SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 - For the fiscal year ended December 31, 2002

Commission file number 1-13905

COMPX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)

Delaware                                            57-0981653     
-------------------------------                           --------------------
(State or other jurisdiction of                              (IRS Employer
incorporation or organization)                            Identification No.)

5430 LBJ Freeway, Suite 1700, Dallas, Texas                     75240-2697    
-----------------------------------------------           --------------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code:          (972) 233-1700   
--------------------

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class                        which registered

Class A common stock                   New York Stock Exchange
($.01 par value per share)

Securities registered pursuant to Section 12(g) of the Act:

None.

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 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 an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes   No X 
---  ---

The  aggregate  market  value of the 4.7 million  shares of voting stock held by
nonaffiliates of CompX International Inc. as of June 28, 2002 approximated $62.7
million.

As of  February  28,  2003,  5,115,780  shares  of  Class A  common  stock  were
outstanding.

Documents incorporated by reference

Certain of the  information  required by Part III is  incorporated  by reference
from the Registrant's definitive proxy statement to be filed with the Commission
pursuant to  Regulation  14A not later than 120 days after the end of the fiscal
year covered by this report.

PART I

ITEM 1.   BUSINESS

General

CompX International Inc. (NYSE: CIX) is a leading manufacturer of precision
ball bearing slides,  security  products and ergonomic  computer support systems
used in office furniture,  computer-related  applications and a variety of other
industries. The Company's products are principally designed for use in medium to
high-end product applications, where design, quality and durability are critical
to the Company's  customers.  The Company  believes that it is among the world's
largest producers of precision ball bearing slides, security products consisting
of cabinet locks and other locking  mechanisms and ergonmomic  computer  support
systems. In 2002, precision ball bearing slides, security products and ergonomic
computer  support systems  accounted for  approximately  43%, 37% and 15% of net
sales,  respectively.  The remaining  sales were  generated  from sales of other
products.

Valhi, Inc. and Valhi's  wholly-owned  subsidiary Valcor, Inc. owned 69% of
the  Company's  outstanding  common stock at December 31, 2002.  At December 31,
2002, Contran Corporation held, directly or through subsidiaries,  approximately
93%  of  Valhi's  outstanding  common  stock.  Substantially  all  of  Contran's
outstanding  voting  stock is held by  trusts  established  for the  benefit  of
certain children and grandchildren of Harold C. Simmons, of which Mr. Simmons is
sole trustee. Mr. Simmons is Chairman of the Board of each of Contran, Valhi and
Valcor and may be deemed to control each of such companies and CompX.

The Company was  incorporated  in Delaware in 1993 under the name  National
Cabinet Lock,  Inc. At that time,  Valhi  contributed  the assets of its Cabinet
Lock  Division  and the stock of Waterloo  Furniture  Components  Limited to the
Company.  In 1996, the Company changed its name to CompX  International  Inc. In
1998, the Company issued  approximately  6 million shares of its common stock in
an initial public offering and CompX acquired two additional  security  products
producers.  CompX acquired two more slide producers in 1999 and another security
products  producer in January  2000.  See Note 2 to the  Consolidated  Financial
Statements.

The  Company  maintains  a website  on the  internet  with the  address  of
www.compxnet.com.  Copies of this Annual  Report on Form 10-K for the year ended
December 31, 2002 and copies of the Company's Quarterly Reports on Form 10-Q for
2002 and 2003 and any  Current  Reports  on Form 8-K for 2002 and 2003,  and any
amendments  thereto,  are or  will  be  available  free  of  charge  as  soon as
reasonably  practical  after they are filed  with the  Securities  and  Exchange
Commission  ("SEC") at such website.  The general  public may also read and copy
any materials the Company files with the SEC at the SEC's Public  Reference Room
at 450 Fifth Street, NW, Washington, DC 20549, and may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
Company is an electronic  filer,  and the SEC  maintains an internet  website at
www.sec.gov that contains reports, proxy and information  statements,  and other
information regarding issuers that file electronically with the SEC.

As  provided  by the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995, the Company cautions that the statements in this
Annual  Report on Form 10-K relating to matters that are not  historical  facts,
including,  but not limited to,  statements  found in this Item 1 -  "Business,"
Item 3 - "Legal Proceedings," Item 7 - "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations" and Item 7A - "Quantitative  and
Qualitative Disclosures About Market Risk," are forward-looking  statements that
represent  management's  beliefs and  assumptions  based on currently  available
information.  Forward-looking  statements  can be identified by the use of words
such as "believes,"  "intends,"  "may,"  "should,"  "anticipates,"  "expects" or
comparable  terminology or by discussions of strategies or trends.  Although the
Company  believes  that  the  expectations  reflected  in  such  forward-looking
statements are reasonable, it cannot give any assurances that these expectations
will prove to be correct.  Such  statements by their nature involve  substantial
risks and uncertainties that could  significantly  impact expected results,  and
actual  future  results  could differ  materially  from those  described in such
forward-looking  statements.  Among the factors that could cause  actual  future
results to differ materially are the risks and  uncertainties  discussed in this
Annual Report and those  described from time to time in materials filed with the
Company's  other filings with the SEC.  While it is not possible to identify all
factors,  the Company continues to face many risks and uncertainties  including,
but not limited to, the following:

o    Future supply and demand for the Company's products,
o    Changes in costs of raw materials and other operating costs (such as energy
costs),
o    General global economic and political conditions,
o    Demand for office furniture,
o    Service industry employment levels,
o    The possibility of labor disruptions,
o    Competitive  products  and prices,  including  increased  competition  from
low-cost manufacturing sources (such as China),
o    Substitute products,
o    Customer and competitor strategies,
o    The introduction of trade barriers,
o    The impact of pricing and production decisions,
o    Fluctuations in the value of the U.S.  dollar relative to other  currencies
(such as the euro, Canadian dollar and New Taiwan dollar),
o    Potential difficulties in integrating completed acquisitions,
o    Uncertainties associated with new product development,
o    Environmental  matters  (such as those  requiring  emission  and  discharge
standards for existing and new facilities),
o    The ultimate outcome of income tax audits,
o    The impact of current or future government regulations,
o    Possible future litigation and
o    Other risks and uncertainties.

Should one or more of these risks  materialize  (or the  consequences  of such a
development worsen) or should the underlying assumptions prove incorrect, actual
results could differ  materially from those forecasted or expected.  The Company
disclaims  any  intention  or  obligation  to update  publicly  or  revise  such
statements whether as a result of new information, future events or otherwise.

Industry Overview

Prior to 1998, approximately 75% of the Company's products were sold to the
office furniture  manufacturing  industry. As a result of strategic acquisitions
in the security  products  industry in 1998 and 2000 and in the  precision  ball
bearing slide  industry in 1999,  the Company has expanded its product  offering
and reduced its percentage of sales to the office furniture  market.  Currently,
approximately  62% of the  Company's  products are sold to the office  furniture
manufacturing  industry while the remainder are sold for use in other  products,
such  as  vending  equipment,   electromechanical  enclosures,   transportation,
computers and related equipment,  and other non-office  furniture  applications.
Beginning in 2001 and continuing  throughout 2002, the office furniture industry
has  experienced  a  contraction  with   consistently   negative  growth  rates.
Consequently,  CompX's sales growth has been negatively  affected.  See Item 6 -
"Selected Financial Data" and Item 7 - "Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations."  However,  CompX's  management
believes  that its emphasis on new product  development,  sales of its ergonomic
computer support systems as well as slide and security products used in computer
and other non-office  furniture markets result in the potential for higher rates
of growth and  diversification  of risk than the office furniture  industry as a
whole.

Products

CompX  manufactures  and sells  components  in three major  product  lines:
precision ball bearing slides,  security products and ergonomic computer support
systems.

Sales for the respective product lines in 2000, 2001 and 2002 are as
follows:

Years ended December 31  
2000          2001         2002
----          ----         ----
($ in thousands)

Precision ball bearing slides ...........     $119,046     $ 91,822     $ 84,446
Security products .......................       85,218       74,071       73,358
Ergonomic computer support systems ......       41,658       36,383       29,945
Other products ..........................        7,372        9,146        8,352
--------     --------     --------

$253,294     $211,422     $196,101
========     ========     ========

The Company's  precision ball bearing slides and ergonomic computer support
systems are sold under the CompX Waterloo, Waterloo Furniture Components, Thomas
Regout and Dynaslide  brand names and the Company's  security  products are sold
under the CompX Security Products,  National Cabinet Lock, Fort Lock, Timberline
Lock,  Chicago Lock and TuBAR brand names.  The Company  believes that its brand
names are well recognized in the industry.

Precision  ball  bearing  slides.  CompX  manufactures  a complete  line of
precision  ball  bearing  slides for use in office  furniture,  computer-related
equipment, tool storage cabinets, imaging equipment, file cabinets, desk drawers
and other applications. These products include CompX's patented Integrated Slide
Lock in which a file cabinet manufacturer can reduce the possibility of multiple
drawers  being  opened at the same time and the  adjustable  patented  Ball Lock
which  reduces the risk of  heavily-filled  drawers,  such as auto mechanic tool
boxes,  from  opening  while in  movement.  Precision  ball  bearing  slides are
manufactured  to stringent  industry  standards and are designed in  conjunction
with original  equipment  manufacturers  ("OEMs") to meet the needs of end users
with respect to weight support capabilities, ease of movement and durability.

In addition to CompX's basic  precision  ball bearing slide product  lines,
sales based on patented innovations such as the Butterfly Take Apart System, the
Integrated  Slide  Lock and the  Ball  Lock  have  accounted  for an  increasing
proportion  of  the  Company's  sales.  These  applications  have  expanded  the
Company's  product  offerings  within the office  furniture  industry as well as
adding products for heavy-duty tool storage cabinets,  electromechanical imaging
equipment and computer server network cabinets.

Security products.  The Company believes that it is a North American market
leader  in  the  manufacture  and  sale  of  cabinet  locks  and  other  locking
mechanisms.  CompX provides  security products to various  industries  including
institutional furniture,  banking,  industrial equipment,  vehicles, vending and
computer.  The  Company's  products  can also be found in  various  applications
including  ignition  systems,  office  furniture,  vending and gaming  machines,
parking  meters,  electrical  circuit  panels,  storage  compartments,  security
devices for laptop and desktop  computers as well as mechanical  and  electronic
locks for the toolbox industry. Some of these products may include CompX's KeSet
high  security  system,  which has the  ability to change the keying on a single
lock 64 times  without  removing the lock from its  enclosure  and it's patented
high security Tubar locking system.

The Company  manufactures  disc tumbler  locking  mechanisms  at all of its
security  products  facilities,  which mechanisms  provide moderate security and
generally represent the lowest cost lock to produce. CompX also manufactures pin
tumbler locking  mechanisms,  including its KeSet, ACE II and TuBAR brand locks,
which  mechanisms  are more  costly  to  produce  and are  used in  applications
requiring  higher  levels of security.  A  substantial  portion of the Company's
sales  consist  of  products   with   specialized   adaptations   to  individual
manufacturers'  specifications.  CompX, however, also has a standardized product
line  suitable for many  customers.  This  standardized  product line is offered
through a North American  distribution network through the Company's STOCK LOCKS
distribution program as well as to factory centers and to large OEMs.

Ergonomic  computer  support systems.  CompX is a leading  manufacturer and
innovator in ergonomic  computer support systems.  Unlike products targeting the
residential  market,  which are more price  sensitive  with less emphasis on the
overall  value of products and service,  the CompX line  consists of more highly
engineered  products  designed to provide  ergonomic  benefits  for business and
other sophisticated users.

Ergonomic computer support systems include  articulating  computer keyboard
support  arms  (designed  to attach to desks in the  workplace  and home  office
environments  to  alleviate  possible  strains  and stress and  maximize  usable
workspace),   adjustable  computer  table  mechanisms  (which  provide  variable
workspace heights),  CPU storage devices (which minimize adverse effects of dust
and moisture) and a number of  complementary  accessories,  including  ergonomic
wrist rest aids,  mouse pad supports and computer  monitor  support arms.  These
products include CompX's Leverlock,  which is designed to make the adjustment of
an  ergonomic  keyboard  arm  easier.  In  addition,   the  Company  offers  its
engineering and design  capabilities  for the design and manufacture of products
on a proprietary basis for key customers.

Other.  CompX  also  markets  and  distributes  a  complete  line of window
furnishings  hardware in addition to manufacturing  sheet metal products such as
filing frames in European markets.

Sales, Marketing and Distribution

CompX  sells  components  to OEMs and to  distributors  through a dedicated
sales force.  The majority of the Company's sales are to OEMs, while the balance
represents standardized products sold through distribution channels.

Sales to large OEM customers are made through the efforts of  factory-based
sales and marketing  professionals  and engineers  working in concert with field
salespeople  and  independent  manufacturers'  representatives.   Manufacturers'
representatives  are  selected  based on special  skills in  certain  markets or
relationships with current or potential customers.

A significant portion of the Company's sales are made through distributors.
The  Company  has a  significant  market  share  of  cabinet  lock  sales to the
locksmith distribution channel. CompX supports its distributor sales with a line
of standardized products used by the largest segments of the marketplace.  These
products are packaged and  merchandised  for easy  availability  and handling by
distributors  and the end user.  Based on the Company's  successful  STOCK LOCKS
inventory program,  similar programs have been implemented for distributor sales
of  ergonomic  computer  support  systems and, to some  extent,  precision  ball
bearing  slides.  The  Company  also  operates  a  small  tractor/trailer  fleet
associated with its Canadian  facilities to provide an  industry-unique  service
response to major customers.

The Company does not believe it is dependent  upon one or a few  customers,
the loss of which would have a material  adverse  effect on its  operations.  In
2000, 2001 and 2002, sales to the Company's ten largest customers  accounted for
approximately 35%, 36% and 30% of sales,  respectively.  In 2000, 2001 and 2002,
sales to the  Company's  largest  customer  were less than 10% of the  Company's
total sales.  In 2000,  nine of the Company's top ten customers  were located in
the United  States.  In 2001 and 2002,  eight of the Company's top ten customers
were located in the United States.

Manufacturing and Operations

At December 31, 2002, CompX operated nine manufacturing facilities:  six in
North  America  (two in each of  Illinois  and  Canada  and one in each of South
Carolina and Michigan), one in the Netherlands and two in Taiwan. Precision ball
bearing slides or ergonomic  products are manufactured in the facilities located
in  Canada,  the  Netherlands,   Michigan  and  Taiwan.  Security  products  are
manufactured  in the  facilities  located in South  Carolina and  Illinois.  The
Company owns all of these facilities except for one of the Taiwan facilities and
the  Netherlands  facility,  which are leased.  See also Item 2 -  "Properties."
CompX also leases a distribution center in California and a warehouse in Taiwan.
CompX believes that all of its facilities are well  maintained and  satisfactory
for their intended purposes.

Raw Materials

Coiled steel is the major raw material used in the manufacture of precision
ball bearing slides and ergonomic  computer support systems.  Plastic resins for
injection molded plastics are also an integral  material for ergonomic  computer
support  systems.  Purchased  components,   including  zinc  castings,  are  the
principal raw materials used in the manufacture of security products.  These raw
materials are purchased  from several  suppliers and are readily  available from
numerous sources.

The Company occasionally enters into raw material  arrangements to mitigate
the short-term  impact of future  increases in raw material  costs.  While these
arrangements  do not commit the Company to a minimum  volume of purchases,  they
generally  provide for stated unit prices  based upon  achievement  of specified
volume  purchase  levels.  This allows the  Company to  stabilize  raw  material
purchase prices, provided that the specified minimum monthly purchase quantities
are met. Materials purchased outside of these arrangements are sometimes subject
to unanticipated and sudden price increases such as rapidly increasing worldwide
steel prices in 2002. Due to the competitive nature of the markets served by the
Company's  products,  it is often  difficult  to recover  such  increases in raw
material costs through increased product selling prices.  Consequently,  overall
operating margins can be affected by such raw material cost pressures.

Competition

The markets in which CompX participates are highly competitive. The Company
competes  primarily  on the basis of product  design,  including  ergonomic  and
aesthetic  factors,  product quality and durability,  price,  on-time  delivery,
service and technical support. The Company focuses its efforts on the middle and
high-end segments of the market, where product design,  quality,  durability and
service are placed at a premium.

The Company  competes in the precision ball bearing slide market  primarily
on the basis of product  quality  and price with two large  manufacturers  and a
number of smaller  domestic and foreign  manufacturers.  The Company's  security
products  compete  with a variety  of  relatively  small  domestic  and  foreign
competitors.  The Company  competes in the ergonomic  computer  support  systems
market  primarily on the basis of product  quality,  features and price with one
major producer and a number of smaller domestic  manufacturers  and primarily on
the basis of price with a number of foreign manufacturers.  Although the Company
believes that it has been able to compete  successfully  in its markets to date,
price  competition from  foreign-sourced  product has intensified in the current
economic  market and there can be no assurance  that the Company will be able to
continue to successfully compete in all existing markets in the future.

Patents and Trademarks

The Company holds a number of patents  relating to its component  products,
certain  of which are  believed  to be  important  to CompX  and its  continuing
business  activity.  CompX's major  trademarks and brand names,  including CompX
Security  Products,  CompX Waterloo,  National Cabinet Lock,  KeSet,  Fort Lock,
Timberline  Lock,  Chicago Lock,  ACE II,  TuBAR,  Thomas  Regout,  STOCK LOCKS,
ShipFast,  Waterloo Furniture Components Limited and Dynaslide, are protected by
registration  in the United  States and  elsewhere  with respect to the products
CompX  manufactures  and sells.  The Company  believes such  trademarks are well
recognized in the component products industry.

Foreign Operations

The Company  has  substantial  operations  and assets  located  outside the
United States,  principally slide and/or ergonomic product operations in Canada,
the  Netherlands and Taiwan.  The majority of the Company's 2002 non-U.S.  sales
are to customers  located in Canada and Europe.  Foreign  operations are subject
to, among other  things,  currency  exchange  rate  fluctuations.  The Company's
results  of  operations  have in the past been both  favorably  and  unfavorably
affected by  fluctuations  in currency  exchange  rates.  Political and economic
uncertainties  in certain of the  countries  in which the Company  operates  may
expose the Company to risk of loss.  The Company  does not believe that there is
currently  any  likelihood  of  material  loss  through  political  or  economic
instability,  seizure,  nationalization  or similar  event.  The Company  cannot
predict,  however,  whether  events  of this  type in the  future  could  have a
material  effect on its operations.  See Item 7 -  "Management's  Discussion and
Analysis  of  Financial   Condition  and  Results  of  Operations,"  Item  7A  -
"Quantitative  and Qualitative  Disclosures About Market Risk" and Note 1 to the
Consolidated Financial Statements.

Environmental Matters

The Company's  operations are subject to federal,  state, local and foreign
laws  and  regulations  relating  to the  use,  storage,  handling,  generation,
transportation,  treatment, emission, discharge, disposal and remediation of and
exposure  to  hazardous  and  non-hazardous  substances,  materials  and  wastes
("Environmental  Laws").  The Company's  operations also are subject to federal,
state,  local and foreign  laws and  regulations  relating to worker  health and
safety. The Company believes that it is in substantial  compliance with all such
laws and  regulations.  The costs of maintaining  compliance  with such laws and
regulations have not significantly impacted the Company to date, and the Company
has no significant planned costs or expenses relating to such matters. There can
be no assurance,  however,  that  compliance with future  Environmental  Laws or
future laws and regulations  governing worker health and safety will not require
the Company to incur significant additional expenditures or that such additional
costs  would  not have a  material  adverse  effect on the  Company's  business,
consolidated financial condition, results of operations or liquidity.

Employees

As  of  December  31,  2002,  the  Company  employed   approximately  1,850
employees,  including  665 in the  United  States,  700  in  Canada,  300 in the
Netherlands and 185 in Taiwan.  Approximately 76% of the Company's  employees in
Canada are  represented  by a labor  union  covered by a  collective  bargaining
agreement  that expires in January  2006.  The Company  believes  that its labor
relations are satisfactory.

ITEM 2.   PROPERTIES

The Company's  principal executive offices are located in approximately 700
square  feet of leased  space at 5430 LBJ  Freeway,  Dallas,  Texas  75240.  The
following table sets forth the location,  size,  business  operating segment and
general product types produced for each of the Company's facilities.

Size
Business                                      (square
Facility Name            Segment              Location                 feet)              Products Produced

Owned Facilities:
----------------

Manitou                          CW      Kitchener, Ontario               276,000           Slides

Trillium                         CW      Kitchener, Ontario               110,000           Ergonomic products

Byron Center                     CW      Byron Center, MI                 143,000           Slides

National                        CSP      Mauldin, SC                      198,000           Security products

Fort                            CSP      River Grove, IL                  100,000           Security products

Timberline                      CSP      Lake Bluff, IL                    16,000           Security products

Dynaslide                        CW      Taipei, Taiwan                    48,000           Slides

Leased Facilities:
-----------------

Regout                           CR      Maastricht,
the Netherlands                 270,000           Slides

Dynaslide                        CW      Taipei, Taiwan                    25,000           Slides

Dynaslide                        CW      Taipei, Taiwan                    11,000           Product distribution/
Warehouse

Distribution Center              CW      Rancho Cucamonga, CA              12,000           Product distribution

CW  - CompX Waterloo business segment
CR  - CompX Regout business segment
CSP - CompX Security Products business segment

The Manitou,  Trillium,  Regout, Byron Center, National and Fort facilities
are ISO-9001  registered.  The Dynaslide-owned  facility is ISO-9002 registered.
The  Company   believes  that  all  its  facilities  are  well   maintained  and
satisfactory for their intended purposes.

A sale/leaseback  transaction was executed on the Netherlands facility with
the municipality of Maastricht in December 2001. See Note 11 to the Consolidated
Financial Statements and see also Item 7 - "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

ITEM 3.   LEGAL PROCEEDINGS

The  Company is  involved,  from time to time,  in  various  environmental,
contractual,  product  liability,  patent (or  intellectual  property) and other
claims  and  disputes   incidental  to  its  business.   Currently  no  material
environmental  or other  material  litigation is pending or, to the knowledge of
the Company,  threatened. The Company currently believes that the disposition of
all claims and disputes,  individually  or in the  aggregate,  should not have a
material  adverse  effect on the  Company's  consolidated  financial  condition,
results of operations or liquidity.

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 December 31, 2002.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The  Company's  Class A common  stock is listed  and traded on the New York
Stock Exchange (symbol:  CIX). As of February 28, 2003, there were approximately
26 holders of record of CompX Class A common  stock.  The  following  table sets
forth the high and low closing  sales  prices per share for CompX Class A common
stock for 2001 and 2002,  according  to the New York  Stock  Exchange  Composite
Tape, and dividends paid per share during such periods. On February 28, 2003 the
closing  price per share of CompX  Class A common  stock  according  to the NYSE
Composite Tape was $6.98.

Dividends
High         Low           paid

Year ended December 31, 2001

First Quarter ..........................       $   11.65    $    9.18    $    .125
Second Quarter .........................           13.00        10.77         .125
Third Quarter ..........................           13.40        10.45         .125
Fourth Quarter .........................           12.97         8.95         .125

Year ended December 31, 2002

First Quarter ..........................       $   14.00    $   11.00    $    .125
Second Quarter .........................           14.40        11.72         .125
Third Quarter ..........................           14.00         8.78         .125
Fourth Quarter .........................            9.55         7.61         .125

The declaration and payment of future dividends and the amount thereof,  if
any,  will be dependent  upon the  Company's  results of  operations,  financial
condition,  cash requirements for its businesses,  contractual  requirements and
restrictions and other factors deemed relevant by the Board of Directors.

ITEM 6.   SELECTED FINANCIAL DATA

The following  selected  financial data should be read in conjunction  with
the  Company's  Consolidated  Financial  Statements  and Item 7 -  "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

The  Company's  operations  are  comprised of a 52 or 53-week  fiscal year.
Excluding 1998, each of the years 1991 through 2002 consisted of a 52-week year.
1998 was a 53-week year.

Years ended December 31,
--------------------------------
1998       1999        2000      2001      2002
----       ----        ----      ----      ----
($ in millions, except per share data)
Income Statement Data

Net sales .....................   $  152.1   $  225.9    $  253.3  $  211.4  $  196.1

Operating income ..............   $   30.4   $   40.0    $   37.3  $   12.5  $    6.2

Income before income taxes and
minority interest ...........   $   32.5   $   39.2    $   35.5  $   12.9  $    3.4
Income taxes ..................       12.0       14.1        13.4       5.8       2.8
Minority interest in losses ...        (.2)       (.1)       --        --        --
--------   --------    --------  --------  --------

Net income ..................   $   20.7   $   25.2    $   22.1  $    7.1  $     .6
========   ========    ========  ========  ========

Cash dividends ................   $    1.8   $    2.0    $    8.1  $    7.6  $    7.6
Net income per basic and
diluted share ................   $   1.37   $   1.56    $   1.37  $    .47  $    .04
Cash dividends per share ......   $    .18   $   .125    $    .50  $    .50  $    .50
Weighted average common shares
outstanding ..................       15.1       16.1        16.1      15.1      15.1

Balance Sheet Data
(at year end):

Cash and other current assets   $   86.5   $   72.5    $   83.0  $   94.9  $   71.3
Total assets ................      152.4      200.4       223.7     222.9     200.1
Current liabilities .........       20.3       26.8        28.9      24.5      22.2
Long-term debt, including
current maturities .........        1.7       22.3        40.6      49.1      31.0
Stockholders' equity ........      130.0      149.4       151.0     143.0     142.0

In 1998,  the Company issued  approximately  6 million shares of its common
stock in an initial public  offering and CompX acquired two additional  security
products producers.  CompX acquired two more slide producers in 1999 and another
security products producer in January 2000.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

The Company  reported net income of $.6 million,  or $.04 per diluted share
for the year ended  December  31, 2002, a decrease of 91% compared to net income
of $7.1 million or $.47 per diluted share for the year ended  December 31, 2001.
The Company's net income in 2000 was $22.1 million, or $1.37 per diluted share.

The continued weak economic conditions in the manufacturing sector in North
America and Europe,  coupled with the  substantial  rise in steel prices,  had a
significant impact on CompX's results in 2002. Several cost control  initiatives
were commenced  during the year in response to the continuing soft market demand
in order to minimize the adverse  effects of lower sales and favorably  position
CompX to meet  demand  when the  economy  recovers.  These  initiatives  were in
addition to actions  taken  during  2001 that  included a  restructuring  of its
European  operations in the fourth  quarter of 2001. The most  significant  2002
action was the retooling of its Byron Center,  Michigan precision slide facility
in the  fourth  quarter  of 2002 to  rationalize  several  products  within  its
precision  slide  product  family.  The Byron  Center  retooling  is expected to
achieve operating  efficiencies that should begin to positively impact operating
results in the first quarter of 2003.

During 2003,  CompX  anticipates  continuing its focus on  opportunities to
rationalize  its cost  structure.  As part of this  initiative,  CompX  plans to
consolidate its two Kitchener, Ontario plants into a single facility and expects
substantial  completion  of this  action  during  the  second  quarter  of 2003.
Expenses relating to this consolidation are expected to primarily consist of the
cost to move  machinery  and  equipment  and are not  anticipated  to  include a
significant  cost for the disposal of fixed assets.  Other  facility and product
rationalization evaluations are also under review. These other evaluations could
result in additional charges for asset impairment, including goodwill, and other
costs in future quarters.

The Company  defines its operations in terms of three  operating  segments:
CompX Security Products,  CompX Waterloo and CompX Regout (formerly called CompX
Europe). The CompX Security Products segment,  with manufacturing  facilities in
South Carolina and Illinois,  manufactures locking mechanisms and other security
products for sale to the office furniture,  banking, vending, computer and other
industries.  The CompX Waterloo segment, with facilities in Canada, Michigan and
Taiwan, and the CompX Regout segment,  with facilities in the Netherlands,  both
manufacture a complete line of precision  ball bearing  slides for use in office
furniture,   computer-related   equipment,   tool  storage  cabinets  and  other
applications.  Both of these segments also either  manufacture and/or distribute
ergonomic   computer   support   systems.   Because  of  the  similar   economic
characteristics  between the CompX Waterloo and CompX Regout segments and due to
the identical products,  customer types,  production  processes and distribution
methods shared by these two segments,  they have been  aggregated  into a single
reportable  segment  for  segment  reporting  purposes.   Prior  period  segment
information has been reclassified to reflect the current operating segments.

As discussed in Notes 1 and 15 to the  Consolidated  Financial  Statements,
beginning  in 2002 the Company no longer  recognizes  periodic  amortization  of
goodwill  in its results of  operations.  The Company  would have  reported  net
income of  approximately  $9.4  million in 2001,  or about $2.3  million  higher
($24.5  million,  or about $2.4  million  higher in 2000) than what was actually
reported,  if the goodwill  amortization  included in the Company's reported net
income had not been recognized.  Of such $2.3 million difference,  approximately
$1.4 million and $.9 million relate to the Company's CompX Security Products and
CompX Waterloo/CompX Regout segments,  respectively  (approximately $1.4 million
and $1.0 million, respectively in 2000).

Critical Accounting Policies and Estimates

The  accompanying   "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations"  are based upon the Company's  consolidated
financial  statements,  which have been prepared in accordance  with  accounting
principles  generally  accepted in the United  States of America  ("GAAP").  The
preparation of these financial statements requires the Company to make estimates
and judgments  that affect the reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements, and the reported amount of revenues and expenses during the reported
period.  On an on-going basis,  the Company  evaluates its estimates,  including
those related to bad debts,  inventory  reserves,  the  recoverability  of other
long-lived  assets  (including  goodwill  and other  intangible  assets) and the
realization  of deferred  income tax assets.  The Company bases its estimates on
historical  experience and on various other  assumptions that are believed to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making judgments about the reported amounts of assets, liabilities, revenues and
expenses.  Actual  results may differ from  previously-estimated  amounts  under
different assumptions or conditions.

The Company believes the critical financial statement judgment risks of its
business are attributable to four primary areas:

o    Will  customer  accounts  receivable on the books be collected at full book
value?
o    Will inventory on hand be sold with a sufficient  mark up to cover the cost
to produce and ship the product?
o    Will future cash flows of the Company be sufficient to recover the net book
value of long-lived assets?
o    Will future  taxable  income be  sufficient  to utilize  recorded  deferred
income tax assets?

The Company believes the following critical  accounting policies affect its
more  significant  judgments  and  estimates,   as  noted  above,  used  in  the
preparation of its consolidated  financial  statements and are applicable to all
of the Company's operating segments:

o    Allowance for  uncollectable  accounts  receivable.  The Company  maintains
allowances for doubtful  accounts for estimated  losses  resulting from the
inability of its  customers to make  required  payments.  The Company takes
into  consideration the current financial  condition of the customers,  the
age of  outstanding  balances  and the current  economic  environment  when
assessing the adequacy of the allowances. If the financial condition of the
Company's  customers  were to  deteriorate,  resulting in an  impairment of
their ability to make payments, increased allowances may be required.
o    Inventory   reserves.   The  Company   provides   reserves  for   estimated
obsolescence or unmarketable  inventory equal to the difference between the
cost of inventory and the estimated net realizable value using  assumptions
about future  demand for its products  and market  conditions.  The Company
also  considers the age and the quantity of inventory on hand in estimating
the reserve.  If actual market  conditions  are less  favorable  than those
projected by management, increased inventory reserves may be required.
o    Net book value of long-lived  assets.  The Company recognizes an impairment
charge  associated  with its  long-lived  assets,  including  property  and
equipment,  goodwill and other  intangible  assets,  whenever it determines
that recovery of the long-lived asset is not probable. The determination is
made in accordance with applicable  GAAP  requirements  associated with the
long-lived  asset, and is based upon, among other things,  estimates of the
amount of future net cash flows to be generated by the long-lived asset and
estimates  of the  current  fair  value of the  asset.  Adverse  changes in
estimates  of future net cash flows or estimates of fair value could result
in an  inability  to recover the carrying  value of the  long-lived  asset,
thereby  possibly  requiring an  impairment  charge to be recognized in the
future.  Based on the Company's latest annual impairment review of goodwill
of the  reporting  units  during  the third  quarter of 2002,  no  goodwill
impairments were deemed to exist.  Based on this review, the estimated fair
value of the  CompX  Waterloo/CompX  Regout  and  CompX  Security  Products
reporting   units  exceeded  the  net  carrying  values  by  23%  and  37%,
respectively. See Notes 1 and 15 to the Consolidated Financial Statements.
o    Deferred income tax assets.  The Company  records a valuation  allowance to
reduce its deferred  income tax assets to the amount that is believed to be
realizable  under  the  "more-likely-than-not"  recognition  criteria.  The
Company  has  considered  future  taxable  income and  ongoing  prudent and
feasible tax  planning  strategies  in  assessing  the need for a valuation
allowance.  It is  possible  that in the future the  Company may change its
estimate  of the  amount of the  deferred  income  tax  assets  that  would
"more-likely-than-not"  be realized.  This would result in an adjustment to
the  deferred  income  tax asset  valuation  allowance  that  would  either
increase or decrease, as applicable,  reported net income in the period the
change in estimate is made.

Results of Operations

Net sales and operating income

Years ended December 31,       % Change
--------------------------   ----------------
2000     2001      2002     2000 - 2001 2001 - 2002
----     ----      ----         ----        ----
(In millions)

Net sales:
CompX Waterloo/CompX

Regout segment ................   $168.3    $137.3    $122.7       -18%       -11%
CompX Security
Products segment ..............     85.0      74.1      73.4       -13%        -1%
------     ------     ------

Total net sales ..............   $253.3    $211.4    $196.1       -17%        -7%
======     ======     ======

Operating income (loss):
CompX Waterloo/CompX
Regout segment ................   $ 24.8    $  5.2    $ (1.9)      -79%      -136%
CompX Security
Products segment ..............     12.5       7.3       8.1       -41%       +10%
------     ------     ------
Total operating
income ......................   $ 37.3    $ 12.5    $  6.2       -67%       -50%
======     ======     ======

Operating income (loss) margin:
CompX Waterloo/CompX
Regout segment ................     15%         4%    (2%)
CompX Security
Products segment ..............     15%        10%    11%
Total operating income
margin ........................     15%         6%     3%

Year ended December 31, 2002 compared to year ended December 31, 2001

Net  sales  decreased  $15.3  million,  or 7%,  in  2002  compared  to 2001
principally  due to continued weak demand for the Company's  component  products
sold to the office  furniture  market  resulting  from  continued  weak economic
conditions in the manufacturing sector in North America and Europe. Net sales of
slide  products in 2002  decreased  8% as  compared to 2001,  while net sales of
security products decreased 1% and net sales of ergonomic products decreased 18%
during the same period.

The Company's cost of goods sold decreased only 3% in 2002 compared to 2001
despite the 7%  decrease in net sales  during the same  period.  Therefore,  the
Company's gross margin percentage  decreased  significantly  from 21% in 2001 to
17% in 2002. The disproportionate change in cost of goods sold and its effect on
gross  margins  was  primarily  due to lower  revenues  from  sales of slide and
ergonomic  products and the  resulting  impact of spreading  fixed factory costs
over lower volume. In addition,  steel cost increases following the steel tariff
imposed by the United  States  government  increased  the Company's raw material
cost,  most of  which  was  not  immediately  recoverable  through  sales  price
increases in 2002.  Such steel cost  increases  resulted in additional  2002 raw
material costs to CompX of approximately $1.2 million compared to 2001 steel raw
material pricing. The CompX Waterloo/CompX Regout segment was most significantly
impacted by the steel cost  increases,  while the effects on the CompX  Security
Products segment were minimal.

Operating  income for 2002 decreased $6.3 million,  or 50% compared to 2001
and operating margins decreased to 3% in 2002 compared to 6% for 2001. Continued
reductions in  manufacturing,  fixed overhead and other overhead costs partially
offset the  effects  of the  decline  in net sales in 2002.  However,  operating
margins in 2002  continued  to be  adversely  impacted  by the decline in volume
levels,  unfavorable changes in the sales mix, increases in certain raw material
costs (primarily steel) and general competitive pricing pressures.

Through  December 31, 2001,  goodwill  was  amortized by the  straight-line
method over not more than 20 years.  Upon  adoption of  Statement  of  Financial
Accounting  Standards  ("SFAS") No. 142,  Goodwill and Other Intangible  Assets,
effective   January  1,  2002,   goodwill  is  no  longer  subject  to  periodic
amortization.  The Company would have reported operating income of approximately
$14.7  million in 2001 if the goodwill  amortization  included in the  Company's
reported   operating   income  had  not  been   recognized.   Without   goodwill
amortization, operating income for the CompX Waterloo/CompX Regout segment would
have been  approximately $6.0 million in 2001 and operating income for the CompX
Security Products segment would have been approximately $8.7 million.

The Company recorded a pre-tax charge in the fourth quarter of 2002 of $1.6
million,  the majority of which was non-cash in nature.  The fourth quarter 2002
charge  relates to a retooling of the Company's  precision  slide  manufacturing
facility in Byron Center,  Michigan and includes a $1.0 million loss on disposal
of equipment,  reflected in other general corporate income (expense), net in the
consolidated  statements of income.  The remainder of the charge is reflected in
cost of goods sold. The cost savings and operating  efficiencies  resulting from
the  retooling  are  expected to begin to benefit the  financial  results in the
first  quarter  of  2003.  An  additional   fourth  quarter  pre-tax  charge  of
approximately  $1.9  million  was  recorded  to cost of goods sold to adjust for
various changes in estimates with respect to obsolete and slow-moving inventory,
inventory overhead absorption rates and other items.  Approximately $1.3 million
of this  charge  related to the CompX  Waterloo/CompX  Regout  segment  with the
remaining $.6 million relating to the CompX Security Products  segment.  Pre-tax
charges of $5.7 million were also  recorded in the fourth  quarter of 2001,  and
are discussed in connection with sales and operating income for 2000 compared to
2001, below.

CompX has  substantial  operations  and assets  located  outside the United
States (principally in Canada, the Netherlands and Taiwan). A portion of CompX's
sales generated from its non-U.S. operations are denominated in currencies other
than the U.S. dollar,  principally the Canadian dollar,  the Dutch guilder,  the
euro and the New  Taiwan  dollar.  In  addition,  a  portion  of  CompX's  sales
generated from its non-U.S.  operations  (principally in Canada) are denominated
in the U.S.  dollar.  Most raw materials,  labor and other  production costs for
such  non-U.S.   operations  are  denominated  primarily  in  local  currencies.
Consequently,  the translated  U.S.  dollar values of CompX's  foreign sales and
operating results are subject to currency  exchange rate fluctuations  which may
favorably or unfavorably  impact reported earnings and may affect  comparability
of period-to--period  operating results. The effects of fluctuations in currency
exchange  rates  affect  the CompX  Waterloo/CompX  Regout  segment,  and do not
materially affect the CompX Security Products segment.  During 2002, the effects
of  currency  fluctuations  did not  materially  impact the Company or the CompX
Waterloo/CompX Regout segment.

Year ended December 31, 2001 compared to year ended December 31, 2000

Net sales decreased $41.9 million,  or 17%, in 2001 compared to 2000 due to
decreased  demand for the  Company's  products  resulting  from  continued  weak
economic conditions in the manufacturing sector in North America and Europe, and
to a lesser extent,  the negative  effects of fluctuations in currency  exchange
rates.  Net sales of slide  products in 2001  decreased 23% as compared to 2000,
while net sales of security  products and ergonomic  products each decreased 13%
during the same period.

Cost of goods sold  decreased  10% in 2001 as  compared  to 2000 due to the
lower sales volume in 2001.  As a percentage of sales,  cost of sales  increased
from  74% in  2000  to 79% in 2001  due  primarily  to the  spreading  of  fixed
production costs over lower sales volumes.  In addition,  a $2.6 million pre-tax
charge  related to various  changes in estimate  with  respect to  reserves  for
obsolete and  slow-moving  inventory was recorded in the fourth  quarter of 2001
and negatively impacted cost of goods sold.

Operating income for 2001 decreased $24.8 million,  or 67% compared to 2000
and operating  income margins  decreased to 6% in 2001 compared to 15% for 2000.
Reductions in  manufacturing,  fixed overhead and related overhead costs,  which
began in the first quarter of 2001,  partially offset the effects of the decline
in net sales in 2001. However, despite these cost reductions,  operating margins
in 2001 were adversely  impacted by the decline in volume levels and the related
impact on manufacturing efficiencies,  the effects of unfavorable changes in the
sales  mix  and  general  pricing  pressures.  Operating  income  at  the  CompX
Waterloo/CompX  Regout  segment  decreased 79% in 2001  compared to 2000,  while
operating income at the CompX Security  Products  segment  decreased 41% for the
same period. A pre-tax $2.7 million  restructuring  charge in the fourth quarter
of 2001 and a proportionately  larger impact resulting from unfavorable  changes
in the sales mix contributed to the more substantial operating income decline at
the CompX  Waterloo/CompX  Regout  segment  as  compared  to the CompX  Security
Products segment.

As discussed in Note 6 to the Consolidated Financial Statements, the fourth
quarter 2001  restructuring  charge  included  headcount  reductions of about 35
employees at CompX's Maastricht, the Netherlands facility,  substantially all of
which had been implemented by December 31, 2001. Of the $2.7 million charge,  as
adjusted for changes in currency  exchange rates,  approximately $.4 million was
paid in 2001,  $2.0 million was paid in 2002 and $.6 million was paid in January
2003. In addition,  approximately  $3.0 million in pre-tax charges were recorded
in the fourth quarter of 2001. These charges are predominately comprised of $2.6
million  related to various  changes in  estimates  with respect to reserves for
obsolete  and  slow-moving  inventory,  approximately  $.1  million  related  to
allowances for doubtful accounts,  with the remainder related to other items. Of
the $3.0  million  charges,  approximately  $.9  million  related  to the  CompX
Waterloo/CompX  Regout  segment and the  remaining  $2.1 million  related to the
CompX Security Products segment.

In 2001, excluding the effects of currency exchange rate fluctuations,  the
Company's   sales   decreased   15%  compared  to  2000.   Sales  of  the  CompX
Waterloo/CompX  Regout  segment  decreased  16%,  exclusive  of the  effects  of
currency  and  acquisitions.  Operating  income  comparisons  for  this  period,
however, were not materially impacted by the effects of currency. The effects of
currency  fluctuations  do not  materially  affect the CompX  Security  Products
segment.

General

The Company's profitability primarily depends on its ability to utilize its
production capacity  effectively,  which is affected by, among other things, the
demand for its  products  and its  ability to control its  manufacturing  costs,
primarily  comprised  of labor  costs and raw  materials  such as zinc,  copper,
coiled steel and plastic resins. Raw material costs represent  approximately 43%
of the Company's total cost of sales. During 2000 and 2001, steel prices did not
change significantly  compared to the respective prior years.  However, in 2002,
worldwide  steel  prices  increased  significantly  following  the steel  tariff
imposed by the United States government.  The Company  occasionally  enters into
raw material  supply  arrangements  to mitigate the short-term  impact of future
increases  in raw material  costs.  While these  arrangements  do not commit the
Company to a minimum volume of purchases, they generally provide for stated unit
prices based upon achievement of specified  volume purchase levels.  This allows
the Company to  stabilize  raw  material  purchase  prices to a certain  extent,
provided the specified minimum monthly purchase  quantities are met. The Company
entered into such arrangements for zinc, coiled steel and plastic resins in 2002
and  does  not  anticipate  further  significant  changes  in the  cost of these
materials  from their current levels for the next year.  Materials  purchased on
the spot  market  are  sometimes  subject  to  unanticipated  and  sudden  price
increases.  Due to the competitive nature of the markets served by the Company's
products,  it is often difficult to recover such increases in raw material costs
through  increased  product  selling  prices.  Consequently,  overall  operating
margins may be affected by such raw material cost pressures.

At December  31, 2002,  none of the  Company's  employees in the U.S.,  the
Netherlands or Taiwan were  represented by bargaining  units, and wage increases
for  such  employees  historically  have  been in line  with  overall  inflation
indices.  Approximately 76% of the Company's Canadian employees are covered by a
three year  collective  bargaining  agreement  which  provided  for annual  wage
increases of  approximately  3.5%.  Wage increases for these Canadian  employees
historically  have  also  been in  line  with  overall  inflation  indices.  The
collective  bargaining  agreement  expired in January 2003 and has been replaced
with a new agreement  which expires in January 2006.  The new agreement  retains
the  general  provisions  of the old  agreement  and  provides  for annual  wage
increases from 1% to 2.5% over the life of the contract.

In January 2000, the Company  acquired  substantially  all of the operating
assets of Chicago Lock Company for  approximately $9 million,  further expanding
its security  products line. This acquisition was financed through a combination
of cash on hand and increased  borrowings  under the Company's  Revolving Senior
Credit Facility.

Selling, general and administrative expense consists primarily of salaries,
commissions and  advertising  expenses  directly  related to product sales. As a
percentage of net sales, selling,  general and administrative expense was 11% in
2000, 13% in 2001 and 14% in 2002. Despite cost reduction  programs  implemented
in 2001,  the decline in sales  volumes  outpaced  the ability of the Company to
reduce its selling,  general and administrative expense during 2001 and 2002. As
a result,  the  Company's  selling,  general  and  administrative  expense  as a
percentage of net sales increased since 2000.

Other general corporate income (expense), net

As summarized in Note 12 to the Consolidated  Financial Statements,  "other
general  corporate income  (expense),  net" primarily  includes interest income,
losses  on  disposal  of  property  and  equipment  and  net  foreign   currency
transaction  gain and loss. In 2002,  loss on disposal of property and equipment
included  approximately  $1.0 million  related to the retooling of the Company's
precision slide manufacturing facility in Byron Center,  Michigan. The remainder
of the pre-tax  charge,  $.6  million,  is  reflected  in cost of goods sold and
related to the cost of moving and installing  machinery and equipment as well as
the disposal of obsolete  inventory.  Interest income decreased in 2002 compared
to 2001 due  primarily to lower  interest  rates earned on funds  available  for
investment  combined  with a lower  level of  funds  available  for  investment.
Conversely,  2001 interest income  increased when compared to 2000 due to higher
levels of  available  funds  for  investment.  In 2001,  a  curtailment  gain of
approximately $.1 million was included in other general  corporate income,  net.
This  curtailment  gain,  more  fully  described  in Note 8 to the  Consolidated
Financial  Statements,  relates to the  cessation  of  benefits  provided  under
CompX's defined benefit plan which covered substantially all full-time employees
of Thomas Regout International B.V. As of December 31, 2001, certain obligations
related to the terminated  plan had not yet been fully settled and are reflected
in accrued pension costs. In 2002, such obligations were settled and the Company
reported a $.7 million settlement gain.

Interest expense

Interest  expense  declined  $1.0  million  in 2002  compared  to 2001  due
primarily  to lower  average  interest  rates  and lower  levels of  outstanding
indebtedness on CompX's Revolving Senior Credit Facility. In contrast,  interest
expense  increased  $.6 million in 2001  compared to 2000 due to higher  average
levels of outstanding  indebtedness on CompX's Revolving Senior Credit Facility.
Interest  expense in 2003 is expected to be somewhat higher compared to 2002 due
to slightly  higher  interest  rates charged on the Company's new Revolving Bank
Credit  Agreement,  which is  explained  more  fully  below and in Note 7 to the
Consolidated Financial Statements.

Provision for income taxes

The principal  reasons for the difference  between CompX's effective income
tax rates and the U.S. federal  statutory income tax rates are explained in Note
9  to  the  Consolidated   Financial  Statements.   Income  tax  rates  vary  by
jurisdiction  (country and/or state), and relative changes in the geographic mix
of CompX's pre-tax  earnings can result in fluctuations in the effective  income
tax rate.  Net income in 2002 was  negatively  impacted  by an  increase  in the
effective  income tax rate  primarily as a result of lower income  levels and an
increased  proportion  of  foreign-sourced  dividend  income  taxed  at a higher
effective tax rate.

As discussed in Note 1 to the Consolidated Financial Statements,  effective
January 1, 2002,  the  Company no longer  recognizes  periodic  amortization  of
goodwill.  Under GAAP,  generally there is no income tax benefit  recognized for
financial reporting purposes attributable to goodwill amortization. Accordingly,
ceasing to  periodically  amortize  goodwill  beginning  in 2002  resulted  in a
reduction in the Company's overall effective income tax rate in 2002 as compared
to  2001,   partially   offsetting   the   increased   effective   tax  rate  on
foreign-sourced income.

Other

Reflected in the 2001 results of  operations  is a $2.2 million gain on the
sale/leaseback of the Company's manufacturing facility in the Netherlands, which
is  discussed  more  fully  below and in Note 11 to the  Consolidated  Financial
Statements.

Related party transactions

CompX is a party to certain  transactions with related parties. See Note 13
to the Consolidated Financial Statements.

Outlook

The Company expects that weak market conditions will continue in the office
furniture  market,  the primary  end-market  for the  Company's  products.  As a
result, sales volumes are expected to remain depressed through at least 2003 and
competitive  pricing  pressures  are  expected  to  continue.  The  Company  has
initiated  price increases on certain of its products and will continue to focus
on cost improvement  initiatives,  utilizing lean  manufacturing  techniques and
prudent balance sheet  management in order to minimize the impact of lower sales
to  the  office  furniture   industry  and  to  develop   value-added   customer
relationships  with  additional  focus on sales of the  Company's  higher-margin
ergonomic  computer  support  systems to improve  operating  results.  Among the
Company's cost control  initiatives is a plan to consolidate  its two Kitchener,
Ontario plants into one facility.  Expenses  related to this  consolidation  are
expected to primarily  consist of the cost to move  machinery  and equipment and
are not  anticipated to include a significant net cost for the disposal of fixed
assets.  Substantial  completion of the  consolidation is expected by the end of
the second  quarter of 2003. In addition,  other facility  rationalizations  are
also under review and could result in additional  charges for asset  impairment,
including  goodwill,  and other costs in future quarters.  These actions,  along
with other activities to eliminate  duplicate product lines and excess capacity,
are designed to position the Company to more effectively concentrate on both new
product and new customer opportunities to improve Company profitability.

Liquidity and Capital Resources

Consolidated cash flows

Operating  activities.  Trends in cash  flows  from  operating  activities,
excluding  changes  in assets  and  liabilities,  for  2000,  2001 and 2002 have
generally been similar to the trend in the Company's earnings. Net cash provided
by operating activities,  excluding changes in assets and liabilities,  in 2000,
2001  and  2002  totaled  $36.7  million,   $21.5  million  and  $13.5  million,
respectively,  compared  to net income of $22.1  million,  $7.1  million and $.6
million,  respectively.  Depreciation and amortization expense increased in 2001
as  compared  to  2000 in  part  due to the  acquisitions  discussed  above  and
additional  expenditures on facilities  improvements and enhancements  discussed
below.  Depreciation and amortization expense decreased in 2002 compared to 2001
due primarily to the cessation of amortization of goodwill. See Notes 1 and 15.

Changes  in assets  and  liabilities  result  primarily  from the timing of
production,  sales  and  purchases.  Such  changes  in  assets  and  liabilities
generally tend to even out over time. However,  year-to-year relative changes in
assets and liabilities can significantly  affect the comparability of cash flows
from  operating  activities.   For  example,  relative  changes  in  assets  and
liabilities consumed approximately $8.3 million of cash in 2000. However, during
2001 and 2002,  with  CompX's  specific  focus on  working  capital  management,
relative changes in assets and liabilities generated a net $6.2 million and $3.4
million,  respectively,  in cash. Therefore,  despite the significant decline in
earnings in 2001 as compared to 2000,  cash from  operating  activities  in 2001
remained  fairly  consistent  with 2000  primarily  due to cash  generated  from
inventory and accounts receivable reduction initiatives  undertaken during 2001.
The cash generated from these initiatives  during 2001 was partially offset by a
use of cash  related  to  relative  changes  in  accounts  payable  and  accrued
liabilities  resulting from the overall decline in operating  activity from 2000
to 2001. The inventory and accounts receivable reduction  initiatives  continued
during  2002,  resulting  in the  generation  of cash from  relative  changes in
inventory and accounts  receivable,  although the amount of cash  generated from
such relative changes was less than the amount generated in 2001. However,  this
positive cash generated was partially  offset by the use of $1.7 million in cash
during  2002  relating to the  restructuring  reserve  that was  recorded in the
fourth quarter of 2001.

Investing  activities.  Net cash used by investing activities totaled $32.4
million,  $2.7 million and $12.7 million for the years ended  December 31, 2000,
2001  and  2002,  respectively.  Cash  used  by  investing  activities  includes
approximately  $9.3 million in 2000 for the Chicago Lock  acquisition.  In 2001,
$10.0  million in cash was provided  from the  sale/leaseback  of the  Company's
plant facility in the Netherlands. Other cash flows from investing activities in
each of the past  three  years  related  principally  to  capital  expenditures.
Capital expenditures in the past three years emphasized  manufacturing equipment
which utilizes new  technologies and increases  automation of the  manufacturing
process to provide  for  increased  productivity  and  efficiency.  The  capital
expenditures in 2000 relate  primarily to the completion of facility  expansions
at the  Company's  Kitchener  facility,  additional  facility  expansions at the
Company's   Byron   Center   facility   and  general   equipment   upgrades  and
modernization. Capital expenditures in 2001 and 2002 relate primarily to general
equipment upgrades and modernization.

Pursuant  to  the   sale/leaseback  of  the  Company's  plant  facility  in
Maastricht,  the Netherlands,  CompX sold the manufacturing  facility with a net
carrying value of $8.2 million for $10.0 million cash  consideration in December
2001, and CompX  simultaneously  entered into a leaseback of the facility with a
nominal  monthly  rental for  approximately  30 months.  CompX has the option to
extend the  leaseback  period  for up to an  additional  two years with  monthly
rentals of $40,000 to $100,000.  CompX may  terminate  the leaseback at any time
without  penalty.  In addition to the cash received up front,  CompX included an
estimate  of  the  fair  market   value  of  the  monthly   rental   during  the
nominal-rental  leaseback period as part of the sale proceeds.  A portion of the
gain from the sale of the facility after transaction costs, equal to the present
value of the monthly rentals over the expected  leaseback period  (including the
fair market  value of the monthly  rental  during the  nominal-rental  leaseback
period),  was  deferred  and is being  amortized  into income over the  expected
leaseback period. CompX is recognizing rental expense over the leaseback period,
including  amortization  of the prepaid rent  consisting of the  estimated  fair
market value of the monthly rental during the  nominal-rental  leaseback period.
Pursuant to the agreement,  CompX is also obligated to acquire  approximately 10
acres from the municipality of Maastricht for approximately  $2.1 million within
the next two years.

Capital  expenditures for 2003 are estimated at approximately  $11 million,
the  majority of which relate to projects  that  emphasize  improved  production
efficiency.  Firm  purchase  commitments  for  capital  projects  in  process at
December 31, 2002 approximated $1.4 million.

Financing  activities.  Net cash  provided  (used) by financing  activities
totaled $2.1  million,  $(1.8)  million and $(25.5)  million for the years ended
December 31, 2000,  2001 and 2002,  respectively.  Total cash  dividends paid in
2000 were $8.1 million and in each of 2001 and 2002 were $7.6 million  ($.50 per
share in each of 2000 through 2002).  The Company used available cash on hand to
reduce its outstanding  debt by $19 million in June 2002 and borrowed $1 million
on its unsecured Revolving Senior Credit Facility in the third quarter of 2002.

The Company's  Board of Directors has authorized the Company to purchase up
to  approximately  1.5  million  shares of its  common  stock in open  market or
privately-negotiated  transactions at unspecified prices and over an unspecified
period of time. As of December 31, 2002, the Company had purchased approximately
1,104,000   shares  for  an  aggregate  of  $11.3   million   pursuant  to  such
authorization ($8.7 million for 844,300 shares in 2000, $2.6 million for 259,600
shares in 2001 and nil in 2002).

In January 2003, the Company  replaced its expiring $100 million  unsecured
Revolving Senior Credit Facility with a new $47.5 million secured Revolving Bank
Credit  Agreement.  Had the facility  been in place at December 31, 2002,  $16.5
million would have been available for future borrowing. The new credit agreement
is collateralized by substantially all of the Company's United States assets and
at least 65% of the ownership interests in the Company's  first-tier  non-United
States  subsidiaries.  Provisions contained in the Credit Agreement could result
in the acceleration of the indebtedness prior to its stated maturity for reasons
other than defaults from failing to comply with typical financial covenants. For
example,  the Company's  Credit  Agreement  allows the lender to accelerate  the
maturity  of the  indebtedness  upon a change of  control  (as  defined)  of the
borrower.  The terms of the Credit Agreement could result in the acceleration of
all or a portion of the  indebtedness  following a sale of assets outside of the
ordinary  course  of  business.   See  Note  7  to  the  Consolidated  Financial
Statements.  Other than  certain  operating  leases  discussed in Note 14 to the
Consolidated Financial Statements,  neither CompX nor any of its subsidiaries or
affiliates are parties to any off-balance sheet financing arrangements.

Other

Management  believes  that cash  generated  from  operations  and borrowing
availability  under the Revolving Bank Credit  Agreement,  together with cash on
hand,  will be  sufficient  to meet the  Company's  liquidity  needs for working
capital,  capital expenditures,  debt service and dividends.  To the extent that
the Company's actual  operating  results or other  developments  differ from the
Company's  expectations,  CompX's liquidity could be adversely affected. In this
regard,  during 2002 the Company's  quarterly common stock dividend of $.125 per
share  exceeded  the  Company's  earnings  per  share.  To the  extent  that the
Company's  future  operating  results  continue to be insufficient to cover such
dividend,  it is  possible  the  Company  might  decide to reduce or suspend its
quarterly dividend.

The Company periodically evaluates its liquidity requirements,  alternative
uses of capital,  capital needs and available  resources in view of, among other
things,  its capital  expenditure  requirements,  dividend  policy and estimated
future operating cash flows. As a result of this process, the Company has in the
past  and may in the  future  seek to raise  additional  capital,  refinance  or
restructure indebtedness, issue additional securities,  repurchase shares of its
common stock,  modify its dividend policy or take a combination of such steps to
manage its  liquidity and capital  resources.  In the normal course of business,
the Company may review  opportunities for acquisitions,  joint ventures or other
business  combinations in the component products  industry.  In the event of any
such  transaction,  the Company  may  consider  using  available  cash,  issuing
additional  equity  securities or increasing the  indebtedness of the Company or
its subsidiaries.

