, direction, consent or advice required under the terms of the Trust
Agreement, and the Trustee shall be entitled to rely on any instrument delivered
to it and signed by the secretary or any authorized member of the Committee as
evidencing the action of the Committee.

<PAGE>
                                      7-3



     A member of the Committee  may not vote or decide upon any matter  relating
solely to himself or vote in any case in which his individual  right or claim to
any benefit under the Plan is  particularly  involved.  If, in any case in which
any Committee  member is so  disqualified  to act, the remaining  members cannot
agree or if there is only one individual member of the Committee, the Sponsoring
Employer,  by formal  action on its part in the manner  described in Section 6.7
hereof, will appoint a temporary substitute member to exercise all of the powers
of a qualified member concerning the matter in which the disqualified  member is
not qualified to act.

7.4 - RULES AND REGULATIONS OF COMMITTEE

     The Committee  shall have the authority to make such rules and  regulations
and to take such action as may be necessary to carry out the  provisions  of the
Plan and will,  subject to the  provisions  of the Plan,  decide  any  questions
arising in the administration, interpretation and application of the Plan, which
decisions  shall be  conclusive  and binding on all parties.  The  Committee may
allocate or delegate any part of its authority and duties as it deems expedient.

7.5 - POWERS OF COMMITTEE

     In order to effectuate the purposes of the Plan,  the Committee  shall have
the full power and authority to construe and interpret any and all provisions of
the Plan, to reconcile any  inconsistencies  and resolve any  ambiguities in the
terms of the Plan and to make equitable  adjustments  for any mistakes or errors
made in the  administration  of the Plan, and all such actions or determinations
made by the  Committee  in good faith  shall not be subject to review by anyone.
The Committee shall have the power to appoint,  in its  discretion,  one or more
Investment Managers to manage, including the power to acquire or dispose of, all
or any portion of the assets of the Plan and Trust  Fund.  The  Committee  shall
also  have the  power to serve as paying  agent  for the  Trust  Fund,  if it so
desires, or to appoint, in its discretion,  a paying agent or agents to disburse
the benefits payable from the Trust Fund and to authorize and direct the Trustee

<PAGE>
                                      7-4


to make  distribution  to the  Committee as paying agent or to such other paying
agent as the Committee shall direct in writing.

7.6 - DUTIES OF COMMITTEE

     The  Committee  shall,  as a part  of its  general  duty to  supervise  and
administer the Plan:

     (A)  determine  all  facts  and  maintain   records  with  respect  to  any
          Employee's age, amount of  Compensation,  length of service,  Hours of
          Service,  Vesting  Service,  Credited  Service  and  date  of  initial
          coverage under the Plan, and by application of the facts so determined
          and any other facts deemed material,  determine the amount, if any, of
          benefit payable under the Plan on behalf of a Participant;

     (B)  establish,  carry out and  periodically  review a funding  policy  and
          method  consistent  with the objectives of the Plan and the applicable
          lawful  requirements  of  Title I of the  Employee  Retirement  Income
          Security Act of 1974; provided, however, that any decisions pertaining
          to the amount and timing of contributions by the Employer to the Trust
          Fund are delegated to the Employer;

     (C)  give the Trustee specific directions in writing with respect to:

          (1)  the  making of  distribution  payments,  giving  the names of the
               payees,  the  amounts  to be paid  and the  time  or  times  when
               payments shall be made; and

          (2)  the making of any other  payments which the Trustee is not by the
               terms  of the  Trust  Agreement  authorized  to  make  without  a
               direction in writing of the Committee;

     (D)  furnish  the  Trustee  with such  information  (including  information
          relative to the  liquidity  needs of the Plan) as is deemed  necessary
          for the Trustee to carry out the purposes of the Trust Agreement;

     (E)  comply  with  all   applicable   lawful   reporting   and   disclosure
          requirements of the Employee Retirement Income Security Act of 1974;

     (F)  comply (or transfer responsibility for compliance to the Trustee) with
          all  applicable  Federal  income  tax  withholding   requirements  for
          distribution   payments   imposed   by  the  Tax   Equity  and  Fiscal
          Responsibility Act of 1982;

<PAGE>
                                      7-5



     (G)  engage on behalf of all Plan  Participants  an  independent  qualified
          public  accountant  to  examine  the  financial  statements  and other
          records of the Plan for the purposes of an annual audit and opinion as
          to whether the financial statements and schedules in the annual report
          of the Plan are presented fairly in conformity with generally accepted
          accounting principles, unless such audit is waived by the Secretary of
          Labor or his delegate or unless such audit is otherwise  not required;
          and

     (H)  engage on behalf  of all Plan  Participants  an  enrolled  actuary  to
          prepare  required  actuarial  statements,  unless this  requirement is
          waived  by the  Secretary  of Labor or his  delegate  or  unless  such
          actuarial statements are otherwise not required.

     The foregoing list of express duties is not intended to be either  complete
or conclusive, and the Committee shall, in addition,  exercise such other powers
and perform such other duties as it may deem necessary,  desirable, advisable or
proper for the supervision and administration of the Plan.

7.7 - INDEMNIFICATION OF CERTAIN FIDUCIARIES

     To the extent not covered by  insurance or if there is a failure to provide
full  insurance  coverage  for any reason and to the  extent  permissible  under
corporate by-laws and other applicable laws and regulations, the Employers agree
to hold harmless and indemnify the members of the Committee  against any and all
claims and causes of action by or on behalf of any and all  parties  whomsoever,
and all losses therefrom,  including,  without limitation,  costs of defense and
attorneys' fees, based upon or arising out of any act or omission relating to or
in connection with the Plan and Trust Agreement other than losses resulting from
any such person's fraud or willful misconduct.

7.8 - ACTUARY

     The actuary will do such  technical  and advisory  work as the Committee or
the Employer may request,  including analysis of the experience of the Plan from
time to time, the preparation of actuarial tables for the making of computations
thereunder,  and the submission of actuarial reports to the Sponsoring  Employer
or the Committee, which reports shall contain an actuarial valuation showing the
financial  condition of the Plan, a statement of the contributions to be made by

<PAGE>
                                      7-6


the Employers and such other  information  as may be required by the  Committee.
The  actuary  shall be  appointed  by the  Committee  with the  approval  of the
Sponsoring  Employer to serve as long as it is agreeable to the  Committee,  the
Sponsoring Employer and the actuary.

7.9 - FIDUCIARIES

     The Trustee is the named  fiduciary  hereunder  with respect to the powers,
duties  and  responsibilities  of  investment  of the Trust  Fund;  the board of
directors of the Sponsoring  Employer is the named fiduciary with respect to the
powers,  duties and the  responsibilities  of (a)  appointing the members of the
Committee  in the manner set out in  Section  7.1  hereof,  (b)  appointing  the
Trustee or Trustees in the manner set out in the Trust  Agreement,  (c) amending
and terminating the Plan and Trust in accordance with the provisions of the Plan
and Trust Agreement and (d) reviewing  annually the annual report of the Trustee
and the  activities  of the Trustee,  any  Investment  Manager and the Committee
relating  to the Plan in order to  determine  whether any  replacement  of those
persons is  necessary;  and the Committee is the plan  administrator  and is the
named  fiduciary  hereunder  with  respect  to  the  other  powers,  duties  and
responsibilities  of the  administration of the Plan;  provided,  however,  that
certain powers,  duties and  responsibilities  of each of said named fiduciaries
are specifically  delegated to others under the provisions of the Plan and Trust
Agreement,  and other powers, duties and responsibilities of any fiduciaries may
be delegated by written  agreement to others to the extent  permitted  under the
provisions of the Plan and Trust Agreement.

     The powers and duties of each fiduciary  hereunder,  whether or not a named
fiduciary,  shall be limited  to those  specifically  delegated  to each of them
under  the  terms of the Plan  and  Trust  Agreement.  It is  intended  that the
provisions  of the Plan and  Trust  Agreement  allocate  to each  fiduciary  the
individual  responsibilities for the prudent execution of the functions assigned
to  each  fiduciary.  None  of  the  allocated  responsibilities  or  any  other
responsibilities  shall be shared by two or more fiduciaries unless such sharing

<PAGE>
                                      7-7


shall be provided by a specific provision in the Plan or the Trust Agreement. If
any of the enumerated responsibilities of a fiduciary are specifically waived by
the  Secretary of Labor,  then such  enumerated  responsibilities  shall also be
deemed to be waived for the purposes of the Plan and Trust  Agreement.  Whenever
one  fiduciary  is  required  by the Plan or the Trust  Agreement  to follow the
directions of another fiduciary, the two fiduciaries shall not be deemed to have
been  assigned  a share of any  responsibility,  but the  responsibility  of the
fiduciary  giving the directions  shall be deemed to be his sole  responsibility
and the  responsibility of the fiduciary  receiving those directions shall be to
follow  same  insofar  as such  instructions  on  their  face are  proper  under
applicable  law. Any  fiduciary  may employ one or more persons to render advice
with respect to any  responsibility  such  fiduciary has under the Plan or Trust
Agreement.

     Each  fiduciary  may,  but need not,  be a director,  proprietor,  partner,
officer or employee of the  Employer.  Nothing in the Plan shall be construed to
prohibit any fiduciary from:

          (a)  serving in more than one  fiduciary  capacity with respect to the
               Plan and Trust Agreement;

          (b)  receiving   any  benefit  to  which  he  may  be  entitled  as  a
               Participant or Beneficiary in the Plan, so long as the benefit is
               computed and paid on a basis that is consistent with the terms of
               the Plan as applied to all other  Participants and Beneficiaries;
               or

          (c)  receiving any reasonable  compensation for services rendered,  or
               for the  reimbursement of expenses properly and actually incurred
               in the performance of his duties with respect to the Plan, except
               that no person so serving who already receives full-time pay from
               an Employer shall receive  compensation from the Plan, except for
               reimbursement of expenses properly and actually incurred.

     Each fiduciary  shall be bonded as required by applicable law or statute of
the United States, or of any state having appropriate jurisdiction,  unless such

<PAGE>
                                      7-8


bond may  under  such law or  statute  be  waived  by the  parties  to the Trust
Agreement.  The Employer  shall pay the cost of bonding any  fiduciary who is an
employee of the Employer.

7.10 - APPLICABLE LAW

     The Plan will,  unless superseded by federal law, be construed and enforced
according  to the laws of the State of  Texas,  and all  provisions  of the Plan
will, unless superseded by federal law, be administered according to the laws of
the said state.


<PAGE>

                                       8-1

                                    SECTION 8

                                   TRUST FUND


8.1 - PURPOSE OF TRUST FUND

     The Trust Fund has been created and will be maintained  for the purposes of
the Plan, and the moneys  thereof will be invested in accordance  with the terms
of the agreement and  declaration  of trust which forms a part of the Plan.  All
contributions  will be paid into the Trust Fund, and all benefits under the Plan
will be paid from the Trust Fund,  except to the extent  provided by Section 3.5
hereof.

8.2 - BENEFITS SUPPORTED ONLY BY TRUST FUND

     Subject to applicable  provisions of law, any person having any claim under
the Plan will look solely to the assets of the Trust Fund for satisfaction.

8.3 - TRUST FUND APPLICABLE ONLY TO PAYMENT OF BENEFITS

     The  Trust  Fund  will be used  and  applied  only in  accordance  with the
provisions  of the Plan,  to provide the  benefits  thereof,  and no part of the
corpus or income of the Trust Fund will be used for,  or diverted  to,  purposes
other  than  for  the  exclusive  benefit  of  Participants  and  other  persons
thereunder  entitled to benefits,  except to the extent  provided in Section 6.2
hereof with respect to contributions that are returnable to the Employer because
they are made by a mistake of fact or are disallowed as a tax deductible expense
under  Section 404 of the  Internal  Revenue  Code or because the Plan is denied
qualification  under  Section  401(a)  of said  Code and  except  to the  extent
provided in Section 4.5 and Section 6.6 hereof with  respect to  termination  of
the Plan and expenses of administration, respectively.


<PAGE>





                                       9-1

     IN  WITNESS  WHEREOF,  CAPITAL  SOUTHWEST  CORPORATION,  CAPITAL  SOUTHWEST
MANAGEMENT CORPORATION, JET-LUBE, INC., THE RECTORSEAL CORPORATION, THE WHITMORE
MANUFACTURING  COMPANY,  SMOKE GUARD, INC. and BLUE MAGIC, INC. have caused this
instrument to be executed by their duly authorized officers on this _____ day of
_________________, 20____, effective as of April 1, 2006.

                                       CAPITAL SOUTHWEST CORPORATION


                                       By

                                       Title:

                                       CAPITAL SOUTHWEST MANAGEMENT CORPORATION


                                       By

                                       Title:

                                       JET LUBE, INC.


                                       By

                                       Title:

                                       THE RECTORSEAL CORPORATION


                                       By

                                       Title:



<PAGE>
                                       9-2


                                       THE WHITMORE MANUFACTURING COMPANY


                                       By

                                       Title:

                                       SMOKE GUARD, INC.


                                       By

                                       Title:

                                       BLUE MAGIC, INC.


                                       By

                                       Title:








<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>5
<FILENAME>capital10kex131033107.txt
<TEXT>


                                                                    Exhibit 13.1


                   Twelve Largest Investments - March 31, 2007


================================================================================
Heelys, Inc.                                                        $195,664,000
- --------------------------------------------------------------------------------

     Heelys,  Inc.,  Carrollton,  Texas,  manufacturers  and  markets  specialty
stealth skate footwear,  equipment and apparel under the brand name Heelys.  The
company  manufactures  its  products  in China and Korea  and  distributes  them
through  domestic  and  international  sporting  goods  chains,  department  and
lifestyle stores and specialty footwear retailers.

     During the year ended  December  31,  2006,  Heelys  reported net income of
$29,174,000  ($1.16 per share) on net sales of  $188,208,000,  compared with net
income of  $4,347,000  ($0.17  per  share) on net  sales of  $43,950,000  in the
previous  year. The March 30, 2007 closing Nasdaq market price of Heely's common
stock was $29.34 per share.

     At March 31, 2007, the $102,490 investment in Heelys by Capital Southwest's
subsidiary  was  valued  at  $195,664,000  ($21.00  per  share),  consisting  of
9,317,310 restricted shares of common stock, representing a fully-diluted equity
interest of 31.8%.

================================================================================
The RectorSeal Corporation                                           $98,000,000
- --------------------------------------------------------------------------------

     The RectorSeal  Corporation,  Houston, Texas, with facilities in Texas, New
York and Idaho,  manufactures  specialty chemical products including pipe thread
sealants,   firestop  sealants,  plastic  cements  and  other  formulations  for
plumbing, HVAC, electrical and industrial  applications.  The company also makes
special tools for plumbers and systems for containing smoke from building fires.
RectorSeal's  subsidiary,  Jet-Lube,  Inc.,  with  plants in Texas,  England and
Canada,  produces anti-seize compounds,  specialty lubricants and other products
used in industrial and oil field  applications.  Another subsidiary produces and
sells automotive  chemical products.  RectorSeal also owns a 20% equity interest
in The Whitmore Manufacturing Company (described on page 9).