Contractual  obligations.  As more  fully  described  in the  notes  to the
Consolidated  Financial  Statements,  the  Company is  obligated  to make future
payments  under  certain  debt  and  lease  agreements,  and is a party to other
commitments. The following table summarizes these obligations as of December 31,
2002.

Payments due by period
--------------------------
Less than  1 - 3      4 - 5
Total    1 year   years      years
(In thousands)

Long-term debt ...........................   $31,000   $ --     $ --     $31,000
Capital lease obligations and other ......        89       89     --        --
Operating leases .........................     1,565      662      881        22
Unconditional purchase obligations .......     1,355    1,355     --        --
Other long-term obligation - Maastricht
real estate acquisition obligation ......     2,085     --      2,085      --
-------   ------   ------   -------

Total contractual cash obligations .......   $36,094   $2,106   $2,966   $31,022
=======   ======   ======   =======

In  addition,  the  Company is a party to  certain  other  agreements  that
contractually and  unconditionally  commit the Company to pay certain amounts in
the future. While the Company believes it is probable that amounts will be spent
in the future under such contracts,  the amount and/or the timing of such future
payments will vary depending on certain  provisions of the applicable  contract.
Agreements  to which the Company is a party that fall into this  category,  more
fully described in Note 14 to the Consolidated Financial Statements, are CompX's
patent license  agreements  under which it pays royalties based on the volume of
certain products manufactured in Canada and sold in the United States.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General.  The  Company is exposed  to market  risk from  changes in foreign
currency  exchange  rates and  interest  rates.  The Company  periodically  uses
currency  forward  contracts to manage a portion of foreign  exchange  rate risk
associated  with  receivables,  or similar  exchange rate risk  associated  with
future  sales,  denominated  in a currency  other than the  holder's  functional
currency. Otherwise, the Company does not generally enter into forward or option
contracts to manage such market risks,  nor does the Company enter into any such
contract  or other type of  derivative  instrument  for  trading or  speculative
purposes.  Other than the contracts discussed below, the Company was not a party
to any forward or derivative  option contract  related to foreign exchange rates
or interest rates at December 31, 2001 and 2002. See Note 1 to the  Consolidated
Financial Statements.

Interest rates. The Company is exposed to market risk from changes in
interest rates, primarily related to indebtedness.

At  December  31,  2001  and  2002,  substantially  all  of  the  Company's
outstanding  indebtedness  were variable  rate  borrowings.  Such  borrowings at
December  31, 2002 related  principally  to $31 million ($49 million at December
31, 2001) in borrowings  under the Company's  unsecured  Revolving Senior Credit
Facility  which was replaced by a $47.5 million  secured  Revolving  Bank Credit
Agreement in January  2003.  The  outstanding  balances at December 31, 2001 and
2002 (which approximate fair value) had a weighted-average interest rate of 4.2%
and 2.5%,  respectively.  Amounts  outstanding under the new credit facility are
due in January 2006. The remaining indebtedness outstanding at December 31, 2001
and 2002 is not material.

Foreign  currency  exchange  rates.  The  Company is exposed to market risk
arising  from  changes  in  foreign  currency  exchange  rates  as a  result  of
manufacturing  and selling its products  outside the United States  (principally
Canada,  Western Europe and Taiwan).  A portion of CompX's sales  generated from
its  non-U.S.  operations  are  denominated  in  currencies  other than the U.S.
dollar,  principally the Canadian dollar, the euro and the New Taiwan dollar. In
addition,  a portion of CompX's  sales  generated  from its non-U.S.  operations
(principally in Canada) are denominated in the U.S. dollar.  Most raw materials,
labor and other  production  costs for such non-U.S.  operations are denominated
primarily in local currencies. Consequently, the translated U.S. dollar value of
CompX's  foreign  sales and operating  results are subject to currency  exchange
rate  fluctuations  which may favorably or unfavorably  impact reported earnings
and may affect comparability of period-to-period operating results.

Certain  of  CompX's  sales  generated  by  its  Canadian   operations  are
denominated in U.S.  dollars.  To manage a portion of the foreign  exchange rate
market  risk  associated  with  receivables,   or  similar  exchange  rate  risk
associated  with future  sales,  at December  31, 2002 CompX had entered  into a
series of short-term forward exchange contracts maturing through January 2003 to
exchange  an  aggregate  of $2.5  million for an  equivalent  amount of Canadian
dollars at an exchange rate of Cdn. $1.57 per U.S. dollar. At each balance sheet
date,  outstanding  currency  forward  contracts are  marked-to-market  with any
resulting gain or loss recognized in income  currently.  The difference  between
the  estimated  fair  value and the face value of all such  outstanding  forward
contracts at December 31, 2002 is not material. At December 31, 2002, the actual
exchange rate was Cdn. $1.57 per U.S. dollar. No foreign exchange contracts were
outstanding at December 31, 2001.

Other. The above discussion includes  forward-looking  statements of market
risk which assume  hypothetical  changes in market prices.  Actual future market
conditions  will likely differ  materially from such  assumptions.  Accordingly,
such  forward-looking  statements  should not be considered to be projections by
the Company of future  events or losses.  Such  forward-looking  statements  are
subject  to  certain  risks  and  uncertainties  some of  which  are  listed  in
"Business-General."

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information  called for by this Item is contained in a separate section
of this Annual Report.  See "Index of Financial  Statements and Schedules" (page
F-1).

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  information  required by this Item is  incorporated  by  reference  to
CompX's  definitive Proxy Statement to be filed with the Securities and Exchange
Commission  pursuant  to  Regulation  14A  within  120 days after the end of the
fiscal year covered by this report (the "CompX Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION

The  information  required by this Item is incorporated by reference to the
CompX Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  required by this Item is incorporated by reference to the
CompX Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by this Item is incorporated by reference to the
CompX  Proxy  Statement.   See  also  Note  13  to  the  Consolidated  Financial
Statements.

ITEM 14. CONTROLS AND PROCEDURES

The Company maintains a system of disclosure  controls and procedures.  The
term "disclosure controls and procedures," as defined by regulations of the SEC,
means controls and other procedures that are designed to ensure that information
required to be disclosed in the reports that the Company files or submits to the
SEC under the  Securities  Exchange  Act of 1934,  as amended  (the  "Act"),  is
recorded, processed,  summarized and reported, within the time periods specified
in the SEC's  rules and  forms.  Disclosure  controls  and  procedures  include,
without limitation,  controls and procedures designed to ensure that information
required to be  disclosed by the Company in the reports that it files or submits
to the SEC  under  the Act is  accumulated  and  communicated  to the  Company's
management,   including  its  principal  executive  officer  and  its  principal
financial officer, as appropriate to allow timely decisions to be made regarding
required disclosure. Each of David A. Bowers, the Company's Vice Chairman of the
Board,  President  and Chief  Executive  Officer,  and  Darryl R.  Halbert,  the
Company's Vice President, Chief Financial Officer and Controller, have evaluated
the Company's  disclosure controls and procedures as of a date within 90 days of
the filing date of this Form 10-K. Based upon their evaluation,  these executive
officers have  concluded that the Company's  disclosure  controls and procedures
are effective as of the date of such evaluation.

The  Company  also  maintains  a  system  of  internal  controls.  The term
"internal  controls," as defined by the American  Institute of Certified  Public
Accountants'  Codification of Statement on Auditing  Standards,  AU Section 319,
means controls and other  procedures  designed to provide  reasonable  assurance
regarding the  achievement  of objectives  in the  reliability  of the Company's
financial   reporting,   the  effectiveness  and  efficiency  of  the  Company's
operations and the Company's  compliance with  applicable laws and  regulations.
There have been no significant  changes in the Company's internal controls or in
other factors that could  significantly  affect such controls  subsequent to the
date of their last evaluation,  including any corrective  actions with regard to
significant deficiencies and material weaknesses.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) and (d)        Financial Statements and Schedules

The Registrant

The consolidated  financial  statements and schedules listed
on  the  accompanying  Index  of  Financial  Statements  and
Schedules  (see page  F-1) are filed as part of this  Annual
Report.

(b)                Reports on Form 8-K

No reports on Form 8-K were filed for the quarter ended 
December 31, 2002.

(c)                Exhibits

Included  as  exhibits  are the items  listed in the Exhibit
Index.  CompX  will  furnish  a copy of any of the  exhibits
listed  below upon payment of $4.00 per exhibit to cover the
costs to  CompX  of  furnishing  the  exhibits.  Instruments
defining  the  rights of holders of  long-term  debt  issues
which do not exceed 10% of consolidated total assets will be
furnished to the Commission upon request.

Item No.                            Exhibit Item

3.1             Restated   Certificate  of  Incorporation  of  Registrant  -
incorporated by reference to Exhibit 3.1 of the Registrant's
Registration Statement on Form S-1 (File No. 333-42643).

3.2             Amended and Restated  Bylaws of  Registrant,  adopted by the
Board of Directors August 31, 2002.

10.1            Intercorporate Services Agreement between the Registrant and
Contran  Corporation  effective  as of  January  1,  2002  -
incorporated   by   reference   to   Exhibit   10.1  of  the
Registrant's  Quarterly  Report on Form 10-Q for the quarter
ended June 30, 2002.

10.2*           CompX  International  Inc. 1997  Long-Term  Incentive Plan -
incorporated   by   reference   to   Exhibit   10.2  of  the
Registrant's  Registration  Statement  on Form S-1 (File No.
333-42643).

10.3*           CompX   International   Inc.   Variable   Compensation  Plan
effective as of January 1, 1999 - incorporated  by reference
to Exhibit 10.4 of the  Registrant's  Annual  Report on Form
10-K for the year ended December 31, 1998.

10.4            Agreement  between  Haworth,  Inc.  and  Waterloo  Furniture
Components,  Ltd. and Waterloo  Furniture  Components,  Inc.
effective  October 1, 1992 -  incorporated  by  reference to
Exhibit 10.3 of the Registrant's  Registration  Statement on
Form S-1 (File No. 333-42643).

10.5            Tax Sharing Agreement among the Registrant, Valcor, Inc. and
Valhi,  Inc. dated as of January 2, 1998 -  incorporated  by
reference to Exhibit 10.4 of the  Registrant's  Registration
Statement on Form S-1 (File No. 333-42643).

Item No.                            Exhibit Item

10.6            $100,000,000   Credit  Agreement   between  the  Registrant,
Bankers  Trust  Company,   as  Agent  and  various   lending
institutions  dated  February  26,  1998 -  incorporated  by
reference to Exhibit 10.5 of the  Registrant's  Registration
Statement on Form S-1 (File No. 333-42643).

10.7            Amendment  No. 1 to  Credit  Agreement  between  Registrant,
Bankers  Trust  Company,   as  Agent  and  various   lending
institutions,  dated  December  15, 1999 -  incorporated  by
reference to Exhibit 10.8 of the Registrant's  Annual Report
on Form 10-K for the year ended December 31, 1999.

10.8            Amendment  No. 2 to  Credit  Agreement  between  Registrant,
Bankers  Trust  Company,   as  Agent  and  various   lending
institutions,   dated  December  2001  -   incorporated   by
reference to Exhibit 10.8 of the Registrant's  Annual Report
on Form 10-K for the year ended December 31, 2001.

10.9            $47,500,000   Credit   Agreement   between  the  Registrant,
Wachovia Bank,  National  Association,  as Agent and various
lending institutions dated January 22, 2003.

10.10*          Employment   agreement  between  Registrant  and  Wouter  J.
Dammers,   effective  August  30,  1999  -  incorporated  by
reference  to  Exhibit  10.1 of the  Registrant's  Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001.

10.11           Asset   sale/leaseback   agreement   between  Thomas  Regout
International  BV and the  municipality  of Maastricht,  the
Netherlands  dated  December 21, 2001  (English  translation
from Dutch language document) - incorporated by reference to
Exhibit 10.12 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2001.

10.12*          Agreement and General  Release  between the  Registrant  and
Brent A. Hagenbuch, effective May 22, 2002.

10.13*          Agreement and General  Release  between the  Registrant  and
Stuart M. Bitting, effective July 31, 2002.

21.1            Subsidiaries of the Registrant.

23.1            Consent of PricewaterhouseCoopers LLP.

99.1            Annual  Report of the  CompX  Contributory  Retirement  Plan
(Form  11-K)  to be filed  under  Form  10-K to this  Annual
Report on Form  10-K405  within 180 days after  December 31,
2002.

99.2            Certification pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.3            Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract, compensatory plan or agreement.

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.

COMPX INTERNATIONAL INC.

By:      /s/ David A. Bowers                         
------------------------------------------------
David A. Bowers
Vice Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)

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

Signature                  Title                           Date

/s/ Glenn R. Simmons                     Chairman of the Board           March 14, 2003
-----------------------------
Glenn R. Simmons

/s/ David A. Bowers                      Vice Chairman of the Board,     March 14, 2003
-----------------------------            President and
David A. Bowers                          Chief Executive Officer
(Principal Executive Officer)

/s/ Darryl R. Halbert                    Vice President,                 March 14, 2003
-----------------------------            Chief Financial Officer
Darryl R. Halbert                        and Controller
(Principal Financial and Accounting
Officer)

/s/ Paul M. Bass, Jr.                    Director                        March 14, 2003
-----------------------------
Paul M. Bass, Jr.

/s/ Keith R. Coogan                      Director                        March 14, 2003
-----------------------------
Keith R. Coogan

/s/ Edward J. Hardin                     Director                        March 14, 2003
-----------------------------
Edward J. Hardin

/s/ Ann Manix                            Director                        March 14, 2003
--------------------------------------
Ann Manix

/s/ Steven L. Watson                     Director                        March 14, 2003
-----------------------------
Steven L. Watson

CERTIFICATION

I,  David A.  Bowers,  the Vice  Chairman  of the  Board,  President  and  Chief
Executive Officer of CompX International Inc., certify that:

1)   I have  reviewed  this  annual  report on Form 10-K of CompX  International
Inc.;

2)   Based on my  knowledge,  this  annual  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 annual report;

3)   Based on my  knowledge,  the  financial  statements,  and  other  financial
information included in this annual 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 annual 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-14 and 15d-14) for the registrant and have:

a)   designed  such  disclosure  controls  and  procedures  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 annual report
is being prepared;

b)   evaluated the  effectiveness of the registrant's  disclosure  controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c)   presented   in  this   annual   report  our   conclusions   about  the
effectiveness  of the disclosure  controls and procedures based on our
evaluation as of the Evaluation Date;

5)   The registrant's  other certifying  officer and I have disclosed,  based on
our most recent  evaluation,  to the  registrant's  auditors  and the audit
committee of  registrant's  board of directors (or persons  performing  the
equivalent functions):

a)   all  significant  deficiencies  in the design or operation of internal
controls  which could  adversely  affect the  registrant's  ability to
record,  process,   summarize  and  report  financial  data  and  have
identified for the  registrant's  auditors any material  weaknesses in
internal controls; and

b)   any fraud, whether or not material,  that involves management or other
employees who have a  significant  role in the  registrant's  internal
controls; and

6)   The  registrant's  other  certifying  officer and I have  indicated in this
annual  report  whether or not there were  significant  changes in internal
controls  or in other  factors  that could  significantly  affect  internal
controls  subsequent to the date of our most recent  evaluation,  including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date:  March 14, 2003

/s/ David A. Bowers
-------------------------------------
David A. Bowers
Vice Chairman of the Board, President
and Chief Executive Officer

CERTIFICATION

I, Darryl R. Halbert, the Vice President, Chief Financial Officer and Controller
of CompX International Inc., certify that:

1)   I have  reviewed  this  annual  report on Form 10-K of CompX  International
Inc.;

2)   Based on my  knowledge,  this  annual  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 annual report;

3)   Based on my  knowledge,  the  financial  statements,  and  other  financial
information included in this annual 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 annual 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-14 and 15d-14) for the registrant and have:

a)   designed  such  disclosure  controls  and  procedures  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 annual report
is being prepared;

b)   evaluated the  effectiveness of the registrant's  disclosure  controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c)   presented   in  this   annual   report  our   conclusions   about  the
effectiveness  of the disclosure  controls and procedures based on our
evaluation as of the Evaluation Date;

5)   The registrant's  other certifying  officer and I have disclosed,  based on
our most recent  evaluation,  to the  registrant's  auditors  and the audit
committee of  registrant's  board of directors (or persons  performing  the
equivalent functions):

d)   all  significant  deficiencies  in the design or operation of internal
controls  which could  adversely  affect the  registrant's  ability to
record,  process,   summarize  and  report  financial  data  and  have
identified for the  registrant's  auditors any material  weaknesses in
internal controls; and

e)   any fraud, whether or not material,  that involves management or other
employees who have a  significant  role in the  registrant's  internal
controls; and

6)   The  registrant's  other  certifying  officer and I have  indicated in this
annual  report  whether or not there were  significant  changes in internal
controls  or in other  factors  that could  significantly  affect  internal
controls  subsequent to the date of our most recent  evaluation,  including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date:  March 14, 2003

/s/ Darryl R. Halbert
------------------------------------------------------
Darryl R. Halbert
Vice President, Chief Financial Officer and Controller

Annual Report on Form 10-K

Items 8, 14(a) and 14(d)

Index of Financial Statements and Schedules

Financial Statements                                                 Page

Report of Independent Accountants                                   F-2

Consolidated Balance Sheets - December 31, 2001 and 2002            F-3

Consolidated Statements of Income -
Years ended December 31, 2000, 2001 and 2002                       F-5

Consolidated Statements of Comprehensive Income -
Years ended December 31, 2000, 2001 and 2002                       F-6

Consolidated Statements of Cash Flows -
Years ended December 31, 2000, 2001 and 2002                       F-7

Consolidated Statements of Stockholders' Equity -
Years ended December 31, 2000, 2001 and 2002                       F-9

Notes to Consolidated Financial Statements                          F-10

Financial Statement Schedule

Report of Independent Accountants                                   S-1

Schedule II - Valuation and Qualifying Accounts                     S-2

Schedules I, III and IV are omitted because they are not applicable.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of CompX International Inc.:

In our  opinion,  the  accompanying  consolidated  balance  sheets  and the
related consolidated statements of income,  comprehensive income, cash flows and
stockholders' equity present fairly, in all material respects,  the consolidated
financial  position of CompX  International Inc. and Subsidiaries as of December
31, 2001 and 2002, and the  consolidated  results of their  operations and their
cash flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America.  These  financial  statements are the  responsibility  of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our  audits.  We  conducted  our audits of these  financial
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States of America,  which  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,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Note 15 to the consolidated financial statements, effective
January 1, 2002 the Company  changed its method of  accounting  for goodwill and
other intangible assets.

PricewaterhouseCoopers LLP

Dallas, Texas
February 13, 2003

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2001 and 2002

(In thousands, except share data)

ASSETS                                         2001         2002
----         ----

Current assets:

Cash and cash equivalents ........................      $ 33,309      $ 12,407
Accounts receivable, less allowance for
doubtful accounts of $841 and $812 ..............        23,422        22,924
Income taxes receivable from affiliates ..........           351           352
Refundable income taxes ..........................         2,032         1,378
Inventories ......................................        30,902        28,876
Prepaid expenses and other current assets ........         2,902         3,422
Deferred income taxes ............................         1,944         1,983
--------      --------

Total current assets .........................        94,862        71,342
--------      --------

Other assets:
Goodwill .........................................        38,882        40,729
Other intangible assets ..........................         2,440         2,183
Prepaid rent .....................................         1,079           426
Other ............................................           577           233
--------      --------

Total other assets ...........................        42,978        43,571
--------      --------

Property and equipment:
Land .............................................         4,368         4,344
Buildings ........................................        29,092        29,452
Equipment ........................................        89,773       102,347
Construction in progress .........................         4,618         3,548
--------      --------
127,851       139,691
Less accumulated depreciation ....................        42,815        54,512
--------      --------

Net property and equipment ...................        85,036        85,179
--------      --------

$222,876      $200,092
========      ========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

December 31, 2001 and 2002

(In thousands, except share data)

LIABILITIES AND STOCKHOLDERS' EQUITY                       2001         2002
----         ----

Current liabilities:

Current maturities of long-term debt .................   $      56    $       6
Accounts payable and accrued liabilities .............      23,168       21,318
Payable to affiliate .................................          15         --
Income taxes .........................................       1,000          419
Deferred income taxes ................................         291          408
---------    ---------

Total current liabilities ........................      24,530       22,151
---------    ---------

Noncurrent liabilities:
Long-term debt .......................................      49,000       31,000
Deferred income taxes ................................       4,441        4,469
Accrued pension costs ................................         660         --
Deferred gain on sale/leaseback ......................       1,221          493
---------    ---------

Total noncurrent liabilities .....................      55,322       35,962
---------    ---------

Stockholders' equity:
Preferred stock, $.01 par value; 1,000 shares
authorized, none issued .............................        --           --
Class A common stock, $.01 par value;
20,000,000 shares authorized; 6,207,180 and 6,219,680
shares issued .......................................          62           62
Class B common stock, $.01 par value;
10,000,000 shares authorized, issued and outstanding          100          100
Additional paid-in capital ...........................     119,224      119,387
Retained earnings ....................................      50,966       44,049
Accumulated other comprehensive income -
currency translation ................................     (16,013)     (10,304)
Treasury stock, at cost - 1,103,900 shares ...........     (11,315)     (11,315)
---------    ---------

Total stockholders' equity .......................     143,024      141,979
---------    ---------

$ 222,876    $ 200,092
=========    =========

Commitments and contingencies (Notes 1, 11 and 14)

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2000, 2001 and 2002

(In thousands, except per share data)

2000          2001         2002
----          ----         ----

Net sales ...................................   $ 253,294    $ 211,422    $ 196,101
Cost of goods sold ..........................     187,299      167,884      163,181
---------    ---------    ---------

Gross margin ..........................      65,995       43,538       32,920

Selling, general and administrative expense .      28,693       28,310       26,713
Restructuring charge ........................        --          2,742         --
---------    ---------    ---------

Operating income ......................      37,302       12,486        6,207

Gain on sale of plant facility ..............        --          2,246         --
Other general corporate income (expense), net         443        1,009         (910)
Interest expense ............................      (2,302)      (2,859)      (1,888)
---------    ---------    ---------

Income before income taxes and
minority interest ....................      35,443       12,882        3,409

Provision for income taxes ..................      13,390        5,758        2,771

Minority interest in losses .................          (3)        --           --
---------    ---------    ---------

Net income ............................   $  22,056    $   7,124    $     638
=========    =========    =========

Basic and diluted earnings per common share .   $    1.37    $     .47    $     .04
=========    =========    =========

Cash dividends per share ....................   $     .50    $     .50    $     .50
=========    =========    =========

Shares used in the calculation of earnings
per share amounts for:
Basic earnings per share ..................      16,115       15,144       15,110
Dilutive impact of stock options ..........          32            6            8
---------    ---------    ---------

Diluted earnings per share ................      16,147       15,150       15,118
=========    =========    =========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2000, 2001 and 2002

(In thousands)

2000         2001        2002
----         ----        ----

Net income ................................    $ 22,056     $ 7,124     $   638
--------     -------     -------

Other comprehensive income - currency
translation adjustment:
Pre-tax amount ........................      (5,159)     (5,097)      5,643
Less income tax benefit ...............        (323)       (207)        (66)
--------     -------     -------

Total other comprehensive income ......      (4,836)     (4,890)      5,709
--------     -------     -------

Comprehensive income ................    $ 17,220     $ 2,234     $ 6,347
========     =======     =======

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2000, 2001 and 2002

(In thousands)

2000         2001        2002
----         ----        ----

Cash flows from operating activities:

Net income ..................................   $ 22,056    $  7,124    $    638
Depreciation and amortization ...............     12,416      14,769      13,004
Deferred income taxes .......................      2,310       1,355        (750)
Gain on sale of plant facility ..............       --        (2,246)       --
Minority interest ...........................         (3)       --          --
Other, net ..................................        (73)        465         604
Change in assets and liabilities:
Accounts receivable .......................       (826)      6,112       1,301
Inventories ...............................     (7,421)      4,075       3,052
Accounts payable and accrued liabilities ..      2,746      (3,983)     (2,798)
Accounts with affiliates ..................       (284)        (38)        (16)
Income taxes ..............................     (1,033)        202       1,561
Other, net ................................     (1,458)       (172)        342
--------    --------    --------

Net cash provided by operating activities     28,430      27,663      16,938
--------    --------    --------

Cash flows from investing activities:
Capital expenditures ........................    (23,128)    (13,283)    (12,703)
Proceeds from sale of plant facility ........       --        10,000        --
Purchase of business units ..................     (9,346)       --          --
Other, net ..................................        111         605          32
--------    --------    --------

Net cash used by investing activities ...    (32,363)     (2,678)    (12,671)
--------    --------    --------

Cash flows from financing activities:
Long-term debt:
Borrowings ................................     20,274      14,919       1,000
Principal payments ........................     (2,454)     (6,511)    (19,050)
Issuance of common stock ....................      1,027        --           120
Dividends paid ..............................     (8,076)     (7,553)     (7,555)
Common stock reacquired .....................     (8,665)     (2,650)       --
Other .......................................         13        --          --
--------    --------    --------

Net cash provided (used) by financing
activities .............................      2,119      (1,795)    (25,485)
--------    --------    --------

Net increase (decrease) .......................   $ (1,814)   $ 23,190    $(21,218)
========    ========    ========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Years ended December 31, 2000, 2001 and 2002

(In thousands)

2000       2001      2002
----       ----      ----

Cash and cash equivalents:
Net increase (decrease) from:
Operating, investing and financing

activities ....................................   $ (1,814)   $23,190   $(21,218)
Currency translation ...........................       (535)       299        316
Balance at beginning of year .....................     12,169      9,820     33,309
--------    -------   --------

Balance at end of year ...........................   $  9,820    $33,309   $ 12,407
========    =======   ========

Supplemental disclosures:
Cash paid for:
Interest .......................................   $  2,086    $ 3,238   $  1,877
Income taxes ...................................     12,562      4,126      2,788

Net assets consolidated - business units acquired:
Cash and cash equivalents ......................   $   --      $  --     $   --   
Goodwill .......................................      4,837       --         --
Other intangible assets ........................        254       --         --
Other non-cash assets ..........................      7,144       --         --
Liabilities ....................................     (2,889)      --         --
--------    -------   --------

Cash paid ......................................   $  9,346    $  --     $   --
========    =======   ========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 2000, 2001 and 2002

(In thousands)

Accumulated other
comprehensive
income -
Additional                    currency                       Total
Common stock      paid-in       Retained     translation                  stockholders'
Class A  Class B    capital       earnings        stock        Treasury        equity
-------        -------     ----------     ----------      ------

Balance at December 31, 1999      $61     $100      $118,067       $37,415      $ (6,287)      $     -       $149,356

Net income                          -        -             -        22,056             -             -         22,056
Other comprehensive income          -        -             -             -        (4,836)            -         (4,836)
Cash dividends                      -        -             -        (8,076)            -             -         (8,076)
Issuance of common stock            1        -         1,072             -             -             -          1,073
Common stock reacquired             -        -             -             -             -        (8,665)        (8,665)
Other                               -        -            55             -             -             -             55
---     ----      --------       -------      --------      --------       --------

Balance at December 31, 2000       62      100       119,194        51,395       (11,123)       (8,665)       150,963

Net income                          -        -             -         7,124             -             -          7,124
Other comprehensive income          -        -             -             -        (4,890)            -         (4,890)
Cash dividends                      -        -             -        (7,553)            -             -         (7,553)
Issuance of common stock            -        -            30             -             -             -             30
Common stock reacquired             -        -             -             -             -        (2,650)        (2,650)
---     ----      --------       -------      --------      --------        --------

Balance at December 31, 2001       62      100       119,224        50,966       (16,013)      (11,315)       143,024

Net income                          -        -             -           638             -             -            638
Other comprehensive income          -        -             -             -         5,709             -          5,709
Cash dividends                      -        -             -        (7,555)            -             -         (7,555)
Issuance of common stock            -        -           156             -             -             -            156
Other                               -        -             7             -             -                            7
---     ----      --------       -------      --------      --------       --------

Balance at December 31, 2002      $62     $100      $119,387       $44,049      $(10,304)     $(11,315)      $141,979
===     ====      ========       =======      ========      ========       ========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of significant accounting policies:

Organization.  CompX  International Inc. (NYSE: CIX) is 69% owned by Valhi,
Inc. (NYSE: VHI) and Valhi's  wholly-owned  subsidiary Valcor,  Inc. at December
31, 2002. The Company  manufactures and sells component products (precision ball
bearing slides,  security products and ergonomic  computer support systems).  At
December 31, 2002, Contran Corporation holds,  directly or through subsidiaries,
approximately  93% of Valhi's  outstanding  common stock.  Substantially  all of
Contran's outstanding voting stock is held by trusts established for the benefit
of certain children and grandchildren of Harold C. Simmons, of which Mr. Simmons
is sole  trustee.  Mr.  Simmons,  the  Chairman of the Board of each of Contran,
Valhi and  Valcor,  may be  deemed to  control  each of such  companies  and the
Company.

Management estimates. The preparation of financial statements in conformity
with accounting  principles  generally  accepted in the United States of America
("GAAP")  requires  management to make estimates and assumptions that affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and liabilities at the date of the financial statements, and the reported amount
of revenues and expenses during the reporting period.  Actual results may differ
from previously-estimated amounts under different assumptions or conditions.

Principles  of  consolidation.   The  accompanying  consolidated  financial
statements   include  the   accounts  of  CompX   International   Inc.  and  its
majority-owned  subsidiaries.  All material  intercompany  accounts and balances
have been  eliminated.  Certain  prior year  amounts have been  reclassified  to
conform to the current year  presentation.  The Company has no involvement  with
any variable interest entity covered by the scope of FASB Interpretation No. 46,
Consolidation of Variable Interest Entities.

Fiscal  year.  The  Company's  operations  are  reported on a 52 or 53-week
fiscal year. The years ended December 31, 2000,  2001 and 2002 each consisted of
52 weeks, and the year ended December 31, 2003 will be a 52-week year.

Translation of foreign  currencies.  Assets and liabilities of subsidiaries
whose  functional  currency  is other  than the U.S.  dollar are  translated  at
year-end  rates of exchange and revenues and expenses are  translated at average
exchange rates prevailing during the year. Resulting translation adjustments are
accumulated in stockholders'  equity as part of accumulated other  comprehensive
income, net of related  applicable  deferred income taxes and minority interest.
Currency transaction gains and losses are recognized in income currently.

Cash and cash  equivalents.  Cash equivalents  consist  principally of bank
time deposits and government and  commercial  notes with original  maturities of
three months or less.

Net sales. Sales are recorded when products are shipped and title and other
risks and rewards of ownership  have passed to the customer.  Shipping terms are
generally F.O.B. shipping point, although in some instances,  shipping terms are
F.O.B.  destination  point (for which sales are  recognized  when the product is
received  by the  customer).  Amounts  charged to  customers  for  shipping  and
handling are not material.  The related costs incurred for shipping and handling
are also not material.

Accounts  receivable.  The  Company  provides  an  allowance  for  doubtful
accounts for known and potential  losses rising from sales to customers based on
a periodic review of these accounts.

Inventories and cost of sales.  Inventories are stated at the lower of cost
or  market,   net  of  allowance  for  obsolete  and  slow-moving   inventories.
Inventories are based on average cost or the first-in, first-out method.

Goodwill and other  intangible  assets.  Goodwill  represents the excess of
cost over fair value of individual net assets acquired in business  combinations
accounted for by the purchase method.  Through  December 31, 2001,  goodwill was
amortized by the straight-line method over not more than 20 years. Upon adoption
of Statement of Financial  Accounting  Standards  ("SFAS") No. 142, Goodwill and
Other  Intangible  Assets,  effective  January 1, 2002,  goodwill  was no longer
subject to  periodic  amortization.  Goodwill  and other  intangible  assets are
stated net of accumulated amortization. See Notes 5 and 15.

Other intangible assets,  consisting of the estimated fair value of certain
patents  acquired,  have been and will  continue to be upon adoption of SFAS No.
142 effective January 1, 2002,  amortized by the  straight-line  method over the
lives of such patents  (approximately  11 years remaining at December 31, 2002),
with no  assumed  residual  value at the end of the life of the  patents.  Other
intangible assets are stated net of accumulated  amortization of $1.0 million at
December 31, 2001 and $1.2 million at December 31, 2002. Amortization expense of
intangible  assets was $361,000 in 2000,  $229,000 in 2001 and $240,000 in 2002,
and is expected to be approximately $250,000 in each of 2003 through 2007.

Through  December  31,  2001,  when  events  or  changes  in  circumstances
indicated  that  goodwill  or  other  intangible  assets  may  be  impaired,  an
evaluation was performed to determine if an impairment  existed.  Such events or
circumstances  included,  among other  things,  (i) a  prolonged  period of time
during which the Company's net carrying value of its investment in  subsidiaries
whose common  stocks are publicly  traded was greater than quoted  market prices
for such stocks and (ii)  significant  current and prior  periods or current and
projected periods with operating losses related to the applicable business unit.
All relevant  factors  were  considered  in  determining  whether an  impairment
existed. If an impairment was determined to exist, goodwill and, if appropriate,
the underlying long-lived assets associated with the goodwill, were written down
to reflect the estimated  future  discounted cash flows expected to be generated
by the underlying  business.  Effective  January 1, 2002, the Company  commenced
assessing  impairment of goodwill and other intangible assets in accordance with
SFAS No. 142. See Note 15.

Property,  equipment and  depreciation.  Property and equipment,  including
purchased  computer software for internal use, are stated at cost.  Expenditures
for maintenance, repairs and minor renewals are expensed; expenditures for major
improvements are capitalized.  Depreciation for financial  reporting purposes is
computed principally by the straight-line method over the estimated useful lives
of 15 to 40  years  for  buildings  and  three  to 10 years  for  equipment  and
software.  Accelerated depreciation methods are used for income tax purposes, as
permitted. Upon sale or retirement of an asset, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is recognized in
income currently.

When  events or  changes  in  circumstances  indicate  that  assets  may be
impaired,  an evaluation is performed to determine if an impairment exists. Such
events or changes in circumstances  include, among other things, (i) significant
current  and prior  periods or current  and  projected  periods  with  operating
losses,  (ii) a significant  decrease in the market value of an asset or (iii) a
significant  change  in the  extent  or  manner  in which an asset is used.  All
relevant  factors  are  considered.  The test for  impairment  is  performed  by
comparing the estimated  future  undiscounted  cash flows (exclusive of interest
expense)  associated  with  the  asset  to the  asset's  net  carrying  value to
determine  if a  write-down  to market  value or  discounted  cash flow value is
required.  Through  December 31, 2001, if the asset being tested for  impairment
was acquired in a business combination accounted for by the purchase method, any
goodwill which arose out of that business combination was also considered in the
impairment test if the goodwill  related  specifically to the acquired asset and
not to other  aspects of the acquired  business,  such as the  customer  base or
product lines. Effective January 1, 2002, the Company began assessing impairment
of goodwill in  accordance  with SFAS No. 142, and the Company  began  assessing
impairment  of other  long-lived  assets  (such as property  and  equipment)  in
accordance  with SFAS No. 144  Accounting  for the  Impairment  or  Disposal  of
Long-Lived Assets.  SFAS No. 144 retains the fundamental  provisions of existing
GAAP with  respect  to the  recognition  and  measurement  of  long-lived  asset
impairment  contained  in  SFAS  No.  121,  Accounting  for  the  Impairment  of
Long-Lived  Assets and for Lived-Lived  Assets to be Disposed Of. However,  SFAS
No. 144 provides new guidance intended to address certain  implementation issues
associated  with SFAS No.  121,  including  expanded  guidance  with  respect to
appropriate  cash  flows  to be used to  determine  whether  recognition  of any
long-lived  asset  impairment  is  required,  and if required how to measure the
amount of the  impairment.  SFAS No. 144 also requires that any net assets to be
disposed of by sale are to be  reported  at the lower of carrying  value or fair
value less cost to sell, and expands the reporting of discontinued operations to
include any  component of an entity with  operations  and cash flows that can be
clearly distinguished from the rest of the entity.  Adoption of SFAS No. 144 did
not have a significant  effect on the Company as of January 1, 2002. See Notes 5
and 15.

Self-insurance.   The  Company  is  partially   self-insured  for  workers'
compensation  and certain  employee  health  benefits  and is  self-insured  for
environmental issues. Stop-loss coverage is purchased by the Company in order to
limit its  exposure  to any  significant  levels  of  workers'  compensation  or
employee  health  benefit  claims.  Self-insured  losses are accrued  based upon
estimates of the aggregate liability for uninsured claims incurred using certain
actuarial  assumptions  followed in the insurance industry and the Company's own
historical claims experience.

Derivatives  and  hedging  activities.  The Company  adopted  SFAS No. 133,
Accounting  for  Derivative  Instruments  and  Hedging  Activities,  as amended,
effective January 1, 2001. Under SFAS No. 133, all derivatives are recognized as
either assets or  liabilities  and measured at fair value.  The  accounting  for
changes  in fair  value of  derivatives  depends  upon the  intended  use of the
derivative,  and such  changes  are  recognized  either  in net  income or other
comprehensive  income.  As permitted by the transition  requirements of SFAS No.
133, as amended,  the  Company has  exempted  from the scope of SFAS No. 133 all
host contracts  containing  embedded  derivatives  which were issued or acquired
prior to  January  1,  1999.  Other  than  certain  currency  forward  contracts
discussed  below,  the Company was not a party to any significant  derivative or
hedging  instrument  covered by SFAS No. 133 at January 1, 2001.  The accounting
for  such  currency  forward  contracts  under  SFAS No.  133 is not  materially
different from the accounting for such contracts under prior GAAP, and therefore
the impact to the Company of adopting SFAS No. 133 was not material.

Certain of the Company's  sales  generated by its non-U.S.  operations  are
denominated in U.S.  dollars.  The Company  periodically  uses currency  forward
contracts  to  manage a very  nominal  portion  of  foreign  exchange  rate risk
associated  with  receivables  denominated in a currency other than the holder's
functional  currency or similar exchange rate risk associated with future sales.
The Company  has not entered  into these  contracts  for trading or  speculative
purposes in the past, nor does the Company  currently  anticipate  entering into
such  contracts  for trading or  speculative  purposes  in the  future.  At each
balance  sheet  date,  any  such   outstanding   currency  forward  contract  is
marked-to-market  with any resulting gain or loss recognized in income currently
as part of net currency  transactions.  To manage such  exchange  rate risk,  at
December 31, 2002 the Company held contracts  maturing  through  January 2003 to
exchange an aggregate of U.S. $2.5 million for an equivalent  amount of Canadian
dollars at an exchange rate of Cdn. $1.57 per U.S. dollar. At December 31, 2002,
the actual exchange rate was Cdn. $1.57 per U.S. dollar.  No such contracts were
held at December 31, 2001.

The  Company  periodically  uses  interest  rate  swaps and other  types of
contracts  to manage  interest  rate risk with  respect to  financial  assets or
liabilities.  The Company has not entered  into these  contracts  for trading or
speculative  purposes  in the past,  nor does the Company  currently  anticipate
entering into such contracts for trading or speculative  purposes in the future.
The Company was not a party to any such contract during 2000, 2001 and 2002.

Income  taxes.  The  Company is a separate  United  States  federal  income
taxpayer and is not a member of Contran's  consolidated  United  States  federal
income tax group.  The  Company is however a part of  consolidated  tax  returns
filed  by  Contran  in  certain  United  States  state  jurisdictions.  For such
consolidated state tax returns, intercompany allocations of state tax provisions
are computed on a separate company basis. Payments are made to, or received from
Contran  in the  amounts  that  would  have  been paid to or  received  from the
respective  state tax  authority  had CompX not been a part of the  consolidated
state tax return.

Deferred  income tax assets and liabilities are recognized for the expected
future tax  consequences  of  temporary  differences  between the income tax and
financial  reporting  carrying  amounts  of assets  and  liabilities,  including
undistributed  earnings  of  foreign  subsidiaries  which  are not  deemed to be
permanently  reinvested.  The Company  periodically  evaluates  its deferred tax
assets in the various taxing  jurisdictions in which it operates and adjusts any
related valuation allowance based on the estimate of the amount of such deferred
tax assets which the Company  believes does not meet the  "more-likely-than-not"
recognition criteria.  Earnings of foreign subsidiaries deemed to be permanently
reinvested  aggregated  $54  million at  December  31,  2001 and $45  million at
December 31, 2002.

Earnings per share.  Basic earnings per share of common stock is based upon
the weighted  average number of common shares actually  outstanding  during each
period.  Diluted  earnings  per share of common  stock  includes  the  impact of
outstanding  dilutive stock options.  The weighted average number of outstanding
stock  options  excluded  from the  calculation  of diluted  earnings  per share
because  their  impact  would have been  antidilutive  aggregated  approximately
848,000 in 2000, 746,000 in 2001 and 819,000 in 2002.

Stock options. At December 31, 2002, the Company has a stock-based employee
compensation  plan,  which is  described  more  fully in Note  10.  The  Company
accounts for stock-based  employee  compensation  related to stock options using
the  intrinsic  value method in  accordance  with  Accounting  Principles  Board
Opinion  ("APBO")  No. 25,  Accounting  for Stock Issued to  Employees,  and its
various  interpretations.  Under APBO No. 25, no compensation  cost is generally
recognized  for fixed stock options in which the exercise  price is greater than
or equal to the market price on the grant date.  Compensation cost recognized by
the Company related to stock options in accordance with APBO No. 25 has not been
significant in any of the past three years. The following table  illustrates the
effect on net income and  earnings per share if the Company had applied the fair
value  recognition  provisions  of SFAS  No.  123,  Accounting  for  Stock-Based
Compensation to stock-based  employee  compensation related to stock options for
all options granted on or after January 1, 1995.

Years ended December 31,
2000        2001         2002
----        ----         ----
(In thousands,
except per share data)

Net income, as reported .......................   $ 22,056    $ 7,124    $   638
Deduct:  Total stock-based employee
compensation expense related to stock options
determined under fair value based method
for all awards, net of related tax effects ..     (1,342)    (1,486)    (1,572)
--------    -------    -------

Pro forma net income (loss) ...................   $ 20,714    $ 5,638    $  (934)
========    =======    =======

Earnings (loss) per share - basic and diluted:
As reported .................................   $   1.37    $   .47    $   .04
========    =======    =======

Pro forma ...................................   $   1.29    $   .37    $  (.06)
========    =======    =======

Fair value of  financial  instruments.  The  carrying  amounts of  accounts
receivable and accounts payable  approximates fair value due to their short-term
nature.  The carrying amount of indebtedness  approximates fair value due to the
stated  interest rate  approximating  a market rate.  These estimated fair value
amounts  have  been  determined  using  available  market  information  or other
appropriate valuation methodologies.

Other.  Advertising  costs,  expensed as incurred,  were  $931,000 in 2000,
$1,026,000  in 2001  and  $879,000  in 2002.  Research  and  development  costs,
expensed as incurred,  were $1,082,000 in 2000, $510,000 in 2001 and $659,000 in
2002.

Note 2 - Business units acquired:

In January 2000, the Company  acquired  substantially  all of the operating
assets of Chicago Lock Company for a cash purchase price of $9.4 million,  using
borrowings under the Company's revolving credit facility.  The Company accounted
for this acquisition by the purchase method of accounting and, accordingly,  the
results of operations and cash flows of the business acquired is included in the
Company's   consolidated   financial  statements   subsequent  to  the  date  of
acquisition.  The purchase price for this  acquisition has been allocated to the
individual  assets  acquired and  liabilities  assumed based upon estimated fair
values.

Note 3 - Business and geographic segments:

The  Company's   operating  segments  are  defined  as  components  of  its
operations  about which  separate  financial  information  is available  that is
regularly  evaluated by the chief operating decision maker in determining how to
allocate resources and in assessing  performance.  The Company's chief operating
decision maker is Mr. David Bowers, president and chief executive officer of the
Company.  The Company has three  operating  segments - CompX Security  Products,
CompX  Waterloo  and CompX Regout  (formerly  called  CompX  Europe).  The CompX
Security Products segment,  with manufacturing  facilities in South Carolina and
Illinois,  manufactures  locking mechanisms and other security products for sale
to the office furniture,  banking, vending,  computer and other industries.  The
CompX Waterloo segment, with facilities in Canada,  Michigan and Taiwan, and the
CompX Regout  segment,  with  facilities in the  Netherlands,  both  manufacture
and/or  distribute a complete line of precision  ball bearing  slides for use in
office furniture,  computer-related  equipment,  tool storage cabinets and other
applications  and  ergonomic  computer  support  systems  for office  furniture.
Because of the similar economic  characteristics  between the CompX Waterloo and
CompX  Regout  segments  and  due to the  identical  products,  customer  types,
production processes and distribution methods shared by these two segments, they
have been  aggregated  into a single  reportable  segment for segment  reporting
purposes.

The chief operating  decision maker evaluates segment  performance based on
segment  operating  income,  which is defined  as income  before  income  taxes,
minority interest and interest  expense,  exclusive of certain general corporate
income  and  expense  items  (including  interest  income and  foreign  exchange
transaction  gains and losses) and special items. All corporate office operating
expenses are allocated to the two  reportable  segments based upon the segments'
net sales. The accounting policies of the reportable  operating segments are the
same as those  described in Note 1. Capital  expenditures  include  additions to
property  and  equipment,   but  exclude   amounts   attributable   to  business
combinations accounted for by the purchase method. See Note 2.

Segment assets are comprised of all assets  attributable  to the reportable
segments.  Corporate assets are not  attributable to the operating  segments and
consist primarily of cash and cash equivalents.  For geographic information, net
sales are  attributable  to the place of  manufacture  (point of origin) and the
location of the customer  (point of  destination);  property and  equipment  are
attributable to their physical location.  At December 31, 2001 and 2002, the net
assets of non-U.S. subsidiaries included in consolidated net assets approximated
$91 million and $82 million, respectively.

Years ended December 31,
2000         2001         2002
----         ----         ----
(In thousands)

Net sales:

CompX Waterloo/CompX Regout .................   $ 168,276    $ 137,351    $ 122,743
CompX Security Products .....................      85,018       74,071       73,358
---------    ---------    ---------

Total net sales ...........................   $ 253,294    $ 211,422    $ 196,101
=========    =========    =========

Operating income (loss):
CompX Waterloo/CompX Regout .................   $  24,822    $   5,166    $  (1,869)
CompX Security Products .....................      12,480        7,320        8,076
---------    ---------    ---------

Total operating income ....................      37,302       12,486        6,207

Interest expense ............................      (2,302)      (2,859)      (1,888)
Gain on sale of plant facility ..............        --          2,246         --
Other general corporate income (expense), net         443        1,009         (910)
---------    ---------    ---------

Income before income taxes and
minority interest ........................   $  35,443    $  12,882    $   3,409
=========    =========    =========

Depreciation and amortization:
CompX Waterloo/CompX Regout .................   $   7,697    $   9,136    $   8,235
CompX Security Products .....................       4,719        5,633        4,769
---------    ---------    ---------

$  12,416    $  14,769    $  13,004
=========    =========    =========

Capital expenditures:
CompX Waterloo/CompX Regout .................   $  13,611    $   6,831    $  11,121
CompX Security Products .....................       9,517        6,452        1,582
---------    ---------    ---------

$  23,128    $  13,283    $  12,703
=========    =========    =========

Years ended December 31,
2000          2001           2002
----          ----           ----
(In thousands)

Net sales:
Point of origin:

Canada ..........................       $ 99,088       $ 81,326       $ 69,803
United States ...................        106,294         88,302         86,432
The Netherlands .................         35,767         32,216         29,626
Taiwan ..........................         12,145          9,578         10,240
--------       --------       --------

$253,294       $211,422       $196,101
========       ========       ========

Point of destination:
United States ...................       $159,658       $130,534       $126,182
Canada ..........................         43,903         35,475         29,601
Europe ..........................         34,858         37,097         33,115
Other ...........................         14,875          8,316          7,203
--------       --------       --------

$253,294       $211,422       $196,101
========       ========       ========

December 31,
2000          2001           2002
----          ----           ----
(In thousands)
Total assets:

CompX Waterloo/CompX Regout ........      $131,707      $128,502      $111,271
CompX Security Products ............        90,321        92,503        87,795
Corporate and eliminations .........         1,644         1,871         1,026
--------      --------      --------

$223,672      $222,876      $200,092
========      ========      ========

Goodwill:
CompX Waterloo/CompX Regout ........      $ 17,055      $ 15,139      $ 16,986
CompX Security Products ............        25,158        23,743        23,743
--------      --------      --------

$ 42,213      $ 38,882      $ 40,729
========      ========      ========

Net property and equipment:
United States ......................      $ 47,555      $ 48,863      $ 46,251
Canada .............................        24,410        23,420        23,046
The Netherlands ....................        17,259         7,323        10,034
Taiwan .............................         5,735         5,430         5,848
--------      --------      --------

$ 94,959      $ 85,036      $ 85,179
========      ========      ========

Note 4 - Inventories:

December 31,
2001           2002
----           ----
(In thousands)

Raw materials ............................            $ 9,677            $ 6,573
Work in process ..........................             12,619             12,602
Finished products ........................              8,494              9,532
Supplies .................................                112                169
-------            -------

$30,902            $28,876

Note 5 - Goodwill:

Changes in the carrying  amount of goodwill  during the past three years is
presented  in  the  table  below.   Goodwill  was  generated   principally  from
acquisitions of certain business units during 1998, 1999 and 2000.

CompX
CompX Waterloo/ Security
CompX Regout  Products     Total
(In millions)

Balance at December 31, 1999 ...............      $19.9       $21.8       $41.7

Goodwill acquired/adjusted during
the year ..................................        (.6)        4.7         4.1
Changes in currency
exchange rates ............................       (1.2)       --          (1.2)
Periodic amortization ......................       (1.0)       (1.4)       (2.4)
-----       -----       -----

Balance at December 31, 2000 ...............       17.1        25.1        42.2

Changes in currency
exchange rates ............................       (1.0)       --          (1.0)
Periodic amortization ......................        (.9)       (1.4)       (2.3)
-----       -----       -----

Balance at December 31, 2001 ...............       15.2        23.7        38.9

Changes in currency
exchange rates ............................        1.8        --           1.8
-----       -----       -----

Balance at December 31, 2002 ...............      $17.0       $23.7       $40.7
=====       =====       =====

Upon  adoption  of SFAS No. 142  effective  January 1, 2002,  the  goodwill
related to the CompX Security Products and CompX Waterloo/CompX  Regout segments
was assigned to reporting  units (as defined in SFAS No. 142)  consisting of the
reportable operating segments to which the goodwill relates.

Note 6 - Accounts payable and accrued liabilities:

December 31,
2001           2002
----           ----
(In thousands)

Accounts payable ...............................         $ 9,459         $ 9,106
Accrued liabilities:
Employee benefits ............................           6,619           7,065
Insurance ....................................             573             478
Royalties ....................................             223             246
Restructuring ................................           2,278             540
Deferred gain on sale/leaseback ..............             479             805
Other ........................................           3,537           3,078
-------         -------

$23,168         $21,318

In 2001,  the  Company  recognized  a charge of $2.7  million  related to a
consolidation  and   rationalization  of  CompX's  European   operations.   This
restructuring  effort included headcount reductions of about 35 employees at the
Company's Maastricht,  the Netherlands facility,  substantially all of which had
been  implemented  by December  31,  2001.  As adjusted  for changes in currency
exchange  rates,  through  December 31, 2002  approximately  $2.4 million of the
total charge has been paid. The remaining $.6 million was paid in January 2003.

Note 7 - Indebtedness:

December 31,
2001           2002
----           ----
(In thousands)

Revolving bank credit facility .................         $49,000         $31,000
Other ..........................................              56               6
-------         -------
49,056          31,006
Less current portion ...........................              56               6
-------         -------

$49,000         $31,000

At December 31, 2002,  the Company had a $100 million  unsecured  revolving
bank credit facility expiring in February 2003 which bore interest at LIBOR plus
a margin  resulting in an interest rate of 2.5% at December 31, 2002. In January
2003, this credit  facility was replaced with a secured $47.5 million  revolving
bank credit  facility which bears interest at the Company's  option,  of either;
(i) the bank's prime rate plus the  applicable  basis point margin or (ii) LIBOR
plus the applicable basis point margin (resulting in a weighted-average interest
rate of 3.3% at loan  inception).  Borrowings  are  available  for the Company's
general corporate purposes,  including  acquisitions,  and are due no later than
January 2006. The credit facility is  collateralized by substantially all of the
Company's United States assets and by at least 65% of the ownership interests in
the Company's  first-tier  foreign  subsidiaries.  The facility contains certain
covenants and restrictions customary in lending transactions of this type, which
are similar to the covenants in the former  agreement  and,  among other things,
restricts the ability of CompX and its  subsidiaries to incur debt, incur liens,
pay dividends,  merge or consolidate  with, or transfer all or substantially all
of their assets to another  entity.  The facility also requires  maintenance  of
specified levels of net worth (as defined).  In the event of a change of control
of CompX,  as  defined,  the  lenders  would  have the right to  accelerate  the
maturity of the facility.  CompX would also be required under certain conditions
to use the net proceeds from the sale of assets  outside the ordinary  course of
business  to  reduce  outstanding  borrowings  under  the  facility,  and such a
transaction  would  also  result  in a  permanent  reduction  of the size of the
facility.

Amounts  outstanding  at  December  31, 2002 under the prior  facility  are
classified as a noncurrent liability because those borrowings were refinanced on
a long-term basis under the terms of the new facility. At December 31, 2002, the
equivalent of $16.5 million  would have been  available for borrowing  under the
terms of the new facility. Approximately $6.3 million was available for dividend
under the terms of the prior credit  facility at December  31,  2002.  Under the
terms of the new  facility,  the Company is  permitted to pay  dividends  and/or
repurchase  its common  stock in an amount  equal to the sum of (i) the  current
dividend  rate of $.125 per share in any  calendar  quarter,  not to exceed $8.0
million in any calendar  year,  plus (ii) $6.0 million plus 50% of aggregate net
income over the term of the credit facility.

Aggregate  maturities  of long-term  debt at December 31, 2002 are shown in
the table below.

Years ending December 31,                                           Amount
(In thousands)

2003                                                             $     6
2006                                                              31,000
-------
$31,006

Note 8 - Employee benefit plans:

Defined   contribution   plans.  The  Company   maintains  various  defined
contribution  plans  with  Company  contributions  based  on  matching  or other
formulas.  Defined  contribution plan expense  approximated  $1,608,000 in 2000,
$1,720,000 in 2001 and $1,748,000 in 2002.

Defined benefit plans.  Through  January 1, 2001, the Company  maintained a
defined benefit pension plan covering  substantially all full-time  employees of
Thomas  Regout  B.V.  Variances  from  actuarially  assumed  rates  resulted  in
increases or decreases in accumulated pension  obligations,  pension expense and
funding requirements. As of January 1, 2001, the Company ceased providing future
benefits under the plan, thus reducing certain pension benefit  obligations.  In
connection with this curtailment,  the Company  recognized a curtailment gain of
approximately  $116,000 in 2001.  As of December 31, 2001,  certain  obligations
related to the terminated  plan had not yet been fully settled and are reflected
in accrued pension costs. In 2002, such obligations were settled and the Company
reported a settlement gain of $677,000. See Note 12.

The rates  used in  determining  the  actuarial  present  value of  benefit
obligations are presented below:

December 31,
2001

Discount rate                                                       6.25%
Rate of increase in future compensation levels                 Not applicable
Long-term rate of return on assets                                  4.0 %

The funded status of the  Company's  defined  benefit  pension  plans,  the
components of net periodic  defined  benefit  pension cost and the rates used in
determining the actuarial present value of benefit  obligations are presented in
the tables below.

Years ended December 31,
2001            2002   
----            ----   
(In thousands)

Change in projected benefit obligations ("PBO"):

PBO at beginning of the year ...................        $ 2,301         $ 1,279
Actuarial gains ................................           (766)           --
Curtailment gain ...............................           (116)           --
Settlement .....................................           --            (1,259)
Change in foreign exchange rates ...............           (140)            (20)
-------         -------

PBO at end of the year .....................        $ 1,279         $  --
=======         =======

Years ended December 31,
2001          2002
----          ----
(In thousands)

Change in fair value of plan assets:
Fair value of plan assets at beginning of

the year ..........................................     $ 1,055      $ 1,019
Actual return on plan assets .......................          61         --
Employer contributions .............................        --            240
Settlement .........................................        --         (1,259)
Change in foreign exchange rates ...................         (97)        --
-------      -------

Fair value of plan assets at end of year .......     $ 1,019      $  --
=======      =======

Funded status at year end:
Plan assets less than PBO ..........................     $   260      $  --   
Unrecognized gains .................................         640         --
-------      -------

$   900      $  --
=======      =======

Amounts recognized in the balance sheet -
accrued pension costs:
Current ..........................................     $   240      $  --
Noncurrent .......................................         660         --
-------      -------

$   900      $  --
=======      =======

Years ended December 31,
------------------------------
2000       2001         2002
----       ----         ----
(In thousands)

Net periodic pension cost (benefit):

Service cost benefits ......................       $ 131        $--         $-
Interest cost on PBO .......................          80         --         --
Expected return on plan assets .............         (35)        (61)       --
Unrecognized gains .........................        --            19        --
-----        ----        ----
$ 176        $(42)       $-
=====        ====        ====

Note 9 - Income taxes:

The  components of pre-tax  income and the provision for income taxes,  the
difference  between the  provision for income taxes and the amount that would be
expected  using  the  U.S.  federal  statutory  income  tax  rate of 35% and the
comprehensive provision for income taxes are presented below.