     During the year ended March 31,  2007,  RectorSeal  earned  $10,381,000  on
revenues of  $103,922,000,  compared  with earnings of $8,655,000 on revenues of
$95,060,000 in the previous year.  RectorSeal's  earnings do not reflect its 20%
equity in The Whitmore Manufacturing Company.

     At March 31, 2007,  Capital  Southwest  owned 100% of  RectorSeal's  common
stock having a cost of $52,600 and a value of $98,000,000.

================================================================================
Palm Harbor Homes, Inc.                                              $70,696,000
- --------------------------------------------------------------------------------

     Palm  Harbor  Homes,  Dallas,  Texas,  is an  integrated  manufacturer  and
retailer of manufactured  and modular housing  produced in 14 plants and sold in
27  states  by  107  company-owned  retail  stores  and  builder  locations  and
approximately  350 independent  dealers,  builders and  developers.  The company
provides financing through its 80% owned subsidiary,  CountryPlace Mortgage, and
sells  insurance  through  its  subsidiary,  Standard  Casualty.  Palm  Harbor's
traditional  manufactured  homes and its upscale  modular  homes are designed to
meet the need for attractive, affordable housing.

     During the year ended March 30,  2007,  Palm Harbor  reported a net loss of
$11,565,000  ($0.51 per share) on net sales of  $661,247,000,  compared with net
income of  $11,114,000  ($0.49  per share) on net sales of  $710,635,000  in the
previous  year.  The March 30, 2007 closing Nasdaq market price of Palm Harbor's
common stock was $14.34 per share.

     At March 31, 2007,  the  $10,931,955  investment  in Palm Harbor by Capital
Southwest  and its  subsidiary  was valued at  $70,696,000  ($9.00  per  share),
consisting  of  7,855,121  restricted  shares of common  stock,  representing  a
fully-diluted equity interest of 30.5%.

================================================================================
Encore Wire Corporation                                              $69,475,000
- --------------------------------------------------------------------------------

     Encore Wire  Corporation,  McKinney,  Texas,  manufactures  a broad line of
copper  electrical  building  wire and cable  including  non-metallic  sheathed,
underground  feeder  and  THHN  wire  and  cable  and  also  armored  cable  for
residential,  commercial and industrial construction. Encore's products are sold
through large-volume distributors and building materials retailers.


                                       1
<PAGE>

     For the year  ended  December  31,  2006,  Encore  reported  net  income of
$115,133,000 ($4.86 per share) on net sales of $1,249,330,000, compared with net
income of  $50,079,000  ($2.13  per share) on net sales of  $758,089,000  in the
previous year.  The March 30, 2007 closing  Nasdaq bid price of Encore's  common
stock was $25.29 per share.

     At March  31,  2007,  the  $5,800,000  investment  in  4,086,750  shares of
Encore's  restricted  common stock by Capital  Southwest and its  subsidiary was
valued at $69,475,000  ($17.00 per share),  representing a fully-diluted  equity
interest of 16.9%.

================================================================================
Alamo Group Inc.                                                     $47,962,000
- --------------------------------------------------------------------------------

     Alamo Group Inc.,  Sequin,  Texas, is a leading designer,  manufacturer and
distributor of heavy-duty, tractor and truck mounted mowing and other vegetation
maintenance  equipment,  mobile  excavators,  street-sweeping  and snow  removal
equipment  and  replacement  parts.  Founded in 1969,  Alamo  Group  operates 16
manufacturing  facilities and serves  governmental,  industrial and agricultural
markets in North America, Europe, and Australia.

     For the year  ended  December  31,  2006,  Alamo  reported  net  income  of
$11,488,000  ($1.16 per share) on net sales of  $456,494,000,  compared with net
income of  $11,291,000  ($1.14  per share) on net sales of  $368,110,000  in the
previous  year.  The March 30, 2007 closing NYSE market price of Alamo's  common
stock was $23.21 per share.

     At March 31, 2007, the $2,065,047  investment in Alamo by Capital Southwest
and its subsidiary was valued at $47,962,000  ($17.00 per share),  consisting of
2,821,300 restricted shares of common stock, representing a fully-diluted equity
interest of 26.2%.

================================================================================
Media Recovery, Inc.                                                 $45,000,000
- --------------------------------------------------------------------------------

     Media Recovery,  Inc.,  Dallas,  Texas,  provides  datacenter  supplies and
services to corporate  customers  through its direct sales force. Its Shockwatch
division manufactures monitoring devices used to detect mishandled shipments and
devices for monitoring material handling equipment. Media Recovery's subsidiary,
The Damage Prevention Company, Denver,  Colorado,  manufactures dunnage products
used to prevent damage in trucking, rail and export container shipments.

     During the year ended  September  30,  2006,  Media  Recovery  reported net
income of $5,164,000 on net sales of  $137,040,000,  compared with net income of
$5,028,000 on net sales of $142,574,000 in the previous year.

     At March 31, 2007, the  $5,415,000  investment in Media Recovery by Capital
Southwest and its  subsidiary was valued at  $45,000,000,  consisting of 800,000
shares of Series A convertible  preferred  stock and 4,000,000  shares of common
stock, representing a fully-diluted equity interest of 96.5%.

================================================================================
Lifemark Group                                                       $40,000,000
- --------------------------------------------------------------------------------

     Lifemark  Group,  Hayward,   California,   owns  and  operates  cemeteries,
mausoleums  and  mortuaries.   Lifemark's  operations,   all  of  which  are  in
California,  include a major cemetery and funeral home in San Mateo, a mausoleum
and an adjacent mortuary in Oakland and cemeteries, mausoleums and mortuaries in
Hayward and Sacramento.  The company also owns a funeral home in San Bruno.  Its
funeral  and  cemetery  trusts  enable  Lifemark's   clients  to  make  pre-need
arrangements. The company's assets also include excess real estate holdings.

     For the fiscal year ended March 31,  2007,  Lifemark  reported  earnings of
$2,239,000 on revenues of  $28,727,000,  compared with earnings of $2,457,000 on
revenues of $27,178,000 in the previous year.

     At March 31, 2007,  Capital Southwest owned 100% of Lifemark Group's common
stock, which had a cost of $4,510,400 and was valued at $40,000,000.

================================================================================
The Whitmore Manufacturing Company                                   $26,000,000
- --------------------------------------------------------------------------------

     The Whitmore Manufacturing Company, Rockwall, Texas, manufactures specialty
lubricants  for heavy  equipment  used in surface  mining,  railroads  and other
industries,  and produces  water-based  coatings for the  automotive and primary
metals   industries.   Whitmore's  Air  Sentry   division   manufactures   fluid
contamination  control  devices.  The  company's  assets  also  include  several
commercial real estate tracts.

     During the year  ended  March 31,  2007,  Whitmore  reported  net income of
$2,848,000 on net sales of  $20,863,000,  compared with net income of $1,776,000
on net sales of  $18,010,000  in the previous  year. The company is owned 80% by
Capital  Southwest and 20% by Capital  Southwest's  subsidiary,  The  RectorSeal
Corporation (described on page 8).

                                       2
<PAGE>


     At March 31,  2007,  the direct  investment  in 80% of  Whitmore by Capital
Southwest was valued at $26,000,000 and had a cost of $1,600,000.

================================================================================
Hologic, Inc.                                                        $18,228,380
- --------------------------------------------------------------------------------

     Hologic, Inc., Bedford, Massachusetts, is a leading developer, manufacturer
and  supplier of bone  densitometers,  mammography  and breast  biopsy  devices,
direct-to-digital  x-ray  systems and other x-ray based imaging  systems.  These
products  are  generally  targeted  to address  women's  healthcare  and general
radiographic applications.

     For the year ended  September  30,  2006,  Hologic  reported  net income of
$27,423,000  ($0.56 per share) on net sales of  $462,680,000,  compared with net
income of  $28,256,000  ($0.63  per share) on net sales of  $287,684,000  in the
previous year.  The March 30, 2007 closing Nasdaq bid price of Hologic's  common
stock was $57.61 per share.

     At March 31, 2007,  Capital  Southwest  and its  subsidiary  owned  316,410
unrestricted  shares of common  stock,  having a cost of  $220,000  and a market
value of $18,228,380 ($57.61 per share).

================================================================================
Texas Capital Bancshares, Inc.                                       $10,013,465
- --------------------------------------------------------------------------------

     Texas Capital Bancshares,  Inc. of Dallas, Texas, formed in 1998, has total
assets of approximately $3.7 billion. With branch banks in Austin,  Dallas, Fort
Worth,  Houston,  Plano and San Antonio,  Texas Capital Bancshares  conducts its
business through its subsidiary,  Texas Capital Bank, N.A., which targets middle
market  commercial and wealthy private client customers in Texas. In 2006, Texas
Capital  Bancshares  sponsored the formation of BankCap  Partners Fund I, a $109
million partnership organized to finance and launch other regional banks similar
to Texas Capital Bancshares.

     For the year ended December 31, 2006,  Texas Capital reported net income of
$28,924,000  ($1.09 per share),  compared with net income of $27,192,000  ($1.02
per share) in the previous  year. The March 30, 2007 closing Nasdaq bid price of
Texas Capital's common stock was $20.45 per share.

     At March 31, 2007, Capital Southwest owned 489,656  unrestricted  shares of
common  stock,  having a cost of  $3,550,006  and a market value of  $10,013,465
($20.45 per share).

================================================================================
PETsMART, Inc.                                                        $9,885,000
- --------------------------------------------------------------------------------

     PETsMART,  Inc.,  Phoenix,  Arizona,  is the largest specialty  retailer of
services and solutions for the lifetime needs of pets. The company operates more
than 928 pet  superstores  in the United States and Canada,  many of which offer
pet grooming services,  operate PETsHOTELS and house veterinary  clinics.  It is
also a direct  marketer of pet products  through its e-commerce site and its pet
and equine catalog businesses.

     For the year ended January 28, 2007, PETsMART,  Inc. reported net income of
$185,069,000 ($1.33 per share) on net sales of $4.234 billion, compared with net
income of  $182,490,000  ($1.25 per share) on net sales of $3.760 billion in the
previous year. The March 30, 2007 closing Nasdaq bid price of PETsMART's  common
stock was $32.95 per share.

     At March 31, 2007,  Capital  Southwest  and its  subsidiary  owned  300,000
unrestricted  shares of common stock,  having a cost of $1,318,771  and a market
value of $9,885,000 ($32.95 per share).

================================================================================
Extreme International, Inc.                                           $7,273,000
- --------------------------------------------------------------------------------

     Extreme   International,   Inc.,  Sugar  Land,   Texas,   owns  Bill  Young
Productions,  Texas Video and Post,  and Extreme  Communications,  which produce
radio and television commercials and corporate communications videos.

     During the year ended  September 30, 2006,  Extreme  reported net income of
$1,202,723 on net sales of $10,342,478,  compared with net income of $817,121 on
net sales of $8,688,545 in the previous year.

     At March 31, 2007,  Capital  Southwest and its subsidiary  owned  39,359.18
shares of Series C  convertible  preferred  stock,  3,750  shares of 8% Series A
convertible  preferred  stock and warrants to purchase  13,035  shares of common
stock at $25 per  share,  having  a cost of  $3,000,000  and a  market  value of
$7,273,000, representing a fully-diluted equity interest of 53.3%.



                                       3
<PAGE>



<TABLE>
<CAPTION>

                    Portfolio of Investments - March 31, 2007

         Company                                     Equity (a)        Investment (b)                      Cost           Value (c)
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>                                 <C>              <C>

+AT&T, INC.                                              <1%       ++20,770 shares common stock
   San Antonio, Texas                                                (acquired 3-9-99)                 $        12      $    818,961
   Global leader in local, long distance,
   Internet and transaction- based voice
   and data services.
- ------------------------------------------------------------------------------------------------------------------------------------
+ALAMO GROUP INC.                                      26.2%       2,821,300 shares common stock
   Seguin, Texas                                                     (acquired 4-1-73 thru 10-4-99)      2,065,047        47,962.000
   Tractor-mounted mowing and mobile excavation
   equipment for governmental, industrial and
   agricultural markets; street-sweeping
   equipment for municipalities.
- ------------------------------------------------------------------------------------------------------------------------------------
ALL COMPONENTS, INC.                                   57.0%       10% subordinated  note due 2008
   Addison, Texas                                                    (acquired 10-28-03 thru 10-3-05)    3,000,000         3,000,000
   Electronics contract manufacturing; distribution                150,000 shares Series A convertible
   and production of memory and other components for                 preferred stock, convertible
   computer manufacturers, retailers and value-added                 into 600,000 shares of common
   resellers.                                                        stock at $0.25 per share
                                                                     (acquired 9-16-94)                    150,000         1,000,000
                                                                                                       -----------      ------------
                                                                                                         3,150,000         4,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
+ALLTEL CORPORATION                                      <1%       ++8,880 shares common stock
   Little Rock, Arkansas                                             (acquired 7-1-98)                      88,699           550,560
   Owner and operator of the nation's
   largest wireless network.
- ------------------------------------------------------------------------------------------------------------------------------------
BALCO, INC.                                            88.5%       445,000 shares common stock and
   Wichita, Kansas                                                   60,920 shares Class B non-voting
   Specialty architectural products used                             common stock (acquired 10-25-83
   in the construction and remodeling of                             and 5-30-02)                          624,920         2,500,000
   commercial and institutional buildings
- ------------------------------------------------------------------------------------------------------------------------------------
BOXX TECHNOLOGIES, INC.                                15.2%       3,125,354 shares Series B
   Austin, Texas                                                     convertible preferred stock,
   Workstations for computer graphics                                convertible into 3,125,354
   imaging and design.                                               shares of common stock at
                                                                     $0.50 per share (acquired
                                                                     8-20-99 thru 8-8-01)                1,500,000           300,000
- ------------------------------------------------------------------------------------------------------------------------------------
CMI HOLDING COMPANY, INC.                              18.2%       10% convertible subordinated
   Richardson, Texas                                                 notes, convertible into
   Owns Chase Medical, which develops                                720,350 shares of common
   and sells devices used in cardiac                                 stock at $1.32 per share,
   surgery to relieve congestive heart                               due 2007 (acquired 4-16-04
   failure; develops and supports cardiac                            thru 12-17-04)                        750,000           750,000
   imaging systems.                                                2,327,658 shares Series A
                                                                     convertible preferred stock,
                                                                     convertible into 2,327,658
                                                                     shares of common stock at
                                                                     $1.72 per share (acquired
                                                                     8-21-02 and 6-4-03)                 4,000,000         2,000,000
                                                                   Warrants to purchase 109,012
                                                                     shares of common stock at
                                                                     $1.72 per share, expiring
                                                                     2012 (acquired 4-16-04)                  --                --
                                                                                                       -----------      ------------
                                                                                                         4,750,000         2,750,000
- ------------------------------------------------------------------------------------------------------------------------------------
+Publicly-owned company                                            ++Unrestricted securities as defined in Note (b)





                                       4
<PAGE>



         Company                                     Equity (a)        Investment (b)                      Cost           Value (c)
- ------------------------------------------------------------------------------------------------------------------------------------
+COMCAST CORPORATION                                     <1%       ++64,656 shares common
   Philadelphia, Pennsylvania                                        stock (acquired 11-18-02)         $        21      $  1,675,884
   Leading provider of cable, entertainment and
   communications products and services.
- ------------------------------------------------------------------------------------------------------------------------------------
DENNIS TOOL COMPANY                                    67.4%       20,725 shares 5%
   Houston, Texas                                                    convertible preferred
   Polycrystalline diamond compacts (PDCs)                           stock, convertible into
   used in oil field drill bits and in                               20,725 shares of common
   mining and industrial applications.                               stock at $48.25 per share
                                                                     (acquired 8-10-98 )                   999,981           999,981
                                                                   140,137 shares common stock
                                                                     (acquired 3-7-94
                                                                     and 8-10-98)                        2,329,963                 2
                                                                                                       -----------      ------------
                                                                                                         3,329,944           999,983
- ------------------------------------------------------------------------------------------------------------------------------------
+DISCOVERY HOLDING COMPANY                               <1%       ++70,501 shares Series A
   Englewood, Colorado                                               common stock (acquired
   Provider of creative content, media                               7-21-05)                               20,262         1,347,274
   management and network services worldwide.
- ------------------------------------------------------------------------------------------------------------------------------------
+EMBARK CORPORATION                                      <1%       ++4,500 shares common
   Overland Park, Kansas                                             stock (acquired 5-17-06)               46,532           253,575
   Local exchange carrier that provides
   voice and data services, including
   high-speed Internet.

- ------------------------------------------------------------------------------------------------------------------------------------
+ENCORE WIRE CORPORATION                               16.9%       4,086,750 shares common stock
   McKinney, Texas                                                   (acquired 7-16-92 thru
   Electric wire and cable for residential                           10-7-98)                            5,800,000        69,475,000
   and commercial use.
- ------------------------------------------------------------------------------------------------------------------------------------
EXTREME INTERNATIONAL, INC.                            53.3%       39,359.18 shares Series C
   Sugar Land, Texas                                                 convertible preferred stock,
   Owns Bill Young Productions, Texas Video                          convertible into 157,436.72
   and Post, and Extreme Communications, which                       shares of common stock at
   produce radio and television commercials and                      $25.00 per share (acquired
   corporate communications videos.                                  9-30-03)                            2,625,000         6,449,000
                                                                   3,750 shares 8% Series A
                                                                     convertible preferred stock,
                                                                     convertible into 15,000 shares
                                                                     of common stock at $25.00
                                                                     per share (acquired 9-30-03)          375,000           614,000
                                                                   Warrants to purchase 13,035 shares
                                                                     of common stock at $25.00 per
                                                                     share, expiring 2008 (acquired
                                                                     8-11-98 thru 9-30-03)                    --             210,000
                                                                                                       -----------      ------------
                                                                                                         3,000,000         7,273,000

- ------------------------------------------------------------------------------------------------------------------------------------
+FMC CORPORATION                                         <1%       ++6,430 shares common stock
   Philadelphia, Pennsylvania                                        (acquired 6-6-86)                      66,726           485,015
   Chemicals for agricultural, industrial and
   consumer markets.
- ------------------------------------------------------------------------------------------------------------------------------------
+FMC TECHNOLOGIES, INC.                                  <1%       ++11,057 shares common stock
   Houston, Texas                                                    (acquired 1-2-02)                      57,051           771,336
   Equipment and systems for the energy, food
   processing and air transportation industries.

- ------------------------------------------------------------------------------------------------------------------------------------
+Publicly-owned company                                            ++Unrestricted securities as defined in Note (b)





                                       5
<PAGE>



         Company                                     Equity (a)        Investment (b)                      Cost           Value (c)
- ------------------------------------------------------------------------------------------------------------------------------------
+HEELYS, INC.                                          31.8%       9,317,310 shares common             $   102,490     $ 195,664,000
   Carrollton, Texas                                               stock (acquire 5-26-00)
   Heelys stealth skate shoes, equipment
   and apparel sold through sporting
   goods chains, department stores and
   footwear retailers

- ------------------------------------------------------------------------------------------------------------------------------------
HIC-STAR CORPORATION                                   34.9%       10% subordinated note due
   Dallas,Texas                                                     2007 (acquired 10-19-04
   Holding company previously engaged in                            and 1-13-05)                          352,646              --
   mortgage banking operations, which have                         12% subordinated notes due
   now been sold.                                                    2008 (acquired 3-25-05
                                                                     thru 2-27-06)                         717,523           354,738
                                                                   12% demand note (acquired 12-15-06)       4,500             4,500
                                                                   Warrants to purchase 463,162
                                                                     shares of Series A common
                                                                     stock at $1.00 per share,
                                                                     expiring 2014 (acquired
                                                                     3-31-04 thru 1-13-05)                   --                 --
                                                                                                       -----------      ------------
                                                                                                        1,074,669            359,238
- ------------------------------------------------------------------------------------------------------------------------------------
+HOLOGIC, INC.                                           <1%       ++316,410 shares common stock
   Bedford, Massachusetts                                            (acquired 8-27-99)                    220,000        18,228,380
   Medical instruments including bone
   densitometers, mammography devices and digital
   radiography systems.
- ------------------------------------------------------------------------------------------------------------------------------------
+KIMBERLY-CLARK CORPORATION                              <1%       ++77,180 shares common stock
   Dallas, Texas                                                   (acquired 12-18-97)                   2,358,518         5,286,058
   Manufacturer of tissue, personal care and
   health care products.
- ------------------------------------------------------------------------------------------------------------------------------------
+LIBERTY GLOBAL, INC.                                    <1%       ++42,463 shares Series A common
   Englewood, Colorado                                               stock (acquired 6-15-05)              106,553         1,397,033
   Owns interests in broadband, distribution                       ++42,463 shares Series C common
   and content companies.                                            stock (acquired 9-6-05)               100,870         1,299,368
                                                                                                       -----------      ------------
                                                                                                           207,423         2,696,401
- ------------------------------------------------------------------------------------------------------------------------------------
+LIBERTY MEDIA CORPORATION                               <1%       ++35,250 shares Liberty Capital
   Englewood, Colorado                                               Series A common stock
   Holding company owning interests in electronic                    (acquired 5-9-06)                      51,829         3,897,593
   retailing, media, communications and entertainment              ++176,252 share Liberty Interactive
   businesses.                                                       Series A common stock
                                                                     (acquired 5-9-06)                      66,424         4,196,560
                                                                                                       -----------      ------------
                                                                                                           118,253         8,094,153
- ------------------------------------------------------------------------------------------------------------------------------------
LIFEMARK GROUP                                        100.0%       1,449,026 shares common stock
   Hayward, California                                               (acquired 7-16-69)                  4,510,400        40,000,000
   Cemeteries, mausoleums and mortuaries located
   in northern California.
- ------------------------------------------------------------------------------------------------------------------------------------
+Publicly-owned company                                            ++Unrestricted securities as defined in Note (b)






                                       6
<PAGE>



         Company                                     Equity (a)        Investment (b)                      Cost           Value (c)
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA RECOVERY, INC.                                   96.5%        800,000 shares Series A
   Dallas, Texas                                                     convertible preferred stock,
   Computer datacenter and office automation supplies                convertible into 800,000
   and accessories; impact, tilt monitoring and                      shares of common stock at
   temperature sensing devices to detect mishandled                  $1.00 per share (acquired
   shipments; dunnage for protecting shipments.                      11-4-97)                          $   800,000      $  7,500,000
                                                                    4,000,000 shares common stock
                                                                     (acquired 11-4-97)                  4,615,000        37,500,000
                                                                                                       -----------      ------------
                                                                                                         5,415,000        45,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
PALLETONE, INC.                                         8.8%       12.3% senior subordinated notes
   Bartow, Florida                                                   due 2012 (acquired 9-25-06)         1,553,150         2,000,000
   Manufacturer fo wooden pallets and                                150,000 shares common stock
   pressure-treated lumber.                                          (acquired 10-18-01)                   150,000         1,714,000
                                                                   Warrant to purchase 15,294 shares
                                                                     of common stock at $1.00 per
                                                                     share, expiring  2011 (acquired
                                                                     2-17-06)                               45,746           159,000
                                                                                                       -----------      ------------
                                                                                                         1,748,896         3,873,000

- ------------------------------------------------------------------------------------------------------------------------------------
+PALM HARBOR HOMES, INC.                               30.5%       7,855,121 shares common stock
   Dallas, Texas                                                     (acquired 1-3-85 thru 7-31-95)     10,931,955        70,696,000
   Integrated manufacturing, retailing, financing
   and insuring of manufactured housing and modular
   homes.
- ------------------------------------------------------------------------------------------------------------------------------------
+PETSMART, INC.                                          <1%       ++300,000 shares common stock
   Phoenix, Arizona                                                  (acquired 6-1-95)                   1,318,771         9,885,000
   Retail chain of more than 928 stores selling pet
   foods, supplies and services.
- ------------------------------------------------------------------------------------------------------------------------------------
THE RECTORSEAL CORPORATION                            100.0%       27,907 shares common stock
   Houston, Texas                                                    (acquired 1-5-73 and
   Specialty chemicals for plumbing, HVAC,                           3-31-73)                               52,600        98,000,000
   electrical, construction, industrial,
   oil field and automotive applications;
   smoke containment systems for building
   fires; owns 20% of The Whitmore Manufacturing
   Company.
- ------------------------------------------------------------------------------------------------------------------------------------
+SPRINT NEXTEL CORPORATION                               <1%       ++90,000 shares common stock
   Reston, Virginai                                                  (acquired 6-20-84)                    457,113         1,706,400
   Diversified telecommunications company.
- ------------------------------------------------------------------------------------------------------------------------------------
TCI  HOLDINGS, INC.                                        -       21 shares 12% Series C
   Denver, Colorado                                                  cumulative compounding preferred
   Cable television systems and microwave                            stock (acquired 1-30-90)                 --             677,250
   relay systems.
- ------------------------------------------------------------------------------------------------------------------------------------
+TEXAS CAPITAL BANCSHARES, INC.                         1.6%       ++489,656 shares common stock
   Dallas, Texas                                                     (acquired 5-1-00)                   3,550,006        10,013,465
   Regional bank holding company with banking
   operations in six Texas cities.
- ------------------------------------------------------------------------------------------------------------------------------------
+Publicly-owned company                                            ++Unrestricted securities as defined in Note (b)






                                       7
<PAGE>




         Company                                     Equity (a)        Investment (b)                      Cost           Value (c)
- ------------------------------------------------------------------------------------------------------------------------------------
VIA HOLDINGS, INC.                                     28.2%       9,118 shares Series B preferred
   Sparks, Nevada                                                    stock (acquired 9-19-05)          $ 4,559,000      $          2
   Designer, manufacturer and distributor of
   high-quality office seating.
- ------------------------------------------------------------------------------------------------------------------------------------
WELLOGIX, INC.                                         19.3%       4,478,673 shares Series A-1
   Houston, Texas                                                    convertible participating
   Developer and supporter of software                               preferred stock, convertible
   used by the oil and gas industry to control                       into 4,478,673 shares of common
   drilling and maintenance expenses.                                stock at $1.1164 per share
                                                                     (acquired 8-19-05 thru 9-15-06)     5,000,000                 2
- ------------------------------------------------------------------------------------------------------------------------------------
THE WHITMORE MANUFACTURING COMPANY                     80.0%       80 shares common stock
   Rockwall, Texas                                                   (acquired 8-31-79)                  1,600,000        26,000,000
   Specialized mining, railroad and industrial
   lubricants; coatings for automobiles and primary
   metals; fluid contamination control devices.
- ------------------------------------------------------------------------------------------------------------------------------------
+WINDSTREAM CORPORATION                                  <1%      ++9,181 shares common stock
   Little Rock, Arkansas                                             (acquired 7-17-06)                     19,656           134,869
   Provider of voice, broadband and
   entertainment services.

- ------------------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS                                              -       BankCap Partners Fund, L.P.
                                                                     -6.0% limited partnership
                                                                     interest (acquired 7-14-06
                                                                     and 1/8-07)                           565,619           595,619
                                                           -       Diamond State Ventures, L.P.
                                                                     - 1.9% limited partnership
                                                                     interest (acquired 10-12-99
                                                                     thru 8-26-05)                         146,000           146,000
                                                           -       First Capital Group of Texas III,
                                                                     L.P. - 3.3% limited partnership
                                                                     interest (acquired 12-26-00 thru
                                                                     8-12-05)                              964,604           964,604
                                                      100.0%       Humac Company - 1,041,000 shares
                                                                     common stock (acquired 1-31-75
                                                                     and 12-31-75)                            --             172,000
                                                           -       PharmaFab, Inc. - contingent
                                                                     payment agreement (acquired
                                                                     2-15-07)                                    2                 2
                                                           -       STARTech Seed Fund I - 12.1%
                                                                     limited partnership interest
                                                                     (acquired 4-17-98 thru 1-5-00)        178,066                 1
                                                           -       STARTech Seed Fund II - 3.2%
                                                                     limited partnership interest
                                                                     (acquired 4-28-00 thru 2-23-05)       950,000                 1
                                                           -       Sterling  Group  Partners  I, L.P.
                                                                     - 1.7% limited partnership
                                                                     interest (acquired 4-20-01 thru
                                                                     1-24-05)                            1,064,042         1,800,000
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL INVESTMENTS                                                                                      $71,642,297      $681,155,033
                                                                                                       ===========      ============
- ------------------------------------------------------------------------------------------------------------------------------------
+Publicly-owned company                                            ++Unrestricted securities as defined in Note (b)
</TABLE>







                                       8
<PAGE>


                        Notes to Portfolio of Investments


(a)  The  percentages  in the  "Equity"  column  express  the  potential  equity
interests held by Capital  Southwest  Corporation and Capital  Southwest Venture
Corporation (together, the "Company") in each issuer. Each percentage represents
the amount of the  issuer's  common  stock the Company  owns or can acquire as a
percentage of the issuer's total outstanding common shares, plus shares reserved
for all warrants,  convertible securities and employee stock options. The symbol
"<1%" indicates that the Company holds a potential  equity interest of less than
one percent.