Years ended December 31,
2000           2001             2002
----           ----             ----
(In thousands)

Components of pre-tax income (loss):

United States ...............         $ 7,746         $   (998)         $(1,913)
Non-U.S .....................          27,697           13,880            5,322
-------         --------          -------

$35,443         $ 12,882          $ 3,409
=======         ========          =======

Years ended December 31,
2000       2001        2002
----       ----        ----
(In thousands)

Provision for income taxes:
Currently payable (refundable):

U.S. federal and state ...................   $  2,385    $  (844)   $ 1,128
Foreign ..................................      8,695      5,247      2,394
--------    -------    -------

11,080      4,403      3,522
--------    -------    -------
Deferred income taxes (benefit):
U.S ......................................      1,034      1,941       (114)
Foreign ..................................      1,276       (586)      (637)
--------    -------    -------

2,310      1,355       (751)
--------    -------    -------

$ 13,390    $ 5,758    $ 2,771
========    =======    =======

Expected tax expense, at the U.S. federal
statutory income tax rate of 35% ............   $ 12,405    $ 4,509    $ 1,193
Non-U.S. tax rates ...........................        (90)      (353)      (290)
Incremental U.S. tax on earnings of
foreign subsidiary ..........................        198        330      1,099
No tax benefit for goodwill amortization .....        610        693       --
State income taxes and other, net ............        267        579        769
--------    -------    -------

$ 13,390    $ 5,758    $ 2,771
========    =======    =======

Comprehensive provision for income tax
benefit allocable to:
Pre-tax income .............................   $ 13,390    $ 5,758    $ 2,771
Other comprehensive income -
currency translation ......................       (323)      (207)       (66)
--------    -------    -------

$ 13,067    $ 5,551    $ 2,705
========    =======    =======

The  components  of net deferred tax assets  (liabilities)  are  summarized
below.

December 31,
2001         2002
----         ----
(In thousands)

Tax effect of temporary differences related to:

Inventories ............................................   $   630    $   575
Property and equipment .................................    (7,890)    (8,510)
Accrued liabilities and other deductible differences ...     2,987      2,087
Tax loss and credit carryforwards ......................     4,831      5,769
Other taxable differences ..............................    (3,346)    (2,815)
Valuation allowance ....................................      --         --
-------    -------

$(2,788)   $(2,894)
=======    =======

Net current deferred tax assets ..........................   $ 1,944    $ 1,983
Net current deferred tax liabilities .....................      (291)      (408)
Net noncurrent deferred tax liabilities ..................    (4,441)    (4,469)
-------    -------

$(2,788)   $(2,894)
=======    =======

At  December  31,  2002,   the  Company  has  net  operating  loss  ("NOL")
carryforwards,  which expire in 2007 through 2018, of approximately $8.4 million
for U.S.  federal  income tax  purposes.  The NOL  carryforwards  arose from the
acquisition  of Thomas Regout USA, Inc.  These losses may only be used to offset
future taxable income of the acquired subsidiary and are not available to offset
taxable income of other subsidiaries. Utilization of certain portions of the NOL
carryforward is limited to approximately $400,000 annually. The Company utilized
none of such NOL  carryforward  in 2000, 2001 or 2002. At December 31, 2002, the
Company  also has the  equivalent  of  approximately  $5.8  million  of tax loss
carryforwards  in the Netherlands  with no expiration date. The Company believes
that it is  more-likely-than-not  that all such NOLs will be  utilized to reduce
future income tax  liabilities.  Consequently,  no valuation  allowance has been
recorded to offset the deferred tax asset related to these NOLs.

Note 10 - Stockholders' equity:

Shares of common stock
--------------------------------------------------
Class A                   Class B
------------------------------------   -----------
Issued and
Issued       Treasury    Outstanding   outstanding

Balance at December 31, 1999   6,147,380         --       6,147,380    10,000,000

Issued .....................      57,300         --          57,300          --   
Reacquired .................        --       (844,300)     (844,300)         --
---------   ----------    ----------    ----------

Balance at December 31, 2000   6,204,680     (844,300)    5,360,380    10,000,000

Issued .....................       2,500         --           2,500          --
Reacquired .................        --       (259,600)     (259,600)         --
---------   ----------    ----------    ----------

Balance at December 31, 2001   6,207,180   (1,103,900)    5,103,280    10,000,000

Issued .....................      12,500         --          12,500          --
---------   ----------    ----------    ----------

Balance at December 31, 2002   6,219,680   (1,103,900)    5,115,780    10,000,000
=========   ==========    ==========    ==========

Class A and Class B common  stock.  The shares of Class A Common  Stock and
Class B Common Stock are  identical in all respects,  except for certain  voting
rights  and  certain  conversion  rights in respect of the shares of the Class B
Common  Stock.  Holders  of Class A Common  Stock are  entitled  to one vote per
share.  Valcor,  which  holds  all of the  outstanding  shares of Class B Common
Stock,  is entitled to one vote per share in all matters  except for election of
directors,  for which Valcor is entitled to ten votes per share.  Holders of all
classes of common stock entitled to vote will vote together as a single class on
all matters presented to the stockholders for their vote or approval,  except as
otherwise  required by  applicable  law.  Each share of Class A Common Stock and
Class B Common Stock have an equal and ratable right to receive  dividends to be
paid from the Company's  assets when, and if declared by the Board of Directors.
In the event of the dissolution,  liquidation or winding up of the Company,  the
holders of Class A Common  Stock and Class B Common  Stock will be  entitled  to
share  equally  and  ratably  in the assets  available  for  distribution  after
payments are made to the Company's creditors and to the holders of any preferred
stock of the Company that may be outstanding at the time.  Shares of the Class A
Common Stock have no  conversion  rights.  Under certain  conditions,  shares of
Class B Common Stock will convert,  on a  share-for-share  basis, into shares of
Class A Common Stock.

Reacquired  common stock.  The Company's  Board of Directors has authorized
the  Company to purchase up to  approximately  1.5 million  shares of its common
stock in open market or privately-negotiated  transactions at unspecified prices
and over an unspecified period of time. As of December 31, 2002, the Company had
purchased  approximately  1,104,000  shares for an  aggregate  of $11.3  million
pursuant to such authorization.

Incentive  compensation  plan. The CompX  International Inc. 1997 Long-Term
Incentive  Plan  provides  for the  award  or  grant  of  stock  options,  stock
appreciation rights,  performance grants and other awards to employees and other
individuals providing services to the Company. Up to 1.5 million shares of Class
A Common Stock may be issued  pursuant to the plan.  Generally,  employee  stock
options  are granted at prices not less than the market  price of the  Company's
stock on the date of grant,  vest over five  years and expire ten years from the
date of grant.

The following  table sets forth changes in  outstanding  options during the
past three years.

Amount
Exercise             payable
price per              upon
Shares         share              exercise
(In thousands, except
per share amounts)

Outstanding at December 31, 1999                658      $15.88 -$20.00            $12,784

Granted                                         292       12.50 - 19.63              5,360
Exercised                                       (57)      17.94 - 20.00             (1,073)
Canceled                                       (171)      15.88 - 20.00             (3,290)
----      --------------            -------

Outstanding at December 31, 2000                722       12.50 - 20.00             13,781

Granted                                         330       10.00 - 13.00              4,181
Canceled                                       (196)      13.00 - 20.00             (3,691)
----      --------------            -------

Outstanding at December 31, 2001                856       10.00 - 20.00             14,271

Granted                                          25       11.00 - 14.30                328
Exercised                                       (10)          12.06                   (120)
Canceled                                       (107)      11.59 - 20.00             (1,484)
----      --------------            -------

Outstanding at December 31, 2002                764      $10.00 -$20.00            $12,995
====     ==============            =======

Outstanding options at December 31, 2002 represent  approximately 5% of the
Company's  total  outstanding  shares of common  shares at that date and  expire
through 2012 with a weighted-average  remaining term of 7 years. At December 31,
2002,  options to purchase  378,000 of the Company's  shares were exercisable at
prices ranging from $10.00 to $20.00 per share,  or an aggregate  amount payable
upon exercise of $7.0 million, with a weighted-average  exercise price of $16.74
per share. These exercisable  options are exercisable  through 2012. All of such
exercisable options are exercisable at prices higher than the Company's December
31,  2002 market  price of $8.37 per share.  At December  31,  2002,  options to
purchase  149,000  shares are  scheduled  to become  exercisable  in 2003 and an
aggregate of 496,000 shares were available for future grants.

Other. The pro forma  information  included in Note 1, required by SFAS No.
123, Accounting for Stock-Based  Compensation,  is based on an estimation of the
fair value of CompX options issued subsequent to January 1, 1998 (the first time
the Company granted stock options).  The  weighted-average  fair values of CompX
options  granted  during  2000,  2001 and 2002 were  $7.86,  $4.53 and $5.05 per
share,  respectively.  The fair values of such options were calculated using the
Black-Scholes  stock option valuation model with the following  weighted-average
assumptions:  stock price volatility of 37% to 45%, risk-free rates of return of
5.1% to 6.9%,  dividend  yields of nil to 5.0% and an expected term of 10 years.
The  Black-Scholes  model was not  developed for use in valuing  employee  stock
options,  but was  developed  for use in  estimating  the fair  value of  traded
options  that  have no  vesting  restrictions  and are  fully  transferable.  In
addition, it requires the use of subjective  assumptions including  expectations
of future dividends and stock price  volatility.  Such assumptions are only used
for making the  required  fair value  estimate and should not be  considered  as
indicators  of future  dividend  policy  or stock  price  appreciation.  Because
changes  in the  subjective  assumptions  can  materially  affect the fair value
estimate and because employee stock options have  characteristics  significantly
different  from  those of traded  options,  the use of the  Black-Scholes  stock
option valuation model may not provide a reliable  estimate of the fair value of
employee stock options.

For  purposes of this pro forma  disclosure,  the  estimated  fair value of
options is amortized to expense over the options' vesting period. Such pro forma
impact  on  net  income  and  basic  and  dilutive  earnings  per  share  is not
necessarily indicative of future effects on net income or earnings per share.

Note 11 - Gain on sale of plant facility:

In 2001,  the Company  recorded a $2.2 million  pre-tax gain related to the
sale/leaseback of its manufacturing facility in the Netherlands. Pursuant to the
sale/leaseback,  CompX sold the manufacturing facility with a net carrying value
of $8.2 million for $10.0 million cash consideration in December 2001, and CompX
simultaneously  entered into a leaseback of the facility with a nominal  monthly
rental for approximately 30 months. CompX has the option to extend the leaseback
period  for up to an  additional  two years with  monthly  rentals of $40,000 to
$100,000.  CompX may  terminate the  leaseback at any time without  penalty.  In
addition to the cash received up front,  CompX  included an estimate of the fair
market value of the monthly rental during the nominal-rental leaseback period as
part of the sale  proceeds.  A portion of the gain from the sale of the facility
after transaction  costs, equal to the present value of the monthly rentals over
the expected  leaseback  period  (including the fair market value of the monthly
rental during the nominal-rental  leaseback  period),  was deferred and is being
amortized into income over the expected  leaseback period.  CompX is recognizing
rental expense over the leaseback period,  including amortization of the prepaid
rent  consisting of the estimated fair market value of the monthly rental during
the nominal-rental  leaseback period.  Pursuant to the agreement,  CompX is also
obligated to acquire  approximately 10 acres from the municipality of Maastricht
for approximately $2.1 million within the next two years.

Note 12 - Other general corporate income (expense), net:

Years ended December 31,
2000        2001        2002
----        ----        ----
(In thousands)

Net foreign currency transaction gain (loss) ..   $  (117)   $   636    $  (865)
Interest income ...............................       569        574        381
Defined benefit plan curtailment gain .........      --          116       --
Defined benefit plan settlement gain ..........      --         --          677
Gain (loss) on disposal of property and
equipment ....................................        27       (126)    (1,193)
Other income (expense), net ...................       (36)      (191)        90
-------    -------    -------

$   443    $ 1,009    $  (910)
=======    =======    =======

In 2002, losses on disposal of property and equipment  included  $1,047,000
related to the retooling of the Company's precision slide manufacturing facility
in Byron  Center,  Michigan.  The  remainder  of the charges for  retooling  are
recorded  as cost of goods sold and relate to the cost of moving and  installing
machinery and equipment as well as the disposal of obsolete inventory.

Note 13 -      Related party transactions:

The Company may be deemed to be controlled  by Harold C. Simmons.  See Note
1.  Corporations  that may be deemed to be controlled by or affiliated  with Mr.
Simmons sometimes engage in (a) intercorporate  transactions such as guarantees,
management and expense  sharing  arrangements,  shared fee  arrangements,  joint
ventures,  partnerships,  loans, options, advances of funds on open account, and
sales,  leases and  exchanges  of assets,  including  securities  issued by both
related  and  unrelated  parties  and  (b)  common  investment  and  acquisition
strategies,   business   combinations,    reorganizations,    recapitalizations,
securities  repurchases,  and  purchases and sales (and other  acquisitions  and
dispositions)  of  subsidiaries,   divisions  or  other  business  units,  which
transactions  have involved both related and unrelated parties and have included
transactions  which  resulted  in the  acquisition  by one  related  party  of a
publicly-held  minority equity  interest in another  related party.  The Company
continuously considers,  reviews and evaluates, and understands that Contran and
related entities consider, review and evaluate such transactions. Depending upon
the business,  tax and other  objectives then relevant,  it is possible that the
Company might be a party to one or more such transactions in the future.

It is the policy of the  Company  to engage in  transactions  with  related
parties  on terms,  in the  opinion of the  Company,  no less  favorable  to the
Company than could be obtained from unrelated parties.

Under the terms of various  Intercorporate Service Agreements ("ISAs") with
Contran,  Valhi and NL Industries,  Inc., a majority-owned  subsidiary of Valhi,
Contran, Valhi and NL have performed certain management, tax planning, financial
and  administrative  services for the Company on a fee basis over the past three
years.  Such fees are based upon estimates of time devoted to the affairs of the
Company by individual  Contran,  Valhi or NL employees and the  compensation  of
such persons.  Because of the large number of companies affiliated with Contran,
the Company believes it benefits from cost savings and economies of scale gained
by not having certain management, financial and administrative staffs duplicated
at each  entity,  thus  allowing  certain  individuals  to provide  services  to
multiple  companies  but  only be  compensated  by one  entity.  These  ISAs are
reviewed and approved by the applicable  independent  directors of the companies
that are parties to the agreement.  In addition,  certain  occupancy and related
office services are provided based upon square footage  occupied.  Fees pursuant
to  these  agreements  aggregated  $689,000  in  2000,  $1,245,000  in 2001  and
$1,744,000 in 2002.

Certain of the Company's  insurance  coverages that were reinsured in 2000,
2001 and 2002 were arranged for and brokered by EWI Re, Inc.  Parties related to
Contran own all of the  outstanding  common stock of EWI.  Through  December 31,
2000,  a  son-in-law  of  Harold  C.  Simmons  managed  the  operations  of EWI.
Subsequent to December 31, 2000, and pursuant to an agreement  that, as amended,
may be terminated with 90 days' written notice by either party,  such son-in-law
provides advisory services to EWI as requested by EWI, for which such son-in-law
is paid  $11,875  per month and  receives  certain  other  benefits  under EWI's
benefit  plans.  Such  son-in-law is also currently the Chairman of the Board of
EWI. The Company  generally does not compensate EWI directly for insurance,  but
understands that,  consistent with insurance industry  practice,  EWI receives a
commission for its services from the insurance underwriters.

Through  January  2002,  an entity  controlled by one of Harold C. Simmons'
daughters owned a majority of EWI, and Contran owned all or substantially all of
the remainder of EWI. In January 2002, NL purchased EWI from its previous owners
for an aggregate cash purchase price of approximately $9 million, and EWI became
a  wholly-owned  subsidiary  of NL.  The  purchase  was  approved  by a  special
committee  of NL's  board  of  directors  consisting  of two of its  independent
directors,  and the purchase price was negotiated by the special committee based
upon its  consideration  of relevant  factors,  including but not limited to due
diligence performed by independent consultants and an appraisal of EWI conducted
by an independent third party selected by the special committee.

The Company and other entities related to Contran participate in a combined
risk management program. Net charges from related parties related to this buying
program,  principally charges for insuring property and other risks,  aggregated
$563,000  in 2000,  $889,000  in 2001 and  $1,094,000  in 2002.  These  fees and
charges are principally pass-through in nature.

Note 14 -      Commitments and contingencies:

Legal proceedings.  The Company is involved,  from time to time, in various
contractual,  product liability,  patent (or intellectual property),  employment
and other claims and disputes incidental to its business.  The Company currently
believes that the disposition of all claims and disputes, individually or in the
aggregate,  if any,  should not have a material  adverse effect on the Company's
consolidated financial condition, results of operations or liquidity.

Environmental matters and litigation. The Company's operations are governed
by various federal, state, local and foreign environmental laws and regulations.
The Company's policy is to comply with environmental laws and regulations at all
of its plants and to continually strive to improve environmental  performance in
association with applicable industry initiatives.  The Company believes that its
operations  are  in  substantial  compliance  with  applicable  requirements  of
environmental   laws.  From  time  to  time,  the  Company  may  be  subject  to
environmental regulatory enforcement under various statutes, resolution of which
typically involves the establishment of compliance programs.

Income  taxes.  The Company is  undergoing  examinations  of certain of its
income tax returns,  and tax authorities  have or may propose tax  deficiencies.
The Company  believes that it has  adequately  provided  accruals for additional
income taxes and related interest expense which may ultimately  result from such
examinations and believes that the ultimate disposition of all such examinations
should  not  have  a  material  adverse  effect  on its  consolidated  financial
position, results of operations or liquidity.

Concentration of credit risk. The Company's  products are sold primarily in
North America and Europe to original  equipment  manufacturers.  The ten largest
customers  accounted for  approximately  35%, 36% and 30% of sales in 2000, 2001
and 2002, respectively,  with no single customer accounting for more than 10% of
sales.

Other.  Royalty  expense  was  $1,073,000  in  2000,  $672,000  in 2001 and
$708,000 in 2002. Royalties relate principally to certain products  manufactured
in Canada and sold in the United States under the terms of a third-party  patent
license agreement.

Rent expense, principally for equipment, was $1,072,000 in 2000, $1,861,000
in 2001 and  $1,009,000 in 2002. At December 31, 2002,  future  minimum  rentals
under  noncancellable  operating  leases  are  approximately  $662,000  in 2003,
$399,000 in 2004, $292,000 in 2005, $190,000 in 2006 and $22,000 in 2007.

Firm purchase  commitments for capital  projects in process at December 31,
2002 approximated $1.4 million.

Note 15 - Accounting principles newly adopted in 2002:

Goodwill.  The Company adopted SFAS No. 142,  Goodwill and Other Intangible
Assets,  effective January 1, 2002. Under SFAS No. 142,  goodwill,  is no longer
amortized on a periodic  basis.  Goodwill is subject to an impairment test to be
performed at least on an annual basis, and such impairment reviews may result in
future periodic write-downs charged to earnings. Under the transition provisions
of SFAS No.  142,  all  goodwill  existing  as of June  30,  2001  ceased  to be
periodically  amortized  as of January 1, 2002,  and all  goodwill  arising in a
purchase  business  combination  completed  on or  after  July 1,  2001  was not
periodically amortized from the date of such combination.

As  discussed  in Note 5, the  Company  has  assigned  its  goodwill to two
reporting units (as that term is defined in SFAS No. 142). Goodwill was assigned
to  two  reporting  units  attributable  to  the  two  operating  segments,  one
consisting of CompX's security  products  operations and the other consisting of
CompX's ergonomic  products and slide products  operations.  Under SFAS No. 142,
such goodwill  will be deemed to not be impaired if the estimated  fair value of
the applicable  reporting unit exceeds the respective net carrying value of such
reporting  unit,  including  the  allocated  goodwill.  If the fair value of the
reporting  unit is less than carrying  value,  then a goodwill  impairment  loss
would be recognized  equal to the excess,  if any, of the net carrying  value of
the  reporting  unit  goodwill  over its  implied  fair  value  (up to a maximum
impairment equal to the carrying value of the goodwill).  The implied fair value
of  reporting  unit  goodwill  would be the  amount  equal to the  excess of the
estimated  fair  value of the  reporting  unit  over the  amount  that  would be
allocated  to the  tangible  and  intangible  net assets of the  reporting  unit
(including  unrecognized  intangible  assets) as if such reporting unit had been
acquired in a purchase  business  combination  accounted for in accordance  with
GAAP as of the date of the impairment testing.

In determining the estimated fair value of the reporting units, the Company
uses  appropriate  valuation  techniques,  such as  discounted  cash  flows,  to
estimate the fair value of the two reporting  units.  The Company  completed its
initial,  transitional  goodwill  impairment  analysis  under SFAS No. 142 as of
January 1, 2002,  and no  goodwill  impairments  were deemed to exist as of such
date. Starting in 2002, in accordance with the requirements of SFAS No. 142, the
Company  reviews the goodwill of its two reporting  units for impairment  during
the third quarter of each year. Goodwill will also be reviewed for impairment at
other times  during each year when events or changes in  circumstances  indicate
that an  impairment  might be present.  No goodwill  impairments  were deemed to
exist as a result of the Company's  impairment review completed during the third
quarter of 2002.

The following  table presents what the Company's  consolidated  net income,
and related per share amounts,  would have been in 2000 and 2001 if the goodwill
amortization  included in the Company's reported consolidated net income had not
been recognized.

Years ended December 31,
2000        2001       2002
----        ----       ----
(In millions,
except per share data)

Net income, as reported .......................      $ 22.1      $  7.1     $   .6
Goodwill amortization .........................         2.4         2.3       --
Incremental income taxes ......................        --          --         --
------      ------     ------
Adjusted net income .........................      $ 24.5      $  9.4     $   .6
======      ======     ======

Basic and diluted net income per share,
as reported ..................................      $ 1.37      $  .47     $  .04

Goodwill amortization .........................         .14         .15       --
Incremental income taxes ......................        --          --         --
------      ------     ------
Adjusted basic and diluted net
income per share ...........................      $ 1.51      $  .62     $  .04
======      ======     ======

Impairment  of  long-lived  assets.  The  Company  adopted  SFAS  No.  144,
effective  January 1, 2002. SFAS No. 144 retains the  fundamental  provisions of
existing  GAAP with respect to the  recognition  and  measurement  of long-lived
asset impairment  contained in SFAS No. 121. However,  SFAS No. 144 provides new
guidance intended to address certain  implementation issues associated with SFAS
No. 121,  including  expanded guidance with respect to appropriate cash flows to
be used to determine  whether  recognition of any long-lived asset impairment is
required, and if required how to measure the amount of the impairment.  SFAS No.
144 also  requires  that net assets to be disposed of by sale are to be reported
at the lower of carrying  value or fair value less cost to sell, and expands the
reporting of discontinued  operations to include any component of an entity with
operations and cash flows that can be clearly distinguished from the rest of the
entity.  Adoption  of SFAS No.  144 did not  have a  significant  impact  on the
Company.

Note 16 - Accounting principles not yet adopted:

Asset  retirement  obligations.  The  Company  will  adopt  SFAS  No.  143,
Accounting for Asset Retirement Obligations,  on January 1, 2003. Under SFAS No.
143, the fair value of a liability for an asset  retirement  obligation  covered
under the scope of SFAS No. 143 would be  recognized  in the period in which the
liability is incurred, with an offsetting increase in the carrying amount of the
related  long-lived  asset.  Over time,  the liability  would be accreted to its
present value,  and the  capitalized  cost would be depreciated  over the useful
life of the related asset.  Upon  settlement of the  liability,  an entity would
either  settle the  obligation  for its recorded  amount or incur a gain or loss
upon  settlement.  The Company  does not have any asset  retirement  obligations
covered by the scope of SFAS No. 143, and  therefore  adoption of such  standard
did not have a significant effect on the Company as of January 1, 2003.

The Company will adopt SFAS No. 146,  Accounting for Costs  Associated with
Exit or Disposal Activities,  on January 1, 2003 for exit or disposal activities
initiated on or after the date of adoption. Under SFAS No. 146, costs associated
with exit activities,  as defined, that are covered by the scope of SFAS No. 146
will be recognized and measured initially at fair value, generally in the period
in which the  liability is incurred.  Costs covered by the scope of SFAS No. 146
include  termination  benefits  provided  to  employees,  costs  to  consolidate
facilities or relocate employees, and costs to terminate contracts (other than a
capital  lease).  Under  existing  GAAP,  a  liability  for such an exit cost is
recognized at the date an exit plan is adopted, which may or may not be the date
at which the liability has been incurred.

Guarantees.  The  Company  has no  guarantees  covered  by  the  disclosure
requirements of FIN No. 45, Guarantor's  Accounting and Disclosure  Requirements
for Guarantees,  Including Indirect  Guarantees of Indebtedness of Others, as of
December  31,  2002.  As required by the  transition  provisions  of FIN No. 45,
beginning in 2003 the Company will adopt the recognition and initial measurement
provisions  of this FIN on a  prospective  basis  for any  guarantees  issued or
modified after December 31, 2002.

Note 17 - Quarterly results of operations (unaudited):

Quarter ended
----------------------
March 31  June 30  Sept. 30   Dec. 31
----     ----     ----       ----
(In millions, except per share amounts)

2001:

Net sales ...............................   $ 59.6   $ 53.4   $ 51.5   $ 47.0
Operating income (loss) .................      6.8      5.3      4.1     (3.8)
Net income (loss) .......................      3.7      2.7      2.1     (1.4)

Basic and diluted earnings (loss)
per share ..............................   $  .24   $  .18   $  .14   $ (.09)

2002:
Net sales ...............................   $ 48.6   $ 51.0   $ 48.8   $ 47.7
Operating income (loss) .................      2.5      2.7      1.3      (.3)
Net income (loss) .......................      1.3       .8       .2     (1.8)

Basic and diluted earnings (loss)
per share ..............................   $  .09   $  .05   $  .02   $ (.12)

The sum of the  quarterly  per share  amounts  may not equal the annual per
share amounts due to relative changes in the  weighted-average  number of shares
used in the per share computations.

During the fourth  quarter of 2002,  the  Company  recorded  the  following
significant adjustments:

o    A $1.6 million  pre-tax  charge  related to a re-tooling  of the  Company's
precision  slide  manufacturing  facility in Byron Center,  Michigan.  $1.0
million of such  charge was  non-cash in nature and is  reflected  in other
general corporate income (expenses),  net, with the remainder  reflected in
cost of goods sold.

o    A $1.9 million pre-tax charge,  recorded as cost of goods sold,  related to
various  changes in  estimates  with  respect to obsolete  and  slow-moving
inventory,   inventory   overhead   absorption   rates  and  other   items.
Approximately   $1.3   million  of  this   charge   related  to  the  CompX
Waterloo/CompX  Regout segment,  with the remaining $.6 million relating to
the CompX Security Products segment.

The aggregate effect of these fourth quarter 2002 adjustments was a pre-tax
charge of $3.5 million ($2.3 million,  or $.15 per diluted share,  net of income
taxes).

During the fourth  quarter of 2001,  the  Company  recorded  the  following
significant adjustments:

o    A $2.7 million  pre-tax  restructuring  charge related to CompX's  European
operations. See Note 6.
o    A $2.2 million  pre-tax  gain on the  sale/leaseback  of its  manufacturing
facility located in Maastricht, the Netherlands. See Note 11.
o    A $3.0 million  pre-tax charge related to changes in estimates with respect
to  reserves  for  obsolete  and  slow-moving  inventory  and other  items.
Approximately  $2.1  million of this charge  related to the CompX  Security
Products  segment  with the  remaining  $.9  million  relating to the CompX
Waterloo/CompX Regout segment.

The aggregate effect of these fourth quarter 2001 adjustments was a pre-tax
charge of $3.5 million ($2.0 million,  or $.13 per diluted share,  net of income
taxes).

REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

To the Stockholders and Board of Directors of CompX International Inc.:

Our audits of the  consolidated  financial  statements  referred  to in our
report dated February 13, 2003, appearing on page F-2 of this 2002 Annual Report
on Form  10-K of  CompX  International  Inc.,  also  included  an  audit  of the
financial  statement schedule listed in the index on page F-1 of this Form 10-K.
In our opinion,  this  financial  statement  schedule  presents  fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Dallas, Texas
February 13, 2003

COMPX INTERNATIONAL INC. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(In thousands)

Additions
Balance at   charged to                              Balance
beginning    costs and       Net     Currency        at end
Description       of year      expenses   deductions  translation     of year
------------------   ---------    ----------  ----------  -----------     -------

Year ended December 31, 2000:

Allowance for doubtful accounts .......   $  725        $  (123)     $   (79)     $ (36)        $  487
======        =======      =======      =====         ======

Amortization of goodwill ..............   $2,730        $ 2,390      $  --        $ (55)       $5,065
======        =======      =======      =====         ======

Amortization of other intangible assets   $  426        $   361      $  --        $  (2)        $  785
======        =======      =======      =====         ======

Year ended December 31, 2001:

Allowance for doubtful accounts .......   $  487        $   636      $  (296)     $  14         $  841
======        =======      =======      =====         ======

Amortization of goodwill ..............   $5,065        $ 2,304      $  --        $ (75)        $7,294
======        =======      =======      =====         ======

Amortization of other intangible assets   $  785        $   229      $  --        $  (4)        $1,010
======        =======      =======      =====         ======

Year ended December 31, 2002:

Allowance for doubtful accounts .......   $  841        $   458      $  (541)     $  54         $  812
======        =======      =======      =====         ======

Amortization of goodwill ..............   $7,294        $  --        $  --        $ 332         $7,626
======        =======      =======      =====         ======

Amortization of other intangible assets   $1,010        $   240      $  --        $  (1)        $1,249
======        =======      =======      =====         ======

AMENDED AND RESTATED
BYLAWS

OF

COMPX INTERNATIONAL INC.
a Delaware Corporation
(Amended and Restated as of August 31, 2002)

TABLE OF CONTENTS

Page
TABLE OF CONTENTS........................................................i
ARTICLE I.  REGISTERED AGENT AND OFFICES.................................1
Section 1.1.  Registered Agent and Office.......................1
Section 1.2.  Other Offices.....................................1
ARTICLE II.  MEETINGS OF STOCKHOLDERS....................................1
Section 2.1.  Place and Time of Meetings........................1
Section 2.2.  Business to be Transacted at Meetings.............1
Section 2.3.  Notice............................................2
Section 2.4.  List of Stockholders..............................2
Section 2.5.  Quorum............................................2
Section 2.6.  Proxies...........................................2
Section 2.7.  Order of Business.................................2
Section 2.8.  Appointment of Inspectors of Election.............3
Section 2.9.  Action Without a Meeting..........................3
Section 2.10.  Fixing A Record Date.............................3
Section 2.11.  Telephone Meetings...............................4
Section 2.12.  Minutes..........................................4
ARTICLE III.  DIRECTORS..................................................4
Section 3.1.  Number, Qualifications and Term of Office.........4
Section 3.2.  Nomination of Director Candidates.................4
Section 3.3.  Removals..........................................5
Section 3.4.  Vacancies.........................................5
Section 3.5.  Annual Meeting....................................5
Section 3.6.  Other Meetings and Notice.........................5
Section 3.7.  Quorum............................................5
Section 3.8.  Committees........................................5
Section 3.9.  Committee Rules...................................6
Section 3.10.  Telephonic Meetings..............................6
Section 3.11.  Presumption of Assent............................6
Section 3.12.  Action Without a Meeting.........................6
Section 3.13.  Compensation.....................................6
Section 3.14.  Minutes..........................................6
ARTICLE IV.  OFFICERS....................................................6
Section 4.1.  Number............................................6
Section 4.2.  Election and Term of Office.......................6
Section 4.3.  The Chairman of the Board.........................6
Section 4.4.  The Vice Chairman of the Board....................7
Section 4.5.  The President.....................................7
Section 4.6.  The Chief Executive Officer.......................7
Section 4.7.  The Chief Financial Officer.......................7
Section 4.8.  Vice Presidents...................................7
Section 4.9.  The Secretary and Assistant Secretary.............7
Section 4.10.  The Treasurer and Assistant Treasurer............7
Section 4.11.  Vacancies........................................8
Section 4.12.  Other Officers, Assistant Officers and Agents....8
Section 4.13.  Normal Duties and Responsibilities of Officers...8
ARTICLE V.  INDEMNIFICATION AND INSURANCE OF DIRECTORS,
OFFICERS AND OTHERS................................................8
Section 5.1.  Indemnification...................................8
Section 5.2.  Advancement of Expenses...........................8
Section 5.3.  Expenses of Contested Indemnification Claims......8
Section 5.4.  Indemnification Not Exclusive.....................8
Section 5.5.  Survival of Indemnification and Advancement 
of Expenses.......................................9
Section 5.6.  Employees, Agents and Others......................9
Section 5.7.  Contract Right....................................9
Section 5.8.  Insurance.........................................9
Section 5.9.  Certain References Under Article V................9
ARTICLE VI.  CERTIFICATES OF STOCK.......................................9
Section 6.1.  Form..............................................9
Section 6.2.  Transfers.........................................9
Section 6.3.  Lost or Destroyed Certificates....................9
Section 6.4.  Registered Stockholders...........................10
ARTICLE VII.  CERTAIN BUSINESS COMBINATIONS..............................10
ARTICLE VIII. GENERAL PROVISIONS.........................................10
Section 8.1.  Dividends.........................................10
Section 8.2.  Moneys............................................10
ARTICLE IX.  NOTICES.....................................................10
Section 9.1.  General...........................................10
Section 9.2.  Waivers...........................................10
Section 9.3.  Attendance as Waiver..............................11
Section 9.4.  Omission of Notice to Stockholders................11

AMENDED AND RESTATED
BYLAWS

OF

COMPX INTERNATIONAL INC.
a Delaware Corporation
(Amended and Restated as of August 31, 2002)

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

ARTICLE I.
REGISTERED AGENT AND OFFICES

Section 1.1.  Registered Agent and Office.  The registered agent and office
of the  corporation  shall be such  person or entity  and  located at such place
within the state of  Delaware  as the board of  directors  may from time to time
determine.

Section 1.2. Other Offices.  The  corporation may also have offices at such
other  places,   both  within  and  without  the  state  of  Delaware,   as  the
corporation's board of directors may from time to time determine or the business
of the corporation may require.

ARTICLE II.
MEETINGS OF STOCKHOLDERS

Section 2.1. Place and Time of Meetings.  All meetings of the  stockholders
shall be held on such date and at such time and  place,  within or  without  the
state of Delaware,  as shall be  determined,  from time to time, by the board of
directors or by means of remote  communication.  The place at which a meeting of
stockholders shall be held shall be stated in the notice and call of the meeting
or a duly executed  waiver of notice thereof.  Special  meetings of stockholders
may be  called  by the  chairman  of the  board,  the  president,  the  board of
directors or the holders of at least 10 percent of the shares of the corporation
that would be entitled to vote at such a meeting. If a special meeting is called
by any person or persons other than the board of directors, the request shall be
in writing,  specifying  the time of such meeting and the general  nature of the
business proposed to be transacted, and shall be delivered personally or sent by
registered mail or by facsimile  transmission to the chairman of the board,  the
president or the secretary of the corporation.  No business may be transacted at
such special meeting other than specified in such notice.  Nothing  contained in
this Section shall be construed as limiting,  fixing, or affecting the time when
a meeting  of  stockholders  called by action of the board of  directors  may be
held.

Section 2.2.  Business to be  Transacted  at Meetings.  At a meeting of the
stockholders,  only such business shall be conducted as shall have been properly
brought before the meeting.  To be properly  brought  before a special  meeting,
business  must be  specified  in the notice of the  meeting  (or any  supplement
thereto). To be properly brought before an annual meeting,  business must be (a)
specified in the notice of the meeting (or any  supplement  thereto) given by or
at the  direction of the board of  directors,  (b)  otherwise  properly  brought
before  the  meeting by or at the  direction  of the board of  directors  or (c)
otherwise properly brought before the meeting by a stockholder.  For business to
be properly  brought before an annual meeting by a stockholder,  the stockholder
must, in addition to any requirements imposed by federal securities law or other
applicable laws, have given timely notice thereof in writing to the secretary of
the corporation. To be timely for an annual meeting, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of the
corporation,  no later  than (i) if the  corporation  mailed  notice of the last
annual  meeting or publicly  disclosed  the date of such  meeting and the annual
meeting  for the current  year has not  changed  more than thirty days from such
date (as if in the current year), forty-five days before the earlier of the date
(as if in the  current  year)  of such  mailing  or  public  disclosure  or (ii)
otherwise ninety days prior to the annual meeting. A stockholder's notice to the
secretary  with regard to an annual  meeting shall set forth as to each order of
business that the  stockholder  proposes to bring before the meeting (a) a brief
description  of such business  desired to be brought  before the meeting and the
reasons for  conducting  such business at the annual  meeting,  (b) the name and
address, as they appear on the corporation's books, of the stockholder proposing
such business,  (c) the class and number of shares of the  corporation  that are
beneficially  owned by the  stockholder  and (d) any  material  interest  of the
stockholder  in such  business.  The chairman of the meeting may refuse to bring
before a meeting  any  business  not  properly  brought  before  the  meeting in
compliance with this section.

Section 2.3.  Notice.  Notice of the time and place of an annual meeting of
stockholders  and notice of the time, place and purpose or purposes of a special
meeting  of the  stockholders  shall  be given by  remote  communications  or by
mailing  written or  printed  notice of the same not less than 10, nor more than
60, days prior to the meeting,  with postage  prepaid,  to each  stockholder  of
record of the corporation entitled to vote at such meeting, and addressed to the
stockholder's  last known post office address or to the address appearing on the
corporate books of the corporation.

Section 2.4.  List of  Stockholders.  The officer or agent having charge of
the stock transfer books of the corporation  shall make, at least 10 days before
every meeting of the stockholders,  a complete list of the stockholders entitled
to vote at such meeting arranged in alphabetical  order,  specifying the address
of and the number of shares  registered  in the name of each  stockholder.  Such
list  shall  be open to the  examination  of any  stockholder,  for any  purpose
germane to the  meeting for a period of at least 10 days prior to the meeting on
a reasonably  accessible  electronic network or, during ordinary business hours,
at the principal  place of business of the  corporation.  The list shall also be
produced  and kept at the time and place of the  meeting  during  the whole time
thereof and may be inspected  by any  stockholder  who is present.  The original
stock transfer  books shall be the only evidence as to who are the  stockholders
entitled to examine such list or transfer book or to vote at any such meeting of
stockholders.

Section 2.5. Quorum.  The holders of a majority of the votes entitled to be
cast at any meeting of stockholders,  counted as a single class if there be more
than one class of stock  entitled to vote at such meeting,  present in person or
represented  by  proxy,  shall  constitute  a  quorum  at  all  meetings  of the
stockholders  except as otherwise  provided by statute or by the  certificate of
incorporation.  Once a quorum is present at a meeting of the  stockholders,  the
stockholders  represented  in person or by proxy at the meeting may conduct such
business as may be properly  brought  before the meeting  until it is adjourned,
and the subsequent withdrawal from the meeting by any stockholder or the refusal
of any  stockholder  represented  in person or by proxy to vote shall not affect
the  presence  of a quorum  at the  meeting.  If a quorum  is not  present,  the
chairman  of the  meeting  or the  holders  of the  shares  present in person or
represented  by proxy at the meeting,  and entitled to vote thereat,  shall have
the power, by the affirmative  vote of the holders of a majority of such shares,
to adjourn the meeting to another time and/or place.  Unless the  adjournment is
for more than thirty  days or unless a new record date is set for the  adjourned
meeting,  no notice of the  adjourned  meeting need be given to any  stockholder
provided that the time and place of the adjourned  meeting were announced at the
meeting  at which the  adjournment  was  taken.  At the  adjourned  meeting  the
corporation  may transact any business  that might have been  transacted  at the
original meeting.

Section 2.6.  Proxies.  Each  stockholder  entitled to vote at a meeting of
stockholders  or to express  consent or dissent to  corporate  action in writing
without a meeting  may  authorize  another  person or  persons to act for him by
proxy. A telegram, telex, cablegram or reliable electronic transmission executed
or duly authorized by the stockholder, or a photographic, photostatic, facsimile
or  reliable  reproduction  of a  writing  executed  or duly  authorized  by the
stockholder  shall be treated as an  execution  in writing for  purposes of this
section.  No  proxy  shall  be  valid  after  three  years  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.

Section  2.7.  Order of  Business.  The  order  of  business  at each  such
stockholders  meeting shall be as determined by the chairman of the meeting. One
of the  following  persons,  in the order in which they are  listed  (and in the
absence of the first,  the next,  and so on),  shall  serve as  chairman  of the
meeting: the chairman of the board, vice chairman of the board, president,  vice
presidents (in the order of their seniority if more than one) and secretary. The
chairman of the meeting  shall have the right and  authority to  prescribe  such
rules,  regulations  and  procedures  and to do all such acts and  things as are
necessary or desirable for the proper conduct of the meeting, including, without
limitation,  the  establishment  of procedures for the  maintenance of order and
safety, limitations on the time allotted to questions or comments on the affairs
of the  corporation,  restrictions  on  entry  to such  meeting  after  the time
prescribed  for the  commencement  thereof,  and the  opening and closing of the
voting polls.

Section 2.8. Appointment of Inspectors of Election.  The board of directors
shall appoint one or more inspectors of election  ("inspectors")  to act at such
meeting or any  adjournment  or  postponement  thereof and make a written report
thereof.  The board of directors  may designate one or more persons as alternate
inspectors  to  replace  any  inspector  who fails to act.  If no  inspector  or
alternate  is so  appointed  or if no inspector or alternate is able to act, the
chairman of the board,  the vice  chairman of the board or the  president  shall
appoint one or more inspectors to act at such meeting.  Each  inspector,  before
entering  upon the  discharge of his or her duties,  shall take and sign an oath
faithfully  to execute  the duties of  inspector  with strict  impartiality  and
according to the best of his or her ability.  The  inspectors  may be directors,
officers or employees of the corporation.

Section 2.9. Action Without a Meeting.

(a) Any action to be taken at a meeting of the  stockholders,  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,  shall be signed by the
holder or holders of shares  having  not less than the  minimum  number of votes
that would be necessary to take such action at a meeting at which the holders of
all shares entitled to vote on the action were present and voted.

(b)  Every  written  consent  of the  stockholders  shall  bear the date of
signature of each stockholder who signs the consent. No written consent shall be
effective to take the action that is the subject of the consent  unless,  within
60  days  after  the  date  of  the  earliest  dated  consent  delivered  to the
corporation  as provided  below,  a consent or consents  signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take the action that is the subject of the consent are delivered to
the  corporation by delivery to its registered  office,  its principal  place of
business,  or an officer or agent of the corporation having custody of the books
in which proceedings of meetings of the stockholders are recorded. Such delivery
shall  be made by  hand or by  certified  or  registered  mail,  return  receipt
requested,  and in the case of delivery to the corporation's  principal place of
business, shall be addressed to the president of the corporation.

(c) A telegram, cablegram or electronic transmission by a stockholder, or a
photographic, photostatic, facsimile or other reliable reproduction of a writing
signed or  transmitted  by a  stockholder,  shall be  regarded  as signed by the
stockholder for the purposes of this section.

(d) Prompt  notice of the taking of any  action by  stockholders  without a
meeting  by less  than  unanimous  written  consent  shall  be  given  to  those
stockholders who did not consent in writing to the action and who, if the action
had been taken at a meeting,  would have been  entitled to notice of the meeting
if the record  date for such  meeting  had been the date that  written  consents
signed by a  sufficient  number of holders to take the action were  delivered to
the corporation.

Section  2.10.  Fixing A Record  Date.  In order that the  corporation  may
determine  the  stockholders  entitled to notice of or to vote at any meeting of
stockholders  or any  adjournment  thereof,  or entitled  to express  consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other  distribution  or allotment of any rights,  or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful  action,  the board of directors may fix, in
advance,  a record  date,  which shall not be more than 60 nor less than 10 days
before  the date of such  meeting,  nor  more  than 60 days  prior to any  other
action.

If the board of directors does not so fix a record date:

(a) The record date for determining  stockholders  entitled to notice of or
to vote at a meeting of  stockholders  shall be at the close of  business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next  preceding the day on which the meeting is
held.

(b) The  record  date for  determining  stockholders  entitled  to  express
consent to corporate  action in writing without a meeting,  when no prior action
by the  board of  directors  is  necessary,  shall be the day on which the first
written consent is expressed.

(c) The record  date for  determining  stockholders  for any other  purpose
shall be at the close of  business  on the day on which  the board of  directors
adopts the resolution relating thereto.

A determination  of stockholders of record entitled to notice of or to vote
at a meeting of  stockholders  shall apply to any  adjournment  of the  meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.

Section 2.11. Telephone Meetings.  Stockholders may participate in and hold
a meeting by means of conference telephone or similar communication equipment by
means of which all  persons  participating  in the  meeting can hear each other.
Participation  in such a  meeting  shall  constitute  presence  in person at the
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.

Section 2.12.  Minutes.  The  stockholders  shall cause regular  minutes of
their  proceedings  to be kept,  and such minutes  shall be placed in the minute
book of the corporation.

ARTICLE III.
DIRECTORS

Section 3.1. Number,  Qualifications  and Term of Office.  The business and
affairs of the corporation shall be managed by a board of directors.  Subject to
the  preferential  voting rights of the holders of preferred  stock or any other
class of capital stock of the  corporation or any series of any of the foregoing
that is then  outstanding,  the board of directors  shall consist of one or more
members.  The number of members  of the board of  directors  shall be fixed from
time to time (i) by the board of directors pursuant to a resolution adopted by a
majority of the entire board of directors or (ii) by the  stockholders  pursuant
to a  resolution  adopted  by a  majority  of  the  holders  of  shares  of  the
corporation entitled to vote for the election of directors;  provided,  however,
that if the stockholders  have acted to fix the number of directors,  any action
by the board of directors to fix another  number shall only become  effective on
or after the first annual meeting of stockholders  that follows such stockholder
action.   Each  director   shall  be  elected  at  the  annual  meeting  of  the
stockholders, except as provided in Section 3.4, and each director elected shall
hold office until the next annual meeting of  stockholders  and until his or her
successor  is duly  elected and  qualified  or until his or her  earlier  death,
resignation or removal. No reduction of the authorized number of directors shall
have the effect of removing any director before that director's term expires.

Section 3.2. Nomination of Director Candidates. Subject to the preferential
voting  rights of the holders of  preferred  stock or any other class of capital
stock of the  corporation  or any  series of any of the  foregoing  that is then
outstanding,  nominations for the election of directors may be made by the board
of  directors  or by any  stockholder  entitled  to  vote  for the  election  of
directors.  Any stockholder entitled to vote for the election of a director at a
meeting may nominate  persons for whom such stockholder may vote only if written
notice of such stockholder's  intent to make such nomination is given, either by
personal delivery or by United States mail, postage prepaid, to the secretary of
the  corporation not later than (a) with respect to an election to be held at an
annual meeting of stockholders, (i) if the corporation mailed notice of the last
annual  meeting or publicly  disclosed  the date of such  meeting and the annual
meeting  for the current  year has not  changed  more than thirty days from such
date (as if in the current year), forty-five days before the earlier of the date
(as if in the  current  year)  of such  mailing  or  public  disclosure  or (ii)
otherwise  ninety days prior to the annual  meeting  and (b) with  respect to an
election to be held at a special  meeting of  stockholders  for the  election of
directors,  the close of business on the tenth day  following  the date on which
notice of such  meeting is first given to  stockholders.  Each such notice shall
set forth:  (a) the name and address of the  stockholder who intends to make the
nomination  and of  the  person  or  persons  intended  to be  nominated;  (b) a
representation  that the  stockholder  is a  holder  of  record  of stock of the
corporation  entitled to vote at such meeting and intends to appear in person or
by proxy at the  meeting to  nominate  the person or  persons  specified  in the
notice;  (c) a description of all  arrangements  or  understandings  between the
stockholder and each nominee and any other person or persons (naming such person
or persons)  pursuant to which the nomination or  nominations  are to be made by
the stockholder;  (d) such other information  regarding each nominee proposed by
such stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange  Commission had
such requirements  been applicable and each nominee been nominated,  or intended
to be nominated, by the board of directors;  and (e) the consent of each nominee
to serve as a director of the  corporation  if so elected.  The  chairman of the
meeting  may  refuse to  acknowledge  the  nomination  of any person not made in
compliance with this section.

Section 3.3.  Removals.  Subject to the  preferential  voting rights of the
holders  of  preferred  stock  or  any  other  class  of  capital  stock  of the
corporation or any series of any of the foregoing that is then outstanding, each
director  may be removed  from office at any time by the  stockholders,  with or
without cause, by the affirmative  vote of the holders of at least a majority of
the voting  power of all of the shares of the  corporation  entitled to vote for
the election of such director.

Section 3.4.  Vacancies.  Subject to the preferential  voting rights of the
holders  of  preferred  stock  or  any  other  class  of  capital  stock  of the
corporation or any series of any of the foregoing that is then  outstanding  and
except as otherwise  required by law, all  vacancies in the board of  directors,
whether caused by resignation,  death or otherwise,  may be filled by a majority
of the remaining directors though less than a quorum;  provided,  however,  that
any vacancy  resulting  from an increase in the number of directors  that is the
result of a resolution  adopted by the  stockholders  of the  corporation may be
filled by the stockholders of the corporation in accordance with the laws of the
state of  Delaware,  any  other  applicable  provisions  of the  certificate  of
incorporation  and these  bylaws.  Each director so chosen shall hold office for
the unexpired term of his or her  predecessor  and until his or her successor is
elected and qualified or until his or her earlier death, resignation or removal.

Section 3.5. Annual  Meeting.  The annual meeting of the board of directors
may be held without notice  immediately after the annual meeting of stockholders
at the location of the stockholders'  meeting. If not held immediately after the
annual meeting of the stockholders, the annual meeting of the board of directors
shall be held as soon thereafter as may be convenient.

Section 3.6.  Other Meetings and Notice.  Regular  meetings of the board of
directors  may be held  without  notice at such time and at such  place as shall
from time to time be determined by the board of directors.  Special  meetings of
the board of directors may be called by or at the request of the chairman of the
board,  the vice  chairman of the board or the  president and shall be called by
the chairman of the board on the written request of a majority of directors,  in
each case on at least twenty-four hours notice to each director.

Section 3.7.  Quorum.  A majority of the total number of directors shall be
necessary  at all  meetings  to  constitute  a  quorum  for the  transaction  of
business.  If a quorum  shall  not be  present  at any  meeting  of the board of
directors,  the directors  present  thereat may adjourn the meeting from time to
time,  without  notice other than  announcement  at the meeting,  until a quorum
shall be present.  At such adjourned meeting at which a quorum shall be present,
any business may be transacted that might have been transacted at the meeting as
originally notified and called.

Section 3.8. Committees. Standing or temporary committees consisting of one
or more directors of the  corporation may be appointed by the board of directors
from time to time,  and the board of directors may from time to time invest such
committees with such powers as it may see fit, subject to limitations imposed by
statute and such  conditions as may be prescribed by the board of directors.  An
executive  committee may be appointed by resolution  passed by a majority of the
entire board of directors and if appointed it shall have all the powers provided
by  statute,  except  as  specially  limited  by the  board  of  directors.  All
committees so appointed shall keep regular minutes of the  transactions of their
meetings  and shall cause them to be recorded in books kept for that  purpose in
the  office  of the  corporation,  and  shall  report  the same to the  board of
directors at its next meeting.  The board of directors may designate one or more
directors as alternate  members of any committee,  who may replace any absent or
disqualified  member at any meeting of the  committee.  The board shall have the
power at any time to change the  membership  of, to  increase  or  decrease  the
membership  of, to fill all  vacancies in and to discharge  any committee of the
board, or any member thereof, either with or without cause.

Section 3.9.  Committee Rules. Each committee of the board of directors may
fix its own rules of  procedure  and shall hold its meetings as provided by such
rules,  except as may  otherwise be provided by the  resolution  of the board of
directors designating such committee,  but in all cases the presence of at least
a majority of the members of such  committee  shall be necessary to constitute a
quorum.

Section 3.10. Telephonic Meetings. Members of the board of directors or any
committee designated by the board of directors may participate in any meeting of
the board of directors or such  committee by means of a conference  telephone or
other  communications  equipment by means of which all persons  participating in
the  meeting  can  hear  each  other.  Participation  in  such a  meeting  shall
constitute presence in person at such meeting.

Section 3.11.  Presumption of Assent.  A director of the corporation who is
present at a meeting of the board of directors or any committee thereof at which
action on any corporate  matter is taken shall be deemed to have assented to the
action  taken  unless his or her dissent  shall be entered in the minutes of the
meeting or unless he or she shall file his or her written dissent to such action
with the person  acting as the secretary of the meeting  before the  adjournment
thereof or shall forward such dissent by registered mail to the secretary of the
corporation  immediately  after the  adjournment  of the meeting.  Such right to
dissent shall not apply to a director who voted in favor of such action.

Section 3.12. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the board of  directors or of any  committee  thereof
may be taken  without a meeting if all members of the board of directors or such
committee,  as the case may be, consent  thereto in writing,  and the writing or
writings are filed with the minutes of  proceedings of the board of directors or
committee.  Action  taken  pursuant  to such  written  consent  of the  board of
directors or of any committee thereof shall have the same force and effect as if
taken by the  board of  directors  or the  committee,  as the case may be,  at a
meeting thereof.

Section 3.13. Compensation. The board of directors shall have the authority
to fix the compensation of directors.

Section  3.14.  Minutes.  The  board of  directors  shall  cause to be kept
regular  minutes of its  proceedings,  and such  minutes  shall be placed in the
minute book of the corporation.

ARTICLE IV.
OFFICERS

Section 4.1. Number. The officers of the corporation shall be a chairman of
the  board,  a vice  chairman  of the  board,  a  president,  one or  more  vice
presidents,  a secretary,  a treasurer,  and such other  officers and  assistant
officers as the board of directors may, by resolution,  appoint. Any two or more
offices  may be held  by the  same  person.  In its  discretion,  the  board  of
directors  may  choose  not to fill any  office  for any  period  as it may deem
advisable, except the offices of president and secretary.

Section 4.2.  Election and Term of Office.  The officers of the corporation
shall be elected annually by the board of directors at the annual meeting of the
board of  directors.  If the  election  of  officers  shall  not be held at such
meeting,  such election  shall be held as soon  thereafter as may be convenient.
Each  officer  shall hold office  until the next annual  meeting of the board of
directors  and until his or her successor is duly elected and qualified or until
his or her earlier death, resignation or removal as hereinafter provided.

Section  4.3.  The  Chairman of the Board.  The chairman of the board shall
preside at all meetings of the stockholders and directors.  He or she shall have
general and active management of the business of the corporation, shall see that
all orders and  resolutions  of the board of  directors  are carried into effect
and,  in  connection  therewith,  shall be  authorized  to  delegate to the vice
chairman of the board,  president  and other  officers such of his or her powers
and duties as chairman of the board at such time and in such manner as he or she
may deem to be  advisable.  The  chairman  of the board  shall be an ex  officio
member of all standing committees and he or she shall have such other powers and
duties as may from time to time be assigned by the board of directors.

Section 4.4. The Vice Chairman of the Board. The vice chairman of the board
shall assist the chairman of the board in the  management of the business of the
corporation,  and, in the absence or  disability  of the  chairman of the board,
shall preside at all meetings of the stockholders and the board of directors and
exercise  the other  powers and perform the other  duties of the chairman of the
board or designate the executive  officers of the corporation by whom such other
powers shall be exercised and other duties  performed.  The vice chairman of the
board shall be an ex officio  member of all  standing  committees  and he or she
shall have such other  powers and duties as may from time to time be assigned by
the board of  directors  or by the  chairman  of the board.  In  addition to the
foregoing,  the vice chairman of the board shall have such other powers,  duties
and authority as may be set forth elsewhere in these bylaws.

Section 4.5. The President.  The president shall be the corporation's chief
operating  officer unless  otherwise  determined by the board of directors.  The
president  shall  assist  the  chairman  of the board in the  management  of the
business of the  corporation,  and, in the absence or disability of the chairman
of the board and the vice  chairman of the board,  shall preside at all meetings
of the stockholders and the board of directors and exercise the other powers and
perform the other duties of the chairman of the board or designate the executive
officers of the  corporation  by whom such other powers  shall be exercised  and
other  duties  performed.  The  president  shall be an ex officio  member of all
standing committees and he or she shall have such other powers and duties as may
from time to time be assigned by the board of  directors  or by the  chairman of
the board.  In addition to the  foregoing,  the president  shall have such other
powers,  duties, and authority as may be set forth elsewhere in these bylaws. If
the board of directors  does not elect a chairman or vice chairman of the board,
the president shall also have the duties and responsibilities,  and exercise all
functions,  of the  chairman  and the vice  chairman of the board as provided in
these bylaws.

Section  4.6.  The Chief  Executive  Officer.  The board of  directors  may
designate an  individual,  whether or not such  individual  is an officer of the
corporation,  to serve as the chief executive  officer of the  corporation.  The
chief executive officer shall have the duties and responsibilities, and exercise
all functions, as the board of directors may determine.

Section  4.7.  The Chief  Financial  Officer.  The board of  directors  may
designate an  individual,  whether or not such  individual  is an officer of the
corporation,  to serve as the chief financial  officer of the  corporation.  The
chief financial officer shall have the duties and responsibilities, and exercise
all functions, as the board of directors may determine.

Section 4.8. Vice  Presidents.  Each vice president  shall have such powers
and  discharge  such duties as may be assigned from time to time by the chairman
of the  board,  the vice  chairman  of the board or the  president.  During  the
absence or disability of the president, one such vice president, when designated
by the board of directors, shall exercise all the functions of the president.

Section 4.9. The Secretary and  Assistant  Secretary.  The secretary or the
chairman of the board shall issue notices for all meetings.  The secretary shall
keep minutes of all meetings of the board of directors,  the committees  thereof
and the stockholders,  shall have charge of the seal and the corporate books and
shall make such  reports and perform  such other  duties as are  incident to the
office,  and perform such other duties  designated  or properly  required by the
chairman  of the board,  the vice  chairman of the board or the  president.  The
secretary shall keep, or cause to be kept, at the principal  executive office of
the  corporation  or at  the  office  of the  corporation's  transfer  agent  or
registrar, a share register, or a duplicate share register, showing the names of
all stockholders  and their addresses,  the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.  The
assistant  secretary  shall be vested  with the same  powers  and  duties as the
secretary,  and any act may be done or duty performed by the assistant secretary
with like effect as though done or performed  by the  secretary.  The  assistant
secretary  shall have such other  powers and perform such other duties as may be
assigned  by the  chairman of the board,  the vice  chairman of the board or the
president.

Section 4.10. The Treasurer and Assistant  Treasurer.  The treasurer  shall
have the custody of all moneys and securities of the  corporation and shall keep
regular books of account.  He or she shall disburse the funds of the corporation
in payment of just demands against the corporation,  or as may be ordered by the
chairman of the board,  the vice chairman of the board,  the president or by the
board of directors,  taking proper  vouchers for such  disbursements,  and shall
render to the board of directors  from time to time as may be required of him or
her, an account of all transactions as treasurer and of the financial  condition
of the  corporation.  The  treasurer  shall  perform all duties  incident to the
office,  and perform such other duties  designated  or properly  required by the
chairman  of the board,  the vice  chairman of the board or the  president.  The
assistant  treasurer  shall be vested  with the same  powers  and  duties as the
treasurer, and any act may be done, or duty performed by the assistant treasurer
with like effect as though done or performed  by the  treasurer.  The  assistant
treasurer  shall have such other  powers and perform such other duties as may be
assigned  by the  chairman of the board,  the vice  chairman of the board or the
president.

Section 4.11. Vacancies. Vacancies in any office arising from any cause may
be filled by the directors for the unexpired portion of the term with a majority
vote of the directors then in office. In the case of the absence or inability to
act of any officer of the corporation and of any person herein authorized to act
in his or her place,  the board of directors  may from time to time delegate the
powers or duties of such  officer to any other  officer or any director or other
person whom it may select.

Section 4.12.  Other  Officers,  Assistant  Officers and Agents.  Officers,
assistant  officers,  and  agents,  if any,  other than those  whose  duties are
provided for in these  bylaws shall hold their  offices for such terms and shall
exercise  such powers and  perform  such  duties as the board of  directors  may
determine.

Section  4.13.  Normal  Duties and  Responsibilities  of  Officers.  Unless
otherwise  provided in these bylaws or the board of directors decides otherwise,
if an officer title is one commonly used for officers of a business  corporation
formed under the Delaware  General  Corporation  Law or any successor or similar
statute,  the  assignment of such title shall  constitute the delegation to such
officer of the  authority  and duties  that are  normally  associated  with that
office,  subject to any specific delegation of authority and duties made to such
officer by the board of directors.

ARTICLE V.
INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND OTHERS

Section 5.1.  Indemnification.  To the fullest extent permitted by Delaware
law, the  corporation  shall indemnify any and all officers and directors of the
corporation  from  and  against  all  expenses   (including   attorneys'  fees),
liabilities or other matters  arising out of their status as such or their acts,
omissions or services  rendered by such persons in such  capacities or otherwise
while serving at the request of the corporation.  Unless specifically  addressed
in a repeal or amendment of Delaware law with regard to a corporation's  ability
to  indemnify  its  officers and  directors,  no such repeal or amendment  shall
adversely affect any  indemnification  rights of any person existing at the time
of such repeal or amendment.

Section  5.2.  Advancement  of  Expenses.  Reasonable  expenses  (including
attorneys'  fees) incurred by a director or officer who was, is or is threatened
to be made a named  defendant or  respondent in a proceeding by reason of his or
her status as a director or officer of the  corporation or services  rendered by
such persons in such  capacities or otherwise at the request of the  corporation
or incurred by a director or officer for  prosecuting  a claim under Section 5.3
shall be paid by the  corporation  in advance of the final  disposition  of such
proceeding  upon receipt of a written  affirmation by the director or officer of
his or her good  faith  belief  that he or she has met the  standard  of conduct
necessary for  indemnification  and a written undertaking by or on behalf of the
director or officer to repay such amount if it shall  ultimately  be  determined
that  he or  she  is not  entitled  to be  indemnified  by  the  corporation  as
authorized in this Article.

Section 5.3.  Expenses of Contested  Indemnification  Claims. If a claimant
makes a claim on the  corporation  under Section 5.1 or 5.2 and the  corporation
does not pay such claim in full within  thirty days after it has  received  such
written claim,  the claimant may at any time  thereafter  bring suit against the
corporation  to recover  the unpaid  amount of the claim and, if  successful  in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim.

Section  5.4.   Indemnification  Not  Exclusive.  The  indemnification  and
advancement of expenses  provided by, or granted pursuant to, this Article shall
not  be  deemed   exclusive  of  any  other   rights  to  which  those   seeking
indemnification  or  advancement  of expenses  may be  entitled  under any other
bylaw,  agreement,  vote of stockholders  or directors or otherwise,  both as to
action in his or her  official  capacity  and as to action in  another  capacity
while holding such office.

Section 5.5. Survival of Indemnification  and Advancement of Expenses.  The
indemnification and advancement of expenses provided by, or granted pursuant to,
this  Article  shall  continue as to a person who has ceased to be a director or
officer  and  shall  inure  to  the   benefit  of  the  heirs,   executors   and
administrators of such person.

Section  5.6.  Employees,  Agents  and  Others.  To the  fullest  extent of
Delaware  law,  the  corporation  may  grant  rights  of   indemnification   and
advancement of expenses to any person who is not at the time a current  director
or officer of the corporation.

Section 5.7.  Contract  Right.  Each of the rights of  indemnification  and
advancement of expenses  provided by, or granted pursuant to, this Article shall
be a  contract  right and any  repeal or  amendment  of the  provisions  of this
Article shall not adversely  affect any such right of any person existing at the
time of such repeal or amendment  with respect to any act or omission  occurring
prior to the time of such repeal or amendment,  and further,  shall not apply to
any proceeding,  irrespective of when the proceeding is initiated,  arising from
the service of such person prior to such repeal or amendment.

Section  5.8.  Insurance.  To the  fullest  extent  of  Delaware  law,  the
corporation shall have power to purchase and maintain insurance on behalf of any
person,  including one who is or was a director,  officer,  employee or agent of
the  corporation  or is or was  serving at the request of the  corporation  as a
director, officer, employee or agent of another enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity,  or
arising out of his or her status as such,  whether or not the corporation  would
have the  power  to  indemnify  him or her  against  such  liability  under  the
provisions of this Article.

Section  5.9.  Certain  References  Under  Article V. For  purposes of this
Article,  references to "the corporation," "other enterprise,"  "proceeding" and
"serving at the request of the  corporation"  shall have the meanings given such
terms in Section 145 of the Delaware General Corporation Law or any successor or
similar statute.

ARTICLE VI.
CERTIFICATES OF STOCK

Section  6.1.  Form.  Certificates  of stock  shall be issued in  numerical
order,  and each  stockholder  shall be entitled to a certificate  signed by the
chairman of the board,  the president or any vice  president and the  secretary,
any assistant secretary, the treasurer or any assistant treasurer, certifying to
the number of shares owned by such stockholder. Where, however, such certificate
is signed by a transfer  agent or an assistant  transfer  agent or by a transfer
clerk acting on behalf of the corporation, and a registrar or by an agent acting
in the dual capacity of transfer agent and  registrar,  the signatures of any of
the  above-named  officers  may be facsimile  signatures.  In the event that any
officer  who has  signed,  or whose  facsimile  signature  has  been  used on, a
certificate  ceases to be an officer before the  certificate has been delivered,
such  certificate  may  nevertheless  be adopted and issued and delivered by the
corporation,  as though the officer who signed such certificate or certificates,
or whose facsimile signature or signatures shall have been used thereon, had not
ceased to be such officer of the corporation.

Section  6.2.  Transfers.  Transfers  of stock  shall be made only upon the
transfer books of the corporation or respective  transfer  agents  designated to
transfer the several  classes of stock,  and before a new certificate is issued,
the old certificate shall be surrendered for cancellation.

Section 6.3. Lost or Destroyed  Certificates.  The  corporation may issue a
new certificate of stock in place of any certificate  theretofore  issued by it,
alleged to have been  lost,  stolen or  destroyed,  and the  corporation  shall,
except as otherwise  determined by the board of  directors,  the chairman of the
board, the president,  any vice president or other authorized  officer,  require
the owner of the  lost,  stolen or  destroyed  certificate,  or his or her legal
representative,  to give the  corporation  a bond  sufficient  to  indemnify  it
against any claim that may be made  against it on account of the  alleged  loss,
theft  or  destruction  of any  such  certificate  or the  issuance  of such new
certificate.

Section 6.4. Registered Stockholders.  The corporation shall be entitled to
recognize the exclusive  right of a person  registered on its books as the owner
of shares to receive  dividends,  and to vote as such owner,  and to hold liable
for  calls  and  assessments  a person  registered  on its books as the owner of
shares,  and shall not be bound to recognize  any equitable or other claim to or
interest  in such  shares  on the part of  another  person,  whether  or not the
corporation  shall have  express or other  notice  thereof,  except as otherwise
provided by the laws of the state of Delaware.

ARTICLE VII.
CERTAIN BUSINESS COMBINATIONS

The provision of Section 203 of the Delaware General  Corporation Law shall
not apply to the corporation.

This Article VII shall be amended,  altered or repealed only as provided in
Section 203 of the Delaware General Corporation Law.

ARTICLE VIII.
GENERAL PROVISIONS

Section  8.1.   Dividends.   Dividends   upon  the  capital  stock  of  the
corporation,  subject  to  any  applicable  provisions  of  the  certificate  of
incorporation,  may be  declared  by the board of  directors  at any  regular or
special meeting,  pursuant to law. Dividends may be paid in cash, in property or
in shares of the capital  stock,  subject to the  applicable  provisions  of the
certificate of incorporation.  Before payment of any dividend,  there may be set
aside out of any funds of the  corporation  available for dividends  such sum or
sums as the directors  from time to time, in their  absolute  discretion,  think
proper  as a  reserve  or  reserves  to meet  contingencies,  or for  equalizing
dividends,  or for repairing or maintaining any property of the corporation,  or
for such other purpose as the directors  shall think in the best interest of the
corporation,  and the  directors  may modify or abolish any such  reserve in the
manner in which it was created.

Section 8.2. Moneys. The chairman of the board, vice chairman of the board,
president  or  any  vice  president  is  authorized  for  and on  behalf  of the
corporation:  to establish,  maintain and to close depositary  accounts,  in the
corporation's  name,  for the deposit and withdrawal of  corporation  funds;  to
designate those individuals  authorized to withdraw funds or sign checks in said
depositary  accounts;  and to execute  customer  agreements with respect to such
depositary accounts,  including forms of corporate  resolutions,  certified with
respect to the  approval of the board of  directors as of the date such forms of
corporate  resolutions  are executed.  The secretary or assistant  secretary is,
authorized for and on behalf of the  corporation  without  further action of the
board of  directors  to certify as to the  approval of the board of directors of
forms of resolutions  regarding any of such depositary or trading accounts as of
the date the officer of the  corporation  executes the customer  agreement  with
respect to each such account.

ARTICLE IX.
NOTICES

Section  9.1.  General.  Whenever  the  provisions  of any statute or these
bylaws require notice to be given to any director, officer or stockholder,  such
notice may be given  personally or in writing by  facsimile,  by telegraph or by
depositing the same in the United States mail with postage prepaid  addressed to
each director, officer or stockholder at his or her address, as the same appears
in the books of the corporation,  and the time when the same shall be personally
given,  sent by  facsimile or telegraph or mailed shall be deemed to be the time
of the giving of such notice.

Section 9.2. Waivers.  Whenever any notice whatever is required to be given
under  provisions  of law or of the  certificate  of  incorporation  or of these
bylaws,  a waiver thereof in writing signed by the person or persons entitled to
said notice,  whether before or after the time stated  therein,  shall be deemed
equivalent to the giving of such notice.

Section  9.3.  Attendance  as Waiver.  Attendance  of a person at a meeting
shall  constitute  a waiver  of notice of such  meeting,  except  where a person
attends a meeting for the express  purpose of objecting at the  beginning of the
meeting to the  transaction of any business  because the meeting is not lawfully
called or convened.

Section 9.4. Omission of Notice to Stockholders.  Any notice required to be
given to any  stockholder  under any statutory  provision,  the  certificate  of
incorporation or these bylaws need not be given to the stockholder if:

(a) notice of two  consecutive  annual meetings and all notices of meetings
held or actions by written  consent taken during the period between those annual
meetings, if any, or

(b) all,  and at least  two,  payments  (if  sent by first  class  mail) of
distributions  or interest on securities  during a twelve month period have been
mailed to that  person,  addressed  at his or her  address as shown on the share
transfer records of the corporation,  and have been returned undeliverable.  Any
action or meeting  taken or held without  notice to such a person shall have the
same force and effect as if the  notice  had been duly  given.  If such a person
delivers  to the  corporation  a written  notice  setting  forth his or her then
current  address,  the requirement  that notice be given to that person shall be
reinstated.

ADOPTED BY THE BOARD OF DIRECTORS AS OF AUGUST 31, 2002

/s/A. Andrew R. Louis, Secretary
-----------------------------------
A. Andrew R. Louis, Secretary

EXECUTION COPY

CREDIT AGREEMENT

CREDIT  AGREEMENT,  dated as of the 22nd day of January,  2003 by and among
COMPX  INTERNATIONAL  INC., a corporation  organized  under the laws of Delaware
(the  "Borrower"),  the lenders who are or may become a party to this Agreement,
as Lenders (the "Lenders"),  and WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking   association,   as   Administrative   Agent   for  the   Lenders   (the
"Administrative Agent").

STATEMENT OF PURPOSE

The Borrower has requested,  and the Lenders have agreed, to extend certain
credit facilities to the Borrower on the terms and conditions of this Agreement.

NOW,  THEREFORE,  for good and  valuable  consideration,  the  receipt  and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1  Definitions.  The following  terms when used in this Agreement
shall have the meanings assigned to ----------- them below:

"Administrative  Agent" means  Wachovia in its  capacity as  Administrative
Agent hereunder, and any successor thereto appointed pursuant to Section 12.9.

"Administrative   Agent's  Correspondent"  means  Wachovia  Bank,  National
Association, London Branch, or any other financial institution designated by the
Administrative  Agent to act as its correspondent  hereunder with respect to the
distribution and payment of Alternative Currency Loans.

"Administrative  Agent's  Office"  means the  office of the  Administrative
Agent  specified in or determined in accordance  with the  provisions of Section
13.1(c).

"Affiliate" means, with respect to any Person, any other Person (other than
a Subsidiary of the Borrower)  which directly or indirectly  through one or more
intermediaries,  controls, or is controlled by, or is under common control with,
such first Person or any of its  Subsidiaries.  The term "control" means (a) the
power  to vote  ten  percent  (10%) or more of the  securities  or other  equity
interests of a Person  having  ordinary  voting  power,  or (b) the  possession,
directly or  indirectly,  of any other power to direct or cause the direction of
the management  and policies of a Person,  whether  through  ownership of voting
securities, by contract or otherwise.

"Aggregate   Commitment"   means  the  aggregate  amount  of  the  Lenders'
Commitments  hereunder,  as such amount may be  increased,  reduced or otherwise
modified at any time or from time to time pursuant to the terms  hereof.  On the
Closing Date, the Aggregate Commitment shall be Forty-Seven Million Five Hundred
Thousand Dollars ($47,500,000). At no time shall the Aggregate Commitment exceed
Fifty Million Dollars ($50,000,000).

"Agreement" means this Credit Agreement, as amended, restated, supplemented
or otherwise modified from time to time.

"Alternative  Currency"  means (i) the euro,  (ii) the Canadian  Dollar and
(iii)  with the  prior  written  consent  of the  Administrative  Agent  and the
Lenders,  any  other  lawful  currency  (other  than  Dollars)  which is  freely
transferable  and convertible  into Dollars in the United States currency market
and freely  available  to all of the  Lenders in the  London  interbank  deposit
market.

"Alternative  Currency  Amount"  means  with  respect  to each Loan made or
continued (or to be made or continued) in an Alternative Currency, the amount of
such Alternative Currency which is equivalent to the principal amount in Dollars
of such  Loan  at the  most  favorable  spot  exchange  rate  determined  by the
Administrative  Agent  to  be  available  to  it  at  approximately  11:00  a.m.
(Charlotte time) two (2) Business Days before such Loan is made or continued (or
to be made or  continued).  When used with respect to any other sum expressed in
Dollars, "Alternative Currency Amount" shall mean the amount of such Alternative
Currency  which is  equivalent to the amount so expressed in Dollars at the most
favorable  spot  exchange  rate  determined  by the  Administrative  Agent to be
available to it at the relevant time.

"Alternative  Currency  Commitment"  means the  lesser  of (i) Ten  Million
Dollars ($10,000,000) and (ii) the Aggregate  Commitment,  as such amount may be
reduced  or  modified  at any time or from  time to time  pursuant  to the terms
hereof.

"Alternative  Currency  Facility" means the alternative  currency  facility
established pursuant to Section 2.2.

"Alternative   Currency   Lender"  means  Wachovia,   in  its  capacity  as
alternative currency lender hereunder.

"Alternative  Currency Loan" means any revolving credit loan denominated in
an Alternative  Currency made by the Alternative Currency Lender to the Borrower
pursuant to Section 2.2, and all such Alternative Currency Loans collectively as
the context requires.

"Alternative Currency Note" means the Alternative Currency Note made by the
Borrower payable to the order of the Alternative Currency Lender,  substantially
in the form of Exhibit A-3 hereto,  evidencing the  Alternative  Currency Loans,
and any  amendments,  supplements  and  modifications  thereto,  any substitutes
therefor and any replacements,  restatements, renewals or extensions thereof, in
whole or in part.

"Applicable Law" means all applicable  provisions of  constitutions,  laws,
statutes,   ordinances,   rules,  treaties,   regulations,   permits,  licenses,
approvals,  interpretations and orders of courts or Governmental Authorities and
all orders and decrees of all courts and arbitrators.

"Applicable  Margin"  shall have the  meaning  assigned  thereto in Section
4.1(c);  provided,  that  with  respect  to  each  LIBOR  Rate  Loan  made in an
Alternative  Currency,  the  Applicable  Margin shall include the Mandatory Cost
Rate, as determined pursuant to the formula set forth on Schedule 1.1(b) hereto.

"Application"  means an  application,  in the form specified by the Issuing
Lender from time to time,  requesting  the  Issuing  Lender to issue a Letter of
Credit.

"Approved Fund" means any Person (other than a natural Person),  including,
without limitation,  any special purpose entity, that is (or will be) engaged in
making,  purchasing,  holding or  otherwise  investing in  commercial  loans and
similar  extensions of credit in the ordinary course of its business;  provided,
that with respect to any assignment of any  Commitment,  such Approved Fund must
be administered  by (a) a Lender,  (b) an Affiliate of a Lender or (c) an entity
or an Affiliate of an entity that administers or manages a Lender.

"Arbitration  Rules"  shall have the  meaning  assigned  thereto in Section
13.6(a).

"Assignment  and  Acceptance"  shall have the meaning  assigned  thereto in
Section 13.10.

"Available Commitment" means, as to any Lender at any time, an amount equal
to (a) such Lender's Commitment less (b) such Lender's Extensions of Credit.

"Base Rate"  means,  at any time,  the higher of (a) the Prime Rate and (b)
the  Federal  Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate.

"Base Rate Loan" means any Loan  bearing  interest at a rate based upon the
Base Rate as provided in Section 4.1(a).

"Benefited Lender" shall have the meaning assigned thereto in Section 4.6.

"Borrower" means CompX  International  Inc., a corporation  organized under
the laws of Delaware, in its capacity as borrower hereunder.

"Business Day" means (a) for all purposes other than as set forth in clause
(b) below, any day other than a Saturday, Sunday or legal holiday on which banks
in Charlotte, North Carolina and New York, New York, are open for the conduct of
their domestic or international commercial banking business, as applicable,  and
(b) with  respect to all notices and  determinations  in  connection  with,  and
payments of principal and interest on, any LIBOR Rate Loan,  any day (i) that is
a Business Day described in clause (a) and that is also a day for trading by and
between banks in deposits for the  applicable  Permitted  Currency in the London
interbank  market  and (ii) on which  banks  are open for the  conduct  of their
domestic   and   international   banking   business   in  the  place  where  the
Administrative  Agent or the  Administrative  Agent's  Correspondent  shall make
available Loans in such Permitted Currency.  Notwithstanding the foregoing, with
respect  to  any  amount  denominated  or to be  denominated  in the  euro,  any
reference to a "Business  Day" shall be construed as a reference to a day (other
than a Saturday or Sunday) on which banks are generally open for business in New
York,  New York and  prime  banks in London  generally  provide  quotations  for
deposits denominated in the euro.

"Calculation  Date"  shall  have the  meaning  assigned  thereto in Section
4.1(c).

"Canadian  Dollar" means, at any time of  determination,  the then official
currency of Canada.

"Capital  Expenditures"  means,  with  respect  to  the  Borrower  and  its
Subsidiaries  for any period,  the aggregate  amount of all  expenditures of the
Borrower and its Subsidiaries  during such period that, in conformity with GAAP,
are included in "additions to property, plant and equipment" or comparable items
reflected  in the  consolidated  financial  statements  of the  Borrower and its
Subsidiaries.

"Capital  Lease"  means any lease of any property by the Borrower or any of
its Subsidiaries, as lessee, that should, in accordance with GAAP, be classified
and  accounted  for as a capital  lease on a  Consolidated  balance sheet of the
Borrower and its Subsidiaries.

"Change in  Control"  shall have the  meaning  assigned  thereto in Section
11.1(h).

"Closing  Date" means the date of this Agreement or such later Business Day
upon which each condition  described in Section 5.2 shall be satisfied or waived
in all respects in a manner acceptable to the Administrative  Agent, in its sole
discretion.

"Code"  means  the  Internal  Revenue  Code  of  1986,  and the  rules  and
regulations thereunder, each as amended or modified from time to time.

"Collateral" means the collateral  security for the Obligations  pledged or
granted pursuant to the Security Documents.

"Collateral Agreement" means the collateral agreement of even date executed
by  the  Borrower  and  each  of  the  Subsidiary  Guarantors  in  favor  of the
Administrative  Agent, for the benefit of itself and the Lenders,  substantially
in the form of  Exhibit  I, as  amended,  restated,  supplemented  or  otherwise
modified from time to time.

"Commitment" means, as to any Lender, the obligation of such Lender to make
Loans  (including,  without  limitation,  to participate in Swingline  Loans and
Alternative Currency Loans) to the Borrower, and issue or participate in Letters
of Credit issued for the account of the Borrower,  in an aggregate  principal or
face amount at any time  outstanding not to exceed the amount set forth opposite
such  Lender's  name on Schedule  1.1(a)  hereto,  as the same may be reduced or
modified at any time or from time to time pursuant to the terms hereof.

"Commitment  Fee Rate" shall have the meaning  assigned  thereto in Section
4.3(a).

"Commitment  Percentage"  means, as to any Lender at any time, the ratio of
(a) the amount of the Commitment of such Lender to (b) the Aggregate  Commitment
of all of the Lenders.

"Consolidated"  means, when used with reference to financial  statements or
financial statement items of the Borrower and its Subsidiaries,  such statements
or items on a consolidated  basis in accordance  with  applicable  principles of
consolidation under GAAP.

"Consolidated  Net  Worth"  means,  with  respect to the  Borrower  and its
Subsidiaries,  on any date of  determination,  the  total  shareholders'  equity
(including capital stock, additional paid-in capital and retained earnings after
deducting the treasury stock) of the Borrower and its Subsidiaries  appearing on
a Consolidated  balance sheet of the Borrower and its  Subsidiaries  prepared in
accordance  with GAAP  (excluding  on a  cumulative  basis any  adjustments  for
foreign currency translation).

"Credit Facility" means,  collectively,  the Revolving Credit Facility, the
Swingline Facility, the Alternative Currency Facility and the L/C Facility.

"Current  Dividend  Level"  shall  have the  meaning  set forth in  Section
10.6(c).

"Debt" means, with respect to the Borrower and its Subsidiaries at any date
and without duplication,  the sum of the following calculated in accordance with
GAAP:  (a) all  liabilities,  obligations  and  indebtedness  for borrowed money
including but not limited to obligations evidenced by bonds,  debentures,  notes
or other similar  instruments of any such Person, (b) all obligations to pay the
deferred  purchase  price of property  or services of any such Person  (provided
that "Debt"  shall not include  trade  payables  and other  accrued  liabilities
arising in the  ordinary  course of business  which are either (i) not more than
ninety (90) days past due or (ii) if more than ninety (90) days past due,  being
contested in good faith by appropriate  proceedings diligently conducted and for
which  adequate  reserves have been provided in accordance  with GAAP),  (c) all
obligations of any such Person as lessee under Capital  Leases,  (d) all Debt of
any other  Person  secured  by a Lien on any asset of any such  Person,  (e) all
Guaranty  Obligations  of any such Person,  (f) all  obligations,  contingent or
otherwise,  of any such Person relative to the face amount of letters of credit,
whether or not drawn, including without limitation any Reimbursement Obligation,
and  banker's  acceptances  issued for the account of any such  Person,  (g) all
obligations  of any such  Person to  redeem,  repurchase,  exchange,  defease or
otherwise  make  payments  in respect of capital  stock or other  securities  or
partnership  interests of such Person, (h) all net payment obligations  incurred
by any such  Person  pursuant to Hedging  Agreements  (solely to the extent that
such net payment  obligations are in excess of $2,000,000),  (i) all outstanding
payment  obligations  with respect to Synthetic  Leases and (j) the  outstanding
attributed  principal  amount under any asset  securitization  program.  For the
purpose of item (h) above, (1) the amount of any net payment obligation pursuant
to any Hedging Agreement on any date shall be deemed to be the Termination Value
thereof as of such date and (2) "Termination Value" means, in respect of any one
or more Hedging Agreements,  after taking into account the effect of any legally
enforceable netting agreement relating to such Hedging  Agreements,  (A) for any
date on or after the date such  Hedging  Agreements  have  been  closed  out and
termination  value(s)  determined  in  accordance  therewith,  such  termination
value(s),  and (B) for any date prior to the date  referenced in clause (A), the
amount(s) determined as the mark-to-market value(s) for such Hedging Agreements,
as  determined  based upon one or more  mid-market  or other  readily  available
quotations  provided by any recognized dealer in such Hedging  Agreements (which
may include any Person that is a Lender or an Affiliate thereof at the time such
Hedging Agreement is executed).

"Default" means any of the events  specified in Section 11.1 which with the
passage of time, the giving of notice or any other  condition,  would constitute
an Event of Default.

"Disputes" shall have the meaning set forth in Section 13.6.

"Dollars"  or "$"  means,  unless  otherwise  qualified,  dollars in lawful
currency of the United States.

"Dollar  Amount"  means (a) with respect to each Loan made or continued (or
to be made or  continued),  or  Letter of Credit  issued or  extended  (or to be
issued or  extended),  in Dollars,  the  principal  amount  thereof and (b) with
respect  to each  Loan  made or  continued  (or to be made or  continued)  in an
Alternative Currency, the amount of Dollars which is equivalent to the principal
amount of such Loan, at the most favorable spot exchange rate  determined by the
Administrative Agent at approximately 11:00 a.m. (the time of the Administrative
Agent's  Correspondent)  two  (2)  Business  Days  before  such  Loan is made or
continued (or to be made or continued).  When used with respect to any other sum
expressed in an Alternative  Currency,  "Dollar Amount" shall mean the amount of
Dollars  which is  equivalent  to the amount so  expressed  in such  Alternative
Currency  at  the  most   favorable   spot  exchange  rate   determined  by  the
Administrative Agent to be available to it at the relevant time.

"Domestic  Subsidiary" means any Subsidiary of the Borrower organized under
the laws of any state of the United States or the District of Columbia.

"EBIT"  means,  for any period,  the sum of the  following  determined on a
Consolidated basis, without  duplication,  for the Borrower and its Subsidiaries
in accordance  with GAAP: (a) Net Income for such period plus (b) the sum of the
following to the extent  deducted in determining  Net Income:  (i) income taxes,
franchise  taxes and similar  taxes  imposed in lieu of net income  taxes,  (ii)
Interest  Expense  and  (iii)  all non cash  charges  associated  with any asset
impairment  less  (c)  interest  income;  provided  that  for  the  purposes  of
determining  EBIT for any  period  during  which any  Permitted  Acquisition  is
consummated,  EBIT shall be adjusted to give effect to the  consummation of such
Permitted  Acquisition on a pro forma basis in accordance  with GAAP, as if such
Permitted Acquisition occurred on the first day of such period, such adjustments
to be  calculated  in a manner  reasonably  satisfactory  to the  Administrative
Agent.

"EBITDA" means,  for any period,  the sum of the following  determined on a
Consolidated basis, without  duplication,  for the Borrower and its Subsidiaries
in accordance  with GAAP: (a) Net Income for such period plus (b) the sum of the
following to the extent  deducted in determining  Net Income:  (i) income taxes,
franchise  taxes and similar  taxes  imposed in lieu of net income  taxes,  (ii)
Interest Expense,  (iii)  amortization,  depreciation and other non-cash charges
and (iv) all non cash  charges  associated  with any asset  impairment  less (c)
interest  income;  provided that for the purposes of determining  EBITDA for any
period during which any Permitted  Acquisition is  consummated,  EBITDA shall be
adjusted to give effect to the  consummation of such Permitted  Acquisition on a
pro forma  basis in  accordance  with  GAAP,  as if such  Permitted  Acquisition
occurred on the first day of such period, such adjustments to be calculated in a
manner reasonably satisfactory to the Administrative Agent.

"Eligible  Assignee"  means,  with respect to any assignment of the rights,
interest and obligations of a Lender hereunder,  a Person that is at the time of
such  assignment (a) a commercial  bank  organized  under the laws of the United
States or any state thereof,  having  combined  capital and surplus in excess of
$500,000,000,  (b) a  commercial  bank  organized  under  the laws of any  other
country  that is a  member  of the  Organization  of  Economic  Cooperation  and
Development,  or a political  subdivision of any such country,  having  combined
capital and surplus in excess of $500,000,000,  (c) a finance company, insurance
company or other financial  institution which in the ordinary course of business
extends  credit of the type  extended  hereunder  and that has  total  assets in
excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original
party to this Agreement or as the assignee of another Lender), (e) the successor
(whether by transfer of assets, merger or otherwise) to all or substantially all
of the commercial lending business of the assigning Lender, (f) any Affiliate of
assigning  Lender,  (g) any Approved  Fund or (h) any other Person that has been
approved  in  writing  as an  Eligible  Assignee  by (i)  other  than  upon  the
occurrence and during the  continuance  of any Default or Event of Default,  the
Borrower, and (ii) the Administrative Agent.

"EMU" means  economic and monetary union as  contemplated  in the Treaty on
European Union.

"EMU  Legislation"  means  legislative  measures of the Council of European
Union for the introduction of, change over to or operation of the euro.

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

"Environmental  Claims"  means any and all  administrative,  regulatory  or
judicial actions,  suits, demands, demand letters,  claims, liens,  accusations,
allegations,  notices of noncompliance or violation,  investigations (other than
internal  reports  prepared by any Person in the ordinary course of business and
not in response to any third party action or request of any kind) or proceedings
relating in any way to any actual or alleged violation of or liability under any
Environmental Law or relating to any permit issued, or any approval given, under
any such Environmental Law, including, without limitation, any and all claims by
Governmental Authorities for enforcement,  cleanup, removal, response,  remedial
or other  actions  or  damages,  contribution,  indemnification  cost  recovery,
compensation or injunctive relief resulting from Hazardous  Materials or arising
from alleged injury or threat of injury to human health or the environment.

"Environmental Laws" means any and all federal,  foreign, state, provincial
and local laws, statutes,  ordinances,  rules, regulations,  permits,  licenses,
approvals,  interpretations  and orders of courts or  Governmental  Authorities,
relating to the protection of human health or the environment.

"ERISA" means the Employee  Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or modified from time to time.

"ERISA  Affiliate"  means any  Person who  together  with the  Borrower  is
treated as a single employer  within the meaning of Section 414(b),  (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.

"euro" means the single currency to which the  Participating  Member States
of the European Union have converted.

"euro unit" means the currency unit of the euro.

"Eurodollar  Reserve  Percentage"  means,  for any day with  respect to any
LIBOR Rate Loan denominated in Dollars,  the percentage  (expressed as a decimal
and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in
effect  for  such  day as  prescribed  by the  Federal  Reserve  Board  (or  any
successor) for determining the maximum reserve  requirement  (including  without
limitation  any  basic,  supplemental  or  emergency  reserves)  in  respect  of
eurocurrency  liabilities or any similar  category of  liabilities  for a member
bank of the Federal Reserve System in New York City.

"Event of  Default"  means any of the events  specified  in  Section  11.1,
provided  that any  requirement  for passage of time,  giving of notice,  or any
other condition, has been satisfied.

"Existing Facility" means the credit facility  established  pursuant to the
$100,000,000  Credit  Agreement  dated as of February 26, 1998, by and among the
Borrower,  Bankers Trust Company, as Agent, and the various lending institutions
party thereto, as amended, restated, supplemented or otherwise modified.

"Extensions of Credit"  means,  as to any Lender at any time, (a) an amount
equal to the sum of (i) the aggregate  principal  amount of all Revolving Credit
Loans  made by such  Lender  then  outstanding,  (ii) such  Lender's  Commitment
Percentage  of  the  L/C  Obligations  then  outstanding,  (iii)  such  Lender's
Commitment  Percentage of the  Swingline  Loans then  outstanding  and (iv) such
Lender's   Commitment   Percentage  of  the  Alternative   Currency  Loans  then
outstanding  or (b) the  making of any Loan or  participation  in any  Letter of
Credit by such Lender, as the context requires.

"FDIC" means the Federal Deposit  Insurance  Corporation,  or any successor
thereto.

"Federal  Funds  Rate"  means,  the rate per  annum  (rounded  upwards,  if
necessary,  to the next higher 1/100th of 1%)  representing  the daily effective
federal  funds  rate as quoted by the  Administrative  Agent  and  confirmed  in
Federal  Reserve  Board  Statistical  Release  H.15  (519) or any  successor  or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not  available,  then "Federal  Funds Rate" shall mean a daily rate
which is determined,  in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national  federal funds
market at 9:00 a.m.  (Charlotte  time).  Rates for weekends or holidays shall be
the same as the rate for the most immediately preceding Business Day.

"Fiscal  Year" means the fiscal year of the Borrower  and its  Subsidiaries
ending on the  nearest  Sunday  to  December  31 (for  United  States  reporting
purposes).

"Foreign  Subsidiary"  means any  Subsidiary  of the Borrower not organized
under the laws of any State of the United States or the District of Columbia.

"GAAP" means generally accepted accounting principles, as recognized by the
American Institute of Certified Public Accountants and the Financial  Accounting
Standards Board,  consistently  applied and maintained on a consistent basis for
the Borrower and its  Subsidiaries  throughout the period indicated and (subject
to Section 13.9)  consistent with the prior  financial  practice of the Borrower
and its Subsidiaries.

"Governmental  Approvals" means all  authorizations,  consents,  approvals,
licenses and exemptions of,  registrations and filings with, and reports to, all
Governmental Authorities.

"Governmental  Authority"  means any nation,  province,  state or political
subdivision  thereof,  and any  government or any Person  exercising  executive,
legislative,   regulatory  or  administrative  functions  of  or  pertaining  to
government,  and any  corporation or other entity owned or  controlled,  through
stock or capital ownership or otherwise, by any of the foregoing.

"Guaranty   Obligation"  means,  with  respect  to  the  Borrower  and  its
Subsidiaries,  without duplication, any obligation,  contingent or otherwise, of
any such  Person  pursuant  to which such  Person  has  directly  or  indirectly
guaranteed  any Debt or other  obligations  of any  other  Person  and,  without
limiting the generality of the foregoing,  any  obligation,  direct or indirect,
contingent or  otherwise,  of any such Person (a) to purchase or pay (or advance
or supply  funds for the  purchase or payment of) such Debt or other  obligation
(whether  arising by virtue of  partnership  arrangements,  by agreement to keep
well, to purchase assets, goods,  securities or services, to take-or-pay,  or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose  of  assuring  in any other  manner  the  obligee  of such Debt or other
obligation  of the payment  thereof or to protect such  obligee  against loss in
respect  thereof  (in  whole or in  part);  provided,  that  the  term  Guaranty
Obligation  shall not  include  endorsements  for  collection  or deposit in the
ordinary course of business.

"Hazardous  Materials"  means any  substances or materials (a) which are or
become  defined  as  hazardous   wastes,   hazardous   substances,   pollutants,
contaminants,  chemical  substances  or mixtures or toxic  substances  under any
Environmental  Law,  (b)  which  are  toxic,  explosive,  corrosive,  flammable,
infectious, radioactive,  carcinogenic,  mutagenic or otherwise harmful to human
health  or the  environment  and are or  become  regulated  by any  Governmental
Authority,  (c) the presence of which require investigation or remediation under
any Environmental Law or common law, (d) the discharge or emission or release of
which  requires  a  permit  or  license  under  any  Environmental  Law or other
Governmental  Approval,  (e) which are  deemed to  constitute  a  nuisance  or a
trespass  which  pose a health  or  safety  hazard  to  Persons  or  neighboring
properties,  (f) which consist of  underground  or  aboveground  storage  tanks,
whether  empty,  filled or  partially  filled with any  substance,  or (g) which
contain,  without  limitation,   asbestos,   polychlorinated   biphenyls,   urea
formaldehyde  foam  insulation,   petroleum   hydrocarbons,   petroleum  derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.

"Hedging  Agreement"  means any agreement with respect to any Interest Rate
Contract,  forward rate  agreement,  commodity swap,  forward  foreign  exchange
agreement, currency swap agreement, cross-currency rate swap agreement, currency
option  agreement or other agreement or arrangement  designed to alter the risks
of any Person arising from  fluctuations in interest  rates,  currency values or
commodity prices, all as amended,  restated,  supplemented or otherwise modified
from time to time.

"Hedging  Obligations"  shall  have the  meaning  assigned  thereto  in the
definition of "Obligations".

"Interest Expense" means, with respect to the Borrower and its Subsidiaries
for any period, the gross interest expense of the Borrower and its Subsidiaries,
all determined for such period on a Consolidated basis, without duplication,  in
accordance with GAAP.

"Interest  Period"  shall  have the  meaning  assigned  thereto  in Section
4.1(b).

"Interest Rate Contract" means any interest rate swap  agreement,  interest
rate  cap  agreement,  interest  rate  floor  agreement,  interest  rate  collar
agreement,  interest rate option or any other agreement regarding the hedging of
interest  rate risk exposure  executed in  connection  with hedging the interest
rate exposure of any Person and any confirming  letter executed pursuant to such
agreement,  all as amended,  restated,  supplemented or otherwise  modified from
time to time.

"ISP  98"  means  the  International   Standby  Practices  (1998  Revision,
effective January 1, 1999),  International  Chamber of Commerce  Publication No.
590.

"Issuing Lender" means Wachovia, in its capacity as issuer of any Letter of
Credit, or any successor thereto.

"Joinder Agreement" means, collectively, each joinder agreement executed in
favor of the  Administrative  Agent for the  ratable  benefit  of itself and the
Lenders, substantially in the form of Exhibit J.

"L/C Commitment" means the lesser of (a) Ten Million Dollars  ($10,000,000)
and (b) the Aggregate Commitment.

"L/C Facility" means the letter of credit facility  established pursuant to
Article III.

"L/C Obligations"  means at any time, an amount equal to the sum of (a) the
aggregate undrawn and unexpired amount of the then outstanding Letters of Credit
and (b) the aggregate  amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to Section 3.5.

"L/C Participants" means the collective  reference to all the Lenders other
than the Issuing Lender.

"Lender" means each Person executing this Agreement as a Lender (including,
without limitation, the Issuing Lender, the Swingline Lender and the Alternative
Currency  Lender  unless  the  context  otherwise  requires)  set  forth  on the
signature  pages hereto and each Person that  hereafter  becomes a party to this
Agreement as a Lender pursuant to Section 13.10.

"Lender  Addition  and  Acknowledgment   Agreement"  means  each  agreement
executed  pursuant to Section 2.9 by the  Borrower  and an existing  Lender or a
Person  not  theretofore  a  Lender,  as  applicable,  and  acknowledged  by the
Administrative  Agent  and each  Guarantor,  providing  for an  increase  in the
Aggregate Commitment hereunder,  acknowledging that any Person not theretofore a
Lender shall be a party hereto and have the rights and  obligations  of a Lender
hereunder, and setting forth the Commitment of each Lender.

"Lending  Office"  means,  with  respect to any Lender,  the office of such
Lender  maintaining  such Lender's  Commitment  Percentage of the  Extensions of
Credit.

"Letters of Credit" shall have the meaning assigned thereto in Section 3.1.

"Leverage Ratio" means the ratio calculated pursuant to Section 9.1.

"LIBOR" means the rate of interest per annum determined on the basis of the
rate for deposits in Dollars in minimum  amounts of at least  $5,000,000 (or the
Alternative Currency Amount thereof with respect to a borrowing to be made in an
Alternative Currency) for a period equal to the applicable Interest Period which
appears on the Dow Jones Market Screen 3750, or the  applicable  Reuters  Screen
Page, as  determined  by the  Administrative  Agent in its sole  discretion,  at
approximately  11:00 a.m. (London time) two (2) Business Days prior to the first
day of the applicable  Interest Period  (rounded  upward,  if necessary,  to the
nearest  1/100th of 1%).  If, for any  reason,  such rate does not appear on Dow
Jones Market Screen 3750, or the applicable  Reuters  Screen Page,  then "LIBOR"
shall be determined by the Administrative  Agent to be the arithmetic average of
the rate per annum at which  deposits  in the  Permitted  Currency  in which the
applicable  Loan is  denominated  would be offered by first  class  banks in the
London  interbank  market to the  Administrative  Agent  (or the  Administrative
Agent's  Correspondent)  approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period for a period equal
to such Interest Period.  Each calculation by the Administrative  Agent of LIBOR
shall be conclusive and binding for all purposes, absent manifest error.

"LIBOR Rate" means

(i) with respect to any LIBOR Rate Loan denominated in Dollars,  a rate per
annum  (rounded  upwards,  if  necessary,  to the  next  higher  1/100th  of 1%)
determined by the Administrative Agent pursuant to the following formula:

LIBOR Rate =     LIBOR                     
-------------------------------
1.00-Eurodollar Reserve Percentage

and

(ii) with  respect to any LIBOR Rate Loan  denominated  in any  Alternative
Currency,  a rate per annum (rounded upwards,  if necessary,  to the next higher
1/100th of 1%) equal to LIBOR.

Each calculation by the Administrative Agent of the LIBOR Rate shall be
conclusive and binding for all purposes, absent manifest error.

"LIBOR Rate Loan" means any Loan bearing  interest at a rate based upon the
LIBOR Rate as provided in Section 4.1(a).

"Lien" means, with respect to any asset, any mortgage,  leasehold mortgage,
lien, pledge,  charge,  security  interest,  hypothecation or encumbrance of any
kind in respect of such  asset.  For the  purposes of this  Agreement,  a Person
shall be deemed to own  subject  to a Lien any asset  which it has  acquired  or
holds subject to the interest of a vendor or lessor under any  conditional  sale
agreement,  Capital Lease or other title  retention  agreement  relating to such
asset.

"Liquidity"  means, with respect to the Borrower and its Subsidiaries as of
any date of determination, (i) consolidated cash and cash equivalents as of such
date plus (ii) the aggregate Available Commitments as of such date.

"Loan  Documents"  means,  collectively,  this  Agreement,  the Notes,  the
Applications,  the Subsidiary Guaranty Agreement,  the Security Documents,  each
Joinder Agreement and each other document, instrument, certificate and agreement
executed and delivered by the Borrower or any  Subsidiary  thereof in connection
with this Agreement  (excluding any Hedging  Agreement),  all as may be amended,
restated, supplemented or otherwise modified from time to time.

"Loans" means the collective  reference to the Revolving  Credit Loans, the
Alternative  Currency Loans and the Swingline Loans and "Loan" means any of such
Loans.

"Mandatory  Cost  Rate"  means  an  addition  to the  interest  rate on any
Revolving  Credit  Loan or  Alternative  Currency  Loan  made by any  Lender  to
compensate  such Lender for the cost  imputed to the Lender  resulting  from the
imposition  from time to time under or  pursuant to the Bank of England Act 1998
and/or by the Bank of England and/or the Financial  Services Authority (or other
Governmental  Authorities  of the  United  Kingdom)  of a  requirement  to place
non-interest  bearing cash ratio deposits or special deposits  (whether interest
bearing or not) with the Bank of England  and/or fees to the Financial  Services
Authority  calculated  by reference to  liabilities  used to fund the  Revolving
Credit Loans and the Alternative  Currency Loans,  expressed as a rate per annum
and determined pursuant to the formula set forth on Schedule 1.1(b) hereto.

"Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
properties,   business,   prospects,   operations  or  condition  (financial  or
otherwise)  of the  Borrower  and its  Subsidiaries  taken as a whole,  (ii) the
ability of the  Borrower  or any of its  Subsidiaries  to perform  its  material
obligations  under  the Loan  Documents  to which  it is a party,  or (iii)  the
validity and enforceability of the Loan Documents.

"Material  Domestic  Subsidiary"  means,  at any  time,  (a)  any  Domestic
Subsidiary  of the Borrower  with net assets in excess of three  percent (3%) of
the total net assets of the  Borrower and its  Subsidiaries  as reflected on the
financial statements delivered in accordance with Section 7.1, (b) any parent of
any  Domestic  Subsidiary  referred to in clause (a) of this  definition,  which
parent is also a Domestic  Subsidiary and which parent is not deemed a "Material
Domestic Subsidiary" pursuant to clause (a) of this definition, (c) any Domestic
Subsidiary   of  the  Borrower   voluntarily   designated   in  writing  to  the
Administrative  Agent  by  the  Borrower  as a  "Material  Domestic  Subsidiary"
regardless  of whether such Domestic  Subsidiary is deemed a "Material  Domestic
Subsidiary"  pursuant  to  clause  (a) or (b) of  this  definition  and  (d) any
Domestic  Subsidiary  of the Borrower  that  executes  all the relevant  joinder
documents in  compliance  with Section 8.11  regardless of whether such Domestic
Subsidiary is deemed a "Material  Domestic  Subsidiary"  pursuant to clause (a),
(b) or (c) of this  definition;  provided,  however,  that  notwithstanding  the
foregoing,  Domestic  Subsidiaries  of the  Borrower  which  are  not  "Material
Domestic Subsidiaries" shall not have total net assets equal to greater than ten
percent  (10%) of total net assets of the Borrower and its  Subsidiaries  at any
time.

"Mortgages" means the collective reference to each deed of trust, mortgage,
or other real property security document, whether encumbering a leasehold or fee
interest in real property,  required by the Administrative Agent and executed by
the  Borrower  or any  Material  Domestic  Subsidiary  thereof  in  favor of the
Administrative Agent, for the ratable benefit of itself and the Lenders, as each
such document may be amended, restated,  supplemented or otherwise modified from
time to time.

"Multiemployer  Plan"  means a  "multiemployer  plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA  Affiliate is making,  or
is  accruing  an  obligation  to make,  or has  accrued an  obligation  to make,
contributions within the preceding six (6) years.

"Net  Cash  Position"  means  on any day,  with  respect  to the  Operating
Account,  a sum equal to the opening available balance in the Operating Account,
plus any maturing  investment  principal and interest  credited to the Operating
Account,  minus the daily  presentment  of checks and Operating  Account  holds,
minus any floor balance which has been established to cover bank charges,  minus
any maturing  interest debited to the Operating  Account,  in each case for such
day.

"Net Cash Proceeds"  means, as applicable,  (a) with respect to any sale or
other disposition of assets, the gross cash proceeds received by the Borrower or
any of its Subsidiaries  from such sale  (including,  without  limitation,  cash
received by way of deferred payment pursuant to a note receivable, conversion of
non-cash  consideration,  cash payments in respect of purchase price adjustments
or otherwise,  but only as and when such cash is actually received) less the sum
of (i) all income  taxes and other taxes  assessed by a  Governmental  Authority
which are paid or payable by the Borrower or any of its Subsidiaries as a result
of such sale or other  disposition,  (ii) any  other  costs,  fees and  expenses
incurred  in  connection  with  such  sale or other  disposition  and  (iii) the
principal amount of, premium, if any, and interest on any Debt which is required
to be repaid by the Borrower or any of its  Subsidiaries in connection with such
sale, (b) with respect to any offering of capital stock or issuance of Debt, the
gross  cash  proceeds  received  by the  Borrower  or  any  of its  Subsidiaries
therefrom less all legal,  underwriting and other fees and expenses  incurred in
connection  therewith  and (c) with  respect to any payment  under an  insurance
policy or in  connection  with a  condemnation  proceeding,  the  amount of cash
proceeds  received by the Borrower or any of its Subsidiaries  from an insurance
company  or  Governmental  Authority,  as  applicable,  net of all  expenses  of
collection  and  net of  all  income  taxes  and  other  taxes  assessed  by any
Governmental  Authority  which are paid or payable by the Borrower or any of its
Subsidiaries as a result of receiving any such payment.

"Net Income" means, with respect to the Borrower and its Subsidiaries,  for
any period of  determination,  the net income (or loss) of the  Borrower and its
Subsidiaries for such period,  determined on a Consolidated  basis in accordance
with GAAP;  provided  that there shall be  excluded  from Net Income (a) the net
income (or loss) of any Person in which the Borrower or any of its  Subsidiaries
has a joint interest with a third party, except to the extent such net income is
actually  paid to the Borrower or any of its  Subsidiaries  by dividend or other
distribution  during  such  period,  (b) the net  income (or loss) of any Person
accrued  prior to the date it becomes a  Subsidiary  of such Person or is merged
into  or  consolidated  with  such  Person  or any of its  Subsidiaries  or that
Person's assets are acquired by such Person or any of its Subsidiaries,  (c) the
cumulative effect of a change in accounting  principles required or permitted by
a change in GAAP subsequent to the Closing Date, and (d) any net gain classified
as an extraordinary item in accordance with GAAP.

"Non-Material  Domestic  Subsidiary"  means any Domestic  Subsidiary of the
Borrower which is not a Material Domestic Subsidiary.

"Notes" means the collective  reference to the Revolving  Credit Notes, the
Alternative  Currency Note and the  Swingline  Note and "Note" means any of such
Notes.

"Notice of Account  Designation" shall have the meaning assigned thereto in
Section 2.4(b).

"Notice of Borrowing"  shall have the meaning  assigned  thereto in Section
2.4(a).

"Notice of Conversion/Continuation" shall have the meaning assigned thereto
in Section 4.2.

"Notice of Prepayment"  shall have the meaning  assigned thereto in Section
2.5(c).

"Obligations"  means,  in each case,  whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing after
the  filing of any  bankruptcy  or  similar  petition)  the  Loans,  (b) the L/C
Obligations,  (c) all existing or future payment and other  obligations owing by
the  Borrower  under any Hedging  Agreement  (which such  Hedging  Agreement  is
permitted  hereunder) with any Person that is a Lender hereunder or an Affiliate
of a Lender  hereunder at the time such Hedging  Agreement is executed (all such
obligations with respect to any such Hedging Agreement,  "Hedging  Obligations")
and (d) all other fees and commissions  (including  attorneys'  fees),  charges,
indebtedness,   loans,  liabilities,   financial  accommodations,   obligations,
covenants  and duties  owing by the Borrower or any of its  Subsidiaries  to the
Lenders or the  Administrative  Agent,  in each case under or in respect of this
Agreement,  any Note, any Letter of Credit or any of the other Loan Documents of
every kind, nature and description,  direct or indirect, absolute or contingent,
due or to become due, contractual or tortious,  liquidated or unliquidated,  and
whether or not evidenced by any note.

"Officer's Compliance  Certificate" shall have the meaning assigned thereto
in Section 7.2.

"Operating  Account" means the principal  operating account of the Borrower
maintained with Wachovia.

"Operating  Lease" shall mean, as to any Person as determined in accordance
with GAAP,  any lease of  property  (whether  real,  personal  or mixed) by such
Person as lessee which is not a Capital Lease.

"Other Taxes" shall have the meaning assigned thereto in Section 4.13(b).

"Participating  Member  State"  means  each state so  described  in any EMU
Legislation.

"PBGC" means the Pension  Benefit  Guaranty  Corporation  or any  successor
agency.

"Pension Plan" means any Employee  Benefit Plan, other than a Multiemployer
Plan,  which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is  maintained  for the  employees of the Borrower or any
ERISA  Affiliate or (b) has at any time within the  preceding six (6) years been
maintained  for the  employees  of the  Borrower or any of its current or former
ERISA Affiliates.

"Permitted Acquisition" has the meaning set forth in Section 10.3(c).

"Permitted  Acquisition  Documents"  means with respect to any  acquisition
proposed by the Borrower or any Subsidiary thereof, the purchase agreement, sale
agreement,  merger  agreement or other agreement  evidencing  such  acquisition,
including,  without  limitation,  all legal  opinions  and each  other  document
executed, delivered, contemplated by or prepared in connection therewith and any
amendment, modification or supplement to any of the foregoing.

"Permitted  Currency"  means Dollars or any Alternative  Currency,  or each
such currency, as the context requires.

"Permitted  Holders" means (i) Harold C. Simmons,  (ii) the trustees of the
Harold C.  Simmons  Family  Trust No. 1 dated  January  1,  1964,  the Harold C.
Simmons  Family  Trust  No. 2 dated  January  1,  1964 and any  trust or  trusts
established  after the Closing Date for the benefit of Harold C. Simmons  and/or
his spouse or his or her  descendants,  whether  natural or adopted (such trusts
collectively,   the   "Trusts"   and   such   individuals,    collectively   the
"Beneficiaries"),  (iii) each of the Trusts, (iv) each of the Beneficiaries, (v)
any Person  controlled,  directly or  indirectly,  by one or more of the Persons
described in clauses (i) through (iv) above,  (vi) any employee  benefit plan or
pension fund of the Borrower or any  Subsidiary and any Person holding any class
of voting  stock of the Borrower or  Subsidiary  for or pursuant to the terms of
any such  plan or fund,  and (vii) any group  made up of  Persons  described  in
clauses (i) through (vi) above.

"Person"  means an  individual,  corporation,  limited  liability  company,
partnership,  association,  trust,  business trust,  joint venture,  joint stock
company,  pool,  syndicate,  sole proprietorship,  unincorporated  organization,
Governmental Authority or any other form of entity or group thereof.

"Pounds  Sterling" means, at any time of  determination,  the then official
currency of the United Kingdom of Great Britain and Northern Ireland.

"Prime Rate" means,  at any time,  the rate of interest per annum  publicly
announced  from time to time by Wachovia  as its prime rate.  Each change in the
Prime Rate shall be  effective  as of the  opening of  business  on the day such
change in such prime rate occurs.  The parties hereto  acknowledge that the rate
announced  publicly  by  Wachovia as its prime rate is an index or base rate and
shall not  necessarily  be its lowest or best rate  charged to its  customers or
other banks.

"Register" shall have the meaning assigned thereto in Section 13.10(d).

"Reimbursement   Obligation"  means  the  obligation  of  the  Borrower  to
reimburse  the Issuing  Lender  pursuant to Section 3.5 for amounts  drawn under
Letters of Credit.

"Replaced  Lender"  shall  have the  meaning  assigned  thereto  in Section
4.15(c).

"Replacement  Lender"  shall have the meaning  assigned  thereto in Section
4.15(c).

"Required  Lenders"  means,  at any date, any  combination of Lenders whose
Commitment  Percentages  aggregate at least  sixty-six  and  two-thirds  percent
(66-2/3%)  of the  Aggregate  Commitment  or, if the  Credit  Facility  has been
terminated pursuant to Section 11.2, any combination of Lenders holding at least
sixty-six and two-thirds percent (66-2/3%) of the aggregate Extensions of Credit
(with the  aggregate  amount of each  Lender's  risk  participation  and  funded
participation in Alternative Currency Loans, Swingline Loans and L/C Obligations
being deemed "held" by such Lender for the purposes of this definition).

"Responsible  Officer"  means any of the  following:  the  chief  executive
officer, president, chief financial officer or controller of the Borrower or any
other officer of the Borrower reasonably acceptable to the Administrative Agent.

"Revolving  Credit  Facility"  means  the  revolving  credit,   alternative
currency and swingline facilities established pursuant to Article II.

"Revolving  Credit Loans" means any revolving  credit loan  denominated  in
Dollars  made by the Lenders to the  Borrower  pursuant to Section  2.1, and all
such revolving credit loans collectively as the context requires.

"Revolving  Credit Notes" means the  collective  reference to the Revolving
Credit  Notes  made  by the  Borrower  payable  to the  order  of  each  Lender,
substantially in the form of Exhibit A-1 hereto, evidencing the Revolving Credit
Facility,  and  any  amendments,  supplements  and  modifications  thereto,  any
substitutes therefor, and any replacements, restatements, renewals or extensions
thereof,  in  whole  or in  part;  "Revolving  Credit  Note"  means  any of such
Revolving Credit Notes.

"Revolving  Credit  Termination  Date"  means  the  earliest  of the  dates
referred to in Section 2.8.

"Security  Documents"  means the  collective  reference  to the  Subsidiary
Guaranty  Agreement,  the  Collateral  Agreement,  the  Mortgages and each other
agreement or writing  pursuant to which the Borrower or any  Subsidiary  thereof
purports  to pledge  or grant a  security  interest  in any  property  or assets
securing  the  Obligations  or any such Person  purports to guaranty the payment
and/or  performance  of the  Obligations,  in each case,  as amended,  restated,
supplemented or otherwise modified from time to time.

"Solvent"  means,  as to the Borrower and its  Subsidiaries on a particular
date,  that any such Person (a) has capital  sufficient to carry on its business
and  transactions  and all  business  and  transactions  in which it is about to
engage and is able to pay its debts as they mature,  (b) owns property  having a
value, at fair  valuation,  greater than the amount required to pay its probable
liabilities  (including  contingencies),  and (c) does not believe  that it will
incur debts or  liabilities  beyond its ability to pay such debts or liabilities
as they mature.

"Subordinated  Debt"  means  the  collective  reference  to any Debt of the
Borrower  or any  Subsidiary  subordinated  in right and time of  payment to the
Obligations and containing such other terms and conditions,  in each case as are
satisfactory to the Required Lenders.