(b) Unrestricted  securities  (indicated by ++) are freely marketable securities
having readily available market quotations.  All other securities are restricted
securities  which are subject to one or more  restrictions on resale and are not
freely  marketable.   At  March  31,  2007,  restricted  securities  represented
approximately 90.9% of the value of the consolidated investment portfolio.

(c) Under the  valuation  policy of the  Company,  unrestricted  securities  are
valued at the closing sale price for listed  securities  and at the lower of the
closing bid price or the last sale price for Nasdaq  securities on the valuation
date. Restricted  securities,  including securities of publicly-owned  companies
which are  subject  to  restrictions  on  resale,  are  valued at fair  value as
determined by the Board of Directors.  Fair value is considered to be the amount
which the Company may reasonably  expect to receive for portfolio  securities if
such securities were sold on the valuation date. Valuations as of any particular
date, however, are not necessarily indicative of amounts which may ultimately be
realized as a result of future sales or other dispositions of securities.

     Among the factors  considered by the Board of Directors in determining  the
fair value of restricted  securities  are the financial  condition and operating
results of the issuer,  the  long-term  potential of the business of the issuer,
the market for and recent sales prices of the issuer's securities, the values of
similar securities issued by companies in similar businesses,  the proportion of
the issuer's securities owned by the Company,  the nature and duration of resale
restrictions  and the nature of any rights  enabling  the Company to require the
issuer to register  restricted  securities under applicable  securities laws. In
determining  the fair value of  restricted  securities,  the Board of  Directors
considers  the  inherent  value  of  such  securities   without  regard  to  the
restrictive  feature and  adjusts for any  diminution  in value  resulting  from
restrictions on resale.

(d) Agreements  between certain issuers and the Company provide that the issuers
will bear  substantially  all costs in connection with the disposition of common
stocks,  including those costs involved in registration under the Securities Act
of 1933 but excluding underwriting  discounts and commissions.  These agreements
cover  common  stocks  owned at March 31,  2007 and common  stocks  which may be
acquired  thereafter  through  exercise of warrants and conversion of debentures
and preferred stocks. They apply to restricted  securities of all issuers in the
investment  portfolio of the Company except securities of the following issuers,
which are not obligated to bear  registration  costs:  Humac  Company,  Lifemark
Group and The Whitmore Manufacturing Company.

(e) The  descriptions  of the companies and ownership  percentages  shown in the
portfolio of investments were obtained from published  reports and other sources
believed to be reliable,  are  supplemental and are not covered by the report of
independent  registered public accounting firm.  Acquisition dates indicated are
the dates specific securities were acquired,  which may differ from the original
investment  dates.  Certain  securities  were  received in exchange  for or upon
conversion or exercise of other securities previously acquired.



                                       9
<PAGE>


                        Portfolio Changes During the Year


New Investments and Additions to Previous Investments


                                                                Amount
                                                                ------
BankCap Partners Fund I, L.P..............................    $595,619
Hic-Star Corporation......................................       4,500
PalletOne, Inc............................................     203,150
                                                             ---------
                                                              $803,269
                                                              ========
Dispositions

                                                              Amount
                                               Cost          Received
                                               ----          --------
Cenveo, Inc. ...........................  $   712,318     $ 9,597,254
Diamond State Ventures, L.P.............       64,000          64,000
Exopack, Inc............................            -         230,035
Heelys, Inc.............................       17,510      31,087,659
Hic-Star Corporation....................    6,529,167               -
PharmaFab, Inc..........................    9,499,998               -
StarTech Seed Fund II...................       50,000          50,000
Sterling Group Partners I, L.P..........            -         601,081
Texas Shredder, Inc.....................            -       1,289,959
                                           ----------      -------------
                                          $16,872,993     $42,919,988
                                          ===========     ==============
Repayments Received.....................                     $884,935
                                                             ========









                                       10
<PAGE>



                 Capital Southwest Corporation and Subsidiaries
                 Consolidated Statements of Financial Condition


                                                       March 31
Assets                                           2007          2006
                                            ------------   ------------

Investments at market or fair value
   Companies more than 25% owned
     (Cost: 2007 - $28,632,356,
     2006 - $23,114,866)................... $526,993,983   $298,481,983
   Companies 5% to 25% owned
     (Cost: 2007 - $18,798,896,
     2006 - $18,595,746)...................   76,398,002     92,070,852
   Companies less than 5% owned
     (Cost: 2007 - $24,211,045,
     2006 - $46,886,344)...................    7,763,048    159,875,248
                                           -------------- -------------

Total investments
     (Cost: 2007 - $71,642,297,
     2006 - $88,596,956)...................  681,155,033    550,428,083
Cash and cash equivalents..................   38,844,203     11,503,866
Receivables................................      337,892        135,887
Other assets...............................    9,170,185      7,300,297
                                           -------------  -------------




   Totals..................................  $729,507,313  $569,368,133
                                             ============  ============




                                                       March 31
Liabilities and Shareholders' Equity             2007          2006
                                            ------------   ------------

Note payable to bank.......................  $         -   $  8,000,000
Other liabilities..........................    1,457,847      1,697,086
Income taxes payable.......................      231,274        982,653
Deferred income taxes......................  213,474,680    162,070,285
                                            ------------  -------------
                    Total liabilities .....  215,163,801    172,750,024
                                            ------------  -------------

Shareholders' equity
   Common stock, $1 par value: authorized,
     5,000,000 shares; issued, 4,323,416
     shares at March 31, 2007 and 4,297,616
     shares at March 31, 2006..............    4,323,416      4,297,616
   Additional capital......................   11,221,601      8,109,797
   Undistributed net investment
     income................................    5,655,020      3,744,830
   Undistributed net realized gain on
     investments...........................  102,766,040     86,432,040
   Unrealized appreciation of investments -
     net of deferred income taxes..........  397,410,737    301,067,128
   Treasury stock - at cost
     (437,365 shares)......................   (7,033,302)    (7,033,302)
                                           --------------  ---------------
   Net assets at market or fair value, equivalent
     to $132.36 per share at March 31, 2007 on
     the 3,886,051 shares outstanding and
     $102.74 per share at March 31, 2006 on the
     3,860,251 shares outstanding..........  514,343,512    396,618,109
                                           -------------  -------------


   Totals.................................. $729,507,313   $569,368,133
                                            ============   ============



                 See Notes to Consolidated Financial Statements




                                       11
<PAGE>
<TABLE>
<CAPTION>

                 Capital Southwest Corporation and Subsidiaries
                      Consolidated Statements of Operations

                                                                                                Years Ended March 31
                                                                                 --------------------------------------------
                                                                                     2007             2006           2005
                                                                                 ------------    ------------   -------------
<S>                                                                              <C>             <C>            <C>
Investment income:
   Interest.....................................................................$   2,308,660  $      505,536  $      437,753
   Dividends....................................................................    3,954,875       3,485,430       3,778,190
   Management and directors' fees...............................................      708,900         848,070         637,000
                                                                                --------------  -------------   -------------
                                                                                    6,972,435     4,839,036         4,852,943
                                                                                --------------  -------------   -------------
Operating expenses:
   Salaries.....................................................................    1,356,062       1,211,584       1,132,510
   Net pension benefit..........................................................     (144,945)       (116,747)       (254,872)
   Other operating expenses.....................................................    1,014,255         859,702       1,068,313
                                                                                --------------  -------------   -------------
                                                                                    2,225,372       1,954,539       1,945,951
                                                                                --------------  -------------   -------------
Income before interest expense and income taxes.................................    4,747,063       2,884,497       2,906,992
Interest expense................................................................      460,399         436,021         420,351
                                                                                --------------  -------------   -------------
Income before income taxes......................................................    4,286,664       2,448,476       2,486,641
Income tax expense..............................................................       53,324          59,220          80,693
                                                                                --------------  -------------   -------------
Net investment income ..........................................................$   4,233,340   $   2,389,256   $   2,405,948
                                                                                ==============  =============   =============
Proceeds from disposition of investments........................................$  42,919,988   $  30,802,552   $   4,565,232
Cost of investments sold........................................................   16,872,993      10,523,986      14,677,252
                                                                                --------------  -------------   -------------
Realized gain (loss) on investments before income taxes.........................   26,046,995      20,278,566     (10,112,020)
Income tax expense (benefit) ...................................................    9,712,995       7,162,692      (4,046,206)
                                                                                --------------  -------------   -------------
Net realized gain (loss) on investments.........................................   16,334,000      13,115,874      (6,065,814)
                                                                                --------------  -------------   -------------
Increase in unrealized appreciation of investments before income taxes..........  147,681,609     124,355,303      27,809,654
Increase in deferred income taxes on appreciation of investments................   51,338,000      43,670,000       9,925,000
                                                                                --------------  -------------   -------------
Net increase in unrealized appreciation of investments..........................   96,343,609      80,685,303      17,884,654
                                                                                --------------  -------------   -------------

Net realized and unrealized gain on investments.................................$ 112,677,609   $  93,801,177    $ 11,818,840
                                                                                 ============    ============    ============

Increase in net assets from operations..........................................$ 116,910,949   $  96,190,433    $ 14,224,788
                                                                                 ============    ============    ============
</TABLE>


                 See Notes to Consolidated Financial Statements




                                       12
<PAGE>
<TABLE>
<CAPTION>

                 Capital Southwest Corporation and Subsidiaries
                Consolidated Statements of Changes in Net Assets



                                                                                      Years Ended March 31
                                                                        ---------------------------------------------
                                                                            2007             2006            2005
                                                                        -------------- --------------  --------------
<S>                                                                     <C>            <C>             <C>

Operations:
  Net investment income................................................. $  4,233,340   $  2,389,256    $  2,405,948
  Net realized gain (loss) on investments...............................   16,334,000     13,115,874      (6,065,814)
  Net increase in unrealized appreciation of investments................   96,343,609     80,685,303      17,884,654
                                                                        -------------- --------------  --------------
  Increase in net assets from operations................................  116,910,949     96,190,433      14,224,788

Distributions from:
  Undistributed net investment income...................................   (2,323,150)    (2,314,231)     (2,314,231)

Capital share transactions:
  Exercise of employee stock options....................................    1,794,850        208,000               -
  Adjustment to initially apply FASB No. 158, net of tax                    1,173,751              -               -
  Stock option expense..................................................      169,003              -               -
                                                                        -------------- --------------  --------------
  Increase in net assets...............................................   117,725,403     94,084,202      11,910,557
Net assets, beginning of year...........................................  396,618,109    302,533,907     290,623,350
                                                                        -------------- --------------  --------------

Net assets, end of year ................................................ $514,343,512   $396,618,109    $302,533,907
                                                                         ============   =============   =============
</TABLE>




                 See Notes to Consolidated Financial Statements



                                       13
<PAGE>
<TABLE>
<CAPTION>

                 Capital Southwest Corporation and Subsidiaries
                      Consolidated Statements of Cash Flows


                                                                                 Years Ended March 31
                                                                  -----------------------------------------------
                                                                       2007              2006             2005
                                                                  -------------    -------------    -------------
<S>                                                               <C>              <C>              <C>

Cash flows from operating activities
Increase in net assets from operations.........................   $ 116,910,949    $  96,190,433    $  14,224,788
Adjustments to reconcile increase in net assets from operations
   to net cash provided by operating activities:
     Proceeds from disposition of investments..................      42,919,988       30,802,552        4,510,652
     Purchases of securities...................................        (803,269)     (15,054,741)      (2,280,690)
     Maturities of securities..................................         884,935          480,197          394,269
     Depreciation and amortization.............................          16,808           16,136           17,597
     Net pension benefit.......................................        (144,945)        (116,747)        (254,872)
     Realized (gain) loss on investments before income taxes...     (26,046,995)     (20,278,566)      10,112,020
     Deferred taxes on realized (gain) loss on investments.....      (1,367,704)       2,335,031       (4,046,206)
     Net increase in unrealized appreciation of investments....     (96,343,609)     (80,685,303)     (17,884,654)
     Stock option expense......................................         169,003             --               --
     (Increase) decrease in receivables........................        (202,005)             514          (59,924)
     Increase in other assets..................................         (39,982)          (3,226)         (10,477)
     Increase (decrease) in other liabilities..................           8,934          (67,245)         121,196
     Decrease in accrued pension cost..........................        (144,171)        (154,673)        (164,129)
     Deferred income taxes.....................................          50,700           40,800           88,800
                                                                  -------------    -------------    -------------
Net cash provided by operating activities......................      35,868,637       13,505,162        4,768,370
                                                                  -------------    -------------    -------------
Cash flows from financing activities
Decrease in note payable to bank...............................      (8,000,000)            --         (7,500,000)
Decrease in note payable to portfolio company..................            --         (5,000,000)            --
Distributions from undistributed net investment income.........      (2,323,150)      (2,314,231)      (2,314,231)
Proceeds from exercise of employee stock options...............       1,794,850          208,000             --
                                                                  -------------    -------------    -------------
Net cash used in financing activities..........................      (8,528,300)      (7,106,231)      (9,814,231)
                                                                  -------------    -------------    -------------
Net increase (decrease) in cash and cash equivalents...........      27,340,337        6,398,931       (5,045,861)
Cash and cash equivalents at beginning of year.................      11,503,866        5,104,935       10,150,796
                                                                  -------------    -------------    -------------
Cash and cash equivalents at end of year.......................   $  38,844,203    $  11,503,866    $   5,104,935
                                                                  =============    =============    =============
Supplemental disclosure of cash flow information:
Cash paid during the year for: Interest........................   $     460,399    $     436,920    $     420,446
                               Income taxes....................   $  11,100,699    $   4,846,081    $         --

</TABLE>


                 See Notes to Consolidated Financial Statements


                                       14
<PAGE>

                   Notes to Consolidated Financial Statements


1.   Summary of Significant Accounting Policies

     Capital Southwest  Corporation  ("CSC") is a business  development  company
subject  to  regulation  under  the  Investment  Company  Act of  1940.  Capital
Southwest Venture Corporation  ("CSVC"), a wholly-owned  subsidiary of CSC, is a
Federal  licensee  under  the Small  Business  Investment  Act of 1958.  Capital
Southwest Management Corporation ("CSMC"), a wholly-owned  subsidiary of CSC, is
the  management  company  for  CSC and  CSVC.  The  following  is a  summary  of
significant  accounting policies followed in the preparation of the consolidated
financial statements of CSC, CSVC and CSMC (together, the "Company"):

     Principles of  Consolidation.  The consolidated  financial  statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America for investment  companies.  Under rules and regulations
applicable to investment  companies,  we are precluded  from  consolidating  any
entity  other than  another  investment  company.  An  exception to this general
principle  occurs if the  investment  company has an  investment in an operating
company that  provides  services to the  investment  company.  Our  consolidated
financial statements include our management company, CSMC.