"Subsidiary" means as to any Person, any corporation,  partnership, limited
liability  company or other entity of which more than fifty percent (50%) of the
outstanding  capital stock or other ownership  interests  having ordinary voting
power to elect a majority of the board of  directors  or other  managers of such
corporation,  partnership,  limited  liability company or other entity is at the
time  owned  by or  the  management  is  otherwise  controlled  by  such  Person
(irrespective  of  whether,  at the  time,  capital  stock  or  other  ownership
interests  of any  other  class or  classes  of such  corporation,  partnership,
limited  liability company or other entity shall have or might have voting power
by reason of the  happening  of any  contingency).  Unless  otherwise  qualified
references to "Subsidiary" or "Subsidiaries"  herein shall refer to those of the
Borrower.

"Subsidiary Guaranty Agreement" means the unconditional  guaranty agreement
of  even  date   executed  by  the   Subsidiary   Guarantors  in  favor  of  the
Administrative  Agent,  for the  ratable  benefit  of  itself  and the  Lenders,
substantially  in the form of Exhibit H, as amended,  restated,  supplemented or
otherwise modified from time to time.

"Subsidiary  Guarantors"  means the Material  Domestic  Subsidiaries of the
Borrower.

"Sweep  Plus  Service  Program"  means the Sweep  Plus  Service  Program of
Wachovia  and any other  cash  management  arrangement  which the  Borrower  and
Wachovia  agree should be included in the  borrowing  and repayment of Swingline
Loans pursuant to Section 2.3.

"Swingline  Commitment"  means  the  lesser  of (a)  Five  Million  Dollars
($5,000,000) and (b) the Aggregate Commitment.

"Swingline  Facility" means the swingline facility  established pursuant to
Section 2.3.

"Swingline  Lender"  means  Wachovia in its  capacity as  swingline  lender
hereunder.

"Swingline  Loan" means any swingline  loan  denominated in Dollars made by
the  Swingline  Lender to the  Borrower  pursuant to Section  2.3,  and all such
swingline loans collectively as the context requires.

"Swingline  Note" means the Swingline Note made by the Borrower  payable to
the order of the  Swingline  Lender,  substantially  in the form of Exhibit  A-2
hereto,  evidencing the Swingline  Loans,  and any  amendments,  supplements and
modifications   thereto,  any  substitutes   therefor,   and  any  replacements,
restatements, renewals or extensions thereof, in whole or in part.

"Swingline   Termination  Date"  means  the  first  to  occur  of  (a)  the
resignation of Wachovia as Administrative  Agent in accordance with Section 12.9
and (b) the Revolving Credit Termination Date.

"Synthetic Lease" means any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such
transaction is considered  borrowed money  indebtedness  for tax purposes but is
classified as an Operating Lease in accordance with GAAP.

"Taxes" shall have the meaning assigned thereto in Section 4.13(a).

"Termination Event" means except for any such event or condition that could
not reasonably be expected to have a Material Adverse Effect:  (a) a "Reportable
Event"  described in Section 4043 of ERISA for which the notice  requirement has
not been waived by the PBGC, or (b) the  withdrawal of the Borrower or any ERISA
Affiliate  from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a
Pension  Plan,  the filing of a notice of intent to  terminate a Pension Plan or
the treatment of a Pension Plan amendment as a  termination,  under Section 4041
of ERISA, if the plan assets are not sufficient to pay all plan liabilities,  or
(d) the institution of proceedings to terminate, or the appointment of a trustee
with  respect  to,  any  Pension  Plan by the PBGC,  or (e) any  other  event or
condition which would constitute  grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan,
or (f) the  imposition  of a Lien pursuant to Section 412 of the Code or Section
302 of ERISA,  or (g) the partial or complete  withdrawal of the Borrower of any
ERISA Affiliate from a Multiemployer Plan if withdrawal liability is asserted by
such plan, or (h) any event or condition which results in the  reorganization or
insolvency of a Multiemployer  Plan under Sections 4241 or 4245 of ERISA, or (i)
any event or condition which results in the termination of a Multiemployer  Plan
under  Section  4041A of  ERISA or the  institution  by PBGC of  proceedings  to
terminate a Multiemployer Plan under Section 4042 of ERISA.

"Total Funded Debt" means, as of any date of determination  with respect to
the Borrower and its Subsidiaries on a Consolidated  basis without  duplication,
the sum of all Debt of the Borrower and its Subsidiaries.

"Treaty on European  Union" means the Treaty of Rome of March 25, 1957,  as
amended by the Single  European Act of 1986 and the  Maastricht  Treaty  (signed
February 7, 1992), as amended from time to time.

"UCC" means the Uniform  Commercial Code as in effect in the State of North
Carolina, as amended or modified from time to time.

"Uniform  Customs" means the Uniform  Customs and Practice for  Documentary
Credits  (1993  Revision),  effective  January  1994  International  Chamber  of
Commerce Publication No. 500.

"United States" means the United States of America.

"Wachovia" means Wachovia Bank,  National  Association,  a national banking
association, and its successors.

"Wholly-Owned"  means,  with respect to a Subsidiary,  any  Subsidiary  for
which all of the  shares of  capital  stock or other  ownership  interests  are,
directly or indirectly,  owned or controlled by the Borrower  and/or one or more
of its Wholly-Owned  Subsidiaries  (except for directors'  qualifying  shares or
other shares  required by Applicable  Law to be owned by a Person other than the
Borrower).

SECTION 1.2  General.  Unless  otherwise  specified,  a  reference  in this
Agreement to a particular article, section, subsection, Schedule or Exhibit is a
reference  to that  article,  section,  subsection,  Schedule or Exhibit of this
Agreement. Wherever from the context it appears appropriate, each term stated in
either the  singular or plural  shall  include  the  singular  and  plural,  and
pronouns  stated in the  masculine,  feminine or neuter gender shall include the
masculine, the feminine and the neuter. Any reference herein to "Charlotte time"
shall refer to the applicable time of day in Charlotte, North Carolina.

SECTION 1.3 Effectiveness of Euro Provisions. With respect to any state (or
the currency of such state) that is not a Participating Member State on the date
of this Agreement,  the provisions of Sections 4.1(g),  4.8(b),  4.8(c) and 4.14
shall  become  effective  in  relation  to such state (and the  currency of such
state) at and from the date on which such state becomes a  Participating  Member
State.

SECTION 1.4.  Other Definitions and Provisions.
--------------------------------

(a)  Use of  Capitalized  Terms.  Unless  otherwise  defined  therein,  all
capitalized terms defined in this Agreement shall have the defined meanings when
used  in  this  Agreement,  the  Notes  and  the  other  Loan  Documents  or any
certificate,  report  or  other  document  made or  delivered  pursuant  to this
Agreement.

(b) Miscellaneous.  The words "hereof",  "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.

ARTICLE II

REVOLVING CREDIT FACILITY

SECTION 2.1 Revolving Credit Loans.  Subject to the terms and conditions of
this  Agreement,  and in reliance upon the  representations  and  warranties set
forth herein,  each Lender  severally  agrees to make Revolving  Credit Loans in
Dollars to the Borrower from time to time from the Closing Date through, but not
including,  the Revolving Credit  Termination Date as requested by the Borrower,
in  accordance  with the terms of Section 2.4;  provided,  that,  based upon the
Dollar Amount of all outstanding  Loans and L/C  Obligations,  (a) the aggregate
principal amount of all outstanding  Revolving Credit Loans (after giving effect
to any amount  requested)  shall not exceed the  Aggregate  Commitment  less the
Swingline Commitment less the sum of all outstanding  Alternative Currency Loans
and L/C  Obligations and (b) the aggregate  principal  amount of all outstanding
Revolving  Credit  Loans from any Lender to the  Borrower  shall not at any time
exceed such Lender's Commitment less such Lender's Commitment  Percentage of the
Swingline Commitment less such Lender's Commitment  Percentage of the sum of all
outstanding  Alternative  Currency  Loans and L/C  Obligations.  Each  Revolving
Credit Loan by a Lender shall be in a principal  amount  equal to such  Lender's
Commitment  Percentage of the  aggregate  principal  amount of Revolving  Credit
Loans  requested on such occasion.  Subject to the terms and conditions  hereof,
the Borrower may borrow,  repay and reborrow  Revolving  Credit Loans  hereunder
until the Revolving Credit Termination Date.

SECTION 2.2 Alternative Currency Loans.

(a)  Availability.  Subject to the terms and conditions of this  Agreement,
and in reliance upon the  representations  and warranties set forth herein,  the
Alternative  Currency  Lender agrees to make  Alternative  Currency Loans to the
Borrower from time to time from the Closing Date through, but not including, the
Revolving  Credit  Termination  Date as requested by the Borrower in  accordance
with the terms of Section 2.4;  provided,  that, based upon the Dollar Amount of
all outstanding Loans and L/C Obligations, the aggregate principal amount of all
outstanding  Alternative  Currency  Loans  (after  giving  effect to any  amount
requested) shall not exceed the lesser of (i) the Aggregate  Commitment less the
sum of the aggregate principal amount of all outstanding  Revolving Credit Loans
less the Swingline  Commitment less the sum of all outstanding L/C  Obligations,
and  (ii)  the  Alternative  Currency  Commitment;  provided  further  that  the
Alternative  Currency Lender will not make an Alternative Currency Loan from and
after the date which is one (1) day after it has  received  written  notice from
the Administrative  Agent (upon the request of the Required Lenders) that one or
more of the applicable  conditions to Extensions of Credit  specified in Section
5.3 is not then  satisfied  until such  conditions  are  satisfied  or waived in
accordance with the provisions of this Agreement (and the  Alternative  Currency
Lender shall be entitled to conclusively  rely on any such notice and shall have
no obligation to independently investigate the accuracy of such notice and shall
have no liability to the Borrower in respect thereof if such notice proves to be
inaccurate).  Alternative  Currency  Loans shall be funded in an amount equal to
the Alternative  Currency Amount of such Alternative  Currency Loan.  Subject to
the terms and  conditions  hereof,  the Borrower may borrow,  repay and reborrow
Alternative  Currency Loans  hereunder  until the Revolving  Credit  Termination
Date.

(b) Refunding of Alternative Currency Loans.

(i) Upon the  occurrence  and  during the  continuance  of an Event of
Default,   each  Alternative  Currency  Loan  may,  at  the  discretion  of  the
Alternative Currency Lender, be converted immediately to a Base Rate Loan funded
in  Dollars  by the  Lenders  in an amount  equal to the  Dollar  Amount of such
Alternative Currency Loan for the remainder of the Interest Period applicable to
such  Alternative  Currency  Loan.  Such  Base  Rate Loan  shall  thereafter  be
reflected as a Revolving  Credit Loan of the Lenders on the books and records of
the  Administrative  Agent.  Each Lender  shall fund its  respective  Commitment
Percentage  of such  Revolving  Credit  Loan as  required  to repay  Alternative
Currency Loans  outstanding to the Alternative  Currency Lender upon such demand
by the Alternative  Currency Lender in no event later than 2:00 p.m.  (Charlotte
time) on the next succeeding Business Day after such demand is made. No Lender's
obligation to fund its respective  Commitment Percentage of any Revolving Credit
Loan required to repay such  Alternative  Currency Loan shall be affected by any
other  Lender's  failure to fund its  Commitment  Percentage  of such  Revolving
Credit Loan,  nor shall any  Lender's  Commitment  Percentage  be increased as a
result of any such failure of any other Lender to fund its Commitment Percentage
of such Revolving Credit Loan.

(ii) The Borrower shall pay to the Alternative  Currency  Lender,  for
the account of the  Alternative  Currency  Lender,  on demand the amount of such
Alternative  Currency Loans to the extent amounts  received from the Lenders are
not  sufficient to refund in full the  outstanding  Alternative  Currency  Loans
requested  or  required  to be  refunded  upon the  occurrence  and  during  the
continuance of an Event of Default. In addition,  the Borrower hereby authorizes
the  Administrative  Agent, upon the occurrence and during the continuance of an
Event of Default,  to charge any account  maintained  by the  Borrower  with the
Alternative  Currency  Lender (up to the amount  available  therein) in order to
immediately pay the Alternative  Currency Lender the amount of such  Alternative
Currency  Loans  to the  extent  amounts  received  from  the  Lenders  are  not
sufficient to repay in full the outstanding Alternative Currency Loans requested
or  required  to be  refunded.  If any  portion of any such  amount  paid to the
Alternative  Currency  Lender shall be recovered by or on behalf of the Borrower
from the Alternative Currency Lender in bankruptcy or otherwise, the loss of the
amount so recovered  shall be ratably shared among all the Lenders in accordance
with their respective Commitment  Percentages (unless the amount so recovered by
or on behalf of the Borrower  pertains to an Alternative  Currency Loan extended
after the occurrence and during the  continuance of an Event of Default of which
the  Alternative  Currency  Lender has  received  notice in the manner  required
pursuant to Section  12.5 and which such Event of Default has not been waived by
the Required Lenders or the Lenders, as applicable).

(iii) Each  Lender  acknowledges  and agrees  that its  obligation  to
refund  Alternative  Currency Loans in accordance with the terms of this Section
2.2 is absolute and  unconditional and shall not be affected by any circumstance
whatsoever,  including,  without limitation,  non-satisfaction of the conditions
set forth in Article V.  Further,  each Lender agrees and  acknowledges  that if
prior to the refunding of any outstanding Alternative Currency Loans pursuant to
this Section 2.2,  one of the events  described in Section  11.1(i) or (j) shall
have  occurred,  each Lender will, on the date the applicable  Revolving  Credit
Loans would have been made, purchase an undivided participating interest in such
Alternative  Currency  Loans to be refunded in an amount equal to its Commitment
Percentage of the aggregate  amount of such  Alternative  Currency  Loans.  Each
Lender will immediately transfer to the Administrative Agent, for the account of
the Alternative Currency Lender, in immediately  available funds in Dollars, the
amount  of its  participation.  Whenever,  at any  time  after  the  Alternative
Currency  Lender  has  received  from any  Lender  such  Lender's  participating
interest in the refunded  Alternative  Currency Loans, the Alternative  Currency
Lender receives any payment on account thereof,  the Alternative Currency Lender
will  distribute  to such  Lender  its  participating  interest  in such  amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's  participating  interest was  outstanding and
funded).

(iv) In the  event  that  any  Lender  fails  to make  payment  to the
Alternative  Currency  Lender of any  amount  due under this  Section  2.2,  the
Administrative  Agent, on behalf of the Alternative  Currency  Lender,  shall be
entitled to receive,  retain and apply against such obligation the principal and
interest  otherwise  payable  to such  Lender  hereunder  until the  Alternative
Currency  Lender  receives  such payment from such Lender or such  obligation is
otherwise fully satisfied.  In addition to the foregoing,  if for any reason any
Lender fails to make payment to the  Alternative  Currency  Lender of any amount
due under this  Section 2.2,  such Lender shall be deemed,  at the option of the
Administrative Agent, to have unconditionally and irrevocably purchased from the
Alternative Currency Lender, without recourse or warranty, an undivided interest
and participation in the applicable Alternative Currency Loan, and such interest
and  participation  may be recovered  from such Lender  together  with  interest
thereon  at the  Federal  Funds  Effective  Rate for each day  during the period
commencing on the date of demand and ending on the date such amount is received.

SECTION 2.3 Swingline Loans. 

(a)  Availability.  Subject to the terms and conditions of this  Agreement,
the Swingline Lender agrees to make Swingline Loans to the Borrower from time to
time from the Closing Date through, but not including, the Swingline Termination
Date; provided, that (i) all Swingline Loans shall be denominated in Dollars and
(ii) based upon the Dollar Amount of all outstanding  Loans and L/C Obligations,
the aggregate principal amount of all outstanding  Swingline Loans (after giving
effect  to any  amount  requested),  shall  not  exceed  the  lesser  of (A) the
Aggregate  Commitment  less the sum of all outstanding  Revolving  Credit Loans,
Alternative Currency Loans and L/C Obligations and (B) the Swingline Commitment;
provided  further that the Swingline  Lender will not make a Swingline Loan from
and after the date  which is one (1) day after it has  received  written  notice
from the  Administrative  Agent (upon the request of the Required  Lenders) that
one or more of the  applicable  conditions to Extensions of Credit  specified in
Section 5.3 is not then satisfied  until such conditions are satisfied or waived
in accordance  with the provisions of this  Agreement (and the Swingline  Lender
shall be  entitled  to  conclusively  rely on any such  notice and shall have no
obligation to  independently  investigate  the accuracy of such notice and shall
have no liability to the Borrower in respect thereof if such notice proves to be
inaccurate).

(b) Sweep Plus Service  Program.  On each Business Day, the  Administrative
Agent shall  calculate the Net Cash  Position.  If the Net Cash Position is less
than zero, then the Borrower shall be deemed to have irrevocably  requested that
the Swingline Lender make a Swingline Loan to the Borrower in an amount equal to
the lesser of (i) an amount, which when rounded up to the nearest $1,000, equals
or exceeds the amount of the deficit Net Cash Position and (ii) an amount, which
when added to the aggregate principal amount of all outstanding  Swingline Loans
(after giving effect to any amount  requested),  shall not exceed the lesser of,
based upon the Dollar Amount of all outstanding  Loans and L/C Obligations,  (A)
the Aggregate Commitment less the sum of all outstanding Revolving Credit Loans,
all outstanding  Alternative  Currency Loans and the L/C Obligations and (B) the
Swingline  Commitment;  provided,  however, that the obligation of the Swingline
Lender to make any such  Swingline  Loan to the Borrower shall be subject to all
the terms and conditions  hereof  (including,  without  limitation,  Section 5.3
hereof).

(c) Payment of Principal and Interest.  Principal and interest on Swingline
Loans deemed requested  pursuant to Section 2.3(b) hereof shall be paid pursuant
to the terms and  conditions  of the Sweep  Plus  Service  Program  without  any
deduction,  setoff  or  counterclaim  whatsoever.   Principal  and  interest  on
Swingline Loans requested  pursuant to Section 2.3 hereof shall be paid pursuant
to the terms of this  Agreement.  Unless sooner paid pursuant to the  provisions
hereof or the provisions of the Sweep Plus Service Program, the principal of the
Swingline Loans shall be paid in full,  together with accrued interest  thereon,
on the Swingline Termination Date.

(d) Refunding.

(i) Swingline  Loans shall be refunded by the Lenders on demand by the
Swingline  Lender.  Such  refundings  shall be made by the Lenders in accordance
with their respective  Commitment  Percentages and shall thereafter be reflected
as  Revolving  Credit  Loans of the  Lenders  on the  books and  records  of the
Administrative   Agent.  Each  Lender  shall  fund  its  respective   Commitment
Percentage  of  Revolving  Credit  Loans as  required to repay  Swingline  Loans
outstanding to the Swingline  Lender upon demand by the Swingline  Lender but in
no event later than 2:00 p.m.  (Charlotte time) on the next succeeding  Business
Day after such demand is made.  No Lender's  obligation  to fund its  respective
Commitment  Percentage  of a  Swingline  Loan  shall be  affected  by any  other
Lender's  failure to fund its  Commitment  Percentage of a Swingline  Loan,  nor
shall any Lender's  Commitment  Percentage  be increased as a result of any such
failure of any other  Lender to fund its  Commitment  Percentage  of a Swingline
Loan.

(ii) The  Borrower  shall pay to the  Swingline  Lender on demand  the
amount of such Swingline  Loans to the extent amounts  received from the Lenders
are not sufficient to refund in full the  outstanding  Swingline Loans requested
or required to be refunded.  In addition,  the Borrower  hereby  authorizes  the
Administrative  Agent to charge any account  maintained by the Borrower with the
Swingline  Lender (up to the amount  available  therein) in order to immediately
pay the  Swingline  Lender  the  amount of such  Swingline  Loans to the  extent
amounts  received  from  the  Lenders  are not  sufficient  to repay in full the
outstanding Swingline Loans requested or required to be refunded. If any portion
of any such amount paid to the  Swingline  Lender  shall be  recovered  by or on
behalf of the Borrower from the Swingline Lender in bankruptcy or otherwise, the
loss of the amount so recovered shall be ratably shared among all the Lenders in
accordance with their respective  Commitment  Percentages (unless the amounts so
recovered by or on behalf of the Borrower  pertain to a Swingline  Loan extended
after the occurrence and during the  continuance of an Event of Default of which
the Administrative  Agent has received notice in the manner required pursuant to
Section 12.5 and which such Event of Default has not been waived by the Required
Lenders or the Lenders, as applicable).

(iii) Each  Lender  acknowledges  and agrees  that its  obligation  to
refund  Swingline  Loans in  accordance  with the terms of this  Section  2.3 is
absolute  and  unconditional  and  shall  not be  affected  by any  circumstance
whatsoever,  including,  without limitation,  non-satisfaction of the conditions
set forth in Article V.  Further,  each Lender agrees and  acknowledges  that if
prior to the  refunding  of any  outstanding  Swingline  Loans  pursuant to this
Section  2.3, one of the events  described in Section  11.1(i) or (j) shall have
occurred,  each Lender will, on the date the applicable  Revolving  Credit Loans
would have been made,  purchase  an  undivided  participating  interest  in such
Swingline  Loans to be refunded in an amount equal to its Commitment  Percentage
of the aggregate  amount of such Swingline  Loans.  Each Lender will immediately
transfer to the Swingline Lender, in immediately  available funds, the amount of
its  participation and upon receipt thereof the Swingline Lender will deliver to
such  Lender a  certificate  evidencing  such  participation  dated  the date of
receipt  of such  funds and for such  amount.  Whenever,  at any time  after the
Swingline  Lender has  received  from any  Lender  such  Lender's  participating
interest in a Swingline  Loan,  the  Swingline  Lender  receives  any payment on
account  thereof,  the  Swingline  Lender  will  distribute  to such  Lender its
participating  interest in such amount  (appropriately  adjusted, in the case of
interest  payments,  to reflect  the period of time during  which such  Lender's
participating interest was outstanding and funded).

(iv) In the  event  that  any  Lender  fails  to make  payment  to the
Swingline  Lender of any amount due under this Section  2.3, the  Administrative
Agent, on behalf of the Swingline Lender,  shall be entitled to receive,  retain
and apply against such obligation the principal and interest  otherwise  payable
to such Lender  hereunder until the Swingline  Lender receives such payment from
such Lender or such obligation is otherwise fully satisfied.  In addition to the
foregoing,  if for any reason any Lender fails to make payment to the  Swingline
Lender of any amount due under this Section 2.3, such Lender shall be deemed, at
the option of the Administrative  Agent, to have unconditionally and irrevocably
purchased from the Swingline Lender,  without recourse or warranty, an undivided
interest and  participation in the applicable  Swingline Loan, and such interest
and  participation  may be recovered  from such Lender  together  with  interest
thereon  at the  Federal  Funds  Effective  Rate for each day  during the period
commencing on the date of demand and ending on the date such amount is received.

SECTION 2.4 Procedure for Advances of Revolving  Credit Loans,  Alternative
Currency Loans and Swingline Loans.

(a) Requests for Borrowing.

(i)  Revolving  Credit  Loans  and  Alternative  Currency  Loans.  The
Borrower shall give the  Administrative  Agent  irrevocable prior written notice
substantially in the form attached hereto as Exhibit B (a "Notice of Borrowing")
not later than 12:00 p.m.  (Charlotte time) (A) on the same Business Day as each
Base Rate Loan  requested  under this  Section  2.4(a),  (B) at least  three (3)
Business  Days  before  each LIBOR Rate Loan  denominated  in Dollars and (C) at
least four (4)  Business  Days  before  each LIBOR Rate Loan  denominated  in an
Alternative Currency, of its intention to borrow, specifying:

(1) the date of such borrowing, which shall be a Business Day;

(2)  if  such  Loan  is  to  be a  Revolving  Credit  Loan  or an
Alternative Currency Loan;

(3) if such Loan is to be a Revolving  Credit Loan,  whether such
Revolving Credit Loan shall be a LIBOR Rate Loan or a Base Rate Loan;

(4) the  amount of such  borrowing,  which  shall be in an amount
equal to the amount of the  Aggregate  Commitment  or the  Alternative
Currency Commitment, as applicable, then available to the Borrower, or
if less,  (1) with  respect to Base Rate Loans  (other than  Swingline
Loans),  in an aggregate  principal  amount of  $3,000,000  or a whole
multiple of  $1,000,000 in excess  thereof,  (2) with respect to LIBOR
Rate Loans denominated in Dollars, in an aggregate principal amount of
$5,000,000 or a whole multiple of $1,000,000 in excess thereof and (3)
with  respect  to  LIBOR  Rate  Loans  denominated  in an  Alternative
Currency,  in an aggregate  principal  Alternative  Currency Amount of
$2,000,000 or a whole multiple of $1,000,000 in excess thereof; and

(5) if such Loan is to be a LIBOR Rate Loan,  the duration of the
Interest Period applicable thereto.

A Notice of Borrowing received after 12:00 p.m. (Charlotte time) shall be deemed
received on the next  Business  Day.  The  Administrative  Agent shall  promptly
notify the Lenders of each Notice of Borrowing.

(ii) Swingline Loans. Swingline Loans shall be requested in the manner
set forth in Section 2.3.

(b) Disbursements.

(i) Revolving Credit Loans. Not later than 2:00 p.m.  (Charlotte time)
on the proposed  borrowing date for any Revolving  Credit Loan, each Lender will
make available to the Administrative  Agent, for the account of the Borrower, at
the office of the Administrative Agent in Dollars in funds immediately available
to  the  Administrative  Agent,  such  Lender's  Commitment  Percentage  of  the
Revolving  Credit Loan to be made on such borrowing  date.  The Borrower  hereby
irrevocably authorizes the Administrative Agent to disburse the proceeds of each
borrowing requested pursuant to this Section 2.4 in immediately  available funds
by  crediting  or wiring such  proceeds to the deposit  account of the  Borrower
identified  in the most  recent  notice  substantially  in the form of Exhibit C
hereto (a "Notice of Account  Designation")  delivered  by the  Borrower  to the
Administrative  Agent or as may be otherwise requested by the Borrower from time
to time (subject to the reasonable consent of the Administrative Agent). Subject
to Section 4.7  hereof,  the  Administrative  Agent  shall not be  obligated  to
disburse  the portion of the  proceeds of any  Revolving  Credit Loan  requested
pursuant  to this  Section  2.4 to the  extent  that  any  Lender  has not  made
available  to  the  Administrative  Agent  its  Commitment  Percentage  of  such
Revolving  Credit  Loan.  Revolving  Credit  Loans to be made for the purpose of
refunding  Swingline  Loans  shall be made by the Lenders as provided in Section
2.3(d).  Revolving  Credit  Loans  to be  made  for  the  purpose  of  refunding
Alternative  Currency  Loans shall be made by the Lenders as provided in Section
2.2(b).

(ii)  Alternative  Currency Loans. Not later than 11:00 a.m. (the time
of the Administrative Agent's Correspondent) on or before the proposed borrowing
date for any  Alternative  Currency Loan, the  Alternative  Currency Lender will
make available to the Administrative  Agent, for the account of the Borrower, at
the  office  of  the  Administrative  Agent's  Correspondent  in  the  requested
Alternative Currency in funds immediately available to the Administrative Agent,
the  Alternative  Currency Loan to be made on such borrowing  date. The Borrower
hereby irrevocably  authorizes the Administrative Agent to disburse the proceeds
of  each  borrowing  requested  pursuant  to  this  Section  2.4 in  immediately
available  funds by crediting or wiring such proceeds to the deposit  account of
the  Borrower  identified  in the most  recent  Notice  of  Account  Designation
delivered  by the  Borrower to the  Administrative  Agent or as may be otherwise
requested by the Borrower from time to time (subject to the  reasonable  consent
of the Administrative  Agent).  Subject to Section 4.7, the Administrative Agent
shall not be  obligated  to  disburse  the  portion of the  proceeds of any Loan
requested  pursuant  to this  Section  2.4 to the  extent  that the  Alternative
Currency  Lender  has  not  made  available  to the  Administrative  Agent  such
Alternative Currency Loan.

(iii)  Swingline  Loans.  Swingline  Loans shall be  disbursed  in the
manner set forth in Section 2.3.

SECTION 2.5 Repayment of Loans.

(a) Repayment on the Revolving Credit Termination Date. The Borrower hereby
agrees to repay the  outstanding  principal  amount of (i) all Revolving  Credit
Loans in full in Dollars on the  Revolving  Credit  Termination  Date,  (ii) all
Alternative  Currency  Loans in full in the  Alternative  Currency in which each
Alternative   Currency  Loan  was  initially  funded  on  the  Revolving  Credit
Termination  Date  and  (iii)  all  Swingline  Loans in full in  Dollars  on the
Swingline  Termination Date (or, if earlier, in accordance with Section 2.3(d)),
together, in each case, with all accrued but unpaid interest thereon.

(b) Mandatory Repayment of Revolving Credit Loans.

(i)  Aggregate  Commitment.  If at  any  time  (as  determined  by the
Administrative  Agent under Section 2.5(b)(v)),  based upon the Dollar Amount of
all  outstanding  Loans and L/C  Obligations,  (A) solely  because  of  currency
fluctuation,  the  outstanding  principal  amount of all Revolving  Credit Loans
exceeds one hundred and five percent (105%) of the Aggregate Commitment less the
Swingline Commitment less the sum of all outstanding  Alternative Currency Loans
and L/C  Obligations  or (B) for any other  reason,  the  outstanding  principal
amount of all Revolving  Credit Loans exceeds the Aggregate  Commitment less the
Swingline Commitment less the sum of all outstanding  Alternative Currency Loans
and L/C  Obligations,  then, in each such case, the Borrower shall (I) first, if
(and to the extent)  necessary  to  eliminate  such  excess,  immediately  repay
outstanding Swingline Loans (and/or reduce any pending request for such Loans on
such day by the  Dollar  Amount of such  excess),  (II)  second,  if (and to the
extent)  necessary  to  eliminate  such excess,  immediately  repay  outstanding
Revolving  Credit  Loans which are Base Rate Loans by the Dollar  Amount of such
excess  (and/or  reduce any  pending  request  for such Loans on such day by the
Dollar Amount of such excess),  (III) third, if (and to the extent) necessary to
eliminate such excess,  immediately repay Revolving Credit Loans which are LIBOR
Rate Loans and  Alternative  Currency Loans (and/or reduce any pending  requests
for a borrowing or continuation or conversion of such Loans submitted in respect
of such Loans on such day by the Dollar  Amount of such excess) and (IV) fourth,
with respect to any Letters of Credit then  outstanding,  make a payment of cash
collateral into a cash collateral account opened by the Administrative Agent for
the benefit of the Lenders in an amount equal to the aggregate  then undrawn and
unexpired  amount of such Letters of Credit (such cash  collateral to be applied
in accordance with Section 11.2(b)).

(ii) Alternative Currency Commitment. If at any time (as determined by
the Administrative Agent under Section 2.5(b)(v)),  based upon the Dollar Amount
of all  outstanding  Loans and L/C  Obligations,  (A) solely because of currency
fluctuation,  the outstanding principal amount of all Alternative Currency Loans
exceeds the lesser of (1) one hundred and five percent  (105%) of the  Aggregate
Commitment  less  the  Swingline  Commitment  less  the  sum of all  outstanding
Revolving  Credit Loans and L/C Obligations and (2) one hundred and five percent
(105%) of the Alternative  Currency  Commitment or (B) for any other reason, the
outstanding  principal  amount of all  Alternative  Currency  Loans  exceeds the
lesser of (1) the Aggregate  Commitment  less the Swingline  Commitment less the
sum of all  outstanding  Revolving  Credit Loans and L/C Obligations and (2) the
Alternative Currency  Commitment,  then, in each such case, such excess shall be
immediately  repaid, in the currency in which such Alternative  Currency Loan or
Alternative  Currency  Loans  were  initially  funded,  by the  Borrower  to the
Administrative Agent for the account of the Alternative Currency Lender.

(iii)  Swingline  Commitment.  If at any  time (as  determined  by the
Administrative  Agent under Section 2.5(b)(v)),  based upon the Dollar Amount of
all outstanding  Loans and L/C  Obligations,  and for any reason the outstanding
principal  amount of all Swingline Loans exceeds the lesser of (1) the Aggregate
Commitment less the sum of all outstanding  Revolving Credit Loans,  Alternative
Currency Loans and L/C  Obligations and (2) the Swingline  Commitment,  then, in
each such case,  such excess shall be immediately  repaid by the Borrower to the
Administrative Agent for the account of the Swingline Lender.

(iv)  Excess L/C  Obligations.  If at any time (as  determined  by the
Administrative Agent under Section 2.5(b)(v)) and for any reason, based upon the
Dollar Amount of all  outstanding  Loans and L/C  Obligations,  the  outstanding
amount of all L/C Obligations exceeds the lesser of (A) the Aggregate Commitment
less the  Swingline  Commitment  less the sum of the  amount of all  outstanding
Revolving  Credit  Loans  and  Alternative   Currency  Loans  and  (B)  the  L/C
Commitment,  then, in each such case,  the Borrower shall make a payment of cash
collateral into a cash collateral account opened by the Administrative Agent for
the benefit of the Lenders in an amount equal to the aggregate  then undrawn and
unexpired  amount of such Letters of Credit (such cash  collateral to be applied
in accordance with Section 11.2(b)).

(v)  Compliance  and Payments.  The  Borrower's  compliance  with this
Section 2.5(b) shall be tested from time to time by the Administrative  Agent at
its sole  discretion,  but in any event shall be tested on (A) the date on which
the  Borrower  requests  the  Lenders  to make a  Revolving  Credit  Loan or the
Alternative  Currency Lender to make an Alternative Currency Loan or the Issuing
Lender to issue a Letter of Credit and (B) the date an  interest  payment is due
under Section 4.1(e).  Each such repayment pursuant to this Section 2.5(b) shall
be  accompanied  by any amount  required  to be paid  pursuant  to Section  4.11
hereof.

(c) Optional Repayments. The Borrower may at any time and from time to time
repay the  Loans,  in whole or in part,  upon at least four (4)  Business  Days'
irrevocable  notice to the  Administrative  Agent with  respect  to  Alternative
Currency Loans, upon at least three (3) Business Days' irrevocable notice to the
Administrative Agent with respect to LIBOR Rate Loans denominated in Dollars and
upon one (1) Business Day irrevocable notice with respect to Base Rate Loans and
Swingline  Loans,  substantially  in the form  attached  hereto as  Exhibit D (a
"Notice of Prepayment"),  specifying (i) the date of repayment,  (ii) the amount
of  repayment,  (iii)  whether  the  repayment  is of  Revolving  Credit  Loans,
Alternative Currency Loans,  Swingline Loans, or a combination thereof,  and, if
of a  combination  thereof,  the amount  allocable  to each and (iv) whether the
repayment is of LIBOR Rate Loans denominated in an Alternative  Currency,  LIBOR
Rate Loans  denominated in Dollars,  Base Rate Loans, or a combination  thereof,
and, if of a combination  thereof, the amount allocable to each. Upon receipt of
such notice, the Administrative  Agent shall promptly notify each Lender. If any
such  notice is given,  the amount  specified  in such  notice  shall be due and
payable on the date set forth in such notice.  Partial repayments shall be in an
aggregate  amount (i) of $3,000,000 or a whole  multiple of $1,000,000 in excess
thereof with respect to Base Rate Loans (other than  Swingline  Loans),  (ii) of
$5,000,000 or a whole  multiple of $1,000,000 in excess  thereof with respect to
LIBOR Rate Loans denominated in Dollars, (iii) of $2,000,000 or a whole multiple
of $1,000,000 in excess  thereof  (based upon the  Alternative  Currency  Amount
thereof) with respect to Alternative  Currency Loans and (iv) permitted pursuant
to the terms and  conditions of the Sweep Plus Service  Program (or as otherwise
agreed to by the Swingline  Lender and the Borrower).  Each such repayment shall
be  accompanied  by any amount  required  to be paid  pursuant  to Section  4.11
hereof.

(d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not repay
any LIBOR Rate Loan on any day other than on the last day of the Interest Period
applicable  thereto unless such repayment is accompanied by any amount  required
to be paid pursuant to Section 4.11 hereof.

(e) Hedging Agreements. No repayment or prepayment pursuant to this Section
2.5 shall affect any obligations of the Borrower's obligations under any Hedging
Agreement.

(f) Payment of Interest and Other  Expenses.  Each  repayment or prepayment
pursuant to this  Section 2.5 shall be  accompanied  by accrued  interest on the
amount repaid.

SECTION 2.6 Notes.

(a)  Revolving  Credit  Notes.  Except as  otherwise  provided  in  Section
13.10(a) - (e), each Lender's  Revolving  Credit Loans and the obligation of the
Borrower to repay such  Revolving  Credit Loans shall be evidenced by a separate
Revolving  Credit  Note  executed by the  Borrower  payable to the order of such
Lender.

(b)  Alternative  Currency  Note.  The  Alternative  Currency Loans and the
obligation  of the Borrower to repay such  Alternative  Currency  Loans shall be
evidenced  by a separate  Alternative  Currency  Note  executed by the  Borrower
payable to the order of the Alternative Currency Lender.

(c) Swingline  Note. The Swingline Loans and the obligation of the Borrower
to repay such  Swingline  Loans shall be evidenced by a separate  Swingline Note
executed by the Borrower payable to the order of the Swingline Lender.

SECTION  2.7  Permanent  Reduction  of the  Aggregate  Commitment  and  the
Alternative Currency Commitment.

(a) Voluntary Reduction.  The Borrower shall have the right at any time and
from time to time,  upon at least five (5) Business Days prior written notice to
the Administrative Agent, to permanently reduce, without premium or penalty, (i)
the entire  Aggregate  Commitment  at any time or (ii) portions of the Aggregate
Commitment,  from time to time, in an aggregate  principal  amount not less than
$3,000,000 or any whole multiple of $1,000,000 in excess thereof;  provided that
in no event shall the Aggregate Commitment be reduced to an amount less than the
face amount of all Letters of Credit then outstanding.

(b)  Mandatory  Permanent  Reduction.  The  Aggregate  Commitment  shall be
permanently reduced by the following amounts:

(i) 100% of the Net Cash  Proceeds  received by the Borrower or any of
its Subsidiaries  from any issuance of Debt (other than Debt permitted  pursuant
to Section 10.1);

(ii) 100% of the Net Cash Proceeds  received by the Borrower or any of
its  Subsidiaries  in connection  with any sale of assets  (including its equity
ownership in any Person) unless,  with respect to any sale of assets  consisting
of property, plant or equipment of the Borrower or any of its Subsidiaries,  and
so long as no Default or Event of Default has occurred and is  continuing,  such
Net Cash Proceeds are reinvested in assets that are similar or  complimentary to
the assets sold (or otherwise in a manner acceptable to the Administrative Agent
and the Required Lenders,  in their sole discretion)  within two hundred seventy
(270) days after receipt of such Net Cash Proceeds;  provided,  that this clause
(ii) shall not apply with  respect to (A) any asset sales  permitted  by Section
10.5(a) - (g), (B) up to an aggregate  amount of $5,000,000 of the aggregate Net
Cash  Proceeds  received by the Borrower and the  Domestic  Subsidiaries  of the
Borrower  during the term of this  Agreement  pursuant  to this  clause (ii) and
clause  (iii)  below and (C) up to an  aggregate  amount of  $10,000,000  of the
aggregate Net Cash Proceeds received by the Foreign Subsidiaries of the Borrower
during the term of this Agreement  pursuant to this clause (ii) and clause (iii)
below;

(iii) 100% of the Net Cash Proceeds received by the Borrower or any of
its  Subsidiaries  under any policy of insurance of such Person or in connection
with any condemnation  proceeding involving property of such Person,  unless, so
long as no Default or Event of Default has occurred and is continuing,  such Net
Cash Proceeds are utilized by the Borrower or such Subsidiary within two hundred
seventy (270) days of receipt of such Net Cash Proceeds to replace or repair any
of its assets  damaged  in  connection  with the  related  claim or  proceeding;
provided,  that this clause  (iii) shall not apply with  respect to (A) up to an
aggregate  amount of $5,000,000  of the aggregate Net Cash Proceeds  received by
the Borrower and the Domestic  Subsidiaries  of the Borrower  during the term of
this  Agreement  pursuant to this clause (iii) and clause (ii) above and (ii) up
to an  aggregate  amount  of  $10,000,000  of the  aggregate  Net Cash  Proceeds
received by the Foreign  Subsidiaries  of the  Borrower  during the term of this
Agreement pursuant to this clause (iii) and clause (ii) above;

(iv) 100% of the Net Cash Proceeds  received by the Borrower or any of
its Domestic  Subsidiaries  from any offering of equity  securities  (other than
offerings  of equity  securities  made solely to the  Borrower,  any  Subsidiary
thereof or any Affiliate thereof).

(c) Corresponding Reductions. Each partial permanent reduction permitted or
required pursuant to this Section 2.7 shall (i) permanently  reduce the Lenders'
Commitments pro rata in accordance with their respective Commitment  Percentages
and (ii)  permanently  reduce the  Alternative  Currency  Commitment pro rata in
accordance with the relative amount of the Alternative  Currency  Commitment and
the Aggregate Commitment.

(d) Corresponding  Payments. Each permanent reduction permitted or required
pursuant to this  Section  2.7 shall be  accompanied  by a payment of  principal
sufficient  to  reduce  (i)  the  aggregate  Dollar  Amount  of all  outstanding
Revolving  Credit Loans,  Alternative  Currency  Loans,  Swingline Loans and L/C
Obligations, as applicable,  after such reduction to the Aggregate Commitment as
so reduced and (ii) to the extent that the  Alternative  Currency  Commitment is
reduced,  the aggregate  Dollar Amount of all outstanding  Alternative  Currency
Loans to the  Alternate  Currency  Commitment  as so reduced.  If the  Aggregate
Commitment  as so reduced is less than the aggregate  amount of all  outstanding
Letters of Credit,  the Borrower shall be required to deposit cash collateral in
a cash collateral account opened by the Administrative  Agent in an amount equal
to the aggregate  then undrawn and  unexpired  amount of such Letters of Credit.
Such cash collateral  shall be applied in accordance with Section  11.2(b).  Any
reduction of the Aggregate Commitment to zero shall be accompanied by payment of
all outstanding Revolving Credit Loans, Alternative Currency Loans and Swingline
Loans (and  furnishing of cash  collateral  satisfactory  to the  Administrative
Agent for all L/C  Obligations)  and  shall  result  in the  termination  of the
Commitments  and  Credit  Facility.  Such cash  collateral  shall be  applied in
accordance with Section 11.2(b). If the reduction of the Aggregate Commitment or
the Alternative Currency Commitment, as applicable requires the repayment of any
LIBOR Rate Loan,  such repayment  shall be accompanied by any amount required to
be paid pursuant to Section 4.11 hereof.

SECTION 2.8  Termination  of Credit  Facility.  The Credit  Facility  shall
terminate on the earliest of (a) January 15, 2006,  (b) the date of  termination
by the Borrower  pursuant to Section 2.7 or (c) the date of  termination  by the
Administrative Agent on behalf of the Lenders pursuant to Section 11.2(a).

SECTION 2.9 Increase of the Aggregate Commitment.  So long as no Default or
Event of Default shall have occurred and be continuing,  the Borrower shall have
the right from time to time upon not less than thirty  (30) days' prior  written
notice  to the  Administrative  Agent  to  increase  the  Aggregate  Commitment;
provided  that  (i)  no  Lender  shall  have  any  obligation  to  increase  its
Commitment,  (ii) such  requested  increase  shall be in an aggregate  principal
amount of  $2,500,000,  (iii) in no event  shall  the  Aggregate  Commitment  be
increased  to  an  aggregate   amount   greater  than  Fifty   Million   Dollars
($50,000,000)  and (iv) the  Borrower  and an  existing  Lender or a Person  not
theretofore  a  Lender,  as  applicable,  shall  execute a Lender  Addition  and
Acknowledgement  Agreement,  which shall be acknowledged  by the  Administrative
Agent  and  each  Guarantor  and  shall  be in  form  and  substance  reasonably
satisfactory to the Administrative Agent.

(a) Any  increase in the  Aggregate  Commitment  which is  accomplished  by
increasing  the  Commitment  of any Lender  who is at the time of such  increase
party to this Agreement (which Lender shall consent to such increase in its sole
and absolute  discretion)  shall be accomplished as follows:  (i) this Agreement
will be amended by the Borrower,  the Administrative  Agent and the Lender whose
Commitment is being increased (but without any  requirement  that the consent of
any other Lenders be obtained) to reflect the revised  Commitment of each of the
Lenders,  (ii) the Administrative  Agent will update the Register to reflect the
revised Commitment and Commitment  Percentage of each of the Lenders,  (iii) the
outstanding   Revolving   Credit  Loans  and   Commitment   Percentages  of  L/C
Obligations,  Alternative Currency Loans and Swingline Loans will be reallocated
on the  effective  date of such increase  among the Lenders in  accordance  with
their revised Commitment Percentages (and the Lenders agree to make all payments
and adjustments  necessary to effect the reallocation and the Borrower shall pay
any and all costs  required  pursuant to Section  4.11 in  connection  with such
reallocation  if  the  Administrative  Agent  reasonably  determines  that  such
reallocation  requires a repayment of  outstanding  Revolving  Credit Loans) and
(iv) if requested,  the Borrower will deliver new a Revolving Credit Note to the
Lender whose  Commitment is being  increased  reflecting the revised  Commitment
amount of such Lender;

(b) Any  increase in the  Aggregate  Commitment  which is  accomplished  by
addition of a new Lender under this Agreement  shall be accomplished as follows:
(i) such new Lender shall be subject to the consent of the Administrative  Agent
and the Borrower,  which consent shall not be unreasonably  withheld,  (ii) this
Agreement will be amended by the Borrower, the Administrative Agent and such new
Lender (but  without any  requirement  that the consent of any other  Lenders be
obtained)  to reflect  the  addition  of such new Lender as a Lender  hereunder,
(iii) the  Administrative  Agent will update the Register to reflect the revised
Commitment  and  Commitment   Percentage  of  each  of  the  Lenders,  (iv)  the
outstanding   Revolving   Credit  Loans  and   Commitment   Percentages  of  L/C
Obligations,  Alternative Currency Loans and Swingline Loans will be reallocated
on the  effective  date of such increase  among the Lenders in  accordance  with
their revised Commitment Percentages (and the Lenders agree to make all payments
and adjustments  necessary to effect the reallocation and the Borrower shall pay
any and all costs  required  pursuant to Section  4.11 in  connection  with such
reallocation  if  the  Administrative  Agent  reasonably  determines  that  such
reallocation requires a repayment of outstanding Revolving Credit Loans) and (v)
if  requested  the  Borrower  will  deliver a Revolving  Credit Note to such new
Lender; and

(c)  Notwithstanding  anything to the contrary contained in this Agreement,
upon any  voluntary  reduction of the Aggregate  Commitment  pursuant to Section
2.7, the Borrower  shall no longer have the option to request an increase in the
Aggregate Commitment pursuant to this Section 2.9.

ARTICLE III

LETTER OF CREDIT FACILITY

SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, the
Issuing Lender,  in reliance on the agreements of the other Lenders set forth in
Section 3.4(a),  agrees to issue standby letters of credit ("Letters of Credit")
for the  account of the  Borrower  on any  Business  Day from the  Closing  Date
through but not including the Revolving Credit  Termination Date in such form as
may be approved  from time to time by the  Issuing  Lender;  provided,  that the
Issuing  Lender shall have no obligation to issue any Letter of Credit if, after
giving effect to such issuance,  based upon the Dollar Amount of all outstanding
Loans and L/C  Obligations,  (a) the L/C Obligations  would exceed the lesser of
(i) the L/C  Commitment  or (ii) the  Aggregate  Commitment  less the  Swingline
Commitment  less the aggregate  principal  amount of all  outstanding  Revolving
Credit Loans and Alternative  Currency Loans or (b) the Available  Commitment of
any  Lender  would be less  than  zero.  Each  Letter  of  Credit  shall  (i) be
denominated in Dollars in a minimum amount of $100,000, (ii) be a standby letter
of  credit  issued  to  support  obligations  of  the  Borrower  or  any  of its
Subsidiaries,  contingent  or  otherwise,  incurred  in the  ordinary  course of
business,  (iii) expire on a date satisfactory to the Issuing Lender, which date
shall  be no  later  than  ninety  (90)  days  prior  to  the  Revolving  Credit
Termination  Date and (iv) be subject to the Uniform  Customs  and/or ISP 98, as
set forth in the Application or as determined by the Issuing Lender, and, to the
extent not inconsistent therewith,  the laws of the State of North Carolina. The
Issuing  Lender shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance  would  conflict with, or cause the Issuing Lender or
any L/C  Participant  to exceed  any limits  imposed  by,  any  Applicable  Law.
References herein to "issue" and derivations  thereof with respect to Letters of
Credit shall also include extensions or modifications of any existing Letters of
Credit, unless the context otherwise requires.

SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower,  may
from time to time  request  that the Issuing  Lender issue a Letter of Credit by
delivering  to the  Issuing  Lender  at the  Administrative  Agent's  Office  an
Application  therefor,  completed to the satisfaction of the Issuing Lender, and
such other  certificates,  documents  and other  papers and  information  as the
Issuing  Lender may reasonably  request.  Upon receipt of any  Application,  the
Issuing Lender shall process such  Application and the  certificates,  documents
and other  papers and  information  delivered to it in  connection  therewith in
accordance with its customary  procedures and shall,  subject to Section 3.1 and
Article V hereof,  promptly issue the Letter of Credit requested thereby (but in
no event  shall the  Issuing  Lender be  required  to issue any Letter of Credit
earlier  than four (4)  Business  Days  after  its  receipt  of the  Application
therefor  and all such  other  certificates,  documents  and  other  papers  and
information  relating  thereto) by issuing the original of such Letter of Credit
to the  beneficiary  thereof or as otherwise may be agreed by the Issuing Lender
and the Borrower;  provided that the Issuing  Lender shall not issue a Letter of
Credit  from and  after  the date  which  is one (1) day  after it has  received
written notice from the  Administrative  Agent (upon the request of the Required
Lenders) that one or more of the  applicable  conditions to Extensions of Credit
specified  in  Section  5.3 is not then  satisfied  until  such  conditions  are
satisfied or waived in accordance with the provisions of this Agreement (and the
Issuing  Lender  shall be entitled to  conclusively  rely on any such notice and
shall have no  obligation  to  independently  investigate  the  accuracy of such
notice and shall have no liability  to the  Borrower in respect  thereof if such
notice proves to be  inaccurate).  The Issuing Lender shall promptly  furnish to
the Borrower a copy of such Letter of Credit and promptly  notify each Lender of
the issuance  and upon  request by any Lender,  furnish to such Lender a copy of
such Letter of Credit and the amount of such Lender's participation therein.

SECTION 3.3 Commissions and Other Charges.

(a) The Borrower shall pay to the Administrative  Agent, for the account of
the Issuing Lender and the L/C Participants,  a letter of credit commission with
respect to each  Letter of Credit in an amount  equal to the face amount of such
Letter of Credit  multiplied by the Applicable Margin with respect to LIBOR Rate
Loans  (determined  on a per annum  basis).  Such  commission  shall be  payable
quarterly in arrears on the last  Business Day of each  calendar  quarter and on
the Revolving Credit Termination Date. The Administrative Agent shall,  promptly
following  its receipt  thereof,  distribute  to the Issuing  Lender and the L/C
Participants  all  commissions  received  pursuant  to this  Section  3.3(a)  in
accordance with their respective Commitment Percentages.

(b) In addition to the  foregoing  commission,  the Borrower  shall pay the
Issuing  Lender an  issuance  fee with  respect  to each  Letter of Credit in an
amount  equal  to the  face  amount  of such  Letter  of  Credit  multiplied  by
one-eighth of one percent (0.125%) per annum. Such issuance fee shall be payable
quarterly in arrears on the last  Business Day of each  calendar  quarter and on
the Revolving Credit Termination Date.

(c) In addition to the foregoing fees and  commissions,  the Borrower shall
pay or  reimburse  the Issuing  Lender for such normal and  customary  costs and
expenses as are incurred or charged by the Issuing Lender in issuing,  effecting
payment under, amending or otherwise administering any Letter of Credit.

SECTION 3.4 L/C Participations.

(a) The Issuing  Lender  irrevocably  agrees to grant and hereby  grants to
each L/C  Participant,  and,  to induce the Issuing  Lender to issue  Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby  accepts  and  purchases  from the Issuing  Lender,  on the terms and
conditions  hereinafter  stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's  Commitment  Percentage in
the Issuing Lender's  obligations and rights under and in respect of each Letter
of Credit  issued  hereunder  and the amount of each  draft paid by the  Issuing
Lender thereunder.  Each L/C Participant  unconditionally and irrevocably agrees
with the Issuing  Lender that, if a draft is paid under any Letter of Credit for
which the Issuing  Lender is not  reimbursed  in full by the Borrower  through a
Revolving  Credit  Loan or  otherwise  in  accordance  with  the  terms  of this
Agreement,  such L/C Participant  shall pay to the Issuing Lender upon demand at
the Issuing  Lender's  address for notices  specified  herein an amount equal to
such L/C Participant's Commitment Percentage of the amount of such draft, or any
part thereof, which is not so reimbursed.

(b)  Upon  becoming  aware  of any  amount  required  to be paid by any L/C
Participant to the Issuing  Lender  pursuant to Section 3.4(a) in respect of any
unreimbursed  portion of any payment made by the Issuing Lender under any Letter
of Credit,  the Issuing  Lender shall notify each L/C  Participant of the amount
and due date of such required payment and such L/C Participant  shall pay to the
Issuing  Lender the amount  specified on the  applicable  due date.  If any such
amount is paid to the Issuing  Lender after the date such  payment is due,  such
L/C Participant  shall pay to the Issuing Lender on demand,  in addition to such
amount,  the product of (i) such amount,  times (ii) the daily  average  Federal
Funds Rate as determined by the Administrative  Agent during the period from and
including  the date such  payment  is due to the date on which  such  payment is
immediately  available  to the  Issuing  Lender,  times  (iii)  a  fraction  the
numerator of which is the number of days that elapse  during such period and the
denominator of which is 360. A certificate of the Issuing Lender with respect to
any amounts  owing under this Section  3.4(b) shall be conclusive in the absence
of  manifest  error.  With  respect  to  payment  to the  Issuing  Lender of the
unreimbursed  amounts  described in this Section 3.4(b), if the L/C Participants
receive  notice that any such  payment is due (A) prior to 1:00 p.m.  (Charlotte
time) on any Business  Day, such payment shall be due that Business Day, and (B)
after 1:00 p.m.  (Charlotte time) on any Business Day, such payment shall be due
on the following Business Day.

(c) Whenever,  at any time after the Issuing  Lender has made payment under
any Letter of Credit and has received from any L/C  Participant  its  Commitment
Percentage  of such  payment in  accordance  with this  Section 3.4, the Issuing
Lender receives any payment  related to such Letter of Credit (whether  directly
from the Borrower or otherwise),  or any payment of interest on account thereof,
the Issuing Lender will  distribute to such L/C  Participant  its pro rata share
thereof;  provided,  that in the event  that any such  payment  received  by the
Issuing Lender shall be required to be returned by the Issuing Lender,  such L/C
Participant  shall return to the Issuing Lender the portion  thereof  previously
distributed by the Issuing Lender to it.

SECTION 3.5 Reimbursement  Obligation of the Borrower.  In the event of any
drawing  under any Letter of Credit,  the Borrower  agrees to reimburse  (either
with the proceeds of a Revolving Credit Loan as provided for in this Section 3.5
or with funds from other sources),  in the same day funds, the Issuing Lender on
each date on which the  Issuing  Lender  notifies  the  Borrower of the date and
amount of a draft  paid  under any  Letter of Credit  for the amount of (a) such
draft so paid and (b) any amounts  referred to in Section 3.3(c) incurred by the
Issuing  Lender in  connection  with such  payment.  Unless the  Borrower  shall
immediately notify the Issuing Lender that the Borrower intends to reimburse the
Issuing Lender for such drawing from other sources or funds,  the Borrower shall
be deemed to have timely given a Notice of Borrowing to the Administrative Agent
requesting that the Lenders make a Revolving Credit Loan bearing interest at the
Base  Rate on such  date in the  amount  of (a)  such  draft so paid and (b) any
amounts  referred  to in  Section  3.3(c)  incurred  by the  Issuing  Lender  in
connection with such payment, and the Lenders shall make a Revolving Credit Loan
bearing interest at the Base Rate in such amount, the proceeds of which shall be
applied to reimburse  the Issuing  Lender for the amount of the related  drawing
and costs and expenses.  Each Lender acknowledges and agrees that its obligation
to fund a Revolving Credit Loan in accordance with this Section 3.5 to reimburse
the Issuing  Lender for any draft paid under a Letter of Credit is absolute  and
unconditional  and  shall  not  be  affected  by  any  circumstance  whatsoever,
including,  without limitation,  non-satisfaction of the conditions set forth in
Section  2.4(a) or Article V. If the  Borrower  has elected to pay the amount of
such  drawing  with funds from other  sources  and shall fail to  reimburse  the
Issuing Lender as provided above, the unreimbursed  amount of such drawing shall
bear  interest at the rate which would be payable on any  outstanding  Base Rate
Loans which were then overdue from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment in full.

SECTION 3.6 Obligations  Absolute.  The Borrower's  obligations  under this
Article III (including without limitation the Reimbursement Obligation) shall be
absolute and  unconditional  under any and all circumstances and irrespective of
any set-off,  counterclaim  or defense to payment which the Borrower may have or
have had against the Issuing Lender or any  beneficiary of a Letter of Credit or
any other Person.  The Borrower also agrees that the Issuing  Lender and the L/C
Participants  shall not be  responsible  for, and the  Borrower's  Reimbursement
Obligation  under Section 3.5 shall not be affected by, among other things,  the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid,  fraudulent or forged,  or any
dispute  between  or among the  Borrower  and any  beneficiary  of any Letter of
Credit or any other party to which such Letter of Credit may be  transferred  or
any claims  whatsoever of the Borrower against any beneficiary of such Letter of
Credit or any such  transferee.  The Issuing  Lender shall not be liable for any
error, omission, interruption or delay in transmission,  dispatch or delivery of
any message or advice,  however  transmitted,  in connection  with any Letter of
Credit,  except for errors or  omissions  caused by the Issuing  Lender's  gross
negligence or willful  misconduct.  The Borrower agrees that any action taken or
omitted by the Issuing  Lender under or in connection  with any Letter of Credit
or the related drafts or documents,  if done in the absence of gross  negligence
or willful misconduct,  shall be binding on the Borrower and shall not result in
any liability of the Issuing Lender or any L/C Participant to the Borrower.  The
responsibility  of the Issuing  Lender to the  Borrower in  connection  with any
draft presented for payment under any Letter of Credit shall, in addition to any
payment  obligation  expressly provided for in such Letter of Credit, be limited
to determining  that the documents  (including each draft)  delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.

SECTION 3.7 Effect of Application.  To the extent that any provision of any
Application  related to any Letter of Credit is inconsistent with the provisions
of this Article III, the provisions of this Article III shall apply.

ARTICLE IV

GENERAL LOAN PROVISIONS

SECTION 4.1 Interest.

(a) Interest Rate Options.  Subject to the  provisions of this Section 4.1,
at the election of the Borrower,  (i) Revolving Credit Loans shall bear interest
at (A) the Base Rate plus the  Applicable  Margin as set forth in Section 4.1(c)
or (B) the LIBOR Rate plus the Applicable Margin as set forth in Section 4.1(c),
(ii)  Alternative  Currency Loans shall bear interest at the LIBOR Rate plus the
Applicable Margin as set forth in Section 4.1(c) and (iii) Swingline Loans shall
bear  interest  at the Base  Rate  plus the  Applicable  Margin  as set forth in
Section 4.1(c);  provided that the LIBOR Rate shall not be available until three
(3) Business Days after the Closing Date.  The Borrower shall select the rate of
interest  and  Interest  Period,  if any,  applicable  to any Loan at the time a
Notice of  Borrowing  is given  pursuant  to Section 2.4 or 3.5 or at the time a
Notice of Conversion/Continuation is given pursuant to Section 4.2. Each Loan or
portion  thereof  bearing  interest based on the Base Rate  (including,  without
limitation,  each  Swingline  Loan) shall be a "Base Rate Loan" and each Loan or
portion thereof bearing  interest based on the LIBOR Rate shall be a "LIBOR Rate
Loan." Any Revolving Credit Loan or any portion thereof as to which the Borrower
has not duly  specified  an interest  rate as provided  herein shall be deemed a
Base Rate Loan  denominated  in Dollars.  Any  Alternative  Currency Loan or any
portion thereof as to which the Borrower has not duly specified an interest rate
as provided  herein shall be deemed a LIBOR Rate Loan with an Interest Period of
one (1) month and shall be made four (4)  Business  Days  after  receipt of such
notice

(b)  Interest  Periods.  In  connection  with each  LIBOR  Rate  Loan,  the
Borrower, by giving notice at the times described in Section 4.1(a), shall elect
an interest period (each,  an "Interest  Period") to be applicable to such Loan,
which  Interest  Period shall be a period of one (1), two (2), three (3), or six
(6) months (or, if available  to all of the  Lenders,  nine (9) months or twelve
(12) months) with respect to each LIBOR Rate Loan; provided that:

(i) the Interest  Period  shall  commence on the date of advance of or
conversion  to any LIBOR Rate Loan and,  in the case of  immediately  successive
Interest Periods,  each successive Interest Period shall commence on the date on
which the immediately preceding Interest Period expires;

(ii) if any Interest  Period would  otherwise  expire on a day that is
not a Business  Day, such  Interest  Period shall expire on the next  succeeding
Business Day; provided, that if any Interest Period with respect to a LIBOR Rate
Loan would otherwise  expire on a day that is not a Business Day but is a day of
the month  after  which no  further  Business  Day  occurs in such  month,  such
Interest Period shall expire on the immediately preceding Business Day;

(iii) any  Interest  Period  with  respect  to a LIBOR  Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no  numerically  corresponding  day in the calendar  month at the end of such
Interest  Period)  shall end on the last  Business Day of the relevant  calendar
month at the end of such Interest Period;

(iv) no Interest  Period  shall  extend  beyond the  Revolving  Credit
Termination Date; and

(v) there shall be no more than six (6) Interest  Periods in effect at
any time.

(c) Applicable Margin. The Applicable Margin provided for in Section 4.1(a)
with respect to any Loan (the "Applicable Margin") shall be based upon the table
set forth below and shall be determined and adjusted quarterly on the date (each
a  "Calculation  Date")  ten (10)  Business  Days  after  the date by which  the
Borrower  provides an Officer's  Compliance  Certificate  for the most  recently
ended fiscal quarter of the Borrower;  provided,  however,  that (a) the initial
Applicable  Margin shall be based on Pricing Level II (as shown below) and shall
remain at Pricing Level II until the first  Calculation Date occurring after the
Closing Date and,  thereafter the Pricing Level shall be determined by reference
to the  Leverage  Ratio (as  calculated  pursuant  to the  formula  set forth in
Section 9.1) as of the last day of the most recently ended fiscal quarter of the
Borrower  preceding the  applicable  Calculation  Date,  and (b) if the Borrower
fails to provide the Officer's Compliance Certificate as required by Section 7.2
for the most  recently  ended  fiscal  quarter  of the  Borrower  preceding  the
applicable  Calculation  Date, the Applicable  Margin from such Calculation Date
shall be  based on  Pricing  Level I (as  shown  below)  until  such  time as an
appropriate  Officer's  Compliance  Certificate  is provided,  at which time the
Pricing Level shall be  determined by reference to the Leverage  Ratio as of the
last day of the most  recently  ended fiscal  quarter of the Borrower  preceding
such  Calculation  Date.  The  Applicable  Margin  shall be  effective  from one
Calculation  Date  until  the  next  Calculation  Date.  Any  adjustment  in the
Applicable  Margin shall be applicable to all Extensions of Credit then existing
or subsequently made or issued.

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

Pricing Level                 Leverage Ratio                 LIBOR Rate                   Base Rate
Applicable Margin           Applicable Margin
----------------------------- ----------------------------- ---------------------------- ---------------------------
----------------------------- ----------------------------- ---------------------------- ---------------------------
I                 Greater than 2.00 to 1.00               2.00%                       1.00%
----------------------------- ----------------------------- ---------------------------- ---------------------------
----------------------------- ----------------------------- ---------------------------- ---------------------------
II                Greater than 1.50 to 1.00
but less than or equal to
2.00 to 1.00                     1.75%                       0.75%
----------------------------- ----------------------------- ---------------------------- ---------------------------
----------------------------- ----------------------------- ---------------------------- ---------------------------
III                Greater than 1.00 to 1.00
but less than or equal to
1.50 to 1.00                     1.50%                       0.50%
----------------------------- ----------------------------- ---------------------------- ---------------------------
----------------------------- ----------------------------- ---------------------------- ---------------------------
IV                Less than or equal to 1.00
to 1.00                        1.25%                       0.25%
----------------------------- ----------------------------- ---------------------------- ---------------------------

(d)  Default  Rate.  Subject  to Section  11.3,  at the  discretion  of the
Administrative Agent or as directed by the Required Lenders, upon the occurrence
and during the  continuance  of any Event of Default,  (i) the Borrower shall no
longer  have  the  option  to  request  LIBOR  Rate  Loans  (including,  without
limitation, Alternative Currency Loans) or Swingline Loans, (ii) all outstanding
LIBOR Rate Loans shall bear  interest  at a rate per annum two  percent  (2%) in
excess of the rate then  applicable  to LIBOR  Rate  Loans  until the end of the
applicable Interest Period and thereafter at a rate equal to two percent (2%) in
excess of the rate then applicable to Base Rate Loans, and (iii) all outstanding
Base Rate Loans and other Obligations  arising hereunder or under any other Loan
Document  shall bear  interest at a rate per annum equal to two percent  (2%) in
excess of the rate then applicable to Base Rate Loans or such other  Obligations
arising  hereunder or under any other Loan Document;  provided that clauses (i),
(ii) and (iii)  shall  apply  immediately  upon the  occurrence  and  during the
continuance of any Event of Default under Sections 11.1(a), 11.1(b), 11.1(i) and
11.1(j).  Interest  shall continue to accrue on the Notes after the filing by or
against the Borrower of any petition  seeking any relief in  bankruptcy or under
any act or law pertaining to insolvency or debtor relief, whether state, federal
or foreign.

(e) Interest Payment and Computation. Interest on each Base Rate Loan shall
be  payable  in  arrears  on the  last  Business  Day of each  calendar  quarter
commencing March 31, 2003; and interest on each LIBOR Rate Loan shall be payable
on the last day of each Interest Period applicable thereto, and if such Interest
Period  extends  over  three  (3)  months,  at the end of each  three  (3) month
interval during such Interest Period.  Interest on LIBOR Rate Loans and all fees
payable  hereunder shall be computed on the basis of a 360-day year and assessed
for the  actual  number of days  elapsed  (except,  to the  extent  that  Pounds
Sterling is agreed upon as an  Alternative  Currency  pursuant to the definition
thereof,  for  Alternative  Currency Loans  denominated in Pounds Sterling which
shall be computed on the basis of a  365/66-day  year) and interest on Base Rate
Loans shall be computed on the basis of a  365/66-day  year and assessed for the
actual number of days elapsed.

(f) Maximum Rate. In no contingency or event whatsoever shall the aggregate
of all amounts  deemed  interest  hereunder or under any of the Notes charged or
collected  pursuant  to the terms of this  Agreement  or  pursuant to any of the
Notes exceed the highest rate permissible under any Applicable Law which a court
of competent  jurisdiction  shall,  in a final  determination,  deem  applicable
hereto.  In the event that such a court determines that the Lenders have charged
or received  interest  hereunder in excess of the highest  applicable  rate, the
rate in effect  hereunder  shall  automatically  be reduced to the maximum  rate
permitted by Applicable Law and the Lenders shall at the Administrative  Agent's
option (i) promptly refund to the Borrower any interest  received by the Lenders
in excess of the maximum  lawful rate or (ii) apply such excess to the principal
balance of the Obligations on a pro rata basis. It is the intent hereof that the
Borrower not pay or contract to pay, and that neither the  Administrative  Agent
nor any Lender  receive or contract to receive,  directly or  indirectly  in any
manner whatsoever,  interest in excess of that which may be paid by the Borrower
under Applicable Law.

(g) Basis of  Accrual.  Subject  to  Section  1.3  hereof,  if the basis of
accrual of interest or fees  expressed  in this  Agreement  with  respect to the
currency of any state that becomes a Participating  Member State, in judgment of
the  Administrative  Agent,  shall not be available because interest rate quotes
for the applicable  national  currency unit are no longer provided,  or shall be
inconsistent  with any convention or practice in the London Interbank Market for
the basis of accrual of interest or fees in respect of the euro, such convention
or practice shall replace such expressed basis effective as of and from the date
on which such state becomes a Participating  Member State;  provided that if any
Loan in the  currency  of such state is  outstanding  immediately  prior to such
date, such replacement shall take effect,  with respect to such Loan, at the end
of the then current Interest Period.

SECTION  4.2 Notice  and Manner of  Conversion  or  Continuation  of Loans.
Provided  that  no  Default  or  Event  of  Default  has  occurred  and is  then
continuing,  the  Borrower  shall  have the  option to (a)  convert  at any time
following  the third  Business  Day after the Closing Date all or any portion of
any  outstanding  Base Rate Loans  (other than  Swingline  Loans) in a principal
amount equal to $5,000,000 or any whole multiple of $1,000,000 in excess thereof
into  one or more  LIBOR  Rate  Loans  denominated  in  Dollars,  (b)  upon  the
expiration of any Interest  Period,  convert all or any part of its  outstanding
LIBOR  Rate  Loans  denominated  in  Dollars  in a  principal  amount  equal  to
$3,000,000 or a whole  multiple of  $1,000,000 in excess  thereof into Base Rate
Loans (other than  Swingline  Loans),  (c) upon the  expiration  of any Interest
Period,  continue  any LIBOR Rate Loan  denominated  in  Dollars in a  principal
amount of $5,000,000 or any whole  multiple of $1,000,000 in excess thereof as a
LIBOR  Rate  Loan  denominated  in  Dollars  or (d) upon the  expiration  of any
Interest  Period,  continue any LIBOR Rate Loan  denominated in any  Alternative
Currency in a principal amount of $2,000,000 or any whole multiple of $1,000,000
in excess thereof (based on the Alternative  Currency Amount thereof) as a LIBOR
Rate Loan in the same  Alternative  Currency.  Whenever the Borrower  desires to
convert  or  continue  Loans as  provided  above,  the  Borrower  shall give the
Administrative  Agent  irrevocable  prior written notice in the form attached as
Exhibit E (a  "Notice  of  Conversion/Continuation")  not later  than 12:00 p.m.
(Charlotte  time)  four (4)  Business  Days  (with  respect  to any  Alternative
Currency Loan) and three (3) Business Days (with respect to any Loan denominated
in Dollars)  before the day on which a proposed  conversion or  continuation  of
such  Loan is to be  effective  specifying  (A) the  Loans  to be  converted  or
continued, and, in the case of any LIBOR Rate Loan to be converted or continued,
the last day of the Interest  Period  therefor,  (B) the  Permitted  Currency in
which such Loan is  denominated,  (C) the effective  date of such  conversion or
continuation  (which shall be a Business Day), (D) the principal  amount of such
Loans to be converted or continued, and (E) the Interest Period to be applicable
to such converted or continued LIBOR Rate Loan. The  Administrative  Agent shall
promptly notify the Lenders of such Notice of Conversion/Continuation.

SECTION 4.3 Fees.

(a) Commitment Fee.  Commencing on the Closing Date, the Borrower shall pay
to the  Administrative  Agent, for the account of the Lenders,  a non-refundable
commitment fee at a rate per annum equal to the  applicable  rate based upon the
table set forth below (the  "Commitment  Fee Rate") on the average  daily unused
portion of the Aggregate  Commitment;  provided  that the amount of  outstanding
Swingline Loans and Alternative  Currency Loans shall not be considered usage of
the Revolving  Credit  Commitment for the purpose of calculating such commitment
fee. The  commitment fee shall be payable in arrears on the last Business Day of
each calendar  quarter  during the term of this Agreement  commencing  March 31,
2003, and on the Revolving Credit Termination Date. Such commitment fee shall be
distributed  by the  Administrative  Agent to the Lenders pro rata in accordance
with the Lenders'  respective  Commitment  Percentages.  The Commitment Fee Rate
shall be determined and adjusted  quarterly on each Calculation Date;  provided,
however,  that (a) the  initial  Commitment  Fee Rate  shall be based on Pricing
Level II (as shown below) and shall  remain at Pricing  Level II until the first
Calculation  Date  occurring  after the Closing Date and  thereafter the Pricing
Level shall be  determined  by reference to the  Leverage  Ratio (as  calculated
pursuant to the formula set forth in Section 9.1) as of the last day of the most
recently  ended  fiscal  quarter  of  the  Borrower   preceding  the  applicable
Calculation  Date,  and (b) if the  Borrower  fails  to  provide  the  Officer's
Compliance  Certificate  as required by Section 7.2 for the most recently  ended
fiscal quarter of the Borrower  preceding the applicable  Calculation  Date, the
Commitment Fee Rate from such Calculation Date shall be based on Pricing Level I
(as  shown  below)  until  such  time  as an  appropriate  Officer's  Compliance
Certificate is provided,  at which time the Pricing Level shall be determined by
reference to the Leverage  Ratio as of the last day of the most  recently  ended
fiscal quarter of the Borrower  preceding such Calculation  Date. The Commitment
Fee Rate shall be effective from one Calculation Date until the next Calculation
Date.

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

Pricing Level                              Leverage Ratio                               Commitment Fee Rate
===================== ================================================================ =============================

I                               Greater than 2.00 to 1.00                                0.35%
--------------------- ---------------------------------------------------------------- -----------------------------
--------------------- ---------------------------------------------------------------- -----------------------------

II             Greater than 1.50 to 1.00 but less than or equal to 2.00 to               0.30%
1.00
--------------------- ---------------------------------------------------------------- -----------------------------
--------------------- ---------------------------------------------------------------- -----------------------------

III             Greater than 1.00 to 1.00 but less than or equal to 1.50 to               0.25%
1.00
--------------------- ---------------------------------------------------------------- -----------------------------
--------------------- ---------------------------------------------------------------- -----------------------------

IV                         Less than or equal to 1.00 to 1.00                            0.20%
--------------------- ---------------------------------------------------------------- -----------------------------

(b)  Administrative  Agent's and Other  Fees.  In order to  compensate  the
Administrative  Agent for  structuring  and syndicating the Extensions of Credit
and  for  its  obligations  hereunder,   the  Borrower  agrees  to  pay  to  the
Administrative  Agent,  for its account,  the fees set forth in the separate fee
letter  agreement  executed by the Borrower and the  Administrative  Agent dated
November 1, 2002.

SECTION 4.4 Manner of Payment.

(a) Loans and Letters of Credit Denominated in Dollars. Each payment by the
Borrower  on account of the  principal  of or  interest on any Loan or Letter of
Credit  denominated  in  Dollars  or of any fee,  commission  or  other  amounts
(including  the  Reimbursement  Obligation  with respect to any Letter of Credit
denominated in Dollars)  payable to the Lenders under this Agreement or any Note
(except as set forth in Section  4.4(b)) shall be made in Dollars not later than
1:00  p.m.  (Charlotte  time) on the  date  specified  for  payment  under  this
Agreement to the Administrative  Agent at the Administrative  Agent's Office for
the  account  of the  Lenders  (other  than  as set  forth  below)  pro  rata in
accordance with their  respective  Commitment  Percentages  (except as specified
below) in  immediately  available  funds and shall be made  without any set-off,
counterclaim or deduction  whatsoever.  Any payment received after such time but
before 2:00 p.m.  (Charlotte time) on such day shall be deemed a payment on such
date for the  purposes  of Section  11.1,  but for all other  purposes  shall be
deemed  to have been  made on the next  succeeding  Business  Day.  Any  payment
received after 2:00 p.m.  (Charlotte  time) shall be deemed to have been made on
the next succeeding  Business Day for all purposes.  With respect to each Letter
of Credit denominated in Dollars,  each payment to the  Administrative  Agent of
the Issuing Lender's fees or L/C Participants' commissions shall be made in like
manner,  but for the account of the Issuing Lender or the L/C  Participants,  as
the case may be.

(b) Alternative  Currency Loans. Each payment by the Borrower on account of
the principal of or interest on the Alternative  Currency Loans shall be made in
such  Alternative   Currency  not  later  than  11:00  a.m.  (the  time  of  the
Administrative  Agent's  Correspondent)  on the date specified for payment under
this Agreement to the  Administrative  Agent's  account with the  Administrative
Agent's  Correspondent for the account of the Alternative Currency Lender (other
than as set  forth  below) in  immediately  available  funds,  and shall be made
without any set-off,  counterclaim or deduction whatsoever. Any payment received
after such time but before  12:00 noon (the time of the  Administrative  Agent's
Correspondent)  on such day  shall  be  deemed a  payment  on such  date for the
purposes of Section  11.1,  but for all other  purposes  shall be deemed to have
been made on the next succeeding  Business Day. Any payment received after 12:00
noon (the time of the Administrative  Agent's  Correspondent) shall be deemed to
have been made on the next succeeding Business Day for all purposes.

(c) Pro Rata Treatment.  Upon receipt by the  Administrative  Agent of each
such payment,  the  Administrative  Agent shall distribute to each Lender at its
address  for  notices  set forth  herein its pro rata  share of such  payment in
accordance with such Lender's Commitment  Percentage (except as specified below)
and shall wire advice of the amount of such credit to each Lender.  Each payment
to the  Administrative  Agent of the Issuing Lender's fees or L/C  Participants'
commissions  shall be made in like  manner,  but for the  account of the Issuing
Lender  or the L/C  Participants,  as the  case  may  be.  Each  payment  to the
Administrative  Agent of  Administrative  Agent's fees or expenses shall be made
for the account of the Administrative  Agent. Each payment to the Administrative
Agent with respect to the Swingline Note  (including,  without  limitation,  the
Swingline  Lender's  fees or  expenses)  shall  be made for the  account  of the
Swingline Lender.  Each payment to the Administrative  Agent with respect to the
Alternative  Currency  Note  shall be made for the  account  of the  Alternative
Currency  Lender.  Any amount payable to any Lender under  Sections 4.10,  4.11,
4.12, 4.13 or 13.2 shall be paid to the Administrative  Agent for the account of
the applicable Lender. Subject to Section 4.1(b)(ii),  if any payment under this
Agreement  or any Note shall be  specified  to be made upon a day which is not a
Business  Day, it shall be made on the next  succeeding  day which is a Business
Day and such  extension of time shall in such case be included in computing  any
interest if payable along with such payment.

SECTION 4.5  Crediting  of  Payments  and  Proceeds.  In the event that the
Borrower shall fail to pay any of the  Obligations  when due and the Obligations
have been  accelerated  pursuant to Section 11.2,  all payments  received by the
Lenders upon the Notes and the other  Obligations  and all net proceeds from the
enforcement of the Obligations shall be applied:  (a) first to all expenses then
due and payable by the Borrower  hereunder  and under the other Loan  Documents,
(b) then to all  indemnity  obligations  then due and  payable  by the  Borrower
hereunder  and under the other Loan  Documents,  (c) then to all  Administrative
Agent's  and  Issuing  Lender's  fees  then  due and  payable,  (d)  then to all
commitment  and other fees and  commissions  then due and  payable,  (e) then to
accrued and unpaid  interest on the Swingline  Note to the Swingline  Lender and
the Alternative  Currency Note to the  Alternative  Currency Lender (pro rata in
accordance  with  all  such  amounts  due),  (f)  then to the  principal  amount
outstanding under the Swingline Note to the Swingline Lender and the Alternative
Currency Note to the  Alternative  Currency  Lender (pro rata in accordance with
all such amounts due), (g) then to accrued and unpaid  interest on the Revolving
Credit Notes,  accrued and unpaid interest on the  Reimbursement  Obligation and
any Hedging Obligations  (including any termination payments and any accrued and
unpaid interest thereon) (pro rata in accordance with all such amounts due), (h)
then to the  principal  amount of the Revolving  Credit Notes and  Reimbursement
Obligation  (pro rata in  accordance  with all such amounts due) and (i) then to
the cash collateral account described in Section 11.2(b) hereof to the extent of
any L/C Obligations then outstanding, in that order.

SECTION 4.6 Adjustments.  If any Lender (a "Benefited Lender") shall at any
time  receive  any  payment  of all or part of the  Obligations  owing to it, or
interest  thereon,  or if any Lender shall at any time receive any collateral in
respect to the Obligations owing to it (whether voluntarily or involuntarily, by
set-off or otherwise)  (other than pursuant to Sections 4.8, 4.9, 4.10,  4.11 or
13.2 hereof) in a greater  proportion  than any such  payment to and  collateral
received by any other  Lender,  if any,  in respect of the  similar  Obligations
owing to such other Lender,  or interest  thereon,  such Benefited  Lender shall
purchase  for cash from the  other  Lenders  such  portion  of each  such  other
Lender's  Extensions  of Credit,  or shall  provide such other  Lenders with the
benefits of any such collateral,  or the proceeds thereof, as shall be necessary
to cause such  Benefited  Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders;  provided,  that if all
or any portion of such excess  payment or benefits is thereafter  recovered from
such Benefited Lender, such purchase shall be rescinded,  and the purchase price
and benefits returned to the extent of such recovery,  but without interest. The
Borrower  agrees that each Lender so  purchasing  a portion of another  Lender's
Extensions  of Credit may  exercise  all rights of payment  (including,  without
limitation,  rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.

SECTION  4.7 Nature of  Obligations  of  Lenders  Regarding  Extensions  of
Credit;  Assumption by the Administrative  Agent. The obligations of the Lenders
under this  Agreement to make the Loans and issue or  participate  in Letters of
Credit  are  several  and are  not  joint  or  joint  and  several.  Unless  the
Administrative  Agent  shall  have  received  notice  from a  Lender  prior to a
proposed  borrowing  date  that  such  Lender  will  not make  available  to the
Administrative  Agent such Lender's ratable portion of the amount to be borrowed
on such date  (which  notice  shall not release  such Lender of its  obligations
hereunder),  the Administrative  Agent may assume that such Lender has made such
portion available to the Administrative  Agent on the proposed borrowing date in
accordance  with Section  2.4(b) and the  Administrative  Agent may, in reliance
upon  such   assumption,   make  available  to  the  Borrower  on  such  date  a
corresponding  amount.  If such amount is made  available to the  Administrative
Agent  on a date  after  such  borrowing  date,  such  Lender  shall  pay to the
Administrative  Agent on demand an amount, until paid, equal to (a) with respect
to any Loan  denominated  in  Dollars,  the  product  of (i) the amount not made
available by such Lender in  accordance  with the terms  hereof,  times (ii) the
daily  average  Federal  Funds Rate  during  such  period as  determined  by the
Administrative  Agent,  times  (iii) a fraction  the  numerator  of which is the
number of days that elapse from and including such borrowing date to the date on
which such amount not made available by such Lender in accordance with the terms
hereof shall have become immediately  available to the Administrative  Agent and
the denominator of which is 360 and (b) with respect to any Loan  denominated in
an  Alternative  Currency,  the  amount  not made  available  by such  Lender in
accordance with the terms hereof and interest  thereon at a rate per annum equal
to the  Administrative  Agent's  aggregate  marginal cost (including the cost of
maintaining  any  required  reserves  or  deposit  insurance  and of  any  fees,
penalties,  overdraft  charges  or  other  costs  or  expenses  incurred  by the
Administrative  Agent as a result of the failure to deliver funds  hereunder) of
carrying such amount. A certificate of the Administrative  Agent with respect to
any amounts owing under this Section 4.7 shall be  conclusive,  absent  manifest
error.  If such Lender's  Commitment  Percentage  of such  borrowing is not made
available to the  Administrative  Agent by such Lender within three (3) Business
Days after such borrowing  date, the  Administrative  Agent shall be entitled to
recover such amount made  available by the  Administrative  Agent with  interest
thereon  at the rate per annum  applicable  to Base  Rate  Loans  hereunder,  on
demand,  from the  Borrower.  The  failure of any Lender to make  available  its
Commitment Percentage of any Loan requested by the Borrower shall not relieve it
or any other Lender of its obligation,  if any, hereunder to make its Commitment
Percentage of such Loan available on the borrowing  date, but no Lender shall be
responsible  for  the  failure  of any  other  Lender  to  make  its  Commitment
Percentage  of  such  Loan  available  on the  borrowing  date.  Notwithstanding
anything  set forth  herein  to the  contrary,  any  Lender  that  fails to make
available its Commitment Percentage of any Loan shall not (a) have any voting or
consent  rights under or with respect to any Loan  Document or (b)  constitute a
"Lender" (or be included in the calculation of Required  Lenders  hereunder) for
any voting or consent rights under or with respect to any Loan Document.

SECTION 4.8. Redenomination of Alternative Currency Loans

(a)  Conversion  to the Base  Rate.  If any  Alternative  Currency  Loan is
required  to bear  interest  based at the Base Rate  rather  than the LIBOR Rate
pursuant  to Section  4.1(d),  Section  4.10 or any other  applicable  provision
hereof,  such Loan shall be funded in  Dollars in an amount  equal to the Dollar
Amount of such  Alternative  Currency  Loan,  all subject to the  provisions  of
Section 2.5(b). The Borrower shall reimburse the Alternative  Currency Lender or
the Lenders, as applicable, upon any such conversion for any amounts required to
be paid under Section 4.11.

(b) Redenomination of Loans and Obligations. Subject to Section 1.3 hereof,
(i) any Loan to be denominated  in the currency of the applicable  Participating
Member  State  shall be made in the euro and (ii) any  obligation  of any  party
under this  Agreement or any other Loan Document  which has been  denominated in
the currency of a  Participating  Member State shall be  redenominated  into the
euro.

(c) Further Assurances.  The terms and provisions of this Agreement will be
subject  to  such  reasonable  changes  of  construction  as  determined  by the
Administrative   Agent  to  reflect  the   implementation  of  the  EMU  in  any
Participating  Member  State or any market  conventions  relating  to the fixing
and/or  calculation  of interest being changed or replaced and to reflect market
practice at that time, and subject thereto, to put the Administrative Agent, the
Lenders and the Borrower in the same  position,  so far as  possible,  that they
would  have  been  if  such  implementation  had  not  occurred.  In  connection
therewith,  the Borrower agrees, at the request of the Administrative  Agent, at
the  time  of or at any  time  following  the  implementation  of the EMU in any
Participating  Member  State or any market  conventions  relating  to the fixing
and/or  calculation  of interest  being  changed or  replaced,  to enter into an
agreement  amending this  Agreement in such manner as the  Administrative  Agent
shall reasonably request.

SECTION 4.9. Regulatory Limitation.  In the event, as a result of increases
in the  value of  Alternative  Currencies  against  the  Dollar or for any other
reason,  the obligation of any of the Lenders to make Loans (taking into account
the Dollar Amount of the Obligations and all other  indebtedness  required to be
aggregated  under 12 U.S.C.A.  ss.84, as amended,  the  regulations  promulgated
thereunder and any other  Applicable Law) is determined by such Lender to exceed
its then applicable legal lending limit under 12 U.S.C.A. ss.84, as amended, and
the regulations promulgated thereunder,  or any other Applicable Law, the amount
of  additional  Extensions  of Credit such Lender  shall be obligated to make or
issue or  participate in hereunder  shall  immediately be reduced to the maximum
amount which such Lender may legally advance (as determined by such Lender), the
obligation of each of the remaining Lenders  hereunder shall be  proportionately
reduced,  based on their  applicable  Commitment  Percentages and, to the extent
necessary under such laws and regulations (as determined by each of the Lenders,
with respect to the  applicability of such laws and regulations to itself),  and
the  Borrower  shall  reduce,  or cause to be reduced,  complying  to the extent
practicable with the remaining  provisions hereof,  the Obligations  outstanding
hereunder by an amount sufficient to comply with such maximum amounts.

SECTION 4.10 Changed Circumstances.

(a)   Circumstances   Affecting   LIBOR  Rate  and   Alternative   Currency
Availability.  If with respect to any  Interest  Period for any LIBOR Rate Loan,
the Administrative  Agent, the Alternative  Currency Lender or any Lender (after
consultation with the  Administrative  Agent) shall determine that (i) by reason
of circumstances affecting the foreign exchange and interbank markets generally,
deposits in eurodollars or an Alternative Currency in the applicable amounts are
not being  quoted via Dow Jones  Market  Screen 3750 or the  applicable  Reuters
Screen  Page or  offered  to the  Administrative  Agent or such  Lender for such
Interest Period,  (ii) a fundamental change has occurred in the foreign exchange
or  interbank  markets  with  respect to any  Alternative  Currency  (including,
without limitation, changes in national or international financial, political or
economic conditions or currency exchange rates or exchange controls) or (iii) it
has become otherwise materially  impractical for the Alternative Currency Lender
to make such  Alternative  Currency Loan,  then the  Administrative  Agent shall
forthwith   give  notice  thereof  to  the  Borrower.   Thereafter,   until  the
Administrative  Agent  notifies the Borrower that such  circumstances  no longer
exist,  the obligation of the Lenders or the  Alternative  Currency  Lender,  as
applicable,  to  make  LIBOR  Rate  Loans  or  Alternative  Currency  Loans,  as
applicable, and the right of the Borrower to convert any Loan to or continue any
Loan as a LIBOR Rate Loan or an Alternative Currency Loan, as applicable,  shall
be  suspended,  and the  Borrower  shall repay in full (or cause to be repaid in
full) the then  outstanding  principal  amount of each such  LIBOR  Rate Loan or
Alternative  Currency  Loan,  as  applicable,  together  with  accrued  interest
thereon,  on the last day of the then current Interest Period applicable to such
LIBOR Rate Loan or Alternative Currency Loan, as applicable, or convert the then
outstanding  principal  amount  of each  such  LIBOR  Rate  Loan or  Alternative
Currency Loan, as applicable,  to a Base Rate Loan in Dollars as of the last day
of such  Interest  Period;  provided  that if the  Borrower  elects to make such
conversion,  the Borrower shall pay to the Administrative Agent, the Alternative
Currency  Lender  and the  Lenders  any and all costs,  fees and other  expenses
incurred by the  Administrative  Agent, the Alternative  Currency Lender and the
Lenders in effecting such conversion.

(b) Laws Affecting LIBOR Rate and Alternative  Currency  Availability.  If,
after the date hereof, the introduction of, or any change in, any Applicable Law
or  any  change  in  the   interpretation  or  administration   thereof  by  any
Governmental  Authority,  central  bank or  comparable  agency  charged with the
interpretation  or administration  thereof,  or compliance by any of the Lenders
(or any of their  respective  Lending  Offices)  with any  request or  directive
(whether  or not  having the force of law) of any such  Governmental  Authority,
central bank or comparable agency,  shall make it unlawful or impossible for any
of the  Lenders  (or any of their  respective  Lending  Offices)  to  honor  its
obligations hereunder to make or maintain any LIBOR Rate Loan or any Alternative
Currency   Loan,   such  Lender  shall  promptly  give  notice  thereof  to  the
Administrative  Agent and the Administrative Agent shall promptly give notice to
the Borrower, and the other Lenders.  Thereafter, until the Administrative Agent
notifies  the  Borrower  that  such  circumstances  no  longer  exist,  (i)  the
obligations of the Lenders or the Alternative Currency Lender, as applicable, to
make LIBOR Rate Loans or Alternative  Currency  Loans,  as  applicable,  and the
right of the  Borrower to convert any Loan or continue  any Loan as a LIBOR Rate
Loan or an  Alternative  Currency  Loan, as  applicable,  shall be suspended and
thereafter the Borrower may select only Base Rate Loans  hereunder,  and (ii) if
any of the Lenders or the Alternative  Currency Lender,  as applicable,  may not
lawfully continue to maintain a LIBOR Rate Loan or an Alternative Currency Loan,
as applicable, to the end of the then current Interest Period applicable thereto
as a LIBOR Rate Loan or Alternative Currency Loan, as applicable, the applicable
LIBOR  Rate  Loan  or  an  Alternative  Currency  Loan,  as  applicable,   shall
immediately  be  converted  to a Base Rate Loan in Dollars for the  remainder of
such  Interest  Period;  provided  that if the  Borrower  elects  to  make  such
conversion,  the Borrower shall pay to the Administrative Agent, the Alternative
Currency  Lender  and the  Lenders  any and all costs,  fees and other  expenses
incurred by the  Administrative  Agent, the Alternative  Currency Lender and the
Lenders in effecting such conversion.

(c) Increased Costs. If, after the date hereof, the introduction of, or any
change  in, any  Applicable  Law,  or in the  interpretation  or  administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration  thereof,  or compliance by any of the
Lenders  (or any of  their  respective  Lending  Offices)  with any  request  or
directive  (whether  or not  having  the  force  of law)  of  such  Governmental
Authority, central bank or comparable agency:

(i) shall (except as provided in Section  4.13(e))  subject any of the
Lenders (or any of their  respective  Lending Offices) to any tax, duty or other
charge with respect to any Note, Letter of Credit or Application or shall change
the  basis  of  taxation  of  payments  to any of the  Lenders  (or any of their
respective  Lending Offices) of the principal of or interest on any Note, Letter
of Credit or  Application  or any other  amounts  due under  this  Agreement  in
respect  thereof  (except for changes in the rate of franchise tax or tax on the
overall  net  income of any of the  Lenders or any of their  respective  Lending
Offices  imposed by the  jurisdiction in which such Lender is organized or is or
should be qualified to do business or such Lending Office is located);  provided
that the Borrower  shall not be  obligated  to pay any amounts  pursuant to this
Section  4.10(c)(i)  to the extent  that such  amounts  are  duplicative  of any
amounts paid by the Borrower pursuant to Section 4.13; or

(ii) shall impose,  modify or deem applicable any reserve  (including,
without limitation, any reserve imposed by the Board of Governors of the Federal
Reserve System),  special deposit,  insurance or capital or similar  requirement
against  assets of,  deposits with or for the account of, or credit  extended by
any of the Lenders (or any of their respective  Lending Offices) or shall impose
on any of the  Lenders  (or any of  their  respective  Lending  Offices)  or the
foreign exchange and interbank  markets any other condition  affecting any Note;
and the result of any of the  foregoing  events  described in clause (i) or (ii)
above is to increase  the costs to any of the Lenders of  maintaining  any LIBOR
Rate  Loan or an  Alternative  Currency  Loan,  as  applicable,  or  issuing  or
participating  in  Letters of Credit or to reduce the yield or amount of any sum
received or receivable  by any of the Lenders under this  Agreement or under the
Notes in  respect  of a LIBOR  Rate Loan or an  Alternative  Currency  Loan,  as
applicable, or Letter of Credit or Application,  then such Lender shall promptly
notify the  Administrative  Agent, and the  Administrative  Agent shall promptly
notify the Borrower of such fact and demand  compensation  therefor and,  within
fifteen (15) days after such notice by the  Administrative  Agent,  the Borrower
shall pay to such Lender such  additional  amount or amounts as will  compensate
such Lender or Lenders for such increased cost or reduction.  The Administrative
Agent will  promptly  notify the Borrower of any event of which it has knowledge
which will entitle such Lender to compensation pursuant to this Section 4.10(c);
provided,  that the Administrative  Agent shall incur no liability whatsoever to
the  Lenders or the  Borrower in the event it fails to do so. The amount of such
compensation  shall  be  determined,   in  the  applicable  Lender's  reasonable
discretion,  based upon the  assumption  that such Lender funded its  Commitment
Percentage of the LIBOR Rate Loans or Alternative Currency Loans, as applicable,
in the London interbank market and using any reasonable attribution or averaging
methods which such Lender deems appropriate and practical. A certificate of such
Lender setting forth the basis for determining such amount or amounts  necessary
to  compensate  such  Lender  shall be  forwarded  to the  Borrower  through the
Administrative  Agent and shall be conclusively  presumed to be correct save for
manifest error.

(d) Exchange  Indemnification and Increased Costs. The Borrower shall, upon
demand from the  Administrative  Agent, pay to the  Administrative  Agent or any
applicable Lender, the amount of (i) any loss or cost or increased cost incurred
by the Administrative  Agent or any applicable Lender, (ii) any reduction in any
amount   payable  to  or  in  the  effective   return  on  the  capital  to  the
Administrative  Agent or any applicable Lender,  (iii) any interest or any other
return,  including  principal,  foregone  by  the  Administrative  Agent  or any
applicable  Lender  as a  result  of the  introduction  of,  change  over  to or
operation of the euro, or (iv) any currency  exchange loss, that  Administrative
Agent or any  Lender  sustains  as a result  of any  payment  being  made by the
Borrower in a currency other than that  originally  extended to the Borrower.  A
certificate of the Administrative  Agent setting forth the basis for determining
such  additional  amount or amounts  necessary to compensate the  Administrative
Agent or the applicable Lender shall be conclusively presumed to be correct save
for manifest error.

SECTION 4.11 Indemnity. The Borrower hereby indemnifies each of the Lenders
against any loss or expense (including, without limitation, any foreign exchange
costs)  which  may  arise  or  be  attributable  to  each  Lender's   obtaining,
liquidating  or employing  deposits or other funds  acquired to effect,  fund or
maintain  any Loan (a) as a  consequence  of any failure by the Borrower to make
any payment when due of any amount due hereunder in connection with a LIBOR Rate
Loan or an Alternative  Currency Loan, (b) due to any failure of the Borrower to
borrow,  continue  or  convert  on a date  specified  therefor  in a  Notice  of
Borrowing  or  Notice  of  Conversion/Continuation  or (c)  due to any  payment,
prepayment or conversion of any LIBOR Rate Loan or any Alternative Currency Loan
on a date other than the last day of the Interest Period therefor. The amount of
such loss or expense shall be determined,  in the applicable Lender's reasonable
discretion,  based upon the  assumption  that such Lender funded its  Commitment
Percentage of the LIBOR Rate Loans in the London  interbank market and using any
reasonable  attribution or averaging methods which such Lender deems appropriate
and  practical.  A  certificate  of such  Lender  setting  forth  the  basis for
determining such amount or amounts  necessary to compensate such Lender shall be
forwarded  to the  Borrower  through  the  Administrative  Agent  and  shall  be
conclusively presumed to be correct save for manifest error.

SECTION 4.12 Capital  Requirements.  If either (a) the  introduction of, or
any change in, or in the interpretation of, any Applicable Law or (b) compliance
with any  guideline  or request from any central  bank or  comparable  agency or
other  Governmental  Authority  (whether or not having the force of law), has or
would have the effect of  reducing  the rate of return on the capital of, or has
affected or would affect the amount of capital required to be maintained by, any
Lender or any corporation  controlling  such Lender as a consequence of, or with
reference to the Commitments and other  commitments of this type, below the rate
which such Lender or such other  corporation  could have  achieved  but for such
introduction,  change or  compliance,  then within five (5) Business  Days after
written  demand by any such Lender,  the Borrower  shall pay to such Lender from
time to time as  specified  by such  Lender  additional  amounts  sufficient  to
compensate such Lender or other corporation for such reduction. A certificate as
to such amounts submitted to the Borrower and the  Administrative  Agent by such
Lender,  shall,  in the absence of manifest error, be presumed to be correct and
binding for all purposes.

SECTION 4.13 Taxes.

(a)  Payments  Free and  Clear.  Except as  otherwise  provided  in Section
4.13(e),  any and all payments by the  Borrower  hereunder or under the Notes or
the Letters of Credit shall be made free and clear of and without  deduction for
any and all present or future taxes,  levies,  imposts,  deductions,  charges or
withholding, and all liabilities with respect thereto excluding, (i) in the case
of each Lender and the Administrative  Agent, income and franchise taxes imposed
by the  jurisdiction  under the laws of which such Lender or the  Administrative
Agent  (as the case may be) is  organized  or is or should  be  qualified  to do
business  or any  political  subdivision  thereof  and  (ii) in the case of each
Lender,  income and franchise taxes imposed by the jurisdiction of such Lender's
Lending  Office or any  political  subdivision  thereof  (all such  non-excluded
taxes, levies, imposts, deductions,  charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct or withhold any Taxes from or in respect of any sum payable  hereunder or
under any Note or in  respect  of any  Letter  of  Credit  to any  Lender or the
Administrative  Agent, (A) except as otherwise provided in Section 4.13(e),  the
sum payable  shall be  increased  as may be  necessary  so that after making all
required  deductions  or  withholdings  (including  deductions  or  withholdings
applicable  to  additional  sums payable under this Section 4.13) such Lender or
the  Administrative  Agent (as the case may be)  receives an amount equal to the
amount such party would have  received had no such  deductions  or  withholdings
been made, (B) the Borrower shall make such deductions or withholdings,  (C) the
Borrower shall pay the full amount deducted to the relevant taxing  authority or
other  authority in accordance  with  Applicable Law, and (D) the Borrower shall
deliver to the Administrative  Agent and such Lender evidence of such payment to
the  relevant  taxing  authority or other  Governmental  Authority in the manner
provided in Section 4.13(d).

(b) Stamp and Other Taxes. In addition,  the Borrower shall pay any present
or future stamp,  registration,  recordation or  documentary  taxes or any other
similar fees or charges or excise or property taxes, levies of the United States
or  any  state  or  political  subdivision  thereof  or any  applicable  foreign
jurisdiction  which arise from any payment made hereunder or from the execution,
delivery or registration  of, or otherwise with respect to, this Agreement,  the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or  security  interest  in respect  thereof  (hereinafter  referred to as
"Other Taxes").

(c)  Indemnity.  Except as  otherwise  provided  in  Section  4.13(e),  the
Borrower shall indemnify each Lender and the  Administrative  Agent for the full
amount of Taxes and Other Taxes (including,  without  limitation,  any Taxes and
Other Taxes imposed by any  jurisdiction  on amounts  payable under this Section
4.13) paid by such Lender or the  Administrative  Agent (as the case may be) and
any liability (including penalties,  interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally  asserted.  Such  indemnification  shall be made within thirty (30) days
from the date such Lender or the Administrative Agent (as the case may be) makes
written demand  therefor.  Within sixty (60) days of the written  request of the
Borrower,  the  Administrative  Agent and each Lender shall  execute and deliver
such  certificates,  forms or other documents which can be reasonably  furnished
thereby  consistent with the facts and which are reasonably  necessary to assist
the Borrower in applying for refunds of such Taxes or Other Taxes.

(d)  Evidence  of  Payment.  Within  thirty (30) days after the date of any
payment  of  Taxes  or  Other  Taxes,   the  Borrower   shall   furnish  to  the
Administrative  Agent, at its address  referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.

(e)  Delivery of Tax Forms.  To the extent  required by  Applicable  Law to
reduce or  eliminate  withholding  or  payment  of taxes,  each  Lender  and the
Administrative  Agent  shall  deliver  to  the  Borrower,  with  a  copy  to the
Administrative  Agent, on the Closing Date or concurrently  with the delivery of
the relevant  Assignment and  Acceptance,  as applicable,  (i) two United States
Internal Revenue Service Forms W-9, Forms W-8ECI or Forms W-8BEN,  as applicable
(or successor  forms)  properly  completed and certifying in each case that such
Lender is entitled to a complete  exemption from withholding or deduction for or
on account of any United  States  federal  income  taxes,  and (ii) an  Internal
Revenue Service Form W-8BEN or W-8ECI or successor  applicable form, as the case
may be, to establish an exemption from United States backup  withholding  taxes.
Each such Lender  further  agrees to deliver to the Borrower  with a copy to the
Administrative  Agent,  as applicable,  two Form W-9, Form W-8BEN or W-8ECI,  or
successor applicable forms or manner of certification, as the case may be, on or
before  the date that any such form  expires or  becomes  obsolete  or after the
occurrence  of any event  requiring a change in the most recent form  previously
delivered  by it to the  Borrower  certifying  in the case of a Form  W-9,  Form
W-8BEN or W-8ECI (or  successor  forms)  that such Lender is entitled to receive
payments  under this  Agreement  without  deduction or withholding of any United
States federal income taxes (unless in any such case an event (including without
limitation any change in treaty,  law or  regulation)  has occurred prior to the
date on which any such delivery  would  otherwise be required which renders such
forms  inapplicable or the exemption to which such forms relate  unavailable and
such Lender  notifies the Borrower and the  Administrative  Agent that it is not
entitled to receive payments  without  deduction or withholding of United States
federal  income  taxes) and,  in the case of a Form W-9,  Form W-8BEN or W-8ECI,
establishing   an  exemption   from  United  States  backup   withholding   tax.
Notwithstanding  anything in any Loan  Document to the  contrary,  the  Borrower
shall  not  be  required  to  pay  additional  amounts  to  any  Lender  or  the
Administrative  Agent under Section 4.13 or Section 4.10(c),  (i) if such Lender
or the  Administrative  Agent  fails to  comply  with the  requirements  of this
Section  4.13(e),  other than to the extent that such failure is due to a change
in law occurring after the date on which such Lender or the Administrative Agent
became a party to this Agreement or (ii) that are the result of such Lender's or
the  Administrative   Agent's  gross  negligence  or  willful   misconduct,   as
applicable.

(f) Survival.  Without  prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 4.13 shall  survive the payment in full of the  Obligations  and
the termination of the Commitments.

SECTION 4.14. Rounding and Other Consequential Changes.  Subject to Section
1.3 hereof,  without  prejudice  and in addition to any method of  conversion or
rounding  prescribed  by  any  EMU  Legislation  and  without  prejudice  to the
respective  obligations  of the  Borrower  to the  Administrative  Agent and the
Lenders and the  Administrative  Agent and the Lenders to the Borrower  under or
pursuant to this Agreement, except as expressly provided in this Agreement, each
provision of this Agreement, including, without limitation, the right to combine
currencies to effect a set-off,  shall be subject to such reasonable  changes of
interpretation as the  Administrative  Agent may from time to time specify to be
necessary or  appropriate to reflect the  introduction  of or change over to the
euro in Participating Member States.

SECTION 4.15. Replacement of Lenders.

(a) If any Lender requests compensation pursuant to Section 4.10 or Section
4.12, or if the Borrower is required to pay any additional  amount to any Lender
or any Governmental  Authority for the account of any Lender pursuant to Section
4.13,  then such Lender  shall use  reasonable  efforts to designate a different
lending office for funding or booking its  Extensions of Credit  hereunder or to
assign its rights and obligations hereunder to another of its offices,  branches
or  affiliates,  if,  in the  judgment  of  such  Lender,  such  designation  or
assignment  (A) would  eliminate or reduce amounts  payable  pursuant to Section
4.10,  Section 4.12 or Section  4.13,  as the case may be, in the future and (B)
would not subject such Lender to any unreimbursed  cost or expense and would not
otherwise be disadvantageous to such Lender.

(b) If any Lender requests compensation pursuant to Section 4.10 or Section
4.12, or if the Borrower is required to pay any additional  amount to any Lender
or any Governmental  Authority for the account of any Lender pursuant to Section
4.13,  then the Borrower may, upon notice to such Lender and the  Administrative
Agent,  require  such  Lender to  assign  and  delegate,  without  recourse  (in
accordance with and subject to the restrictions contained in Section 13.10), all
of its  interests,  rights and  obligations  under this Agreement to an Eligible
Assignee  that shall  assume such  obligations  (which  assignee  may be another
Lender,  if a Lender  accepts such  assignment);  provided that (A) the Borrower
shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld,  (B) such Lender shall have received
payment of an amount equal to the  outstanding  principal of its  Extensions  of
Credit,  accrued interest  thereon,  accrued fees,  breakage costs and all other
amounts  payable  to it  hereunder,  from the  assignee  (to the  extent of such
outstanding  principal  and accrued  interest  and fees) or the Borrower (in the
case of all other amounts) and (C) in the case of any such assignment  resulting
from a claim for  compensation  pursuant to Section 4.10 or Section  4.12,  such
assignment will result in a reduction in such compensation or payments. A Lender
shall not be required  to make any such  assignment  and  delegation  if,  prior
thereto, as a result of a waiver by such Lender or otherwise,  the circumstances
entitling the Borrower to require such assignment and delegation cease to apply.

(c) To the extent  that any Lender (a  "Replaced  Lender")  is  required to
assign all of its interests,  rights and obligations  under this Agreement to an
Eligible  Assignee (a "Replacement  Lender") pursuant to this Section 4.15, upon
the execution of all applicable assignment documents and the satisfaction of all
other conditions set forth herein,  the Replacement Lender shall become a Lender
hereunder and the Replaced Lender shall cease to be a Lender  hereunder,  except
with  respect to the  indemnification  provisions  under this  Agreement,  which
provisions shall survive as to such Replaced Lender.

SECTION 4.16. Security. The Obligations shall be secured as provided in the
Security Documents.

ARTICLE V

CLOSING; CONDITIONS OF CLOSING AND BORROWING

SECTION  5.1  Closing.  The  closing  shall  take  place at the  offices of
Kennedy, Covington, Lobdell & Hickman, L.L.P. at 10:00 a.m. on January 22, 2003,
or on such other date and time as the parties hereto shall mutually agree.

SECTION 5.2  Conditions to Closing and Initial  Extensions  of Credit.  The
obligation  of the Lenders to close this  Agreement and to make the initial Loan
or issue or participate  in the initial Letter of Credit,  if any, is subject to
the satisfaction of each of the following conditions:

(a) Executed  Loan  Documents.  The  following  Loan  Documents in form and
substance satisfactory to the Administrative Agent and each Lender:

(i) this Agreement,

(ii) the Revolving Credit Notes,

(iii) the Alternative Currency Note,

(iv) the Swingline Note,

(v) the Subsidiary Guaranty Agreement;

(vi) the Collateral Agreement;

(vii) the Mortgages; and

(viii) each other applicable Loan Document;

shall have been duly  authorized,  executed and delivered to the  Administrative
Agent by the parties  thereto,  shall be in full force and effect and no Default
or  Event of  Default  shall  exist  thereunder,  and the  Borrower  shall  have
delivered original counterparts thereof to the Administrative Agent.

(b) Closing Certificates; etc.

(i) Officer's  Certificate of the Borrower.  The Administrative  Agent
shall have received a certificate from a Responsible Officer of the Borrower, in
form and substance  satisfactory to the Administrative Agent, to the effect that
all  representations  and  warranties  of  the  Borrower  and  its  Subsidiaries
contained in this Agreement and the other Loan  Documents are true,  correct and
complete;  that the Borrower and its Subsidiaries are not in violation of any of
the covenants  contained in this Agreement and the other Loan  Documents;  that,
after giving  effect to the  transactions  contemplated  by this  Agreement,  no
Default  or  Event of  Default  has  occurred  and is  continuing;  and that the
Borrower and its Subsidiaries have satisfied each of the closing conditions.

(ii)  Certificate  of Secretary  of the  Borrower and each  Subsidiary
Guarantor.  The  Administrative  Agent shall have received a certificate  of the
secretary or assistant  secretary of the Borrower and each Subsidiary  Guarantor
certifying as to the incumbency and genuineness of the signature of each officer
of the Borrower or such Subsidiary  Guarantor  executing Loan Documents to which
it is a party and  certifying  that  attached  thereto  is a true,  correct  and
complete  copy of (A) the  articles  of  incorporation  of the  Borrower or such
Subsidiary  Guarantor and all amendments  thereto,  certified by the appropriate
Governmental  Authority in its jurisdiction of incorporation,  (B) the bylaws of
the  Borrower  or such  Subsidiary  Guarantor  as in  effect on the date of such
certifications,  (C)  resolutions  duly adopted by the Board of Directors of the
Borrower and such Subsidiary Guarantor  authorizing the borrowings  contemplated
hereunder and the execution,  delivery and performance of this Agreement and the
other Loan Documents to which it is a party, and (D) each  certificate  required
to be delivered pursuant to Section 5.2(b)(iii).

(iii) Certificates of Good Standing.  The  Administrative  Agent shall
have received (A)  certificates  as of a recent date of the good standing of the
Borrower and each  Subsidiary  Guarantor  under the laws of its  jurisdiction of
organization  and, to the extent  requested by the  Administrative  Agent,  each
other jurisdiction where the Borrower and each Subsidiary Guarantor is qualified
to do business and (B) a  certificate  of the relevant  taxing  authority of the
jurisdiction  of  organization  of the  Borrower and each  Subsidiary  Guarantor
certifying  that  such  Person  has  filed  required  tax  returns  and  owes no
delinquent taxes.

(iv) Opinions of Counsel. The Administrative Agent shall have received
favorable  opinions of counsel to the  Borrower  and each  Subsidiary  Guarantor
addressed  to the  Administrative  Agent and the  Lenders  with  respect  to the
Borrower, the Subsidiary  Guarantors,  the Loan Documents and such other matters
as the Lenders shall request.

(v) Tax Forms. The Administrative  Agent shall have received copies of
the United States  Internal  Revenue  Service forms required by Section  4.13(e)
hereof.

(c) Collateral.

(i) Filings and  Recordings.  All  filings and  recordations  that are
necessary  to perfect the security  interests  of the Lenders in the  collateral
described  in  the  Security   Documents   shall  have  been   received  by  the
Administrative  Agent and the Administrative  Agent shall have received evidence
satisfactory to the Administrative Agent that upon such filings and recordations
such security  interests  constitute  valid and perfected  first  priority Liens
therein  (subject only to Liens  permitted  pursuant to Section 10.2);  provided
that with regard to any Foreign  Subsidiary whose capital stock is to be pledged
hereunder,  (i) the  Borrower may  evidence  compliance  herewith by providing a
perfected first priority security  interest (or the equivalent  thereof pursuant
to the Applicable Laws and practices of any relevant  foreign  jurisdiction)  in
the  relevant  indicia of  ownership  of such  Foreign  Subsidiary  and (ii) the
Borrower  or the  applicable  Domestic  Subsidiary  of the  Borrower  owning the
capital stock or other membership interests of such Foreign Subsidiary shall not
be required to pledge more than that  percentage  of all issued and  outstanding
shares  of all  capital  stock or other  membership  interests  of such  Foreign
Subsidiary  the  granting  of a security  interest  in which shall not result in
material  adverse tax  consequences to the Borrower or such applicable  Domestic
Subsidiary  (it  being  acknowledged  by  the  Borrower,  the  Lenders  and  the
Administrative  Agent that, as of the Closing Date, such percentage  required to
be pledged is sixty-five percent (65%)).

(ii) Pledged Collateral.  The Administrative Agent shall have received
original stock certificates or other certificates (or the equivalent taking into
account the Applicable Laws and practices of any relevant foreign  jurisdiction)
of each Material Domestic Subsidiary and, to the extent that the Applicable Laws
and practices of any relevant foreign  jurisdiction  provide for the issuance of
stock  certificates  or other  certificates,  each Foreign  Subsidiary  which is
directly  owned  by the  Borrower  or a  Domestic  Subsidiary  of  the  Borrower
evidencing the capital stock or other ownership  interests  pledged  pursuant to
the  Collateral  Agreement,  together  with an undated stock power for each such
certificate  duly executed in blank by the registered  owner  thereof;  provided
that  with  regard  to any  Foreign  Subsidiary  whose  stock  is to be  pledged
hereunder,  the  Borrower  may  evidence  compliance  herewith  by  providing  a
perfected first priority security  interest (or the equivalent  thereof pursuant
to the Applicable Laws and practices of any relevant  foreign  jurisdiction)  in
the relevant indicia of ownership of such Foreign Subsidiary.

(iii)  Foreign  Security  Interests and Filings.  Notwithstanding  the
provisions  of the  foregoing  subsections  (c)(i) and (ii),  with regard to any
Foreign  Subsidiary  whose stock is to be pledged  hereunder,  (A) the  Borrower
shall not be required to deliver a foreign pledge  agreement  unless  reasonably
requested to do so by the Administrative Agent and (B) the Borrower shall not be
required  to deliver an opinion of counsel as to the  perfection,  validity  and
binding nature of the security interests created pursuant to such foreign pledge
agreement unless reasonably requested to do so by the Administrative Agent.