     Cash and Cash Equivalents. All temporary cash investments having a maturity
of three months or less when purchased are considered to be cash equivalents.

     Investments.  Investments are stated at market or fair value  determined by
the Board of Directors as described in the Notes to Portfolio of Investments and
Note 2 below. The average cost method is used in determining cost of investments
sold.  Investments are recorded on a trade date basis.  Dividends are recognized
on the ex-dividend date and interest income is accrued daily.

     Segment  Information.  The Company  operates  and manages its business in a
singular  segment.  As an investment  company,  the Company invests in portfolio
companies  in  various  industries  and  geographic  areas as  presented  in the
portfolio of investments.

     Use of Estimates.  The  preparation  of financial  statements in conformity
with accounting  principles  generally  accepted in the United States of America
requires  management to make estimates and  assumptions  that affect the amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ from those estimates.

     Federal Income Taxes.  CSC and CSVC intend to comply with the  requirements
of the  Internal  Revenue  Code  necessary  to qualify as  regulated  investment
companies. By meeting these requirements,  they will not be subject to corporate
federal income taxes on ordinary income distributed to shareholders.  Therefore,
CSC and CSVC made no provision for federal income taxes on net investment income
in their financial statements. The Company's policy is to retain and pay the 35%
corporate  tax on realized  long-term  capital  gains.  Therefore,  CSC and CSVC
provide in their  financial  statements  for taxes on such gain. See page 39 for
more detail.

     Stock-Based  Compensation.  In  December  2004,  the  Financial  Accounting
Standards Board (FASB) issued SFAS No. 123 (revised 2004),  Share-Based  Payment
(SFAS 123R), which revised SFAS 123. SFAS 123R also supersedes APB 25 and amends
SFAS No. 95,  Statement of Cash Flows.  SFAS 123R  eliminates the alternative to
account for employee  stock  options under APB 25 and requires the fair value of
all  share-based  payments to  employees,  including the fair value of grants of
employee stock options,  be recognized in the income  statement,  generally over
the vesting period.

     In  March  2005,  the  Securities  and  Exchange  Commission  issued  Staff
Accounting  Bulletin  (SAB) No. 107, which  provides  additional  implementation
guidance  for SFAS 123R.  Among  other  things,  SAB 107  provides  guidance  on
share-based   payment   valuations,    income   statement   classification   and
presentation, capitalization of costs and related income tax accounting.

     Effective  April 1, 2006, the Company  adopted SFAS 123R using the modified
prospective transition method. The Company recognizes compensation cost over the
straight-line  method for all share-based payments granted on or after that date
and for all  awards  granted  to  employees  prior to April 1, 2006 that  remain
unvested on that date.  The fair value of stock


                                       15
<PAGE>


options  are  determined  on the date of grant using the  Black-Scholes  pricing
model and are expensed  over the vesting  period of the related  stock  options.
Accordingly,  for  the  year  ended  March  31,  2007,  the  Company  recognized
compensation expense of $169,003.

     The following table illustrates the effect on net asset value and net asset
value per share for the years  ended  March 31, 2006 and 2005 if the Company had
applied the fair value  recognition  provisions to stock-based  compensation for
options.

                                           Years Ended March 31
                                            2006               2005
                                       -------------       ------------

Net asset value, as reported            $396,618,109       $302,533,907
Deduct: Total fair value computed
  stock-based compensation                   150,936            160,764
                                       -------------      -------------
Pro forma net asset value               $396,467,173       $302,373,143
                                       =============      =============

Net asset value per share:
  Basic - as reported                        $102.74             $78.44
                                             =======             ======
  Basic - pro forma                          $102.71             $78.39
                                             =======             ======


  Diluted - as reported                       $102.49             $78.38
                                              =======             ======
  Diluted- pro forma                          $102.45             $78.34
                                              =======             ======

     As of March 31, 2007, the total remaining  unrecognized  compensation  cost
related to non-vested  stock options was $1,171,452 which will be amortized over
the weighted-average service period of approximately 7.53 years.

Defined Pension Benefits and Other Postretirement Plans

     Effective  March 31,  2007,  the Company  adopted  Statement  of  Financial
Accounting  Standards (SFAS) No. 158, Employers'  Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB Statements Nos. 87,
88, 106 and 132R (SFAS 158). SFAS 158 is required to be adopted on a prospective
basis and prior  year  financial  statements  and  related  disclosures  are not
permitted to be restated.  SFAS 158  requires an employer  that  sponsors one or
more postretirement defined benefit plan(s) to:

     o    Recognize the funded status of postretirement  defined benefit plans -
          measured as the  difference  between the fair value of plan assets and
          the benefit obligations - in its balance sheet.

     o    Recognize  changes  in the  funded  status of  postretirement  defined
          benefit plans in shareholder's equity in the year in which the changes
          occur.

     o    Measure  postretirement defined benefit plan assets and obligations as
          of the date of the employer's  fiscal year-end.  The Company presently
          uses March 31 as the  measurement  date for all of its  postretirement
          defined benefit plans.

Recent Accounting Pronouncements

     In June 2006,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Interpretation No. 48 (FIN48), which clarifies the accounting for uncertainty in
income taxes recognized in an entity's  financial  statements in accordance with
FASB  Statement  109,  "Accounting  for  Income  Taxes".  FIN  48  prescribes  a
recognition  threshold and  measurement  attribute  for the financial  statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return.  FIN 48 is effective for our Company April 1, 2007.  The Company has
evaluated  the  positions  in the tax  returns it has filed and does not believe
that FIN 48 will have a material impact on the Company's financial statements.

     The State of Texas  recently  passed House Bill 3 (HB3),  which revises the
existing  franchise  tax  system  to  create a new tax on  virtually  all  Texas
businesses.  Starting in the fiscal year 2007,  HB3  changes the  franchise  tax
base,  lowers the tax rate and extends coverage to active  businesses  receiving
state law  liability  protection.  The Company has been subject to an immaterial
amount of Texas  franchise taxes and expects the future effect of HB3 to also be
immaterial.

     In  September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 157, "Fair Value  Measurements"  (SFAS 157).  The standard  defines
fair  value,  outlines a framework  for  measuring  fair value,  and details the
required  disclosures about fair value  measurements.  The standard is effective

                                       16
<PAGE>

for years  beginning  after November 15, 2007,  therefore the Company will adopt
SFAS 157 effective  April 1, 2008.  The Company is evaluating the impact of SFAS
157.

     In  September  2006,  the SEC issued  Staff  Accounting  Bulletin  No. 108,
"Considering   the  Effects  of  Prior  Year   Misstatements   when  Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 clarifies
the SEC staff's beliefs regarding the process of quantifying financial statement
misstatements  and is effective for fiscal years ending after November 15, 2006.
The Company  applied  SAB 108 during the year and was not  required to record an
adjustment as a result of the application of SAB 108.

     In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial  Assets  and  Financial  Liabilities"  (SFAS  159).  SFAS 159  permits
entities to choose to measure many financial instruments and certain other items
at fair value and establishes  presentation and disclosure requirements designed
to facilitate  comparisons  between entities that choose  different  measurement
attributes  for similar types of assets and  liabilities.  SFAS 159 is effective
for our Company  beginning April 1, 2008. The impact,  if any, from the adoption
of SFAS 159 has not been determined.

2.   Valuation of Investments

     The consolidated financial statements as of March 31, 2007 and 2006 include
restricted  securities  valued  at  $619,207,702  (90.9%  of  the  value  of the
consolidated  investment  portfolio) and $485,924,522 (88.3% of the value of the
consolidated  investment  portfolio),   respectively,  whose  values  have  been
determined  by the Board of  Directors  in the absence of readily  ascertainable
market values.  Because of the inherent  uncertainty of valuation,  these values
may differ  significantly  from the values that would have been used had a ready
market  for the  securities  existed,  and the  differences  could be  material.
Unrestricted  securities  are  valued  at the  closing  sale  price  for  listed
securities  and at the lower of the closing bid price or the last sale price for
Nasdaq securities on the valuation date.

3.   Income Taxes

     For the tax years ended  December  31,  2006,  2005 and 2004,  CSC and CSVC
qualified  to  be  taxed  as  regulated   investment  companies  ("RICs")  under
applicable  provisions of the Internal  Revenue Code. As RICs, CSC and CSVC must
distribute  at least 90% of their  taxable  net  investment  income  (investment
company  taxable  income) and may either  distribute or retain their taxable net
realized gain on investments  (capital gains).  Both CSC and CSVC intend to meet
the  applicable  qualifications  to be taxed as RICs in future  years;  however,
either company's ability to meet certain portfolio diversification  requirements
of RICs in future years may not be controllable by such company.

     For the year  ended  December  31,  2006,  CSC and CSVC had net  investment
income for book and tax purposes of $2,323,150 and $394,124,  respectively,  all
of which has been distributed.  During 2006, CSC and CSVC had a net capital gain
for book  purposes  of  $31,932,775  and  $28,697,723,  respectively,  and a net
capital gain for tax purposes of $31,659,140 and $28,697,723, respectively.

     The aggregate  cost of  investments  for federal  income tax purposes as of
March 31, 2007 was $75,147,983.  Such investments had unrealized appreciation of
$626,445,188  and unrealized  depreciation of $16,932,452 for book purposes,  or
net unrealized appreciation of $609,512,736. They had unrealized appreciation of
$623,584,608 and unrealized depreciation of $17,577,558 for tax purposes, or net
unrealized  appreciation  of  $606,007,050  at March 31,  2007.  The  difference
between book basis and tax basis net  unrealized  appreciation  is  attributable
primarily to interest income that was accrued for tax purposes, but not for book
purposes.

     CSC and CSVC may not qualify or elect to be taxed as RICs in future  years.
Therefore,  consolidated  deferred  Federal  income  taxes of  $212,102,000  and
$160,764,000 have been provided on net unrealized appreciation of investments of
$609,512,736  and  $461,831,127 at March 31, 2007 and 2006,  respectively.  Such
appreciation is not included in taxable income until  realized.  Deferred income
taxes on net unrealized  appreciation  of investments  have been provided at the
then currently  effective maximum Federal corporate tax rate on capital gains of
35% at March 31, 2007 and 2006.

4.   Note Payable

     The note  payable to bank at March 31, 2007 and 2006 was from an  unsecured
revolving  line of credit of  $25,000,000  of which $0 and  $8,000,000  had been
drawn at March 31, 2007 and 2006,  respectively.  The  revolving  line of credit
bears interest at the bank's base rate less .50% or LIBOR plus 1.25% and matures
on August 31, 2007. The average  interest rates during the years ended March 31,
2007 and 2006 were 6.46% and 5.05% respectively.



                                       17
<PAGE>

5.   Employee Stock Option Plan

     On July  19,  1999,  shareholders  approved  the  1999  Stock  Option  Plan
("Plan"),  which  provided  for the granting of stock  options to employees  and
officers  of the  Company  and  authorized  the  issuance  of common  stock upon
exercise of such options for up to 140,000 shares. All options are granted at or
above market  price,  generally  expire ten years from the date of grant and are
generally  exercisable on or after the first anniversary of the date of grant in
five to ten annual installments.

     At March 31, 2007,  there were 58,500 shares  available for grant under the
Plan. The per share  weighted-average fair value of the stock options granted on
May 15, 2006 was $31.276 per option using the  Black-Scholes  pricing model with
the following assumptions:  expected dividend yield of 0.64%, risk-free interest
rate of 5.08%,  expected  volatility of 21.1%, and expected life of 7 years. The
per share  weighted-average  fair value of the stock options granted on July 17,
2006 was  $33.045  per option  using the  Black-Scholes  pricing  model with the
following assumptions: expected dividend yield of 0.61%, risk-free interest rate
of 5.04%, expected volatility of 21.2%, and expected life of 7 years.

     The following  summarizes  activity in the stock option plans for the years
ended March 31, 2007, 2006 and 2005:

                                     Number         Weighted Average
                                    of shares        Exercise Price
                                    -------            --------
Balance at April 1, 2004             54,500             $70.004
     Granted                          7,500              76.000
     Exercised                            -                   -
     Canceled                       (13,500)             79.870
                                    -------            --------
Balance at March 31, 2005            48,500              68.186
     Granted                              -                   -
     Exercised                       (3,200)             65.000
     Canceled                             -                   -
                                    -------            --------
Balance at March 31, 2006            45,300              68.411
     Granted                         57,500              94.136
     Exercised                      (25,800)             69.568
     Canceled                       (24,500)             89.482
                                    --------           --------
Balance at March 31, 2007            52,500             $86.184
                                     ======             =======

     At March  31,  2007,  the range of  exercise  prices  and  weighted-average
remaining  contractual life of outstanding options was $65.00 to $98.44 and 7.78
years,  respectively.  The total intrinsic value of options exercised during the
year ended March 31, 2007 was $571,565,  with the exercise  prices  ranging from
$65.00 to $77.00  per share.  New shares  were  issued for the  $1,794,850  cash
received from option exercises for the year ended March 31, 2007.

     At March 31, 2007,  2006 and 2005,  the number of options  exercisable  was
8,515, 29,500 and 25,650,  respectively and the weighted-average  exercise price
of those options was $69.15, $69.01 and $68.98, respectively.

6.   Employee Stock Ownership Plan

     The  Company  and one of its  wholly-owned  portfolio  companies  sponsor a
qualified  employee  stock  ownership  plan ("ESOP") in which certain  employees
participate. Contributions to the plan, which are invested in Company stock, are
made at the discretion of the Board of Directors.  A  participant's  interest in
contributions  to the ESOP  fully  vests  after  five  years of active  service.
Effective  April 1, 2007,  the vesting  period will be three  years.  During the
three years ended March 31, 2007,  the Company made  contributions  to the ESOP,
which were charged against net investment income, of $84,488 in 2007, $99,167 in
2006 and $93,588 in 2005.

7.   Retirement Plans

     The Company sponsors a qualified  defined benefit pension plan which covers
its employees and employees of certain of its wholly-owned  portfolio companies.
The following  information  about the plan  represents  amounts and  information
related to the  Company's  participation  in the plan and is presented as though
the Company  sponsored a  single-employer  plan.  Benefits are based on years of
service and an average of the highest  five  consecutive  years of  compensation
during the last ten years of  employment.  The funding  policy of the plan is to
contribute  annual  amounts  that are  currently  deductible  for tax  reporting
purposes.  No  contribution  was made to the plan  during the three  years ended
March 31, 2007.