(iv) Lien Search.  The  Administrative  Agent shall have  received the
results of a Lien search (including a search as to judgments, pending litigation
and tax matters) made against the Borrower and the Subsidiary  Guarantors  under
the Uniform Commercial Code (or applicable  judicial docket) as in effect in any
state in which any of its assets are located, indicating among other things that
its assets are free and clear of any Lien except for Liens permitted hereunder.

(v) Hazard and Liability  Insurance.  The  Administrative  Agent shall
have  received  certificates  of  insurance  for the current  policy year of the
Borrower,  and, if requested by the Administrative Agent, copies (certified by a
Responsible  Officer)  of  insurance  policies  in the form  required  under the
Security Documents and otherwise in form and substance  reasonably  satisfactory
to the Administrative Agent.

(vi) Title Insurance.  The Administrative  Agent shall have received a
marked-up  commitment  for a policy of title  insurance,  providing  coverage in
amount  satisfactory  to  the  Administrative  Agent,  insuring  Lenders'  first
priority  Liens and showing no Liens  prior to Lenders'  Liens other than for ad
valorem taxes not yet due and payable, with title insurance companies acceptable
to the  Administrative  Agent,  on each parcel of real  property  subject to the
Mortgages, with the final title insurance policies being delivered within thirty
(30) days after the Closing  Date.  Further,  the Borrower  agrees to provide or
obtain any customary  affidavits and indemnities as may be required or necessary
to obtain title insurance satisfactory to the Administrative Agent.

(vii) Title Exceptions.  The Administrative  Agent shall have received
copies of all  recorded  documents  creating  exceptions  to the title  policies
referred to in Section 5.2(c)(vi).

(viii) Matters Relating to Flood Hazard Properties. The Administrative
Agent  shall have  received a  certification  form of a  certification  from the
National Research Center, or any successor agency thereto, regarding each parcel
of real property securing any portion of the Obligations.

(ix) Surveys.  The Administrative  Agent shall have received copies of
as-built surveys prepared on or prior to the Closing Date of each parcel of real
property  subject to the  Mortgages  certified by a registered  engineer or land
surveyor,  which surveys shall be in form and substance sufficient to permit the
issuance of the final title policy without  exception for matters which would be
revealed by current, accurate as-built surveys of such parcels of real property.
To the extent  that any such survey was not  prepared  within the sixty (60) day
period immediately  preceding the Closing Date, such survey shall be accompanied
by an affidavit (a "Survey  Affidavit") of an authorized  signatory of the owner
of such property  stating that there have been no improvements or  encroachments
to the property since the date of the  respective  survey such that the existing
survey is no longer accurate.  Such survey shall show the area of such property,
all boundaries of the land with courses and distances indicated, including chord
bearings and arc and chord  distances for all curves,  and shall show dimensions
and  locations  of all  easements,  private  drives,  roadways,  and other facts
materially  affecting  such  property,  and shall show such other details as the
Administrative Agent may reasonably request,  including without limitation,  any
encroachment (and the extent thereof in feet and inches) onto the property or by
any of the improvements on the property upon adjoining land or upon any easement
burdening the property;  any improvements,  to the extent  constructed,  and the
relation of the improvements by distances to the boundaries of the property,  to
any easements burdening the property,  and to the established building lines and
the street  lines;  and if  improvements  are  existing,  the  locations  of all
utilities serving the improvement.

(x) Environmental  Assessments.  The  Administrative  Agent shall have
received a copy of an existing or updated Phase I  environmental  assessment for
each  parcel  of  real  property   subject  to  the  Mortgages  and  such  other
environmental reports reasonably requested by the Administrative Agent regarding
each  such  parcel of real  property  showing  no  environmental  conditions  or
liabilities in violation of Environmental Laws that could reasonably be expected
to have a Material Adverse Effect.

(xi) Other Real Property  Information.  The Administrative Agent shall
have  received  such  other  certificates,  documents  and  information  as  are
reasonably requested by the Lenders, each in form and substance  satisfactory to
the Administrative Agent.

(d) Consents; Defaults. 

(i) Governmental  and Third Party  Approvals.  The Borrower shall have
obtained all necessary  material  approvals,  authorizations and consents of any
Person and of all Governmental  Authorities and courts having  jurisdiction with
respect to the  transactions  contemplated  by this Agreement and the other Loan
Documents.

(ii) No Injunction,  Etc. No action, suit, proceeding,  investigation,
regulation or  legislation  shall have been  instituted,  threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of, this
Agreement or the other Loan Documents or the consummation by the Borrower or any
of its Subsidiaries of the transactions contemplated hereby or thereby, or which
would be reasonably likely to have a Material Adverse Effect.

(iii) No Event of Default.  No Default or Event of Default  shall have
occurred and be continuing.

(e) Financial Matters.

(i) Financial Statements. The Administrative Agent shall have received
the  audited   Consolidated   financial  statements  of  the  Borrower  and  its
Subsidiaries  for each of the Borrower's  Fiscal Years ending in 2001,  2000 and
1999, each as filed with the Securities and Exchange  Commission and prepared in
accordance with GAAP.

(ii)  Financial  Condition   Certificate.   The  Borrower  shall  have
delivered  to the  Administrative  Agent a  certificate,  in form and  substance
satisfactory  to the  Administrative  Agent,  and  certified  as  accurate  by a
Responsible Officer, that (A) the Borrower and each of its Subsidiaries are each
Solvent as of the Closing Date, (B) the payables of the Borrower and each of its
Subsidiaries  are current and not past due as of the  Closing  Date  (except for
those  payables  which  are  being   contested  in  good  faith  by  appropriate
proceedings  diligently  conducted  and for which  adequate  reserves  have been
provided  in  accordance  with GAAP),  (C)  attached  thereto  are  calculations
evidencing  compliance  on a pro forma  basis with the  covenants  contained  in
Article  IX hereof as the most  recent  quarterly  financial  statements  of the
Borrower and its  Subsidiaries  (provided that, with respect to Section 9.3, the
Interest Coverage Ratio requirement shall be 2.00 to 1.0 for the purpose of this
Section  5.2(e)(ii)),  (D) attached thereto are  calculations  setting forth the
total net assets of each Domestic  Subsidiary of the Borrower as the most recent
quarterly  financial  statements  of the Borrower and its  Subsidiaries  for the
purpose of determining which Domestic  Subsidiaries of the Borrower are Material
Domestic  Subsidiaries  on the Closing  Date and (E) the  financial  projections
previously  delivered  to the  Administrative  Agent  represent  the good  faith
estimates  (utilizing  reasonable  assumptions)  of the financial  condition and
operations of the Borrower and its Subsidiaries as of the date thereof.

(iii) Payment at Closing; Fee Letters. The Borrower shall have paid to
the  Administrative  Agent and the Lenders the fees set forth or  referenced  in
Section 4.3 and any other accrued and unpaid fees or  commissions  due hereunder
(including,  without limitation,  reasonable legal fees and expenses) and to any
other  Person  such  amount  as  may be  due  thereto  in  connection  with  the
transactions contemplated hereby, including all taxes, fees and other charges in
connection with the execution,  delivery,  recording, filing and registration of
any of the Loan Documents.

(f) Miscellaneous.

(i) Notice of Borrowing.  The Administrative Agent shall have received
(A) a Notice of Borrowing,  as applicable,  from the Borrower in accordance with
Section  2.4(a) and (B) a Notice of Account  Designation  from the  Borrower  in
accordance  with Section 2.4(b)  specifying the account or accounts to which the
proceeds of any Loans made after the Closing Date are to be disbursed.

(ii) Existing Facility.  The Existing Facility shall be repaid in full
and  terminated,  and the  Administrative  Agent  shall have  received a pay-off
letter in form and substance  satisfactory  to it evidencing  such repayment and
termination.

(iii)  Miscellaneous  Matters.  The  Administrative  Agent  shall have
received such  information  as it may have  requested  from the Borrower and its
Subsidiaries relating to litigation, tax, accounting,  labor, insurance, pension
liabilities  (actual  or  contingent),   leases  of  real  property,  agreements
evidencing Debt, ownership of assets by the Borrower or any of its Subsidiaries,
environmental matters, contingent liabilities and management of the Borrower and
its Subsidiaries (including, as applicable, copies of all documents, instruments
and agreements relating to such subjects), and such information shall be in form
and substance satisfactory to Administrative Agent.

(iv) Other Documents. All opinions, certificates and other instruments
and all  proceedings in connection  with the  transactions  contemplated by this
Agreement  shall be  satisfactory  in form and  substance to the  Administrative
Agent.  The  Administrative  Agent  shall  have  received  copies  of all  other
documents,  certificates  and  instruments  reasonably  requested  thereby  with
respect to the transactions contemplated by this Agreement.

SECTION 5.3 Conditions to All Extensions of Credit.  The obligations of the
Lenders to make any  Extensions of Credit  (including  the initial  Extension of
Credit),  convert or continue  any Loan  and/or the  Issuing  Lender to issue or
extend any Letter of Credit are  subject to the  satisfaction  of the  following
conditions  precedent  on  the  relevant  borrowing,  conversion,  continuation,
issuance or extension date:

(a) Continuation of Representations and Warranties. The representations and
warranties  contained  in Article VI shall be true and correct on and as of such
borrowing,  conversion,  continuation,  issuance or extension date with the same
effect as if made on and as of such  date,  except  for any  representation  and
warranty made as of an earlier date,  which  representation  and warranty  shall
remain true and correct as of such earlier date.

(b) No Existing Default. No Default or Event of Default shall have occurred
and be continuing (i) on the  borrowing,  conversion or  continuation  date with
respect to such Loan or after giving  effect to the Loans to be made,  converted
or  continued on such date or (ii) on the issue date with respect to such Letter
of Credit or after giving  effect to the issuance or extension of such Letter of
Credit on such date.

(c)  Notices.  The  Administrative  Agent  shall have  received a Notice of
Borrowing or Notice of Conversion/Continuation, as applicable, from the Borrower
in accordance with Section 2.4(a).

(d) Compliance with Borrowing Limits.  The Borrower shall have demonstrated
that  compliance  with  Section  2.5(b)  (i) on  the  borrowing,  conversion  or
continuation  date with respect to such Loan or after giving effect to the Loans
to be made,  converted  or  continued  on such date or (ii) on the  issuance  or
extension  date with respect to such Letter of Credit or after giving  effect to
the issuance or extension of such Letter of Credit on such date.

(e) Additional Documents. The Administrative Agent shall have received each
additional  document,   instrument,  legal  opinion  or  other  item  reasonably
requested by it.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

SECTION 6.1  Representations  and Warranties.  To induce the Administrative
Agent and the Lenders to enter into this  Agreement and to induce the Lenders to
make Extensions of Credit,  the Borrower  hereby  represents and warrants to the
Administrative  Agent and  Lenders  both before and after  giving  effect to the
transactions contemplated hereunder that:

(a)  Organization;  Power;  Qualification.  Each  of the  Borrower  and its
Subsidiaries (i) is duly organized,  validly existing and in good standing under
the laws of the  jurisdiction of its  incorporation  or formation,  (ii) has the
power and  authority to own its  properties  and to carry on its business as now
being and  hereafter  proposed to be conducted  and (iii) is duly  qualified and
authorized  to do business in each  jurisdiction  in which the  character of its
properties  or the  nature  of its  business  requires  such  qualification  and
authorization,  except where the failure to be so qualified could not reasonably
be expected to have a Material  Adverse Effect.  The  jurisdictions in which the
Borrower and its  Subsidiaries  are organized and qualified to do business as of
the Closing Date are described on Schedule 6.1(a).

(b) Ownership.  Each  Subsidiary of the Borrower  (including  each Material
Domestic  Subsidiary) as of the Closing Date is listed on Schedule 6.1(b). As of
the Closing  Date,  the  capitalization  of the  Borrower  and its  Subsidiaries
consists of the number of shares,  authorized,  issued and outstanding,  of such
classes and series, with or without par value, described on Schedule 6.1(b). All
outstanding  shares have been duly  authorized  and validly issued and are fully
paid and nonassessable,  with no personal  liability  attaching to the ownership
thereof,  and not subject to any preemptive or similar rights.  The shareholders
of the Subsidiaries of the Borrower and the number of shares owned by each as of
the Closing Date are described on Schedule 6.1(b). As of the Closing Date, there
are no outstanding stock purchase warrants, subscriptions,  options, securities,
instruments  or  other  rights  of any  type or  nature  whatsoever,  which  are
convertible  into,  exchangeable  for or  otherwise  provide  for or permit  the
issuance of capital stock of the Borrower or its  Subsidiaries,  except pursuant
to plans and agreements  described in the Borrower's  periodic  filings with the
SEC.

(c) Authorization of Agreement,  Loan Documents and Borrowing.  Each of the
Borrower and its Subsidiaries  has the right,  power and authority and has taken
all  necessary  corporate  and  other  organizational  action to  authorize  the
execution, delivery and performance of this Agreement and each of the other Loan
Documents to which it is a party in accordance with their respective terms. This
Agreement  and each of the other  Loan  Documents  have been duly  executed  and
delivered  by the  duly  authorized  officers  of the  Borrower  and each of its
Subsidiaries party thereto,  and each such document constitutes the legal, valid
and  binding  obligation  of the  Borrower  or  its  Subsidiary  party  thereto,
enforceable in accordance with its terms,  except as such  enforceability may be
limited by bankruptcy, insolvency,  reorganization,  moratorium or similar state
or  federal  debtor  relief  laws from time to time in effect  which  affect the
enforcement of creditors'  rights in general and the  availability  of equitable
remedies.

(d) Compliance of Agreement,  Loan Documents and Borrowing with Laws,  Etc.
The execution,  delivery and performance by the Borrower and its Subsidiaries of
the Loan  Documents  to which each such Person is a party,  in  accordance  with
their respective  terms, the Extensions of Credit hereunder and the transactions
contemplated  hereby do not and will not, by the passage of time,  the giving of
notice or otherwise,  (i) require any material  Governmental Approval or violate
any material Applicable Law relating to the Borrower or any of its Subsidiaries,
(ii)  conflict  with,  result in a breach of or  constitute a default  under the
articles  of  incorporation,  bylaws or other  organizational  documents  of the
Borrower or any of its  Subsidiaries  or any  material  indenture,  agreement or
other  instrument  to  which  such  Person  is a party  or by  which  any of its
properties may be bound or any  Governmental  Approval  relating to such Person,
(iii) result in or require the creation or  imposition of any material Lien upon
or with respect to any  property now owned or hereafter  acquired by such Person
other than Liens arising  under the Loan  Documents or (iv) require any material
consent or material  authorization  of,  material filing with, or other material
act in respect  of, an  arbitrator  or  Governmental  Authority  and no material
consent  of any other  Person is  required  in  connection  with the  execution,
delivery, performance, validity or enforceability of this Agreement.

(e) Compliance with Law; Governmental  Approvals.  Each of the Borrower and
its Subsidiaries (i) has all Governmental  Approvals  required by any Applicable
Law for it to conduct its  business,  each of which is in full force and effect,
is final and not  subject  to review on  appeal  and is not the  subject  of any
pending  or,  to its  knowledge,  threatened  attack  by  direct  or  collateral
proceeding,   (ii)  is  in  compliance  in  all  material   respects  with  each
Governmental  Approval  applicable  to it  and  in  compliance  with  all  other
Applicable Laws relating to it or any of its respective properties and (iii) has
timely filed all material reports,  documents and other materials required to be
filed by it under all Applicable  Laws with any  Governmental  Authority and has
retained all material records and documents  required to be retained by it under
Applicable Law.

(f) Tax Returns and Payments. Each of the Borrower and its Subsidiaries has
duly filed or caused to be filed all federal tax returns,  all state tax returns
and all other  material  tax  returns  (including  material  local tax  returns)
required by Applicable Law to be filed, and has paid, or made adequate provision
for the payment of, all federal taxes,  state taxes and all other material taxes
(including material local taxes), assessments and governmental charges or levies
upon it and its property,  income, profits and assets which are due and payable,
except those which are being contested in good faith by appropriate  proceedings
diligently  conducted  and for which  adequate  reserves  have been  provided in
accordance with GAAP. Such returns  accurately  reflect in all material respects
all  liability  for taxes of the Borrower and its  Subsidiaries  for the periods
covered  thereby.  There is no ongoing audit or examination or, to the knowledge
of the Borrower,  other  investigation by any Governmental  Authority of the tax
liability of the Borrower and its  Subsidiaries,  except as could not reasonably
be expected to have a Material  Adverse Effect.  No  Governmental  Authority has
asserted any Lien or other claim against the Borrower or any Subsidiary  thereof
with respect to unpaid taxes which has not been  discharged or resolved,  except
unpaid taxes which are being contested in good faith by appropriate  proceedings
diligently  conducted  and for which  adequate  reserves  have been  provided in
accordance  with GAAP.  The  charges,  accruals and reserves on the books of the
Borrower and any of its  Subsidiaries  in respect of federal,  state,  local and
other taxes for all Fiscal Years and portions  thereof since the organization of
the  Borrower  and any of its  Subsidiaries  are in the judgment of the Borrower
adequate,  and the Borrower does not anticipate any additional material taxes or
material  assessments for any of such years with respect to the Borrower and its
Subsidiaries taken as a whole.

(g)  Intellectual   Property   Matters.   Each  of  the  Borrower  and  its
Subsidiaries  owns  or  possesses  rights  to  use  all  franchises,   licenses,
copyrights,  copyright applications,  patents, patent rights or licenses, patent
applications,  trademarks, trademark rights, service marks, service mark rights,
trade  names,  trade name  rights,  copyrights  and rights  with  respect to the
foregoing  which are  required to conduct its  business,  except for those,  the
failure of which to own or possess,  could not  reasonably be expected to have a
Material  Adverse  Effect.  To its  knowledge,  (i) no event has occurred  which
permits,  or after notice or lapse of time or both would permit,  the revocation
or  termination  of any  such  rights  and (ii)  neither  the  Borrower  nor any
Subsidiary thereof is liable to any Person for infringement under Applicable Law
with respect to any such rights as a result of its business operations,  in each
case which could reasonably be expected to have a Material Adverse Effect.

(h) Environmental Matters.

(i) The properties  owned,  leased or operated by the Borrower and its
Subsidiaries now or in the past do not contain,  and to their knowledge have not
previously contained, any Hazardous Materials in amounts or concentrations which
(A)  constitute or constituted a violation of applicable  Environmental  Laws or
(B) could give rise to liability under  applicable  Environmental  Laws, in each
case the result of which could reasonably be expected to have a Material Adverse
Effect;

(ii)  The  Borrower,  each  Subsidiary  and  such  properties  and all
operations conducted in connection therewith are in compliance, and have been in
compliance,   with  all   applicable   Environmental   Laws,  and  there  is  no
contamination  at, under or about such properties or such operations which could
interfere  with the  continued  operation of such  properties or impair the fair
saleable  value  thereof,  except  to the  extent  any  such  non-compliance  or
contamination  could not  reasonably  be  expected  to have a  Material  Adverse
Effect;

(iii) Neither the Borrower nor any Subsidiary thereof has received any
notice of violation, alleged violation,  non-compliance,  liability or potential
liability regarding  environmental matters,  Hazardous Materials,  or compliance
with  Environmental  Laws, nor does the Borrower or any Subsidiary  thereof have
knowledge or reason to believe that any such notice will be received or is being
threatened,  except as could  not  reasonably  be  expected  to have a  Material
Adverse Effect;

(iv) Hazardous  Materials have not been  transported or disposed of by
the Borrower or any of its Subsidiaries or, to the Borrower's knowledge,  by any
other Person to or from the properties owned, leased or operated by the Borrower
and its  Subsidiaries  in  violation  of, or in a manner or to a location  which
could give rise to liability under,  Environmental  Laws, nor have any Hazardous
Materials been generated,  treated, stored or disposed of by the Borrower or any
of its Subsidiaries or, to the Borrower's knowledge,  by any other Person at, on
or under any of such  properties in violation of, or in a manner that could give
rise to liability under, any applicable Environmental Laws that could reasonably
be expected to have a Material Adverse Effect;

(v) No judicial  proceedings or governmental or administrative  action
is  pending,  or,  to the  knowledge  of the  Borrower,  threatened,  under  any
Environmental Law to which the Borrower or any Subsidiary  thereof is or will be
named as a  potentially  responsible  party with respect to such  properties  or
operations conducted in connection therewith,  nor are there any consent decrees
or other decrees,  consent  orders,  administrative  orders or other orders,  or
other   administrative   or   judicial   requirements   outstanding   under  any
Environmental Law with respect to Borrower, any Subsidiary or such properties or
such  operations  that could  reasonably be expected to have a Material  Adverse
Effect; and

(vi) There has been no release, or to the Borrower's knowledge, threat
of release,  of  Hazardous  Materials  at or from  properties  owned,  leased or
operated by the Borrower or any Subsidiary,  now or in the past, in violation of
or  in  amounts  or  in a  manner  that  could  give  rise  to  liability  under
Environmental  Laws that could reasonably be expected to have a Material Adverse
Effect.

(i)   ERISA.

(i) As of the Closing  Date,  neither the  Borrower nor any ERISA
Affiliate maintains or contributes to, or has any obligation under, any Employee
Benefit Plans other than those identified on Schedule 6.1(i);

(ii)  The  Borrower  and  each  ERISA  Affiliate  is in  material
compliance  with all  applicable  provisions  of ERISA and the  regulations  and
published interpretations  thereunder with respect to all Employee Benefit Plans
except for any required  amendments for which the remedial  amendment  period as
defined in Section  401(b) of the Code has not yet  expired  and except  where a
failure to so comply could not reasonably be expected to have a Material Adverse
Effect.  Each  Employee  Benefit  Plan that is  intended to be  qualified  under
Section 401(a) of the Code has been  determined by the Internal  Revenue Service
to be so qualified,  and each trust related to such plan has been  determined to
be exempt under  Section  501(a) of the Code except for such plans that have not
yet received  determination  letters but for which the remedial amendment period
for submitting a determination letter has not yet expired. No liability has been
incurred by the Borrower or any ERISA  Affiliate  which remains  unsatisfied for
any  taxes  or  penalties  with  respect  to any  Employee  Benefit  Plan or any
Multiemployer  Plan except for a liability that could not reasonably be expected
to have a Material Adverse Effect;

(iii)  As  of  the  Closing   Date,  no  Pension  Plan  has  been
terminated,  nor has any accumulated  funding  deficiency (as defined in Section
412 of the Code)  been  incurred  (without  regard to any waiver  granted  under
Section 412 of the Code),  nor has any funding waiver from the Internal  Revenue
Service been received or requested with respect to any Pension Plan, nor has the
Borrower or any ERISA Affiliate  failed to make any  contributions or to pay any
amounts due and owing as  required  by Section  412 of the Code,  Section 302 of
ERISA  or the  terms  of any  Pension  Plan  prior  to the  due  dates  of  such
contributions  under  Section 412 of the Code or Section  302 of ERISA,  nor has
there been any event  requiring any disclosure  under Section  4041(c)(3)(C)  or
4063(a) of ERISA with respect to any Pension Plan;

(iv)  Except   where  the   failure  of  any  of  the   following
representations  to be correct in all material  respects could not reasonably be
expected to have a Material  Adverse Effect,  neither the Borrower nor any ERISA
Affiliate has: (A) engaged in a nonexempt  prohibited  transaction  described in
Section 406 of the ERISA or Section 4975 of the Code, (B) incurred any liability
to the PBGC which  remains  outstanding  other than the payment of premiums  and
there are no premium  payments  which are due and  unpaid,  (C) failed to make a
required  contribution or payment to a Multiemployer Plan, or (D) failed to make
a required installment or other required payment under Section 412 of the Code;

(v) No Termination  Event has occurred or is reasonably  expected
to occur; and

(vi)  Except   where  the   failure  of  any  of  the   following
representations  to be correct in all material  respects could not reasonably be
expected to have a Material Adverse Effect,  no proceeding,  claim (other than a
benefits claim in the ordinary course of business), lawsuit and/or investigation
is  existing  or, to the best  knowledge  of the  Borrower  after  due  inquiry,
threatened  concerning  or involving any (A) employee  welfare  benefit plan (as
defined in Section 3(1) of ERISA) currently  maintained or contributed to by the
Borrower or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.

(j) Margin Stock.  Neither the Borrower nor any Subsidiary  thereof is
engaged  principally  or as one of its  activities  in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each
such term is defined or used,  directly or  indirectly,  in  Regulation U of the
Board of Governors of the Federal  Reserve  System).  No part of the proceeds of
any of the Loans or Letters of Credit  will be used for  purchasing  or carrying
margin stock or for any purpose which  violates,  or which would be inconsistent
with, the provisions of Regulation T, U or X of such Board of Governors.

(k)  Government  Regulation.  Neither the Borrower nor any  Subsidiary
thereof is an "investment  company" or a company  "controlled" by an "investment
company" (as each such term is defined or used in the Investment  Company Act of
1940,  as amended) and neither the Borrower  nor any  Subsidiary  thereof is, or
after giving  effect to any  Extension of Credit will be,  subject to regulation
under the Public Utility Holding Company Act of 1935 or the Interstate  Commerce
Act, each as amended,  or any other  Applicable  Law which limits its ability to
incur or consummate the transactions contemplated hereby.

(l) Employee Relations.  Each of the Borrower and its Subsidiaries has
a stable work force in place and is not, as of the  Closing  Date,  party to any
collective  bargaining  agreement nor has any labor union been recognized as the
representative  of its  employees  except as set forth on Schedule  6.1(l).  The
Borrower knows of no pending,  threatened or contemplated strikes, work stoppage
or other  collective  labor  disputes  involving  its  employees or those of its
Subsidiaries  that could  reasonably  be  expected  to have a  Material  Adverse
Effect.

(m)  Burdensome  Provisions.  Neither the Borrower nor any  Subsidiary
thereof is a party to any indenture,  agreement,  lease or other instrument,  or
subject to any corporate or partnership  restriction,  Governmental  Approval or
Applicable  Law which could be  reasonably  expected to have a Material  Adverse
Effect.  No  Subsidiary  is party to any  agreement or  instrument  or otherwise
subject to any  restriction or encumbrance  that restricts or limits its ability
to make dividend payments or other distributions in respect of its capital stock
to the Borrower or any Subsidiary or to transfer any of its assets or properties
to the Borrower or any other  Subsidiary in each case other than existing  under
or by reason of the Loan Documents or Applicable Law.

(n) Financial  Statements.  The (i) audited Consolidated balance sheet
of the  Borrower  and its  Subsidiaries  as of December 31, 2001 and the related
audited statements of income and retained earnings and cash flows for the Fiscal
Year then ended and (ii)  unaudited  Consolidated  balance sheet of the Borrower
and its  Subsidiaries  as of September  30, 2002 and related  unaudited  interim
statements  of  income  and  retained  earnings,  in  each  case  including  the
accompanying  notes,  copies of which have been furnished to the  Administrative
Agent and each  Lender,  are  complete  and  correct  and  fairly  present  on a
Consolidated basis the financial position,  results of operations and cash flows
of the Borrower and its  Subsidiaries  as of such dates and for the periods then
ended  (other than  customary,  year end  adjustments  for  unaudited  financial
statements). All such financial statements,  including the related schedules and
notes thereto,  have been prepared in accordance with GAAP. The Borrower and its
Subsidiaries  have no Debt,  obligation  or other  unusual  forward or long-term
commitment which is not fairly reflected in the foregoing  financial  statements
or in the notes thereto.

(o) No Material  Adverse Change.  Except as publicly  disclosed by the
Borrower prior to the Closing Date,  since September 30, 2002, there has been no
material  adverse  change in the  properties,  assets,  liabilities  (actual  or
contingent),   business,  operations,  prospects,  or  condition  (financial  or
otherwise) of the Borrower and its Subsidiaries,  taken as a whole, and no event
has occurred or  condition  arisen that could  reasonably  be expected to have a
Material Adverse Effect.

(p)  Solvency.  As of the Closing Date and after giving effect to each
Extension of Credit made  hereunder,  the Borrower and each of its  Subsidiaries
will be Solvent.

(q) Titles to  Properties.  Each of the Borrower and its  Subsidiaries
has such title to the real  property  owned or leased by it as is  necessary  or
desirable to the conduct of its business and valid and legal title to all of its
personal  property and assets,  except those which have been  disposed of by the
Borrower or its  Subsidiaries  subsequent to such date which  dispositions  have
been in the  ordinary  course of business or as  otherwise  expressly  permitted
hereunder.

(r) Liens.  None of the  properties  and assets of the Borrower or any
Subsidiary  thereof is subject to any Lien,  except Liens permitted  pursuant to
Section 10.2. No financing  statement  under the Uniform  Commercial Code of any
state  which  names  the  Borrower  or any  Subsidiary  thereof  or any of their
respective trade names or divisions as debtor and which has not been terminated,
has been filed in any state or other  jurisdiction  and neither the Borrower nor
any Subsidiary  thereof has signed any such financing  statement or any security
agreement  authorizing  any secured party  thereunder to file any such financing
statement, except to perfect those Liens permitted by Section 10.2 hereof.

(s) Debt and Guaranty  Obligations.  Schedule 6.1(s) is a complete and
correct  listing of all Debt and  Guaranty  Obligations  of the Borrower and its
Subsidiaries  as of the Closing Date in excess of  $3,000,000.  The Borrower and
its  Subsidiaries  have performed and are in compliance with all of the terms of
such Debt and Guaranty  Obligations and all instruments and agreements  relating
thereto,  and no default or event of default,  or event or condition  which with
notice or lapse of time or both  would  constitute  such a  default  or event of
default  on the part of the  Borrower  or any of its  Subsidiaries  exists  with
respect to any such Debt or Guaranty Obligation.

(t)  Litigation.  Except for matters  existing on the Closing Date and
set forth on Schedule 6.1(t), there are no actions, suits or proceedings pending
nor, to the  knowledge of the Borrower,  threatened  against or in any other way
relating adversely to or affecting the Borrower or any Subsidiary thereof or any
of their respective properties in any court or before any arbitrator of any kind
or before or by any Governmental Authority that, if adversely determined,  could
reasonably be expected to have a Material Adverse Effect.

(u) Absence of Defaults.  No event has occurred or is continuing which
constitutes  a Default or an Event of Default,  or which  constitutes,  or which
with the passage of time or giving of notice or both would constitute, a default
or  event of  default  by the  Borrower  or any  Subsidiary  thereof  under  any
judgment,  decree or order to which the Borrower or its  Subsidiaries is a party
or by  which  the  Borrower  or its  Subsidiaries  or any  of  their  respective
properties may be bound or which would require the Borrower or its  Subsidiaries
to make any payment  thereunder  prior to the scheduled  maturity date therefor,
except where such default or defaults,  if any, could not reasonably be expected
to have a Material Adverse Effect.

(v) Senior Debt Status.  The  Obligations  of the Borrower and each of
its Subsidiaries under this Agreement and each of the other Loan Documents ranks
and  shall  continue  to rank at least  senior in  priority  of  payment  to all
Subordinated  Debt and all  senior  unsecured  Debt of each such  Person  and is
designated as "Senior Indebtedness" under all instruments and documents,  now or
in the future,  relating to all Subordinated  Debt and all senior unsecured Debt
of such Person.

(w) Accuracy and Completeness of Information. All written information,
reports and other  papers and data  produced by or on behalf of the  Borrower or
any  Subsidiary  thereof and furnished to the Lenders were, at the time the same
were so furnished,  complete and correct in all material  respects to the extent
necessary  to give the  recipient a true and  accurate  knowledge of the subject
matter. No document  furnished or written  statement made to the  Administrative
Agent or the Lenders by the  Borrower or any  Subsidiary  thereof in  connection
with the  negotiation,  preparation or execution of this Agreement or any of the
Loan Documents  contains or will contain any untrue statement of a fact material
to the  creditworthiness  of the Borrower or its  Subsidiaries  or omits or will
omit to  state a  material  fact  necessary  in  order  to make  the  statements
contained  therein not misleading in any material  respect.  The Borrower is not
aware of any facts which it has not  disclosed in writing to the  Administrative
Agent having a Material Adverse Effect.

SECTION  6.2  Survival  of   Representations   and  Warranties,   Etc.  All
representations   and   warranties   set  forth  in  this  Article  VI  and  all
representations and warranties contained in any certificate,  or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this  Agreement.  All  representations  and warranties
made  under this  Agreement  shall be made or deemed to be made at and as of the
Closing Date (except those that are expressly made as of a specific date), shall
survive the Closing Date and shall not be waived by the  execution  and delivery
of this Agreement,  any investigation made by or on behalf of the Lenders or any
borrowing hereunder.

ARTICLE VII

FINANCIAL INFORMATION AND NOTICES

Until all the  Obligations  have been  paid and  satisfied  in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section  13.11,  the  Borrower  will  furnish or cause to be furnished to the
Administrative  Agent at the  Administrative  Agent's  Office at the address set
forth in Section  13.1 and to the Lenders at their  respective  addresses as set
forth on  Schedule  1.1(a),  or such other  office as may be  designated  by the
Administrative Agent and Lenders from time to time:

SECTION 7.1 Financial Statements and Projections.

(a) Quarterly Financial Statements. As soon as practicable and in any event
within fifty (50) days after each fiscal quarter of each Fiscal Year,  unaudited
Consolidated  financial  statements of the Borrower and its Subsidiaries for the
fiscal  quarter  then  ended and that  portion of the  Fiscal  Year then  ended,
including  the notes  thereto,  all in  reasonable  detail and  prepared  by the
Borrower in accordance with GAAP and in compliance with the applicable reporting
requirements  of the Securities and Exchange  Commission for issuers of publicly
traded  securities,  and  certified  by  the  chief  financial  officer  or  the
controller  of the  Borrower  to present  fairly in all  material  respects  the
financial condition of the Borrower and its Subsidiaries on a Consolidated basis
as of their  respective  dates and the results of operations of the Borrower and
its Subsidiaries for the respective  periods then ended,  subject to normal year
end adjustments (it being agreed that the requirements of this subsection may be
satisfied  by delivery of the  applicable  quarterly  report on Form 10-Q of the
Borrower to the  Securities  and Exchange  Commission to the extent that: (i) it
contains the foregoing  information,  (ii) it is delivered within the applicable
time period noted herein and is  available to the  Administrative  Agent and the
Lenders on EDGAR and (iii) the Borrower  notifies the  Administrative  Agent and
the Lenders  within the time period noted herein that it is available to them on
EDGAR).

(b) Annual  Financial  Statements.  As soon as practicable and in any event
within  one  hundred  and five (105)  days  after the end of each  Fiscal  Year,
audited  Consolidated  financial statements of the Borrower and its Subsidiaries
for the Fiscal Year then ended,  including the notes thereto,  all in reasonable
detail  and  certified  by an  independent  public  accounting  firm  reasonably
acceptable to the Administrative  Agent in accordance with GAAP, and accompanied
by a report  thereon  by such  independent  public  accounting  firm that is not
qualified  with respect to scope  limitations  imposed by the Borrower or any of
its  Subsidiaries  or with  respect to  accounting  principles  followed  by the
Borrower or any of its Subsidiaries not in accordance with GAAP (it being agreed
that the  requirements  of this  subsection  may be satisfied by delivery of the
applicable  annual  report on Form 10-K of the  Borrower to the  Securities  and
Exchange   Commission  to  the  extent  that:  (i)  it  contains  the  foregoing
information, (ii) it is delivered within the applicable time period noted herein
and is available to the Administrative  Agent and the Lenders on EDGAR and (iii)
the Borrower notifies the  Administrative  Agent and the Lenders within the time
period noted herein that it is available to them on EDGAR).

SECTION  7.2  Officer's  Compliance  Certificate.  At each  time  financial
statements  are delivered  pursuant to Sections  7.1(a) or (b) and at such other
times as the Administrative Agent shall reasonably request, a certificate of the
chief financial officer,  the controller or the treasurer of the Borrower in the
form of Exhibit F attached hereto (an "Officer's Compliance Certificate").

SECTION 7.3 Accountants' Certificate. At each time financial statements are
delivered  pursuant to Section 7.1(b), a certificate from the independent public
accountants certifying such financial statements addressed to the Administrative
Agent for the benefit of the Lenders and stating that, in connection  with their
audit,  nothing  came to their  attention  that caused them to believe  that the
Borrower failed to comply with the terms, covenants, provisions or conditions of
Article IX of this Agreement insofar as they relate to accounting matters.

SECTION 7.4 Other Reports. Such other information regarding the operations,
business  affairs  and  financial  condition  of  the  Borrower  or  any  of its
Subsidiaries as the Administrative Agent or any Lender may reasonably request.

SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no event
later  than ten (10) days after an officer  of the  Borrower  obtains  knowledge
thereof) telephonic and written notice of:

(a) the commencement of (i) all proceedings and investigations by or before
any Governmental  Authority and (ii) all actions and proceedings in any court or
before any  arbitrator  against or  involving  the  Borrower  or any  Subsidiary
thereof or any of their respective  properties,  assets or businesses  which, if
adversely  determined,  could  reasonably be expected to have a Material Adverse
Effect;

(b) any notice of any violation  received by the Borrower or any Subsidiary
thereof from any  Governmental  Authority  including,  without  limitation,  any
notice of violation of  Environmental  Laws, which violation could reasonably be
expected to have a Material Adverse Effect;

(c) any labor  controversy that has resulted in, or threatens to result in,
a strike or other work action  against the  Borrower or any  Subsidiary  thereof
that could reasonably be expected to have a Material Adverse Effect;

(d) any attachment, judgment, lien, levy or order exceeding $3,000,000 that
may be assessed  against or  threatened  against the Borrower or any  Subsidiary
thereof;

(e) (i) any Default or Event of Default or (ii) the occurrence or existence
of any event or  circumstance  that could  reasonably  be  expected  to become a
Default or Event of Default;

(f) (i) any  unfavorable  determination  letter from the  Internal  Revenue
Service  regarding the  qualification  of an Employee Benefit Plan under Section
401(a) of the Code (along with a copy thereof), (ii) all notices received by the
Borrower or any ERISA  Affiliate of the PBGC's  intent to terminate  any Pension
Plan or to have a trustee  appointed to administer  any Pension Plan,  (iii) all
notices  received by the Borrower or any ERISA  Affiliate  from a  Multiemployer
Plan  sponsor  concerning  the  imposition  or  amount of  withdrawal  liability
pursuant to Section 4202 of ERISA and (iv) the Borrower  obtaining  knowledge or
reason to know that the Borrower or any ERISA  Affiliate has filed or intends to
file a  notice  of  intent  to  terminate  any  Pension  Plan  under a  distress
termination within the meaning of Section 4041(c) of ERISA; and

(g) any event which makes any of the  representations  set forth in Section
6.1 inaccurate in any respect (provided that, with respect to any representation
set forth in  Section  6.1 that is not  subject to a  materiality  or a Material
Adverse  Effect  qualification,   any  event  which  makes  such  representation
inaccurate in any material respect).

SECTION 7.6  Accuracy of  Information.  All written  information,  reports,
statements  and other papers and data  furnished by or on behalf of the Borrower
to the  Administrative  Agent or any Lender whether pursuant to this Article VII
or any other  provision of this  Agreement,  or any of the  Security  Documents,
shall, at the time the same is so furnished, comply with the representations and
warranties set forth in Section 6.1(w).

ARTICLE VIII

AFFIRMATIVE COVENANTS

Until all of the  Obligations  have been paid and satisfied in full and the
Commitments terminated,  unless consent has been obtained in the manner provided
for in Section 13.11, the Borrower will, and will cause each of its Subsidiaries
to:

SECTION 8.1 Preservation of Corporate Existence and Related Matters. Except
as permitted  by Section  10.4,  preserve  and  maintain its separate  corporate
existence and all rights,  franchises,  licenses and privileges necessary to the
material conduct of its business,  and qualify and remain qualified as a foreign
corporation  and  authorized  to do business in each  jurisdiction  in which the
failure to so qualify could  reasonably  be expected to have a Material  Adverse
Effect.

SECTION 8.2 Maintenance of Property. In addition to the requirements of any
of the Security  Documents,  protect and preserve all  properties  useful in and
material to its business,  including copyrights,  patents,  trade names, service
marks  and  trademarks;  maintain  in  good  working  order  and  condition  all
buildings,  equipment and other  tangible real and personal  property;  and from
time to time make or cause to be made all renewals,  replacements  and additions
to such property necessary for the conduct of its business, so that the business
carried on in connection therewith may be conducted in a commercially reasonable
manner.

SECTION  8.3  Insurance.  Maintain  insurance  with  financially  sound and
reputable  insurance  companies  against  such risks and in such  amounts as are
customarily  maintained by similar businesses  (including,  without  limitation,
hazard and business interruption  coverage) and as may be required by Applicable
Law and as are required by any Security  Documents,  and on the Closing Date and
from  time to time  thereafter  deliver  to the  Administrative  Agent  upon its
request a detailed  list of the insurance  then in effect,  stating the names of
the insurance companies,  retention amounts,  the amounts of the insurance,  the
dates of the expiration thereof and the properties and risks covered thereby.

SECTION 8.4 Accounting Methods and Financial Records.  Maintain a system of
accounting,  and keep such books,  records and accounts (which shall be true and
complete in all material  respects) as may be required or as may be necessary to
permit the  preparation of financial  statements in accordance  with GAAP and in
compliance  with  the   regulations  of  any   Governmental   Authority   having
jurisdiction over it or any of its properties.

SECTION 8.5 Payment and  Performance  of  Obligations.  Pay and perform all
Obligations  under  this  Agreement  and the other  Loan  Documents,  and pay or
perform (a) all taxes,  assessments and other  governmental  charges that may be
levied  or  assessed  upon  it or  any  of  its  property,  and  (b)  all  other
indebtedness,  obligations  and  liabilities in accordance  with customary trade
practices;  provided,  that the Borrower or such Subsidiary may contest any item
described  in clauses  (a) or (b) of this  Section  8.5 in good faith so long as
adequate reserves are maintained with respect thereto in accordance with GAAP.

SECTION  8.6  Compliance  With Laws and  Approvals.  Observe  and remain in
compliance  in all material  respects with all  Applicable  Laws and maintain in
full force and effect all Governmental Approvals, in each case applicable to the
conduct of its business.

SECTION 8.7  Environmental  Laws.  In addition to and without  limiting the
generality  of Section 8.6, (a) comply with,  and ensure such  compliance by all
tenants and  subtenants,  if any,  with all  applicable  Environmental  Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants,
if any,  obtain and comply with and maintain,  any and all licenses,  approvals,
notifications,  registrations  or permits  required by applicable  Environmental
Laws,  except to the extent  that the failure to do so could not  reasonably  be
expected  to have a Material  Adverse  Effect,  (b)  conduct  and  complete  all
investigations,  studies,  sampling and testing,  and all remedial,  removal and
other actions  required under  Environmental  Laws,  and promptly  comply in all
respects with all lawful orders and  directives  of any  Governmental  Authority
regarding  Environmental  Laws, except to the extent that such actions are being
contested  in good  faith by  appropriate  proceedings,  adequate  reserves  are
maintained with respect to such actions in accordance with GAAP and the pendency
of such  actions  could not  reasonably  be expected to have a Material  Adverse
Effect, and (c) defend, indemnify and hold harmless the Administrative Agent and
the Lenders, and their respective parents, Subsidiaries,  Affiliates, employees,
agents, officers and directors, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise,  arising out of, or in any way
relating  to  the  presence  of  Hazardous  Materials,   or  the  violation  of,
noncompliance  with or liability under any Environmental  Laws applicable to the
operations of the Borrower or any such Subsidiary,  or any orders,  requirements
or demands of  Governmental  Authorities  related  thereto,  including,  without
limitation,  reasonable  attorney's and  consultant's  fees,  investigation  and
laboratory fees, response costs, court costs and litigation expenses,  except to
the extent that any of the foregoing  directly result from the gross  negligence
or willful misconduct of the party seeking indemnification therefor.

SECTION 8.8 Compliance with ERISA. In addition to and without  limiting the
generality  of Section 8.6, (a) except where the failure to so comply could not,
individually  or in the  aggregate,  reasonably  be  expected to have a Material
Adverse Effect, (i) comply with all material applicable  provisions of ERISA and
the  regulations  and published  interpretations  thereunder with respect to all
Employee  Benefit  Plans,  (ii) not take any  action or fail to take  action the
result of which could be a  liability  to the PBGC or to a  Multiemployer  Plan,
(iii) not  participate  in any prohibited  transaction  that could result in any
civil  penalty  under ERISA or tax under the Code and (iv) operate each Employee
Benefit  Plan in such a manner  that  will not  incur  any tax  liability  under
Section  4980B of the Code or any  liability  to any  qualified  beneficiary  as
defined in Section 4980B of the Code and (b) furnish to the Administrative Agent
upon the  Administrative  Agent's request such additional  information about any
Employee  Benefit  Plan as may be  reasonably  requested  by the  Administrative
Agent.

SECTION 8.9 Compliance  With  Agreements.  Comply in all material  respects
with each term,  condition and provision of all material leases,  agreements and
other instruments  entered into in the conduct of its business;  provided,  that
the  Borrower  or any such  Subsidiary  may  contest  any such  material  lease,
agreement or other  instrument in good faith through  applicable  proceedings so
long as adequate reserves are maintained in accordance with GAAP.

SECTION  8.10  Visits  and  Inspections.   Permit  representatives  of  the
Administrative Agent or any Lender, from time to time upon reasonable notice, to
visit and inspect its  properties;  inspect,  audit and make  extracts  from its
books,  records and files,  including,  but not limited to,  management  letters
prepared by independent  accountants;  and discuss with its principal  officers,
and its independent accountants,  its business, assets,  liabilities,  financial
condition, results of operations and business prospects.

SECTION 8.11 Additional Subsidiaries and Additional Collateral.

(a) Material Domestic Subsidiaries.  Notify the Administrative Agent of (1)
the creation or  acquisition  of any  Material  Domestic  Subsidiary  or (2) any
Domestic  Subsidiary of the Borrower becoming a Material Domestic  Subsidiary as
evidenced by the information set forth in the Officer's  Compliance  Certificate
delivered  pursuant to Section 7.2, and  promptly  thereafter  (and in any event
within   thirty  (30)  days),   cause  to  be  executed  and  delivered  to  the
Administrative  Agent (i) a duly executed Joinder  Agreement  (pursuant to which
such Material Domestic  Subsidiary shall become party to the Guaranty Agreement,
the Collateral Agreement and any other applicable Security Documents), (ii) such
other  instruments  and  documents  and other  items of the type  required to be
delivered  pursuant  to Section  5.2(c),  all in form and  substance  reasonably
satisfactory to the Administrative  Agent, as may be reasonably  required by the
Administrative  Agent to obtain a first priority  perfected security interest in
all personal  property and real  property of such Material  Domestic  Subsidiary
(subject  to  Permitted  Liens),   (iii)  such  closing  documents  and  closing
certificates  of the type required to be delivered  pursuant to Section  5.2(b),
including,  without  limitation,  favorable  legal  opinions  addressed  to  the
Administrative   Agent  and  the  Lenders  in  form  and  substance   reasonably
satisfactory  thereto with respect to such duly executed Joinder  Agreement (and
the  Guaranty  Agreement,  the  Collateral  Agreement  and any other  applicable
Security Documents to which such Material Domestic Subsidiary shall become party
thereto in connection therewith), in each case as may reasonably be requested by
the Administrative  Agent, and (iv) such other documents and certificates as may
be reasonably requested by the Administrative Agent.

(b) Non-Material Domestic Subsidiaries.  Notify the Administrative Agent of
the  creation  or  acquisition  of any  Non-Material  Domestic  Subsidiary,  and
promptly  thereafter (and in any event within forty-five (45) days), cause to be
executed and  delivered to the  Administrative  Agent,  in each case only to the
extent  requested  by the  Administrative  Agent,  (i) a duly  executed  Joinder
Agreement  (pursuant to which the Borrower or the applicable Domestic Subsidiary
of the Borrower  shall pledge to the  Administrative  Agent the capital stock of
such  Non-Material  Domestic  Subsidiary),   (ii)  such  other  instruments  and
documents  and other  items of the type  required  to be  delivered  pursuant to
Section  5.2(c),  all in  form  and  substance  reasonably  satisfactory  to the
Administrative  Agent, as may be reasonably required by the Administrative Agent
to obtain a first priority  perfected  security interest in the capital stock of
such  Non-Material  Domestic  Subsidiary  and (iii)  such  other  documents  and
certificates as may be reasonably requested by the Administrative Agent.

(c) Foreign  Subsidiaries.  Notify the Administrative Agent of the creation
or acquisition of any Foreign Subsidiary which is directly owned by the Borrower
or a Domestic  Subsidiary of the Borrower,  and promptly  thereafter (and in any
event within  forty-five  (45) days),  cause to be executed and delivered to the
Administrative  Agent,  in  each  case  only  to  the  extent  requested  by the
Administrative  Agent, (i) a duly executed Joinder Agreement  (pursuant to which
the Borrower or the applicable  Domestic Subsidiary of the Borrower shall pledge
to  the  Administrative  Agent  no  more  that  percentage  of  all  issued  and
outstanding  shares of all capital stock or other  membership  interests of such
Foreign Subsidiary the granting of a security interest in which shall not result
in material adverse tax consequences to the Borrower or the applicable  Domestic
Subsidiary  (it  being  acknowledged  by  the  Borrower,  the  Lenders  and  the
Administrative  Agent that, as of the Closing Date, such percentage  required to
be  pledged is  sixty-five  percent  (65%)),  (ii) such  other  instruments  and
documents  and other  items of the type  required  to be  delivered  pursuant to
Section  5.2(c),  all in  form  and  substance  reasonably  satisfactory  to the
Administrative  Agent, as may be reasonably required by the Administrative Agent
to obtain a first priority  perfected  security interest in the capital stock of
such Foreign Subsidiary,  (iii) such closing documents and closing  certificates
of the type  required to be  delivered  pursuant to Section  5.2(b),  including,
without  limitation,  favorable legal opinions  addressed to the  Administrative
Agent and the Lenders in form and substance reasonably satisfactory thereto with
respect to such duly executed  Joinder  Agreement (and the Collateral  Agreement
and any  other  applicable  Security  Documents  to which the  Borrower  (or the
applicable  Domestic  Subsidiary) and such Foreign Subsidiary shall become party
thereto in connection therewith), in each case as may reasonably be requested by
the Administrative  Agent, and (iv) such other documents and certificates as may
be  reasonably  requested  by  the  Administrative  Agent.  Notwithstanding  the
provisions  of the  foregoing  subsection  (b)(i),  the  Borrower  may  evidence
compliance with such  subsection  (b)(i) by providing a perfected first priority
security interest (or the equivalent thereof pursuant to the Applicable Laws and
practices  of any relevant  foreign  jurisdiction)  in the  relevant  indicia of
ownership of such Foreign Subsidiary.

(d) Additional Real Property Collateral. Notify the Administrative Agent of
the  acquisition  of any real property by the Borrower or any Material  Domestic
Subsidiary  that is of the same type and character of the Collateral  subject to
any  Security  Document,  but  that  is not  subject  to the  existing  Security
Documents   (including  pursuant  to  any  after-acquired   property  provisions
thereof), and any other event or condition that may require additional action of
any nature in order to preserve the  effectiveness  and perfected  status of the
liens and security  interests of the  Administrative  Agent and the Lenders with
respect to such real  property  pursuant  to the  Security  Documents  and,  and
promptly  thereafter  (and in any event  within  thirty (30) days),  cause to be
executed and  delivered to the  Administrative  Agent (i) such  instruments  and
documents  and other  items of the type  required  to be  delivered  pursuant to
Section  5.2(c),  all in  form  and  substance  reasonably  satisfactory  to the
Administrative  Agent, as may be reasonably required by the Administrative Agent
to obtain a first  priority  perfected  security  interest in such real property
(subject  to Liens  permitted  pursuant  to  Section  10.2),  (ii) such  closing
documents and closing certificates of the type required to be delivered pursuant
to  Section  5.2(b),  in  form  and  substance  reasonably  satisfactory  to the
Administrative  Agent and the  Lenders  with  respect  to such  instruments  and
documents,  in each case as may  reasonably  be requested by the  Administrative
Agent,  and (iii) such other  documents  and  certificates  as may be reasonably
requested by the Administrative Agent.

SECTION 8.12 Use of Proceeds.  Use the proceeds of the Extensions of Credit
(a) to refinance the Existing  Facility and (b) for working  capital and general
corporate  requirements  of the Borrower  and its  Subsidiaries,  including  the
payment  of  certain  fees  and  expenses   incurred  in  connection   with  the
transactions contemplated by this Agreement.

SECTION  8.13  Further  Assurances.  Make,  execute  and  deliver  all such
additional and further acts, things, deeds and instruments as the Administrative
Agent the Required  Lenders  (through the  Administrative  Agent) may reasonably
require to document and consummate the transactions  contemplated  hereby and to
vest  completely  in and insure the  Administrative  Agent and the Lenders their
respective rights under this Agreement, the Notes, the Letters of Credit and the
other Loan Documents.

ARTICLE IX

FINANCIAL COVENANTS

Until all of the  Obligations  have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11, the Borrower and its Subsidiaries on a Consolidated basis will
not:

SECTION 9.1 Leverage  Ratio. As of any fiscal quarter end, permit the ratio
of (a) Total Funded Debt on such date,  to (b) EBITDA for the period of four (4)
consecutive  fiscal quarters ending on or immediately  prior to such date, to be
greater than 2.50 to 1.00.

SECTION 9.2 Consolidated Net Worth.  Permit, at any time,  Consolidated Net
Worth to be less than the sum of (a)  $135,000,000  plus (b) an amount  equal to
fifty percent (50%) of aggregate Net Income of the Borrower and its Subsidiaries
since  September  30, 2002;  provided  that,  in the event that Borrower and its
Subsidiaries on a Consolidated basis have a net loss for any fiscal quarter, Net
Income  for  purposes  of this  Section  9.2 shall be deemed to be zero for such
fiscal quarter.

SECTION 9.3 Interest  Coverage  Ratio.  As of any fiscal quarter end during
the periods set forth below, permit the ratio of (a) EBIT for the period of four
(4) consecutive  fiscal quarters ending on or immediately prior to such date, to
(b)  Interest  Expense for the period of four (4)  consecutive  fiscal  quarters
ending on or immediately  prior to such date, to be less than the  corresponding
ratio set forth below:

Period                                                               Ratio
------                                                               -----
Closing Date through and including December 31, 2003             2.25 to 1.00
January 1, 2004 and thereafter                                   2.50 to 1.00

SECTION 9.4 Capital  Expenditures.  During any Fiscal Year,  permit Capital
Expenditures to be greater than the sum of (i) one hundred thirty percent (130%)
of depreciation  and amortization  expense  (calculated in accordance with GAAP)
for the prior Fiscal Year and (ii) $5,000,000.

ARTICLE X

NEGATIVE COVENANTS

Until all of the  Obligations  have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in  Section  13.11,  the  Borrower  has  not  and  will  not  permit  any of its
Subsidiaries to:

SECTION 10.1 Limitations on Debt. Create,  incur, assume or suffer to exist
any Debt except:

(a) the Obligations (excluding any Hedging Obligations);

(b)  Debt  incurred  in  connection   with  a  Hedging   Agreement  with  a
counterparty and upon terms and conditions  (including interest rate) reasonably
satisfactory to the Administrative Agent;  provided,  that any counterparty that
is a  Lender  or The  Bank of  Montreal  shall  be  deemed  satisfactory  to the
Administrative Agent;

(c) Debt  existing on the Closing Date and not  otherwise  permitted  under
this  Section  10.1,  as  set  forth  on  Schedule  6.1(s),   and  the  renewal,
refinancing,  extension and  replacement  (but not the increase in the aggregate
principal amount) thereof;

(d)  Guaranty  Obligations  in favor of the  Administrative  Agent  for the
benefit of the Administrative Agent and the Lenders;

(e)  unsecured  Debt of the Borrower and the  Domestic  Subsidiaries  in an
aggregate amount not to exceed $5,000,000 on any date of determination (provided
that such  Debt may be  secured  to the  extent  that any such Debt is  created,
incurred,  assumed or suffered to exist in  connection  with Capital  Leases and
purchase money financing);

(f) Debt of the Foreign  Subsidiaries in an aggregate  amount not to exceed
$10,000,000 on any date of determination;

(g) intercompany Debt (i) between the Borrower and any Domestic  Subsidiary
of the Borrower or between any Domestic Subsidiary of the Borrower and any other
Domestic  Subsidiary of the Borrower,  (ii) between the Borrower and any Foreign
Subsidiary of the Borrower or between the Borrower or any Domestic Subsidiary of
the Borrower and any Foreign  Subsidiary  of the Borrower and (iii)  between any
Foreign  Subsidiary  of the Borrower  and any other  Foreign  Subsidiary  of the
Borrower; and

(h)  Debt of any  Person  acquired  in  accordance  with  Section  10.3(c),
including  any renewal,  extension or  refinancing,  but not any increase in the
aggregate principal amount, thereof (provided that such Debt was not incurred in
connection  with such  acquisition);  provided,  that no agreement or instrument
with respect to Debt  permitted to be incurred by this Section  shall  restrict,
limit or  otherwise  encumber  (by  covenant  or  otherwise)  the ability of any
Subsidiary  of the  Borrower to make any  payment to the  Borrower or any of its
Subsidiaries (in the form of dividends,  intercompany advances or otherwise) for
the purpose of enabling the Borrower to pay the Obligations.