     The following tables set forth the qualified plan's benefit obligations and
fair value of plan assets at March 31, 2007, 2006 and 2005:



                                       18
<PAGE>



                                                  Years Ended March 31
                                                  --------------------
                                            2007         2006         2005
                                        -----------  -----------   -----------
Change in benefit obligation

Benefit obligation at beginning
     of  year...................       $ 4,004,017  $  3,833,411  $ 3,799,113
Service cost....................           103,342        95,590       92,434
Interest cost...................           230,711       223,374      214,076
Actuarial loss..................            68,854       228,122       94,812
Benefits paid...................          (386,982)     (376,480)    (367,024)
Plan change.....................           (54,842)            -            -
                                       -----------  ------------  -----------
Benefit obligation at end of year      $ 3,965,100  $  4,004,017  $ 3,833,411
                                       ===========  ============  ===========

Change in plan assets

Fair value of plan assets at beginning
     of  year....................      $11,640,693  $  9,326,254  $10,030,763
Actual return on plan assets.....        1,719,581     2,690,919     (337,485)
Benefits paid....................         (386,982)     (376,480)    (367,024)
                                       -----------  ------------  -----------
Fair value of plan assets at end of
     year........................      $12,973,292   $11,640,693  $ 9,326,254
                                       ===========   ===========  ===========

     The  following  table sets forth the  qualified  plan's  funded  status and
amounts  recognized  in  the  Company's  consolidated  statements  of  financial
condition:

                                                              March 31
                                                              --------
                                                         2007         2006
                                                      ----------   ----------
Actuarial present value of benefit obligations:
     Accumulated benefit obligation.........         $(3,435,396) $(3,475,899)
                                                     ===========  ===========
Projected benefit obligation for service
     rendered todate.........................        $(3,965,100) $(4,004,017)
Plan assets at fair value*................            12,973,292   11,640,693
                                                      ----------   ----------
Funded status.............................             9,008,192    7,636,676
Unrecognized net (gain)loss from past experience
     different from that assumed and effects of
     changes in assumptions...............            (1,761,054)    (670,478)
Unrecognized prior service costs............             132,904      195,281
Additional asset, FAS 158...................           1,628,150            -
                                                     ----------    ----------
Prepaid pension cost included in other assets        $ 9,008,192  $ 7,161,479
                                                     ===========  ===========
- -------------
*Primarily  equities and bonds including  approximately  25,000 shares of common
stock of the Company.

     Components of net pension benefit related to the qualified plan include the
following:

                                                   Years Ended March 31
                                                   --------------------
                                             2007          2006         2005
                                          ---------     ----------   ----------
Service cost - benefits earned during
     the year....................          $103,342    $   95,590   $   92,434
Interest cost on projected benefit
     obligation..................           230,711       223,374      214,076
Expected return on assets........          (580,104)     (551,026)    (564,627)
Net amortization.................            27,487        38,897      (66,280)
                                         -----------   -----------  -----------
Net pension benefit from qualified plan   $(218,564)    $(193,165)   $(324,397)
                                          =========     =========    =========

     The Company also sponsors an unfunded Retirement Restoration Plan, which is
a  nonqualified  plan that  provides for the payment,  upon  retirement,  of the
difference  between the maximum annual payment  permissible  under the qualified
retirement  plan  pursuant  to Federal  limitations  and the amount  which would
otherwise have been payable under the qualified plan.



                                       19
<PAGE>


     The following  table sets forth the Retirement  Restoration  Plan's benefit
obligations at March 31, 2007, 2006 and 2005:

                                               Years Ended March 31
                                               --------------------
                                         2007          2006         2005

Change in benefit obligation

Benefit obligation at beginning
     of  year....................     $1,280,542    $1,302,368   $1,414,091
Service cost.....................         20,245        19,094       10,380
Interest cost....................         68,937        72,886       74,711
Actuarial (gain) loss...........         (36,529)       40,867      (32,685)
Benefits paid....................       (144,170)     (154,673)    (164,129)
Plan change......................        (10,134)            -            -
                                      ----------    ----------   ----------
Benefit obligation at end of year     $1,178,891    $1,280,542   $1,302,368
                                      ==========    ==========   ==========

   The following table sets forth the status of the Retirement Restoration Plan
and the amounts recognized in the consolidated statements of financial
condition:

                                                          March 31
                                                          --------
                                                     2007          2006
                                                  -----------   ------------

Projected benefit obligation.................    $(1,178,891)  $(1,280,542)
Unrecognized net loss from past ex-
     perience different from that assumed
     and effects of changes in assumptions            56,523        93,049
Unrecognized prior service costs.............       (234,144)     (239,573)
Additional asset, FAS 158....................        177,621             -
Accrued pension cost included in                  -----------  ------------
     other liabilities.......................    $(1,178,891)  $(1,427,066)
                                                  ===========  ============

     The Retirement  Restoration Plan expenses recognized during the years ended
March 31, 2007, 2006 and 2005 of $73,619, $76,417 and $69,528, respectively, are
offset against the net pension benefit from the qualified plan.

     The following  assumptions  were used in estimating  the actuarial  present
value of the projected benefit obligations:

                                             Years Ended March 31
                                             --------------------
                                        2007         2006         2005
                                      ---------    ----------   ----------

Discount rate......................     6.0%         5.75%        5.75%
Rate of compensation increases.....     5.0%          5.0%         5.0%

     The  following  assumptions  were  used  in  estimating  the  net  periodic
(income)/expense:

                                             Years Ended March 31
                                             --------------------
                                        2007         2006         2005
                                     ---------    ----------   ----------
Discount rate......................    5.75%         5.75%        5.75%
Expected return on plan assets.....     6.0%          6.0%         6.0%
Rate of compensation increases.....     5.0%          5.0%         5.0%

     The expected rate of return on assets  assumption was  determined  based on
the anticipated performance of the various asset classes in the plan's portfolio
and the allocation of assets to each class.  The anticipated  asset class return
is  developed  using   historical  and  predicted   asset  return   performance,
considering the investments  underlying each asset class and expected investment
performance  based on forecasts of inflation,  interest rates and market indices
for fixed income and equity securities.

     The Company's pension plan asset allocations are as follows:

                                                Percentage of plan assets
                                                       at March 31
                                                       -----------
Asset Category                                    2007              2006
- --------------                                ----------        ----------

Equity securities...........................      79.1%             83.6%
Debt securities.............................      11.4%             12.9%
Cash .......................................       9.5%              3.5%
                                               --------          --------
                                                 100.0%            100.0%
                                               ========          ========

                                       20
<PAGE>

     The Company's pension plan is administered by a  board-appointed  committee
that has fiduciary responsibility for the plan's management.  The trustee of the
plan is JPMorgan Asset  Management.  Currently,  approximately 18% of the assets
are  selected  and managed by the trustee  and the  remainder  of the assets are
managed by the committee,  invested mostly in equity  securities,  including the
Company's stock.

     Following are the expected  benefit payments for the next five years and in
the aggregate for the years 2013-2017:

                                  Years Ended March 31
                                  --------------------
                                                                 2013-
(In Thousands)   2008     2009     2010      2011      2012      2017
                 ----     ----     ----      ----      ----      ----
                 $357     $337     $316      $294      $281     $1,136


     Incremental  effect of applying FASB  Statement No. 158 on individual  line
items in the Statement of Financial Condition:

                                               March 31, 2007
                                               --------------
                               Before Application              After application
                               Of Statement 158    Adjustments  of Statement 158
                               ----------------    -----------  ----------------

Other assets...................     $  7,542,035    $1,628,150 $      9,170,185
Other liabilities..............        1,635,468      (177,621)       1,457,847
Deferred income taxes..........      212,842,660       632,020      213,474,680
Additional capital.............       10,047,850     1,173,751       11,221,601
Net assets at market or fair value   513,169,761     1,173,751      514,343,512

8.   Commitments

     The  Company  has agreed,  subject to certain  conditions,  to invest up to
$9,891,281 in three portfolio companies.

     The Company  leases  office space under an operating  lease which  requires
base annual rentals of  approximately  $80,000 through  February,  2008. For the
three years ended March 31, total rental  expense  charged to investment  income
was $79,979 in 2007, $76,877 in 2006 and $75,248 in 2005.

9.   Sources of Income

     Income was derived from the following sources:



                               Investment  Income          Realized Gain
                                                             (Loss) on
Years Ended                                                 Investments
March 31                                         Other     Before Income
2007                    Interest    Dividends    Income        Taxes
- ----                    -------------------------------------------------
Companies more than
   25% owned........   $       -   $3,449,558   $659,500   $31,070,149
Companies 5% to 25%
   owned............     125,733      171,578     20,000             -
Companies less than
   5% owned.........     938,761      333,739     29,400    (5,023,154)
Other sources,
   including temporary
   investments......   1,244,166            -          -             -
                      ------------------------------------------------
                      $2,308,660   $3,954,875   $708,900   $26,046,995
                      ================================================




2006
- ----
Companies more than
   25% owned........   $      -    $2,926,964   $642,500   $         -
Companies 5% to 25%
   owned............     (55,236)     188,233     10,000             -
Companies less than
   5% owned.........     302,622      370,233    195,570    20,278,566
Other sources,
   including temporary
   investments......     258,150            -          -             -
                        ----------------------------------------------
                        $505,536   $3,485,430   $848,070   $20,278,566
                        ==============================================

                                       21
<PAGE>

<TABLE>
<CAPTION>

2005
- ----
Companies more than
   25% owned........  $       -    $3,361,345   $637,000  $          -
Companies 5% to 25
   owned............     55,236        80,858          -   (12,097,124)
Companies less than
   5% owned.........    346,396       335,987          -     1,985,104
Other sources,
   including temporary
   investments......     36,121             -          -             -
                       ------------------------------------------------
                       $437,753    $3,778,190   $637,000  $(10,112,020)
                       ================================================


                       Selected Per Share Data and Ratios


                                                                                       Years Ended March
                                                                    -------------------------------------------------------
   Per Share Data                                                         2007       2006       2005       2004       2003
                                                                    -------------------------------------------------------
<S>                                                                 <C>            <C>         <C>        <C>        <C>

Investment income..............................................    $     1.79  $     1.25  $    1.26  $    1.22  $    1.06
Operating expenses.............................................          (.57)       (.51)      (.51)      (.39)      (.30)
Interest expense...............................................          (.12)       (.11)      (.11)      (.14)      (.12)
Income taxes...................................................          (.01)       (.01)      (.02)      (.02)      (.04)
                                                                    -------------------------------------------------------
Net investment income..........................................          1.09         .62        .62        .67        .60
Distributions from undistributed net investment income.........          (.60)       (.60)      (.60)      (.60)      (.60)
Net realized gain (loss) on investments........................          4.20        3.40      (1.57)      2.13        .35
Net increase (decrease) in unrealized appreciation of
investments after deferred taxes...............................         24.80       20.90       4.64      19.37     (11.85)
Exercise of employee stock options*............................          (.21)       (.02)       --        (.14)       --
Stock option expense...........................................           .04         --         --         --         --
Adjustment to initially apply FASB No. 158, net of tax.........           .30         --         --         --         --
                                                                    -------------------------------------------------------



Increase (decrease) in net asset value.........................         29.62       24.30       3.09      21.43     (11.50)
Net asset value
  Beginning of year............................................        102.74       78.44      75.35      53.92      65.42
                                                                    -------------------------------------------------------
  End of year..................................................    $   132.36  $   102.74  $   78.44  $   75.35  $   53.92
                                                                    =======================================================

Increase (decrease) in deferred taxes on
  unrealized appreciation .....................................    $    12.93  $    11.29  $    2.57  $   10.09  $   (6.35)
Deferred taxes on unrealized appreciation:
  Beginning of year............................................         41.65       30.36      27.79      17.70      24.05
                                                                    -------------------------------------------------------
  End of year..................................................    $    54.58  $    41.65  $   30.36  $   27.79  $   17.70
                                                                    =======================================================


Ratios and Supplemental Data
Ratio of operating expenses to average net assets..............           .50%        .58%       .67%       .63%       .52%
Ratio of operating expenses to average net assets plus average
  deferred taxes on unrealized appreciation ...................           .36%        .42%       .49%       .47%       .39%
Ratio of net investment income to average net assets...........           .96%        .71%       .83%      1.09%      1.04%
Portfolio turnover rate........................................          0.13%       2.36%       .56%      3.74%      1.53%


Net asset value total return...................................         32.41%      33.69%      4.90%     41.16%   (16.75)%

   Shares outstanding at end of period (000s omitted)..........          3,886       3,860      3,857      3,857     3,829

</TABLE>

- ------------
* Net decrease is due to the exercise of employee stock options at prices less
than beginning of period net asset value.

                                       22

<PAGE>


Management's Report on Internal Control Over Financial Reporting


     Management  is  responsible  for  establishing  and  maintaining   adequate
internal  control  over  financial  reporting,  as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's
internal  control over  financial  reporting  is designed to provide  reasonable
assurance  regarding the reliability of financial  reporting and the preparation
of financial  statements  for external  purposes in accordance  with  accounting
principles generally accepted in the United States.

     Because of its  inherent  limitations,  internal  controls  over  financial
reporting  may not prevent or detect  misstatements.  Also,  projections  of any
evaluation of  effectiveness to future periods are subject to risk that controls
may become  inadequate  because of changes in conditions,  or that the degree of
compliance with the policies or procedures may deteriorate.

     The Company has assessed  the  effectiveness  of its internal  control over
financial reporting as of March 31, 2007. In making this assessment, it used the
criteria  described in  "Internal  Control-Integrated  Framework"  issued by the
Committee of Sponsoring  Organizations of the Treadway Commission (COSO).  Based
on this  assessment,  management  believes  that,  as of  March  31,  2007,  the
Company's internal control over financial reporting was effective.

     Grant  Thornton  LLP has  issued  its  attestation  report on  management's
assessment  and on the  effectiveness  of the  Company's  internal  control over
financial reporting. That report appears on the next page.

Date:    May 25, 2007

/s/ William R. Thomas
William R. Thomas
President & Chairman of the Board


/s/ Susan K. Hodgson
Susan K. Hodgson
Secretary-Treasurer
(chief financial/accounting officer)



                                       23
<PAGE>


Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
Capital Southwest Corporation

     We have audited management's assessment, included in Management's Report on
Internal Control Over Financial  Reporting,  that Capital Southwest  Corporation
and  subsidiaries  (the "Company")  maintained  effective  internal control over
financial  reporting  as of March 31,  2007,  based on criteria  established  in
Internal  Control-Integrated  Framework  issued by the  Committee of  Sponsoring
Organizations of the Treadway Commission  ("COSO").  The Company's management is
responsible for maintaining  effective internal control over financial reporting
and for its assessment of the  effectiveness  of internal control over financial
reporting.   Our  responsibility  is  to  express  an  opinion  on  management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

     We  conducted  our audit in  accordance  with the  standards  of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and  perform  the audit to obtain  reasonable  assurance  about  whether
effective  internal  control over  financial  reporting  was  maintained  in all
material  respects.  Our audit included  obtaining an  understanding of internal
control over financial reporting,  evaluating management's  assessment,  testing
and evaluating the design and operating  effectiveness of internal control,  and
performing   such  other   procedures   as  we   considered   necessary  in  the
circumstances.  We believe that our audit  provides a  reasonable  basis for our
opinions.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

     Because  of its  inherent  limitations,  internal  control  over  financial
reporting  may not prevent or detect  misstatements.  Also,  projections  of any
evaluation  of  effectiveness  to future  periods  are  subject to the risk that
controls may become  inadequate  because of changes in  conditions,  or that the
degree of compliance with the policies or procedures may deteriorate.

     In our opinion,  management's assessment that Capital Southwest Corporation
and subsidiaries  maintained effective internal control over financial reporting
as of March 31,  2007,  is fairly  stated,  in all material  respects,  based on
criteria  established in Internal  Control-Integrated  Framework issued by COSO.
Also, in our opinion, Capital Southwest Corporation and subsidiaries maintained,
in all material respects, effective internal control over financial reporting as
of March 31, 2007, based on criteria established in Internal  Control-Integrated
Framework issued by COSO.

     We have also  audited,  in  accordance  with the  standards  of the  Public
Company Accounting Oversight Board (United States), the consolidated  statements
of financial  condition of Capital Southwest  Corporation and subsidiaries as of
March 31, 2007 and 2006,  including the portfolio of investments as of March 31,
2007,  and the related  consolidated  statements of  operations,  changes in net
assets,  cash flows,  and the selected per share data and ratios for each of the
three years in the period  ended March 31,  2007,  and our report  dated May 25,
2007  expressed an  unqualified  opinion on those  financial  statements and per
share data and ratios.



/s/Grant Thornton LLP

Dallas, Texas
May 25, 2007




                                       24
<PAGE>


Report of Independent Registered Public Accounting Firm


Board of Directors and Shareholders
Capital Southwest Corporation

     We have  audited the  accompanying  consolidated  statements  of  financial
condition  of  Capital   Southwest   Corporation  (a  Texas   Corporation)   and
subsidiaries  (the  "Company")  as of March  31,  2007 and 2006,  including  the
portfolio  of  investments  as of March 31, 2007,  and the related  consolidated
statements of operations,  changes in net assets,  cash flows,  and the selected
per share data and ratios for each of the three years in the period  ended March
31,  2007.  These  financial  statements  and per share  data and ratios are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and per share data and ratios based on our
audits.  The  selected  per share data and  ratios for the year ended  March 31,
2004,  were audited by other  independent  certified  public  accountants  whose
report dated May 12, 2004,  expressed an unqualified  opinion.  The selected per
share data and ratios for the year ended March 31,  2003,  were audited by other
independent  certified  public  accountants  whose  report dated April 25, 2003,
expressed an unqualified opinion.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification by examination of
securities held by the custodian as of March 31, 2007 and 2006, and confirmation
of securities not held by the custodian by correspondence  with others. An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

     In our opinion, the consolidated  financial statements and the selected per
share  data  and  ratios  referred  to above  present  fairly,  in all  material
respects,  the consolidated  financial position of Capital Southwest Corporation
and subsidiaries as of March 31, 2007 and 2006, and the consolidated  results of
operations,  changes in net assets,  cash flows, and the selected per share data
and ratios for each of the three years in the period  ended March 31,  2007,  in
conformity with accounting principles generally accepted in the United States of
America.

     As  described  in  Note 5 to the  consolidated  financial  statements,  the
Company  adopted the provisions of Financial  Accounting  Standards Board (FASB)
Statement of Financial Accounting Standards No. 123 (revised 2004),  Share-Based
Payment,  effective  April 1, 2006.  As described in Note 7 to the  consolidated
financial statements,  the Company also adopted the provisions of FASB Statement
of Financial  Accounting  Standards No. 158,  Employers'  Accounting for Defined
Benefit Pension and Other Postretirement  Plans: An Amendment of FASB Statements
No. 87, 88, 106, and 132(R), effective March 31, 2007.

     We have also  audited,  in  accordance  with the  standards  of the  Public
Company  Accounting  Oversight  Board  (United  States),  the  effectiveness  of
Company's internal control over financial  reporting as of March 31, 2007, based
on criteria established in Internal  Control-Integrated  Framework issued by the
Committee of Sponsoring  Organizations of the Treadway Commission and our report
dated May 25, 2007, expressed an unqualified opinion on management's  assessment
that the Company's  internal  control over  financial  reporting as of March 31,
2007,  was  effective and an  unqualified  opinion on the  effectiveness  of the
Company's internal control over financial reporting as of March 31, 2007.


/S/GRANT THORNTON LLP

Dallas, Texas
May 25, 2007



                                       25
<PAGE>

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Results of Operations

     The  composite  measure  of  the  Company's  financial  performance  in the
Consolidated  Statements of Operations is captioned "Increase in net assets from
operations"  and  consists  of three  elements.  The  first  is "Net  investment
income",  which is the  difference  between the Company's  income from interest,
dividends  and fees and its combined  operating  and interest  expenses,  net of
applicable  income  taxes.  The second  element is "Net  realized gain (loss) on
investments",  which  is the  difference  between  the  proceeds  received  from
disposition  of portfolio  securities  and their stated cost,  net of applicable
income tax  expense  or  benefit.  The third  element  is the "Net  increase  in
unrealized  appreciation of investments",  which is the net change in the market
or fair value of the Company's investment portfolio,  compared with stated cost,
net of an increase in deferred  income taxes which would  become  payable if the
unrealized  appreciation  were realized through the sale or other disposition of
the investment portfolio.  It should be noted that the "Net realized gain (loss)
on investments" and "Net increase in unrealized appreciation of investments" are
directly  related  in that when an  appreciated  portfolio  security  is sold to
realize a gain, a corresponding  decrease in net unrealized  appreciation occurs
by transferring the gain associated with the transaction from being "unrealized"
to  being  "realized."  Conversely,  when a loss is  realized  on a  depreciated
portfolio security, an increase in net unrealized appreciation occurs.

Net Investment Income

     The  Company's  principal  objective  is to achieve  capital  appreciation.
Therefore,  a significant  portion of the investment  portfolio is structured to
maximize the potential  return from equity  participation  and provides  minimal
current  yield in the form of interest  or  dividends.  The  Company  also earns
interest  income from the  short-term  investment of cash funds,  and the annual
amount of such  income  varies  based upon the average  level of funds  invested
during the year and fluctuations in short-term  interest rates. During the three
years  ended  March 31, the Company had  interest  income  from  temporary  cash
investments  of  $1,187,676 in 2007,  $257,374 in 2006 and $35,048 in 2005.  The
Company also receives management fees primarily from its wholly-owned  portfolio
companies which  aggregated  $626,400 in 2007,  $792,570 in 2006 and $597,000 in
2005. During the three years ended March 31, 2007, the Company recorded dividend
income from the following sources:

                                             Years Ended March 31
                                             --------------------
                                         2007        2006        2005
                                     ----------  ---------   ----------
Alamo Group Inc. ................... $  677,112  $  677,112  $  677,112
Balco, Inc..........................          -     252,960     252,960
Dennis Tool Company.................     62,499      49,999      25,000
Kimberly-Clark Corporation..........    154,360     142,011     127,347
Lifemark Group......................    600,000     600,000     600,000
PalletOne, Inc......................     89,842     179,685      80,858
The RectorSeal Corporation..........  1,869,947   1,106,893     960,000
Sprint Nextel Corporation...........      9,000      18,000      45,000
TCI Holdings, Inc...................     81,270      81,270      81,270
The Whitmore Manufacturing Company..    240,000     240,000     846,273
Other...............................    170,845     137,500      82,370
                                    ------------------------------------
                                     $3,954,875  $3,485,430  $3,778,190
                                    ====================================
     Total operating expenses, excluding interest expense, increased by $270,833
or 13.9%  during  the year  ended  March  31,  2007.  Due to the  nature  of its
business,  the  majority  of the  Company's  operating  expenses  are related to
employee and director compensation,  office expenses,  legal and accounting fees
and the net pension benefit.

Net Realized Gain (Loss) on Investments

     Net realized gain on investments was $16,334,000  (after income tax expense
of  $9,712,995)  during the year ended March 31, 2007,  compared  with a gain of
$13,115,874  (after income tax expense of $7,162,692)  during 2006 and a loss of
$6,065,814 (after income tax benefit of $4,046,206) during 2005. Management does
not attempt to maintain a comparable  level of realized gains from year to year,
but instead attempts to maximize total investment portfolio  appreciation.  This
strategy often dictates the long-term holding of portfolio securities in pursuit
of increased values and increased unrealized appreciation,  but may at opportune
times  dictate  realizing  gains or losses  through the  disposition  of certain
portfolio investments.

Net Increase in Unrealized Appreciation of Investments

     For the three years  ended  March 31, the  Company  recorded an increase in
unrealized  appreciation  of  investments  before income taxes of  $147,681,609,
$124,355,303 and $27,809,654 in 2007, 2006 and 2005, respectively.  As explained
in the first paragraph of this discussion and analysis, the realization of gains



                                       26
<PAGE>

or  losses  results  in a  corresponding  decrease  or  increase  in  unrealized
appreciation  of  investments.   Set  forth  in  the  following  table  are  the
significant  increases  and  decreases in  unrealized  appreciation  (before the
related  change in deferred  income taxes and  excluding  the effect of gains or
losses realized during the year) by portfolio company for securities held at the
end of each year.

                                           Years Ended March 31
                                    2007          2006         2005
                                -----------    -----------  -----------

Alamo Group Inc. .............. $ 2,821,000   $ (5,642,000) $19,749,000
Encore Wire Corporation.......  (12,260,000)    49,041,000  (27,245,000)
Heelys, Inc.................... 170,040,908     27,000,000    1,400,000
Hologic, Inc...................     715,086     12,472,883    1,836,760
Media Recovery, Inc............   3,000,000     15,744,000    9,256,000
Palm Harbor Homes, Inc......... (27,493,000)    27,493,000  (15,710,000)
The RectorSeal Corporation.....  10,500,000     15,000,000   12,500,000

     On December 8, 2006, the Company realized a significant gain on the sale of
a small fraction of its Heelys  investment,  and during the year ended March 31,
2007, the value of our remaining  Heelys stock increased from the March 31, 2006
value by  $170,040,908.  This was  attributable to the increases in Heelys sales
and earnings  during 2006 and the market interest in the initial public offering
of Heelys  common  stock on December 8, 2006.  The  offering  totaled  7,393,750
shares at $21.00 per share.  A total of  4,268,750  shares  were sold by selling
stockholders including 1,591,790 shares sold by our Company.

     Offsetting  part of the major  increase  in Heelys'  value  during the year
ended  March  31,  2007  was a  decrease  of  $27,493,000  in the  value  of the
restricted  stock of Palm Harbor  Homes,  Inc.,  which  experienced  an earnings
decline in the face of unfavorable industry conditions.

     A description of the investments listed above and other material components
of the  investment  portfolio  is included  elsewhere  in this report  under the
caption "Portfolio of Investments - March 31, 2007."

Deferred Taxes on Unrealized Appreciation of Investments

     The Company  provides for deferred  Federal  income taxes on net unrealized
appreciation  of  investments.  Such taxes would become  payable at such time as
unrealized  appreciation  is realized  through the sale or other  disposition of
those  components  of the  investment  portfolio  which would  result in taxable
transactions.  At March 31, 2007  consolidated  deferred Federal income taxes of
$212,102,000  were provided on net  unrealized  appreciation  of  investments of
$609,512,736  compared with deferred  taxes of  $160,764,000  on net  unrealized
appreciation of  $461,831,127 at March 31, 2006.  Deferred income taxes at March
31, 2007 and 2006 were provided at the then currently  effective maximum Federal
corporate tax rate on capital gains of 35%.

Portfolio Investments

     During the year ended  March 31,  2007,  the Company  invested  $803,269 in
various  portfolio  securities listed elsewhere in this report under the caption
"Portfolio  Changes During the Year," which also lists dispositions of portfolio
securities.  During the 2006 and 2005 fiscal years, the Company invested a total
of $15,054,741 and $2,280,690, respectively.

Financial Liquidity and Capital Resources

     At  March  31,  2007,  the  Company  had  cash  and  cash   equivalents  of
approximately  $38.8 million.  Pursuant to Small Business  Administration  (SBA)
regulations,  cash and cash  equivalents of $3.1 million held by CSVC may not be
transferred or advanced to CSC without the consent of the SBA. Under current SBA
regulations and subject to SBA's approval of its credit application,  CSVC would
be entitled to borrow up to $16.4  million.  The Company  also has an  unsecured
$25.0 million  revolving  line of credit from a commercial  bank, of which $25.0
million was  available at March 31, 2007.  With the  exception of a capital gain
distribution  made in the form of a  distribution  of the  stock of a  portfolio
company in the fiscal  year ended  March 31,  1996,  the  Company has elected to
retain all gains realized during the past 39 years. Retention of future gains is
viewed as an  important  source of funds to  sustain  the  Company's  investment
activity.  Approximately $61.9 million of the Company's  investment portfolio is
represented by unrestricted publicly-traded securities and represent a source of
liquidity.

   Funds to be used by the Company for operating or investment purposes may be
transferred in the form of dividends, management fees or loans from Lifemark
Group, The RectorSeal Corporation and The Whitmore Manufacturing Company,
wholly-owned portfolio companies of the Company, to the extent of their
available cash reserves and borrowing capacities.

     Management  believes that the Company's cash and cash  equivalents and cash
available from other sources  described  above are adequate to meet its expected


                                       27
<PAGE>

requirements.  Consistent  with  the  long-term  strategy  of the  Company,  the
disposition of investments  from time to time may also be an important source of
funds for future investment activities.


Contractual Obligations

     As shown below, the Company had the following contractual obligations as of
March  31,  2007.  For  further  information  see  Note  4  and  Note  8 of  the
Consolidated Financial Statements.

                               Payments Due By Period ($ in Thousands)
                               ---------------------------------------
                                     Less than  1-3    3-5   More Than
Contractual Obligations        Total   1 Year  Years  Years  5 Years
- ----------------------------------------------------------------------
Long-term debt obligations    $  --      --   $  --      --      --
Capital  lease obligations       --      --      --      --      --
Operating lease obligations      80      --      80      --      --
Purchase obligations             --      --      --      --      --
Other long-term liabilities
 reflected on the Company's
 balance sheet under GAAP        --      --      --      --      --
                             -------------------------------------------
Total                         $ 80      --    $  80      --      --
                             -------------------------------------------

Critical Accounting Policies

Valuation of Investments

     In  accordance  with the  Investment  Company Act of 1940,  investments  in
unrestricted  securities (freely marketable  securities having readily available
market quotations) are valued at market and investments in restricted securities
(securities subject to one or more resale restrictions) are valued at fair value
determined  in good  faith  by the  Company's  Board  of  Directors.  Under  the
valuation  policy of the  Company,  unrestricted  securities  are  valued at the
closing  sale price for listed  securities  and at the lower of the  closing bid
price or the last sale  price  for  Nasdaq  securities  on the  valuation  date.
Restricted  securities,  including securities of publicly-owned  companies which
are  subject to  restrictions  on resale,  are  valued at fair  value,  which is
considered to be the amount the Company may reasonably expect to receive if such
securities  were sold on the valuation  date.  Valuations  as of any  particular
date, however, are not necessarily indicative of amounts which may ultimately be
realized as a result of future sales or other dispositions of securities.

     Among the factors  considered by the Board of Directors in determining  the
fair value of restricted  securities  are the financial  condition and operating
results of the issuer,  the  long-term  potential of the business of the issuer,
the market for and recent sales prices of the issuer's securities, the values of
similar securities issued by companies in similar businesses,  the proportion of
the issuer's securities owned by the Company,  the nature and duration of resale
restrictions  and the nature of any rights  enabling  the Company to require the
issuer to register restricted securities under applicable securities laws.

Deferred Income Taxes

     In future  years,  the  Company  may not  qualify or elect to be taxed as a
regulated investment company ("RIC") under applicable provisions of the Internal
Revenue Code. Therefore, deferred Federal income taxes have been provided on net
unrealized appreciation of investments at the then currently effective corporate
tax rate on capital gains.

Impact of Inflation

     The Company does not believe that its  business is  materially  affected by
inflation,  other than the impact  which  inflation  may have on the  securities
markets,  the valuations of business  enterprises  and the  relationship of such
valuations to underlying earnings,  all of which will influence the value of the
Company's investments.


Risks

     Pursuant to Section  64(b)(1)  of the  Investment  Company  Act of 1940,  a
business  development  company is required to describe the risk factors involved
in an  investment  in the  securities  of such  company due to the nature of the
company's investment portfolio. Accordingly the Company states that:

     The  Company's  objective  is  to  achieve  capital   appreciation  through
investments in businesses  believed to have  favorable  growth  potential.  Such
businesses are often  undercapitalized  small  companies  which lack  management
depth and have not yet attained profitability. The Company's venture investments
often  include  securities  which do not yield  interest  or  dividends  and are
subject  to legal or  contractual  restrictions  on resale,  which  restrictions
adversely affect the liquidity and marketability of such securities.


                                       28
<PAGE>
<TABLE>
<CAPTION>


     Because of the speculative nature of the Company's investments and the lack
of any market for the securities initially purchased by the Company,  there is a
significantly greater risk of loss than is the case with traditional  investment
securities. The high-risk,  long-term nature of the Company's venture investment
activities  may  prevent  shareholders  of  the  Company  from  achieving  price
appreciation and dividend distributions.


                      Selected Consolidated Financial Data
                (all figures in thousands except per share data)


                                   1997       1998      1999       2000       2001      2002       2003      2004
- -------------------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>       <C>        <C>        <C>       <C>        <C>       <C>

Financial Position  (as of March 31)
Investments at cost..........    $ 59,908 $  61,154  $  73,580 $  85,002  $  87,602 $  82,194  $  91,462  $  97,283
Unrealized appreciation......     233,383   340,132    276,698   238,627    228,316   265,287    195,598    309,666
                                 -------- ---------  --------- ---------  --------- ---------  ---------  ---------
Investments at market or
   fair value................     293,291   401,286    350,278   323,629    315,918   347,481    287,060    406,949
Total assets.................     310,760   522,324    360,786   392,586    322,668   357,183    298,490    423,979
Notes payable *..............       5,000     5,000      5,000    10,000     16,000    14,000     23,000     20,500

Deferred taxes on
   unrealized appreciation...      81,313   118,674     96,473    83,151     79,310    92,107     67,790    107,169
Net assets...................     218,972   296,023    256,232   236,876    226,609   250,491    206,467    290,623
Shares outstanding...........       3,767     3,788      3,815     3,815      3,815     3,829      3,829      3,857

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

Changes in Net Assets (years ended March 31)
Net investment income........    $  2,574 $   2,726  $   1,762 $   1,663  $   1,723 $   2,042  $   2,299  $   2,587
Net realized gain (loss) on
   investments...............       6,806     6,485        995     6,020     (3,231)     (538)     1,346      8,192
Net increase (decrease) in
   unrealized appreciation
   before distributions......      22,804    69,388    (41,233)  (24,750)    (6,470)   24,174    (45,372)    74,689
                                 -------- ---------  --------- ---------  --------- ---------  ---------  ---------
Increase (decrease) in net
   assets from operations
   before distributions......      32,184    78,599    (38,476)  (17,067)    (7,978)   25,678    (41,727)    85,468
Cash dividends paid..........      (2,260)   (2,268)    (2,280)   (2,289)    (2,289)   (2,295)    (2,297)    (2,309)
Employee stock options
   exercised.................           -       720        965         -          -       499          -        997
Stock option expense.........           -         -          -         -          -         -          -          -
Adjustment to initially apply FASB
   Statement No. 158, net of tax        -         -          -         -          -         -          -          -
                                 -----------------------------------------------------------------------------------

Increase (decrease) in net assets  29,924    77,051    (39,791)  (19,356)  ( 10,267)   23,882    (44,024)    84,156

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

Per Share Data (as of March 31)
Deferred taxes on
   unrealized appreciation...    $  21.59 $   31.33  $   25.29 $   21.80  $   20.79 $   24.05  $   17.70  $   27.79
Net assets...................       58.13     78.15      67.16     62.09      59.40     65.42      53.92      75.35
Closing market price.........       67.875    94.00      73.00     54.75      65.00     68.75      48.15      75.47

Cash dividends paid..........         .60       .60        .60       .60        .60       .60        .60        .60

</TABLE>


o Excludes quarter-end borrowing which is repaid on the first business day after
year end.



                                       29
<PAGE>


                      Selected Consolidated Financial Data
                (all figures in thousands except per share data)


                                               2005      2006      2007
                                           ------------------------------

Financial Position  (as of March 31)
Investments at cost..........               $ 84,546  $ 88,597   $ 71,642
Unrealized appreciation......                337,476   461,831    609,513
                                           --------- ---------  ---------
Investments at market or
   fair value................                422,022   550,428    681,155
Total assets.................                434,384   569,368    729,507
Notes payable *..............                 13,000     8,000          -

Deferred taxes on
   unrealized appreciation...                117,094   160,764    212,102
Net assets...................                302,534   396,618    514,344
Shares outstanding...........                  3,857     3,860      3,886

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

Changes in Net Assets (years ended March 31)
Net investment income........               $  2,406  $  2,389   $  4,233
Net realized gain (loss) on
   investments...............                 (6,066)   13,116     16,334
Net increase (decrease) in
   unrealized appreciation
   before distributions......                 17,885    80,685     96,344
                                           --------- ---------  ---------
Increase (decrease) in net
   assets from operations
   before distributions......                 14,225    96,190    116,911
Cash dividends paid..........                 (2,314)   (2,314)    (2,323)
Employee stock options
   exercised.................                     -        208      1,795
Stock option expense.........                     -          -        169
Adjustment to initially apply FASB
   Statement No. 158, net of tax                  -          -      1,173
                                           ------------------------------

Increase (decrease) in net assets             11,911    94,084    117,725

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

Per Share Data (as of March 31)
Deferred taxes on
   unrealized appreciation...               $  30.36  $  41.65   $  54.58
Net assets...................                  78.44    102.74     132.36
Closing market price.........                  79.10     95.50     153.67

Cash dividends paid..........                    .60       .60        .60




o Excludes quarter-end borrowing which is repaid on the first business day after
year end.




                                       30
<PAGE>


                             Shareholder Information



Stock Transfer Agent

     American Stock Transfer & Trust Company, 59 Maiden Lane, New York, NY 10038
(telephone  800-937-5449)  serves as  transfer  agent for the  Company's  common
stock.  Certificates to be transferred should be mailed directly to the transfer
agent, preferably by registered mail.

Shareholders

     The Company had  approximately  700 record  holders of its common  stock at
March 31, 2007. This total does not include an estimated 4,000 shareholders with
shares held under beneficial  ownership in nominee name or within  clearinghouse
positions of brokerage firms or banks.

Market Prices

     The  Company's  common stock trades on The Nasdaq  Global  Market under the
symbol CSWC.  The  following  high and low selling  prices for the shares during
each quarter of the last two fiscal years were taken from quotations provided to
the Company by Nasdaq:

Quarter Ended                                            High      Low
- ------------------------------------------------------------------------
June 30, 2005....................................       $89.68    $74.98
September 30, 2005...............................        95.18     81.84
December 31, 2005................................        92.71     82.10
March 31, 2006...................................        99.01     89.24

Quarter Ended                                            High      Low
- -------------------------------------------------------------------------
June 30, 2006....................................      $104.45   $ 90.65
September 30, 2006...............................       121.00     96.47
December 31, 2006...............................        154.36    115.33
March 31, 2007...................................       155.99    122.05



Dividends

   The payment dates and amounts of cash dividends per share since April 1, 2005
are as follows:

Payment Date                                              Cash Dividend
- -----------------------------------------------------------------------
May 31, 2005..............................................    $0.20
November 30, 2005.........................................     0.40
May 31, 2006..............................................     0.20
November 30, 2006.........................................     0.40
May 31, 2007..............................................     0.20

     The  amounts  and timing of cash  dividend  payments  have  generally  been
dictated by requirements of the Internal Revenue Code regarding the distribution
of taxable net  investment  income  (ordinary  income) of  regulated  investment
companies.   Instead  of  distributing   realized  long-term  capital  gains  to
shareholders,  the Company has  ordinarily  elected to retain such gains to fund
future investments.

Automatic Dividend Reinvestment and Optional Cash Contribution Plan

     As a service to its shareholders,  the Company offers an Automatic Dividend
Reinvestment and Optional Cash  Contribution Plan for shareholders of record who
own a minimum of 25 shares.  The Company pays all costs of administration of the
Plan except brokerage  transaction  fees. Upon request,  shareholders may obtain
information on the Plan from the Company, 12900 Preston Road, Suite 700, Dallas,
Texas 75230. Telephone (972) 233-8242.  Questions and answers about the Plan are
on the next page.

Annual Meeting

     The Annual Meeting of Shareholders of Capital Southwest Corporation will be
held on Monday,  July 16,  2007,  at 10:00 a.m.  in the North  Dallas Bank Tower
Meeting Room (second floor), 12900 Preston Road, Dallas, Texas.




                                       31
<PAGE>









</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>6
<FILENAME>capital10kex211033107.txt
<TEXT>





                                                                   Exhibit  21.1







                          CAPITAL SOUTHWEST CORPORATION

                              List of Subsidiaries




        Name of Subsidiary                                State of Incorporation

        Balco, Inc.                                       Delaware
        Humac Company                                     Texas
        Media Recovery, Inc.                              Nevada
        The RectorSeal Corporation                        Delaware
        Lifemark Group (formerly Skylawn Corporation)     Nevada
        The Whitmore Manufacturing Company                Delaware

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>7
<FILENAME>capital10kex231033107.txt
<TEXT>



                                                                    EXHIBIT 23.1




            Consent of Registered Independent Public Accounting Firm



We have issued our reports  dated May 25, 2007,  accompanying  the  consolidated
financial  statements  and  management's  assessment  of  the  effectiveness  of
internal  control  over  financial  reporting  included in the Annual  Report of
Capital  Southwest  Corporation and subsidiaries on Form 10-K for the year ended
March 31, 2007 which are  incorporated by reference in the March 31, 2007 Annual
Report  on  Form  10-K  of  this  Registration  Statement.  We  consent  to  the
incorporation  by reference of the  aforementioned  reports in the  Registration
Statement of Capital  Southwest  Corporation and  subsidiaries on Form S-8 (File
No. 33-43881).





/s/ GRANT THORNTON LLP

May 25, 2007
Dallas, Texas


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>8
<FILENAME>capital10kex311033107.txt
<TEXT>



                                                                    Exhibit 31.1
                                 CERTIFICATIONS

I, William R. Thomas,  President and Chairman of the Board of Capital  Southwest
Corporation, certify that:

1.   I have  reviewed  this  annual  report  on Form 10-K of  Capital  Southwest
     Corporation (the "registrant");

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.





Date:  May 25, 2007                                  By:  /s/ William R. Thomas
       ------------                                 ----------------------------
                                                    William R. Thomas, President
                                                    and Chairman of the Board


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>9
<FILENAME>capital10kex312033107.txt
<TEXT>



                                                                    Exhibit 31.2

                                 CERTIFICATIONS


I,  Susan K.  Hodgson,  Secretary-Treasurer  of Capital  Southwest  Corporation,
certify that:

1.   I have  reviewed  this  annual  report  on Form 10-K of  Capital  Southwest
     Corporation (the "registrant");

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.





Date:  May 25, 2007                        By:    /s/ Susan K. Hodgson
       ------------                        -------------------------------------
                                           Susan K. Hodgson, Secretary-Treasurer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>10
<FILENAME>capital10kex321033107.txt
<TEXT>



                                                                    Exhibit 32.1


              Certification of President and Chairman of the Board

  Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code


     I,  William  R.  Thomas,  President  and  Chairman  of the Board of Capital
Southwest Corporation, certify that, to my knowledge:

     1. the Form 10-K, filed with the Securities and Exchange  Commission on May
25, 2007 ("accompanied  report") fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. the information  contained in the accompanied report fairly presents, in
all material  respects,  the  consolidated  financial  condition  and results of
operations of Capital Southwest Corporation.


Date:   May 25, 2007                                By:  /s/ William R. Thomas
        ------------                                ----------------------------
                                                    William R. Thomas, President
                                                       and Chairman of the Board



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>11
<FILENAME>capital10kex322033107.txt
<TEXT>



                                                                    Exhibit 32.2

                      Certification of Secretary-Treasurer

  Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code




     I, Susan K. Hodgson,  Secretary-Treasurer of Capital Southwest Corporation,
certify that, to my knowledge:

     1. the Form 10-K, filed with the Securities and Exchange  Commission on May
25, 2007 ("accompanied  report") fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. the information  contained in the accompanied report fairly presents, in
all material  respects,  the  consolidated  financial  condition  and results of
operations of Capital Southwest Corporation.


Date:  May 25, 2007                        /s/ Susan K. Hodgson
       ------------                        -------------------------------------
                                           Susan K. Hodgson, Secretary-Treasurer


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