SECTION  10.2  Limitations  on Liens.  Create,  incur,  assume or suffer to
exist,  any  Lien  on or  with  respect  to  any  of its  assets  or  properties
(including,  without  limitation,  shares of  capital  stock or other  ownership
interests), real or personal, whether now owned or hereafter acquired, except:

(a) Liens for taxes,  assessments and other governmental  charges or levies
(excluding  any  Lien  imposed  pursuant  to any of the  provisions  of ERISA or
Environmental  Laws)  not yet due or as to which the  period  of grace,  if any,
related  thereto has not expired or which are being  contested in good faith and
by  appropriate  proceedings  if adequate  reserves are maintained to the extent
required by GAAP;

(b)  the  claims  of  materialmen,   mechanics,   carriers,   warehousemen,
processors, landlords or other similar parties for labor, materials, supplies or
rentals  incurred in the ordinary course of business,  (i) which are not overdue
for a period of more than thirty (30) days or (ii) which are being  contested in
good faith and by appropriate proceedings;

(c) Liens  consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers'
compensation, unemployment insurance or similar legislation;

(d) Liens constituting  encumbrances in the nature of zoning  restrictions,
easements  and  rights or  restrictions  of record on the use of real  property,
which in the  aggregate are not  substantial  in amount and which do not, in any
case,  detract from the value of such  property or impair the use thereof in the
ordinary conduct of business;

(e) Liens of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders;

(f) Liens not otherwise  permitted by this Section 10.2 and in existence on
the Closing Date and described on Schedule 10.2;

(g) (i) Liens securing Debt incurred in connection  with Capital Leases and
purchase  money  Debt (in each case to the  extent  that such Debt is  permitted
under  Section  10.1(e));   provided  that  (A)  such  Liens  shall  be  created
substantially simultaneously with the acquisition or lease of the related asset,
(B) such Liens do not at any time encumber any property  other than the property
financed  by such  Debt,  (C) the  amount of such Debt  secured  thereby  is not
increased  and (D) the  principal  amount of such Debt  secured by any such Lien
shall at no time  exceed one hundred  percent  (100%) of the  original  purchase
price or lease  payment  amount of such property at the time it was acquired and
(ii) Liens on the assets of any Foreign Subsidiary securing Debt of such Foreign
Subsidiary (to the extent that such Debt is permitted under Section 10.1(f));

(h) Liens in favor of the Borrower or a Domestic Subsidiary of the Borrower
on assets of any other Subsidiary of the Borrower;

(i) Liens securing judgments not giving rise to an Event of Default so long
as (i) such Lien is adequately  bonded and (ii) any appropriate legal proceeding
which may have been duly  initiated  for the review of such  judgment  shall not
have been finally  terminated or the period within which such  proceeding may be
initiated shall not have expired;

(j) Liens  encumbering  deposits  made to secure  obligations  arising from
statutory,  regulatory,  contractual or warranty requirements of the Borrower or
any of its Subsidiaries, including rights of offset and set-off, incurred in the
ordinary course of business;

(k) Liens in favor of custom and revenue authorities arising as a matter of
law to secure  payment of custom duties in connection  with the  importation  of
goods in the ordinary course of business;

(l) Liens arising from the precautionary  filing of Uniform Commercial Code
financing statements (or similar foreign counterparts) regarding leases; and

(m) rights of setoff or  bankers'  liens upon  deposits of cash in favor of
banks or  other  financial  institutions  in the  ordinary  course  of  business
(provided that, to the extent requested by the  Administrative  Agent, such bank
or other  financial  institution  has executed and  delivered a deposit  account
control  agreement  with  respect to such  deposits  pursuant to the  Collateral
Agreement).

SECTION 10.3 Limitations on Loans, Advances,  Investments and Acquisitions.
Purchase,  own,  invest in or otherwise  acquire,  directly or  indirectly,  any
capital stock, interests in any partnership or joint venture (including, without
limitation, the creation or capitalization of any Subsidiary),  evidence of Debt
or other obligation or security,  substantially all or a portion of the business
or assets of any other Person or any other investment or interest  whatsoever in
any other Person, or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or by delivery of
property in, any Person except:

(a) investments (i) existing on the Closing Date in  Subsidiaries,  (ii) in
Subsidiaries  formed or acquired  after the Closing Date so long as the Borrower
and its Subsidiaries  comply with the applicable  provisions of Section 8.11 and
(iii)  existing  on the  Closing  Date  in  the  form  of  loans,  advances  and
investments described on Schedule 10.3;

(b)   investments  in  (i)   marketable   direct   obligations   issued  or
unconditionally guaranteed by the United States of America or any agency thereof
maturing  within one  hundred  twenty  (120)  days from the date of  acquisition
thereof,  (ii)  commercial  paper maturing no more than one hundred twenty (120)
days from the date of creation  thereof and currently  having the highest rating
obtainable  from either  Standard & Poor's Ratings  Services,  a division of The
McGraw-Hill   Companies,   Inc.  or  Moody's  Investors  Service,   Inc.,  (iii)
certificates of deposit maturing no more than one hundred twenty (120) days from
the date of creation thereof issued by commercial banks  incorporated  under the
laws of the United States of America, each having combined capital,  surplus and
undivided  profits of not less than  $500,000,000  and having a rating of "A" or
better by a nationally  recognized rating agency;  provided,  that the aggregate
amount  invested in such  certificates  of deposit  shall not at any time exceed
$5,000,000 for any one such  certificate of deposit and  $10,000,000 for any one
such bank, or (iv) time deposits maturing no more than thirty (30) days from the
date of creation  thereof with commercial  banks or savings banks or savings and
loan  associations  each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding  the maximum  amounts
of insurance thereunder; and

(c)  investments by the Borrower or any of its  Subsidiaries in the form of
acquisitions of all,  substantially  all or a majority of the stock or assets of
the business or a line of business (whether by the acquisition of capital stock,
assets or any  combination  thereof) of any other  Person  (each,  a  "Permitted
Acquisition"); provided that:

(i) the Person to be acquired shall be a going  concern,  engaged in a
business,  or the assets to be  acquired  shall be used in a  business  which is
similar,  related or  complimentary  to the line of business of the Borrower and
its Subsidiaries as required pursuant to Section 10.12;

(ii) the Borrower or such Subsidiary (unless the Person to be acquired
complies with Section 8.11), as applicable, shall be the surviving Person and no
Change in Control shall have been effected thereby;

(iii)  the  Borrower  shall  have  delivered  written  notice  of such
proposed   acquisition  to  the  Administrative   Agent  (for  delivery  by  the
Administrative Agent to the Lenders) and the Lenders, which notice shall include
the proposed  closing date of such  proposed  acquisition,  not less than twenty
(20) calendar days prior to such proposed closing date;

(iv) the Borrower  shall have  delivered to the  Administrative  Agent
copies of the Permitted Acquisition Documents;

(v) the Borrower shall have certified on or before the closing date of
such proposed acquisition, in writing and in a form reasonably acceptable to the
Administrative  Agent and the Lenders,  that such proposed  acquisition has been
approved by the board of directors or equivalent governing body of the Person to
be acquired;

(vi) no  Default  or Event  of  Default  shall  have  occurred  and be
continuing both before and after giving effect to such proposed acquisition;

(vii) the Borrower shall have complied with Section 8.11;

(viii) the Borrower shall have delivered to the  Administrative  Agent
and the Lenders an Officer's Compliance Certificate dated as of the closing date
of such proposed  acquisition  demonstrating,  in form and substance  reasonably
satisfactory  thereto,  pro forma  compliance  with each  covenant  contained in
Article IX (both before and after giving  effect to such  proposed  acquisition)
(it being agreed by the Borrower,  the Administrative Agent and the Lenders that
such calculations  shall assume that all Debt assumed or incurred in conjunction
with such proposed  acquisition  was incurred at the beginning of the applicable
calculation  period  and that all  income  and  expenses  associated  with  such
proposed  acquisition  shall be treated as earned and included in the  pro-forma
calculations (both on a consolidated and consolidating basis));

(ix) the Borrower  shall have at least  $10,000,000  in Liquidity both
before and after giving effect to such proposed acquisition; and

(x) the  Person to be  acquired  is not  subject to  material  pending
litigation which could reasonably be expected to have a Material Adverse Effect;

(d) intercompany  loans and advances in connection with  intercompany  Debt
permitted under Section 10.1(g);

(e) Hedging Agreements permitted pursuant to Section 10.1; and

(f) purchases of assets in the ordinary course of business.

SECTION 10.4 Limitations on Mergers and Liquidation.  Merge, consolidate or
enter into any similar  combination with any other Person or liquidate,  wind-up
or dissolve itself (or suffer any liquidation or dissolution) except:

(a) (i) any Wholly-Owned Domestic Subsidiary of the Borrower may merge with
the  Borrower or any other  Wholly-Owned  Domestic  Subsidiary  of the  Borrower
(provided that (1) in any merger  involving the Borrower,  the Borrower shall be
the surviving  entity and (2) in any merger  involving any Subsidiary  Guarantor
(and  not  involving  the  Borrower),  such  Subsidiary  Guarantor  shall be the
surviving entity) and (ii) any Wholly-Owned  Foreign  Subsidiary of the Borrower
may merge with any other Wholly-Owned Foreign Subsidiary of the Borrower;

(b) (i) any Wholly-Owned Domestic Subsidiary of the Borrower may merge into
the  Person  such  Wholly-Owned  Domestic  Subsidiary  was  formed to acquire in
connection  with an acquisition  permitted by Section  10.3(c)  (provided  that,
after giving  effect to such  acquisition,  such Person shall be a  Wholly-Owned
Domestic  Subsidiary and shall comply with the requirements set forth in Section
8.11) and (ii) any  Wholly-Owned  Foreign  Subsidiary  of the Borrower may merge
into the Person such  Wholly-Owned  Foreign  Subsidiary was formed to acquire in
connection with an acquisition permitted by Section 10.3(c); and

(c) (i) any  Wholly-Owned  Domestic  Subsidiary of the Borrower may wind-up
into the Borrower or any other Wholly-Owned  Domestic Subsidiary of the Borrower
and (ii) any  Wholly-Owned  Foreign  Subsidiary of the Borrower may wind-up into
any other Wholly-Owned Foreign Subsidiary of the Borrower.

SECTION 10.5 Limitations on Sale of Assets.  Convey,  sell, lease,  assign,
transfer  or  otherwise  dispose  of any of its  property,  business  or  assets
(including,  without  limitation,  the  sale of any  receivables  and  leasehold
interests and any sale-leaseback or similar  transaction),  whether now owned or
hereafter acquired except:

(a) the sale of inventory in the ordinary course of business;

(b) the sale of obsolete assets no longer used or usable in the business of
the Borrower or any of its Subsidiaries;

(c) the transfer of assets to the Borrower or any  Wholly-Owned  Subsidiary
of the Borrower pursuant to Section 10.4(c);

(d) the sale or discount without recourse of accounts receivable arising in
the ordinary  course of business in connection with the compromise or collection
thereof;

(e) the disposition of any Hedging Agreement;

(f) sales or grants of licenses in the  ordinary  course of business to use
the patents,  trade  secrets,  know-how and other  intellectual  property of the
Borrower  and its  Subsidiaries  to the extent  that any such  license  does not
prohibit the Borrower or its Subsidiaries  from using any material  technologies
licensed  unless  for  due  consideration,   or  require  the  Borrower  or  its
Subsidiaries to pay fees for the use of any material technology;

(g) any distribution permitted pursuant to Section 10.6; and

(h) sales of assets (i) by the Borrower or any Domestic  Subsidiary  of the
Borrower in an aggregate amount not to exceed $5,000,000 during the term of this
Agreement  and (ii) by any Foreign  Subsidiary  of the  Borrower in an aggregate
amount not to exceed $10,000,000 during the term of this Agreement.

SECTION 10.6 Limitations on Dividends and Distributions. Declare or pay any
dividends  upon any of its  capital  stock  or any  other  ownership  interests;
purchase,  redeem,  retire or otherwise  acquire,  directly or  indirectly,  any
shares  of  its  capital  stock  or  other  ownership  interests,  or  make  any
distribution  of cash,  property  or assets  among the  holders of shares of its
capital stock or other  ownership  interests,  or make any change in its capital
structure; provided that:

(a) the Borrower or any  Subsidiary  may pay dividends in shares of its own
capital stock;

(b) any Subsidiary may pay cash dividends to the Borrower;

(c) the Borrower may pay cash  dividends  on its capital  stock,  purchase,
redeem,  retire or  otherwise  acquire,  directly or  indirectly,  shares of its
capital stock (including  purchases of treasury stock), or make distributions of
cash,  property or assets among its  shareholders in an aggregate  amount not to
exceed the lesser of (i) twelve and  one-half  cents  ($0.125)  per share in any
calendar  quarter,  or (ii)  $8,000,000 in any calendar year (such quarterly and
annual limitations, hereinafter, the "Current Dividend Level"); and

(d) in addition to transactions  permitted under  subsection (c) above, the
Borrower may pay cash dividends on its capital stock,  purchase,  redeem, retire
or  otherwise  acquire,  directly or  indirectly,  shares of its  capital  stock
(including purchases of treasury stock), or make distributions of cash, property
or assets among its  shareholders in an aggregate  amount not to exceed,  during
the term of this Agreement,  the sum of (i) $6,000,000 plus (ii) an amount equal
to  fifty  percent  (50%)  of  aggregate  Net  Income  of the  Borrower  and its
Subsidiaries since September 30, 2002.

SECTION 10.7 Limitations on Exchange and Issuance of Capital Stock.  Issue,
sell or otherwise  dispose of any class or series of capital  stock that, by its
terms  or by  the  terms  of  any  security  into  which  it is  convertible  or
exchangeable, is, or upon the happening of an event or passage of time would be,
(a)  convertible  or  exchangeable  into Debt or (b)  required to be redeemed or
repurchased, including at the option of the holder, in whole or in part, or has,
or upon the happening of an event or passage of time would have, a redemption or
similar payment due.

SECTION  10.8  Transactions   with  Affiliates.   Except  for  transactions
permitted by 10.3, 10.6 and 10.7 and those transactions  existing on the Closing
Date and identified on Schedule 10.8, directly or indirectly enter into, or be a
party to, any  transaction  with any of its  Affiliates,  except pursuant to the
reasonable  requirements of its business and upon fair and reasonable terms that
are no less  favorable to it than it would  obtain in a comparable  arm's length
transaction with a Person not its Affiliate.

SECTION 10.9 Certain Accounting Changes; Organizational Documents.

(a) Make any change in its  accounting  treatment and  reporting  practices
except as required or permitted by GAAP; or

(b) Amend,  modify or change its articles of  incorporation  (or  corporate
charter or other similar  organizational  documents) or amend,  modify or change
its bylaws (or other similar  documents)  in any manner  adverse in any material
respect to the rights or interests of the Lenders.

SECTION 10.10  Amendments;  Payments and Prepayments of Subordinated  Debt.
Amend or modify (or permit the modification or amendment of) any of the terms or
provisions of any  Subordinated  Debt, or cancel or forgive,  make any elective,
voluntary or optional  payment or prepayment  on, or redeem or acquire for value
(including,  without  limitation,  by way of  depositing  with any trustee  with
respect  thereto money or  securities  before due for the purpose of paying when
due) any Subordinated Debt.

SECTION 10.11 Restrictive Agreements.

(a) Enter into any Debt which contains any negative pledge on assets or any
covenants  more  restrictive  than the  provisions  of Articles  VIII,  IX and X
hereof, or which restricts,  limits or otherwise  encumbers its ability to incur
Liens on or with  respect  to any of its  assets or  properties  other  than the
assets or properties securing such Debt.

(b) Enter into or permit to exist any agreement which impairs or limits the
ability of any Subsidiary of the Borrower to pay dividends to the Borrower.

SECTION  10.12  Nature  of  Business.  Alter in any  material  respect  the
character  or  conduct  of the  business  conducted  by  the  Borrower  and  its
Subsidiaries  taken as a whole  as of the  Closing  Date  (except  as  otherwise
permitted by the terms of this Agreement).

SECTION 10.13  Impairment of Security  Interests.  Take or omit to take any
action,  which  might or would  have the  result  of  materially  impairing  the
security  interests  in favor of the  Administrative  Agent with  respect to the
Collateral or grant to any Person (other than the  Administrative  Agent for the
benefit  of itself and the  Lenders  pursuant  to the  Security  Documents)  any
interest whatsoever in the Collateral,  except for Liens permitted under Section
10.2 and asset sales permitted under Section 10.5.

ARTICLE XI

DEFAULT AND REMEDIES

SECTION 11.1 Events of Default.  Each of the following shall  constitute an
Event of  Default,  whatever  the reason for such event and  whether it shall be
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment  or  order  of any  court  or any  order,  rule  or  regulation  of any
Governmental Authority or otherwise:

(a) Default in Payment of Principal of Loans and Reimbursement Obligations.
The Borrower  shall  default in any payment of  principal  of any Loan,  Note or
Reimbursement  Obligation  when and as due  (whether at  maturity,  by reason of
acceleration or otherwise).

(b) Other Payment  Default.  The Borrower shall default in the payment when
and as due (whether at maturity,  by reason of acceleration or otherwise) of (i)
interest on any Loan, Note or Reimbursement  Obligation,  and such default shall
continue unremedied for five (5) Business Days or (ii) any other Obligation, and
such default shall continue unremedied for ten (10) Business Days.

(c) Misrepresentation.  Any representation or warranty made or deemed to be
made by the Borrower or any of its Subsidiaries under this Agreement,  any other
Loan  Document or any  amendment  hereto or thereto,  shall at any time prove to
have been  incorrect or misleading  in any material  respect when made or deemed
made.

(d) Default in Performance of Certain Covenants. The Borrower or any of its
Subsidiaries  shall default in the  performance or observance of any covenant or
agreement  contained  in Sections  7.1,  7.2 or 7.5(e)(i) or Articles IX or X of
this Agreement.

(e) Default in Performance of Other Covenants and Conditions.  The Borrower
or any Subsidiary  thereof shall default in the performance or observance of any
term,  covenant,  condition or agreement contained in this Agreement (other than
as  specifically  provided for otherwise in this Section 11.1) or any other Loan
Document and such default shall  continue for a period of thirty (30) days after
written  notice  thereof has been given to the  Borrower  by the  Administrative
Agent.

(f) Hedging  Agreement.  The Borrower  shall default in the  performance or
observance of any terms,  covenant,  condition or agreement (after giving effect
to any applicable grace or cure period) under any Hedging Agreement with respect
to any Debt or other  obligation  in a principal  amount in excess of $3,000,000
and such default causes the termination of such Hedging Agreement or permits any
counterparty to such Hedging Agreement to terminate any such Hedging Agreement.

(g) Debt  Cross-Default.  The Borrower or any of its Subsidiaries shall (i)
default in the payment of any Debt  (other  than the Notes or any  Reimbursement
Obligation)  the  aggregate  outstanding  amount  of which  Debt is in excess of
$3,000,000  beyond the period of grace if any,  provided  in the  instrument  or
agreement  under which such Debt was created,  or (ii) default in the observance
or performance of any other  agreement or condition  relating to any Debt (other
than the Notes or any Reimbursement Obligation) the aggregate outstanding amount
of which Debt is in excess of  $3,000,000  or  contained  in any  instrument  or
agreement  evidencing,  securing  or  relating  thereto or any other event shall
occur or  condition  exist,  the  effect  of  which  default  or other  event or
condition  is to cause,  or to permit  the  holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause,  with the giving
of notice if required,  any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).

(h)  Change  in  Control.  (i)  The  sale,  lease  or  transfer  of  all or
substantially  all of the  Borrower's  assets to any  person or group of persons
(within the meaning of Section 13(d) of the Securities  Exchange Act of 1934, as
amended), (ii) the liquidation or dissolution of the Borrower,  (iii) any person
or group of persons  (within  the  meaning of  Section  13(d) of the  Securities
Exchange  Act of 1934,  as amended),  other than the  Permitted  Holders,  shall
obtain  ownership or control in one or more series of  transactions of more than
thirty-five  percent (35%) of the common stock or  thirty-five  percent (35%) of
the voting power of the Borrower  entitled to vote in the election of members of
the board of  directors of the Borrower or (iv) during any period of twelve (12)
consecutive  calendar months,  individuals who, at the beginning of such period,
constituted the Borrower's  board of directors  (together with any new directors
whose  election by the  Borrower's  board of directors or whose  nomination  for
election  by the  Borrower's  stockholders  was  approved  by a vote of at least
two-thirds  (2/3rds)  of the  directors  then still in office  who  either  were
directors at the beginning of such period or whose  election or  nomination  for
election was previously so approved)  cease for any reason,  other than death or
disability,  to constitute a majority of the directors  then in office (any such
event, a "Change in Control").

(i) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary thereof
shall (i) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter  in effect),  (ii) file a petition  seeking to take  advantage  of any
other  laws,   domestic  or  foreign,   relating  to   bankruptcy,   insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest  in a timely and  appropriate  manner any  petition  filed
against it in an involuntary case under such bankruptcy laws or other laws, (iv)
apply for or consent to, or fail to contest in a timely and appropriate  manner,
the  appointment  of, or the taking of  possession  by, a  receiver,  custodian,
trustee,  or  liquidator  of itself or of a  substantial  part of its  property,
domestic or foreign, (v) admit in writing its inability to pay its debts as they
become due,  (vi) make a general  assignment  for the benefit of  creditors,  or
(vii) take any  corporate  action  for the  purpose  of  authorizing  any of the
foregoing.

(j) Involuntary Bankruptcy Proceeding.  A case or other proceeding shall be
commenced against the Borrower or any Domestic  Subsidiary  thereof in any court
of competent  jurisdiction  seeking (i) relief under the federal bankruptcy laws
(as now or  hereafter  in effect) or under any other laws,  domestic or foreign,
relating to bankruptcy, insolvency,  reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian,  liquidator or
the like for the Borrower or any Domestic  Subsidiary  thereof or for all or any
substantial part of their respective assets,  domestic or foreign, and such case
or proceeding  shall  continue  without  dismissal or stay for a period of sixty
(60) consecutive days, or an order granting the relief requested in such case or
proceeding  (including,  but not  limited  to, an order for  relief  under  such
federal bankruptcy laws) shall be entered.

(k) Failure of Agreements.  This  Agreement or any other Loan Document,  at
any time after its  execution  and  delivery  and for any  reason  other than as
expressly  permitted  hereunder  or  the  satisfaction  in  full  of  all of the
Obligations,  ceases  to be in full  force  and  effect;  or the  Borrower,  any
Subsidiary  Guarantor or any other Person contests in any manner the validity or
enforceability of this Agreement or any other Loan Document;  or the Borrower or
any  Subsidiary  Guarantor  denies  that  it has  any or  further  liability  or
obligation  under this  Agreement  or any other Loan  Document,  or  purports to
revoke, terminate or rescind this Agreement or any other Loan Document.

(l) Termination  Event. The occurrence of any of the following events:  (i)
the Borrower or any ERISA  Affiliate  fails to make full payment when due of all
amounts  which,  under the  provisions of any Pension Plan or Section 412 of the
Code,  the Borrower or any ERISA  Affiliate is required to pay as  contributions
thereto,  (ii) an accumulated  funding deficiency in excess of $5,000,000 occurs
or exists,  whether or not waived,  with  respect to any Pension  Plan,  (iii) a
Termination Event or (iv) the Borrower or any ERISA Affiliate as employers under
one or more Multiemployer  Plans makes a complete or partial withdrawal from any
such  Multiemployer  Plan  and the  plan  sponsor  of such  Multiemployer  Plans
notifies such withdrawing  employer that such employer has incurred a withdrawal
liability requiring payments in an amount exceeding $5,000,000.

(m) Judgment. A judgment or order for the payment of money which causes the
aggregate  amount of all such judgments to exceed  $5,000,000 in any Fiscal Year
shall be entered  against the Borrower or any of its  Subsidiaries  by any court
and such judgment or order shall continue without discharge or stay for a period
of sixty (60) days.

(n)  Environmental.  Any one or more  Environmental  Claims shall have been
asserted against the Borrower or any of its  Subsidiaries;  the Borrower and its
Subsidiaries  would be reasonable likely to incur liability as a result thereof;
and such liability would be reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect.

SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with the
consent of the  Required  Lenders,  the  Administrative  Agent may,  or upon the
request of the Required Lenders,  the  Administrative  Agent shall, by notice to
the Borrower:

(a) Acceleration;  Termination of Facilities.  Declare the principal of and
interest on the Loans, the Notes and the  Reimbursement  Obligations at the time
outstanding, and all other amounts owed to the Lenders and to the Administrative
Agent  under  this  Agreement  or any of the other  Loan  Documents  (including,
without limitation, all L/C Obligations, whether or not the beneficiaries of the
then outstanding  Letters of Credit shall have presented or shall be entitled to
present the documents required thereunder) and all other Obligations (other than
Hedging Obligations),  to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or other
notice  of any  kind,  all of  which  are  expressly  waived,  anything  in this
Agreement  or the other Loan  Documents  to the  contrary  notwithstanding,  and
terminate  the  Credit  Facility  and  any  right  of the  Borrower  to  request
borrowings or Letters of Credit thereunder;  provided,  that upon the occurrence
of an Event of Default  specified in Section 11.1(i) or (j), the Credit Facility
shall be  automatically  terminated  and all  Obligations  (other  than  Hedging
Obligations)  shall  automatically  become due and payable without  presentment,
demand,  protest or other notice of any kind, all of which are expressly waived,
anything  in this  Agreement  or in any  other  Loan  Document  to the  contrary
notwithstanding.

(b) Letters of Credit.  With  respect to all Letters of Credit with respect
to  which  presentment  for  honor  shall  not have  occurred  at the time of an
acceleration  pursuant to the preceding paragraph,  require the Borrower at such
time to, and the Borrower shall,  deposit in a cash collateral account opened by
the  Administrative  Agent an amount  equal to the  aggregate  then  undrawn and
unexpired amount of such Letters of Credit. Amounts held in such cash collateral
account  shall be applied by the  Administrative  Agent to the payment of drafts
drawn under such Letters of Credit,  and the unused  portion  thereof  after all
such  Letters of Credit  shall have  expired or been fully drawn  upon,  if any,
shall be applied to repay the other  Obligations on a pro rata basis.  After all
such  Letters  of Credit  shall  have  expired or been  fully  drawn  upon,  the
Reimbursement  Obligation  shall have been  satisfied and all other  Obligations
shall  have been paid in full,  the  balance,  if any,  in such cash  collateral
account shall be returned to the Borrower.

(c) Rights of  Collection.  Exercise  on behalf of the  Lenders  all of its
other rights and remedies  under this  Agreement,  the other Loan  Documents and
Applicable Law, in order to satisfy all of the Borrower's Obligations.

SECTION  11.3  Rights  and  Remedies  Cumulative;   Non-Waiver;   etc.  The
enumeration  of the  rights and  remedies  of the  Administrative  Agent and the
Lenders set forth in this  Agreement  is not intended to be  exhaustive  and the
exercise  by the  Administrative  Agent and the  Lenders  of any right or remedy
shall not preclude  the  exercise of any other rights or remedies,  all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the other Loan  Documents or that may now or hereafter  exist
at law or in equity or by suit or otherwise.  No delay or failure to take action
on the part of the  Administrative  Agent or any Lender in exercising any right,
power or privilege  shall operate as a waiver  thereof,  nor shall any single or
partial  exercise of any such right,  power or  privilege  preclude any other or
further exercise thereof or the exercise of any other right,  power or privilege
or shall be  construed  to be a waiver  of any  Event of  Default.  No course of
dealing between the Borrower,  the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any  provision  of this  Agreement  or any of the  other  Loan  Documents  or to
constitute a waiver of any Event of Default.

SECTION 11.4.  Judgment  Currency.  The  obligation of the Borrower to make
payments of the principal of and interest on the Notes and the obligation of any
such Person to make payments of any other amounts payable  hereunder or pursuant
to any other Loan Document in the currency  specified for such payment shall not
be  discharged  or  satisfied  by any tender,  or any  recovery  pursuant to any
judgment, which is expressed in or converted into any other currency,  except to
the extent that such tender or recovery  shall  result in the actual  receipt by
each  of the  Administrative  Agent  and  Lenders  of  the  full  amount  of the
particular Permitted Currency expressed to be payable pursuant to the applicable
Loan Document.  The  Administrative  Agent shall,  using all amounts obtained or
received from the Borrower pursuant to any such tender or recovery in payment of
principal of and interest on the Obligations,  promptly  purchase the applicable
currency  at  the  most   favorable   spot  exchange  rate   determined  by  the
Administrative  Agent to be available to it. The  obligation  of the Borrower to
make payments in the applicable  currency shall be enforceable as an alternative
or  additional  cause of action  solely  for the  purpose of  recovering  in the
applicable  currency the amount, if any, by which such actual receipt shall fall
short of the full amount of the currency expressed to be payable pursuant to the
applicable Loan Document.

ARTICLE XII

THE ADMINISTRATIVE AGENT

SECTION 12.1 Appointment. Each of the Lenders hereby irrevocably designates
and  appoints  Wachovia  as  Administrative  Agent  of such  Lender  under  this
Agreement and the other Loan  Documents for the term hereof and each such Lender
irrevocably authorizes Wachovia as Administrative Agent for such Lender, to take
such action on its behalf under the  provisions of this  Agreement and the other
Loan  Documents  and to  exercise  such  powers and  perform  such duties as are
expressly  delegated to the Administrative  Agent by the terms of this Agreement
and such other Loan Documents, together with such other powers as are reasonably
incidental  thereto.  Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents,  the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein,  or  any  fiduciary  relationship  with  any  Lender,  and  no  implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this  Agreement  or the other Loan  Documents  or  otherwise  exist
against the Administrative  Agent. Any reference to the Administrative  Agent in
this Article XII shall be deemed to refer to the Administrative  Agent solely in
its capacity as Administrative Agent and not in its capacity as a Lender.

SECTION 12.2 Delegation of Duties. The Administrative Agent may execute any
of its respective duties under this Agreement and the other Loan Documents by or
through agents or  attorneys-in-fact  and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not  be  responsible   for  the  negligence  or  misconduct  of  any  agents  or
attorneys-in-fact selected by the Administrative Agent with reasonable care.

SECTION 12.3 Exculpatory  Provisions.  Neither the Administrative Agent nor
any  of  its  officers,   directors,   employees,   agents,   attorneys-in-fact,
Subsidiaries or Affiliates  shall be (a) liable for any action lawfully taken or
omitted  to be  taken by it or such  Person  under or in  connection  with  this
Agreement or the other Loan Documents  (except for actions  occasioned solely by
its or such  Person's  own  gross  negligence  or  willful  misconduct),  or (b)
responsible  in any manner to any of the Lenders for any  recitals,  statements,
representations or warranties made by the Borrower or any of its Subsidiaries or
any officer  thereof  contained in this Agreement or the other Loan Documents or
in any certificate,  report, statement or other document referred to or provided
for in, or received by the  Administrative  Agent under or in  connection  with,
this  Agreement  or the  other  Loan  Documents  or  for  the  value,  validity,
effectiveness,  genuineness,  enforceability or sufficiency of this Agreement or
the other  Loan  Documents  or for any  failure  of the  Borrower  or any of its
Subsidiaries   to  perform  its   obligations   hereunder  or  thereunder.   The
Administrative  Agent  shall  not be  under  any  obligation  to any  Lender  to
ascertain  or to  inquire  as to the  observance  or  performance  of any of the
agreements  contained in, or conditions  of, this  Agreement,  or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries.

SECTION 12.4 Reliance by the Administrative Agent. The Administrative Agent
shall be entitled to rely,  and shall be fully  protected  in relying,  upon any
note, writing,  resolution,  notice, consent,  certificate,  affidavit,  letter,
cablegram,  telegram,  telecopy, telex or teletype message,  statement, order or
other document or  conversation  believed by it to be genuine and correct and to
have been signed,  sent or made by the proper  Person or Persons and upon advice
and statements of legal counsel (including,  without limitation,  counsel to the
Borrower),   independent   accountants   and  other  experts   selected  by  the
Administrative  Agent. The Administrative  Agent may deem and treat the payee of
any Note as the owner thereof for all purposes  unless such Note shall have been
transferred in accordance with Section 13.10. The Administrative  Agent shall be
fully  justified in failing or refusing to take any action under this  Agreement
and the other  Loan  Documents  unless it shall  first  receive  such  advice or
concurrence of the Required  Lenders (or, when expressly  required  hereby or by
the relevant other Loan Documents,  all the Lenders) as it deems  appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any and
all  liability  and  expense  which may be incurred by it by reason of taking or
continuing  to take any such  action  except  for its own  gross  negligence  or
willful  misconduct.  The  Administrative  Agent  shall  in all  cases  be fully
protected in acting, or in refraining from acting,  under this Agreement and the
Notes in accordance  with a request of the Required  Lenders (or, when expressly
required  hereby,  all the  Lenders),  and such  request and any action taken or
failure to act  pursuant  thereto  shall be binding upon all the Lenders and all
future holders of the Notes.

SECTION  12.5  Notice of  Default.  The  Administrative  Agent shall not be
deemed to have  knowledge or notice of the occurrence of any Default or Event of
Default unless it has received notice from a Lender or the Borrower referring to
this  Agreement,  describing  such  Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Administrative Agent
receives such a notice,  it shall  promptly give notice  thereof to the Lenders.
The Administrative  Agent shall take such action with respect to such Default or
Event of Default as shall be  reasonably  directed by the Required  Lenders (or,
when expressly required hereby, all the Lenders); provided that unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be  obligated  to) take such  action,  or refrain  from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best  interests of the Lenders,  except to the extent that
other  provisions of this  Agreement  expressly  require that any such action be
taken or not be taken only with the consent and  authorization or the request of
the Lenders or Required Lenders, as applicable.

SECTION 12.6  Non-Reliance on the  Administrative  Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its respective officers,  directors,  employees,  agents,  attorneys-in-fact,
Subsidiaries or Affiliates has made any  representations or warranties to it and
that no act by the Administrative Agent hereafter taken, including any review of
the  affairs  of the  Borrower  or any of its  Subsidiaries,  shall be deemed to
constitute any  representation  or warranty by the  Administrative  Agent to any
Lender.  Each  Lender  represents  to the  Administrative  Agent  that  it  has,
independently  and without reliance upon the  Administrative  Agent or any other
Lender,   and  based  on  such  documents  and  information  as  it  has  deemed
appropriate,  made its own  appraisal of and  investigation  into the  business,
operations,  property, financial and other condition and creditworthiness of the
Borrower  and its  Subsidiaries  and made its own decision to make its Loans and
issue or  participate  in  Letters  of  Credit  hereunder  and  enter  into this
Agreement.  Each Lender also represents that it will,  independently and without
reliance upon the  Administrative  Agent or any other Lender,  and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own credit  analysis,  appraisals and decisions in taking or not taking
action  under  this  Agreement  and the other Loan  Documents,  and to make such
investigation  as it  deems  necessary  to  inform  itself  as to the  business,
operations,  property, financial and other condition and creditworthiness of the
Borrower and its Subsidiaries.  Except for notices,  reports and other documents
expressly  required to be furnished to the Lenders by the  Administrative  Agent
hereunder or by the other Loan  Documents,  the  Administrative  Agent shall not
have any duty or  responsibility  to provide any Lender with any credit or other
information concerning the business,  operations,  property, financial and other
condition or  creditworthiness  of the Borrower or any of its Subsidiaries which
may  come  into  the  possession  of  the  Administrative  Agent  or  any of its
respective   officers,   directors,   employees,   agents,    attorneys-in-fact,
Subsidiaries or Affiliates.

SECTION  12.7   Indemnification.   The  Lenders   agree  to  indemnify  the
Administrative  Agent in its capacity as such and (to the extent not  reimbursed
by the Borrower and without  limiting the  obligation of the Borrower to do so),
ratably  according to the respective  amounts of their  Commitment  Percentages,
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind whatsoever which may at any time  (including,  without  limitation,  at any
time  following  the payment of the Notes or any  Reimbursement  Obligation)  be
imposed on, incurred by or asserted against the Administrative  Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents,  reports or other information provided to the Administrative Agent or
any  Lender  or  contemplated  by or  referred  to  herein  or  therein  or  the
transactions  contemplated  hereby or thereby or any action  taken or omitted by
the  Administrative  Agent  under or in  connection  with any of the  foregoing;
provided  that no Lender  shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses  or  disbursements  resulting  solely  from the  Administrative
Agent's bad faith,  gross  negligence or willful  misconduct.  The agreements in
this  Section  12.7 shall  survive the payment of the Notes,  any  Reimbursement
Obligation and all other amounts  payable  hereunder and the termination of this
Agreement.

SECTION  12.8 The  Administrative  Agent in Its  Individual  Capacity.  The
Administrative  Agent and its  respective  Subsidiaries  and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the  Borrower  as though the  Administrative  Agent were not the  Administrative
Agent  hereunder.  With  respect to any Loans made or renewed by it and any Note
issued  to it  and  with  respect  to  any  Letter  of  Credit  issued  by it or
participated in by it, the  Administrative  Agent shall have the same rights and
powers under this  Agreement and the other Loan  Documents as any Lender and may
exercise the same as though it were not the Administrative  Agent, and the terms
"Lender" and "Lenders" shall include the Administrative  Agent in its individual
capacity.

SECTION  12.9   Resignation   of  the   Administrative   Agent;   Successor
Administrative  Agent.  Subject to the appointment and acceptance of a successor
as provided  below,  the  Administrative  Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower.  Upon any such resignation,  the
Required  Lenders  shall  have the right to appoint a  successor  Administrative
Agent,  which  successor  shall have  minimum  capital  and  surplus of at least
$500,000,000.  If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such  appointment  within thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the  Administrative  Agent may,  on behalf of the  Lenders,  appoint a successor
Administrative  Agent, which successor shall have minimum capital and surplus of
at least $500,000,000.  Upon the acceptance of any appointment as Administrative
Agent   hereunder  by  a  successor   Administrative   Agent,   such   successor
Administrative  Agent  shall  thereupon  succeed to and become  vested  with all
rights, powers,  privileges and duties of the retiring Administrative Agent, and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations  hereunder.  After any retiring  Administrative  Agent's resignation
hereunder as  Administrative  Agent,  the  provisions of this Section 12.9 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.

SECTION 12.10 Administrative Agent May File Proofs of Claim. In case of the
pendency   of   any   receivership,    insolvency,   liquidation,    bankruptcy,
reorganization,   arrangement,   adjustment,   composition   or  other  judicial
proceeding relative to the Borrower or any Guarantor,  the Administrative  Agent
(irrespective  of whether the principal of any Loan or L/C Obligation shall then
be due and  payable as herein  expressed  or by  declaration  or  otherwise  and
irrespective of whether the  Administrative  Agent shall have made any demand on
the  Borrower)  shall  be  entitled  and  empowered,  by  intervention  in  such
proceeding or otherwise:

(a) to file and  prove a claim for the whole  amount of the  principal  and
interest owing and unpaid in respect of the Loans,  the L/C  Obligations and all
other  Obligations that are owing and unpaid and to file such other documents as
may be necessary or advisable in order to have the claims of the  Administrative
Agent and the  Lenders  (including  any claim for the  reasonable  compensation,
expenses, disbursements and advances of the Administrative Agent and the Lenders
and  their  respective  agents  and  counsel  and  all  other  amounts  due  the
Administrative  Agent and the Lenders under this Agreement,  including,  without
limitation,  Section 3.3, Section 4.3 and Section 13.2) allowed in such judicial
proceeding; and

(b) to  collect  and  receive  any  monies  or other  property  payable  or
deliverable  on any such claims and to distribute  the same;  and any custodian,
receiver, assignee, trustee, liquidator,  sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such
payments to the  Administrative  Agent and, in the event that the Administrative
Agent shall consent to the making of such payments  directly to the Lenders,  to
pay to the Administrative Agent any amount due for the reasonable  compensation,
expenses,  disbursements and advances of the Administrative Agent and its agents
and  counsel,  and any other  amounts  due the  Administrative  Agent under this
Agreement (including, without limitation, Section 4.3 and Section 13.2). Nothing
contained  herein  shall be  deemed to  authorize  the  Administrative  Agent to
authorize  or  consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Lender or to authorize the Administrative  Agent to vote in
respect of the claim of any Lender in any such proceeding.

ARTICLE XIII

MISCELLANEOUS

SECTION 13.1 Notices.

(a)  Method  of  Communication.   Except  as  otherwise  provided  in  this
Agreement,  all notices and  communications  hereunder  shall be in writing (for
purposes  hereof,  the term  "writing"  shall include  information in electronic
format  such as  electronic  mail  and  internet  web  pages),  or by  telephone
subsequently confirmed in writing. Any notice shall be effective if delivered by
hand  delivery or sent via  electronic  mail,  posting on an internet  web page,
telecopy, recognized overnight courier service or certified mail, return receipt
requested,  and shall be presumed  to be  received by a party  hereto (i) on the
date of delivery if delivered by hand or sent by electronic mail,  posting on an
internet web page, telecopy, (ii) on the next Business Day if sent by recognized
overnight courier service and (iii) on the third Business Day following the date
sent by certified mail,  return receipt  requested.  A telephonic  notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the  controlling  and  proper  notice in the event of a  discrepancy  with or
failure to receive a confirming written notice.

(b) Addresses for Notices.  Notices to any party shall be sent to it at the
following addresses,  or any other address as to which all the other parties are
notified in writing.

If to the Borrower:        CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
Attention: J. Mark Hollingsworth
Telephone No.: (972) 233-1700
Telecopy No.: (972) 448-1445

If to Wachovia as          Wachovia Bank, National Association
Administrative Agent:     Charlotte Plaza, CP-8
201 South College Street
Charlotte, North Carolina 28288-0680
Attention:  Syndication Agency Services
Telephone No.:  (704) 374-2698
Telecopy No.:  (704) 383-0288

If to any Lender:          To the address set forth on Schedule 1.1(a)

(c)  Administrative   Agent's  Office.  The  Administrative   Agent  hereby
designates its office located at the address set forth above,  or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders,  as the Administrative  Agent's Office referred to herein,
to which  payments due are to be made and at which Loans will be  disbursed  and
Letters  of Credit  issued,  except for  Alternative  Currency  Loans,  to which
payments  due  are to be  made  at the  office  of  the  Administrative  Agent's
Correspondent.

SECTION 13.2 Expenses;  Indemnity. The Borrower will (a) pay all reasonable
out-of-pocket expenses (including,  without limitation,  all costs of electronic
or internet  distribution  of any information  hereunder) of the  Administrative
Agent in  connection  with (i) the  preparation,  execution and delivery of this
Agreement and each other Loan Document,  whenever the same shall be executed and
delivered,  including, without limitation, all out-of-pocket syndication and due
diligence  expenses and  reasonable  fees and  disbursements  of counsel for the
Administrative  Agent and (ii) the  preparation,  execution  and delivery of any
waiver, amendment or consent by the Administrative Agent or the Lenders relating
to this Agreement or any other Loan  Document,  including,  without  limitation,
reasonable fees and disbursements of counsel for the  Administrative  Agent, (b)
pay all reasonable  out-of-pocket  expenses of the Administrative Agent and each
Lender actually incurred in connection with the  administration  and enforcement
of any rights and  remedies of the  Administrative  Agent and Lenders  under the
Credit Facility,  including, without limitation, in connection with any workout,
restructuring,  bankruptcy or other similar proceeding,  creating and perfecting
Liens in favor of  Administrative  Agent on behalf of  Lenders  pursuant  to any
Security Document,  enforcing any Obligations of, or collecting any payments due
from, the Borrower or any Subsidiary  Guarantor by reason of an Event of Default
(including in connection with the sale of, collection from, or other realization
upon  any of  the  Collateral  or the  enforcement  of the  Subsidiary  Guaranty
Agreement),  consulting with appraisers,  accountants,  engineers, attorneys and
other Persons  concerning  the nature,  scope or value of any right or remedy of
the  Administrative  Agent or any  Lender  hereunder  or under  any  other  Loan
Document or any factual  matters in connection  therewith,  which expenses shall
include,  without  limitation,  the reasonable  fees and  disbursements  of such
Persons,  and (c) defend,  indemnify and hold harmless the Administrative  Agent
and  the  Lenders,  and  their  respective  parents,  Subsidiaries,  Affiliates,
employees,  agents,  officers  and  directors,  from  and  against  any  losses,
penalties,  fines,  liabilities,   settlements,  damages,  costs  and  expenses,
suffered by any such Person in  connection  with any claim  (including,  without
limitation,  any  Environmental  Claims),  investigation,  litigation  or  other
proceeding  (whether  or not the  Administrative  Agent or any Lender is a party
thereto) and the prosecution and defense  thereof,  arising out of or in any way
connected  with the  Loans,  this  Agreement,  any other  Loan  Document  or any
documents,  reports or other information provided to the Administrative Agent or
any Lender or contemplated by or referred herein or therein or the  transactions
contemplated  hereby  or  thereby,  including,  without  limitation,  reasonable
attorney's and consultant's fees and settlement costs, except to the extent that
any of the  foregoing  directly  result  from the gross  negligence  or  willful
misconduct of the party seeking indemnification therefor.

SECTION 13.3 Set-off.

(a) In addition to any rights now or hereafter granted under Applicable Law
and not by way of limitation of any such rights,  upon and after the  occurrence
of any Event of Default and during the continuance  thereof, the Lenders and any
assignee or participant of a Lender in accordance  with Section 13.10 are hereby
authorized by the Borrower at any time or from time to time,  without  notice to
the Borrower or to any other  Person,  any such notice  being  hereby  expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or  special,  time or  demand,  including,  but  not  limited  to,  indebtedness
evidenced by  certificates  of deposit,  whether  matured or unmatured)  and any
other  indebtedness  at any  time  held or  owing  by the  Lenders,  or any such
assignee  or  participant  to or for the credit or the  account of the  Borrower
against and on account of the Obligations irrespective of whether or not (a) the
Lenders shall have made any demand under this Agreement or any of the other Loan
Documents or (b) the Administrative  Agent shall have declared any or all of the
Obligations to be due and payable as permitted by Section 11.2 and although such
Obligations  shall be  contingent or  unmatured.  Notwithstanding  the preceding
sentence, each Lender agrees to notify the Borrower and the Administrative Agent
after any such set-off and application;  provided, that the failure to give such
notice shall not affect the validity of such set-off and application.

(b)  Any  amount  to be  set-off  pursuant  to  Section  13.3(a)  shall  be
denominated in Dollars and any amount  denominated  in an  Alternative  Currency
shall be in an amount  equal to the  Dollar  Amount  of such  amount at the most
favorable  spot  exchange  rate  determined  by the  Administrative  Agent to be
available to it; provided that if at the time of any such  determination no such
spot exchange rate can reasonably be determined,  the  Administrative  Agent may
use any  reasonable  method as it deems  applicable to determine  such rate, any
such determination to be conclusive absent manifest error.

(c)  Each  Lender  and  any  assignee  or  participant  of such  Lender  in
accordance  with Section 13.10 are hereby  authorized by the Borrower to combine
currencies,  as deemed necessary by such Person,  in order to effect any set-off
pursuant to Section 13.3(a).

SECTION 13.4  Governing Law. This  Agreement,  the Notes and the other Loan
Documents,  unless otherwise expressly set forth therein,  shall be governed by,
construed  and  enforced  in  accordance  with  the  laws of the  State of North
Carolina,  without  reference  to the  conflicts  or  choice  of law  principles
thereof.

SECTION 13.5 Jurisdiction and Venue.

(a) Jurisdiction.  The Borrower hereby irrevocably consents to the personal
jurisdiction  of the state and federal  courts  located in  Mecklenburg  County,
North Carolina (and any courts from which an appeal from any of such courts must
or may be taken),  in any action,  claim or other proceeding  arising out of any
dispute  in  connection  with this  Agreement,  the  Notes  and the  other  Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations.  The Borrower hereby irrevocably consents to the
service of a summons and  complaint  and other  process in any action,  claim or
proceeding brought by the Administrative  Agent or any Lender in connection with
this Agreement, the Notes or the other Loan Documents, any rights or obligations
hereunder or thereunder,  or the performance of such rights and obligations,  on
behalf of itself or its  property,  in the manner  specified  in  Section  13.1.
Nothing in this Section 13.5 shall affect the right of the Administrative  Agent
or any Lender to serve legal process in any other manner permitted by Applicable
Law or affect the right of the  Administrative  Agent or any Lender to bring any
action or proceeding against the Borrower or its properties in the courts of any
other jurisdictions.

(b) Venue. The Borrower hereby irrevocably waives any objection it may have
now or in the future to the laying of venue in the aforesaid jurisdiction in any
action,  claim or other  proceeding  arising out of or in  connection  with this
Agreement,  any other Loan Document or the rights and obligations of the parties
hereunder or thereunder.  The Borrower  irrevocably  waives,  in connection with
such action,  claim or proceeding,  any plea or claim that the action,  claim or
other proceeding has been brought in an inconvenient forum.

SECTION 13.6 Binding Arbitration; Waiver of Jury Trial.

(a) Binding  Arbitration.  Upon demand of the Borrower,  the Administrative
Agent or the Required  Lenders,  whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or  relating to this  Agreement  or any other Loan  Document  ("Disputes"),
between  or among  parties  hereto  and to the  other  Loan  Documents  shall be
resolved by binding  arbitration as provided  herein.  Institution of a judicial
proceeding  by a party  does  not  waive  the  right  of that  party  to  demand
arbitration hereunder.  Disputes may include,  without limitation,  tort claims,
counterclaims,  claims  brought  as class  actions,  claims  arising  from  Loan
Documents executed in the future,  disputes as to whether a matter is subject to
arbitration,  or claims  concerning  any  aspect of the past,  present or future
relationships  arising out of or connected with the Loan Documents.  Arbitration
shall be  conducted  under and  governed by the  Commercial  Financial  Disputes
Arbitration  Rules  (the  "Arbitration   Rules")  of  the  American  Arbitration
Association  (the  "AAA")  and the  Federal  Arbitration  Act.  All  arbitration
hearings  shall  be  conducted  in  Charlotte,  North  Carolina.  The  expedited
procedures  set  forth in Rule 51, et seq.  of the  Arbitration  Rules  shall be
applicable  to  claims of less  than  $1,000,000.  All  applicable  statutes  of
limitations shall apply to any Dispute. A judgment upon the award may be entered
in any court  having  jurisdiction.  Notwithstanding  anything  foregoing to the
contrary,  any  arbitration  proceeding  demanded  hereunder  shall begin within
ninety  (90) days  after  such  demand  thereof  and shall be  concluded  within
one-hundred twenty (120) days after such demand.  These time limitations may not
be  extended  unless a party  hereto  shows  cause for  extension  and then such
extension  shall not exceed a total of sixty (60) days. The panel from which all
arbitrators are selected shall be comprised of licensed  attorneys selected from
the  Commercial  Financial  Dispute  Arbitration  Panel of the AAA.  The  single
arbitrator  selected for expedited  procedure  shall be a retired judge from the
highest court of general jurisdiction,  state or federal, of the state where the
hearing  will be  conducted.  The  parties  hereto do not  waive any  applicable
Federal or state substantive law except as provided herein.  Notwithstanding the
foregoing, this paragraph shall not apply to any Hedging Agreement.

(b) Jury Trial.  THE  ADMINISTRATIVE  AGENT,  EACH LENDER AND THE  BORROWER
HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY
WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM
OR  OTHER  PROCEEDING  ARISING  OUT OF  ANY  DISPUTE  IN  CONNECTION  WITH  THIS
AGREEMENT,  THE NOTES OR THE OTHER LOAN  DOCUMENTS,  ANY  RIGHTS OR  OBLIGATIONS
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

(c) Preservation of Certain Remedies. Notwithstanding the preceding binding
arbitration  provisions,  the  parties  hereto  and  the  other  Loan  Documents
preserve,  without diminution,  certain remedies that such Persons may employ or
exercise  freely,  either alone, in conjunction  with or during a Dispute.  Each
such Person shall have and hereby  reserves the right to proceed in any court of
proper  jurisdiction  or by self help to exercise  or  prosecute  the  following
remedies,  as  applicable:  (i) all  rights  to  foreclose  against  any real or
personal property or other security by exercising a power of sale granted in the
Loan  Documents or under  Applicable  Law or by judicial  foreclosure  and sale,
including  a  proceeding  to  confirm  the  sale,  (ii) all  rights of self help
including peaceful  occupation of property and collection of rents, set off, and
peaceful  possession  of  property,  (iii)  obtaining  provisional  or ancillary
remedies including injunctive relief,  sequestration,  garnishment,  attachment,
appointment of receiver and in filing an involuntary bankruptcy proceeding,  and
(iv) when  applicable,  a judgment by  confession of judgment.  Preservation  of
these  remedies  does not  limit  the power of an  arbitrator  to grant  similar
remedies that may be requested by a party in a Dispute.

SECTION  13.7  Reversal of  Payments.  To the extent the  Borrower  makes a
payment or payments to the  Administrative  Agent for the ratable benefit of the
Lenders or the  Administrative  Agent  receives  any  payment or proceeds of the
collateral  which  payments  or proceeds  or any part  thereof are  subsequently
invalidated,  declared  to be  fraudulent  or  preferential,  set  aside  and/or
required  to be repaid to a  trustee,  receiver  or any  other  party  under any
bankruptcy  law, state or federal law, common law or equitable  cause,  then, to
the extent of such payment or proceeds  repaid,  the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such  payment or  proceeds  had not been  received  by the  Administrative
Agent.

SECTION 13.8 Injunctive Relief; Punitive Damages.

(a) The  Borrower  recognizes  that,  in the  event the  Borrower  fails to
perform,  observe or discharge any of its obligations or liabilities  under this
Agreement,  any remedy of law may prove to be inadequate  relief to the Lenders.
Therefore,  the Borrower agrees that the Lenders, at the Lenders' option,  shall
be  entitled  to  temporary  and  permanent  injunctive  relief in any such case
without the necessity of proving actual damages.

(b) The  Administrative  Agent,  the Lenders and the Borrower (on behalf of
itself  and its  Subsidiaries)  hereby  agree that no such  Person  shall have a
remedy of  punitive  or  exemplary  damages  against  any other  party to a Loan
Document  and each such Person  hereby  waives any right or claim to punitive or
exemplary  damages  that  they  may  now  have or may  arise  in the  future  in
connection  with  any  Dispute,   whether  such  Dispute  is  resolved   through
arbitration or judicially.

SECTION 13.9 Accounting  Matters.  Except as otherwise  expressly  provided
herein,  all terms of an  accounting  or financial  nature shall be construed in
accordance  with GAAP,  as in effect from time to time,  provided  that,  if the
Borrower  notifies  the  Administrative  Agent  that the  Borrower  requests  an
amendment  to any  provision  hereof  to  eliminate  the  effect  of any  change
occurring  after the date  hereof in GAAP or in the  application  thereof on the
operation  of  such  provision  (or if the  Administrative  Agent  notifies  the
Borrower that the Required  Lenders request an amendment to any provision hereof
for such  purpose),  regardless  of whether any such  notice is given  before or
after such change in GAAP or in the  application  thereof,  then such  provision
shall be interpreted  on the basis of GAAP as in effect and applied  immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance therewith.

SECTION 13.10 Successors and Assigns; Participations.

(a) Benefit of Agreement. This Agreement shall be binding upon and inure to
the benefit of the  Borrower,  the  Administrative  Agent and the  Lenders,  all
future holders of the Notes, and their respective successors and assigns, except
that the Borrower  shall not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of each Lender.

(b) Assignment by Lenders.  Each Lender may, in the ordinary  course of its
business and in accordance  with  Applicable  Law, sell or assign to any Lender,
any  Affiliate  of a Lender and with the consent of the  Borrower (so long as no
Default or Event of Default has occurred and is  continuing)  and the consent of
the Administrative  Agent, which consents shall not be unreasonably  withheld or
delayed,  assign  to  one or  more  Eligible  Assignees  (any  of the  foregoing
assignees  or  purchasers,  a  "Participating  Lender")  all or a portion of its
interests,  rights  and  obligations  under  this  Agreement  and the other Loan
Documents (including,  without limitation, all or a portion of the Extensions of
Credit at the time owing to it and the Notes held by it); provided that:

(i) each such  assignment  shall be of a constant,  and not a varying,
percentage  of all the  assigning  Lender's  rights and  obligations  under this
Agreement;

(ii) if less than all of the  assigning  Lender's  Commitment is to be
assigned, the Commitment so assigned shall not be less than $5,000,000;

(iii) the parties to each such assignment shall execute and deliver to
the Administrative  Agent, for its acceptance and recording in the Register,  an
Assignment and Acceptance substantially in the form of Exhibit G attached hereto
(an "Assignment and Acceptance"),  together with (to the extent requested by any
Purchasing Lender) any Note or Notes subject to such assignment;

(iv) where  consent of the Borrower to an  assignment  to a Purchasing
Lender is required hereunder  (including consent to an assignment to an Approved
Fund),  the Borrower shall be deemed to have given its consent five (5) Business
Days after the date written  notice  thereof has been delivered by the assigning
Lender  (through  the  Administrative  Agent)  unless such  consent is expressly
refused by the Borrower prior to such fifth (5th) Business Day;

(v) such  assignment  shall not,  without the consent of the  Borrower
require the Borrower to file a  registration  statement  with the Securities and
Exchange Commission or apply to or qualify the Loans or the Notes under the blue
sky laws of any state; and

(vi) the  assigning  Lender shall pay to the  Administrative  Agent an
assignment fee of $3,500 upon the execution by such Lender of the Assignment and
Acceptance;  provided that no such fee shall be payable upon any assignment by a
Lender to an Affiliate of such Lender.

Upon such  execution,  delivery,  acceptance and  recording,  from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business  Days after the  execution  thereof  (unless
otherwise  agreed to by the  Administrative  Agent),  (A) the Purchasing  Lender
thereunder  shall  be a  party  hereto  and,  to the  extent  provided  in  such
Assignment and  Acceptance,  have the rights and  obligations of a Lender hereby
and (B) the Lender  thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.

(c) Rights and Duties Upon  Assignment.  By  executing  and  delivering  an
Assignment and Acceptance,  the assigning  Lender  thereunder and the Purchasing
Lender  thereunder  confirm to and agree  with each other and the other  parties
hereto as set forth in such Assignment and Acceptance.

(d)  Register.  The  Administrative  Agent  shall  maintain  a copy of each
Assignment and Acceptance  delivered to it and a register for the recordation of
the names and  addresses  of the  Lenders  and the amount of the  Extensions  of
Credit  with  respect to each  Lender  from time to time (the  "Register").  The
entries in the Register shall be conclusive,  in the absence of manifest  error,
and the Borrower, the Administrative Agent and the Lenders may treat each person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this  Agreement.  The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.

(e) Issuance of New Notes. Upon its receipt of an Assignment and Acceptance
executed by an assigning  Lender and a Purchasing  Lender together with any Note
or Notes (if  applicable)  subject to such  assignment and (if  applicable)  the
written  consent to such  assignment,  the  Administrative  Agent shall, if such
Assignment and Acceptance has been completed and is substantially in the form of
Exhibit G:

(i) accept such Assignment and Acceptance;

(ii) record the information contained therein in the Register;

(iii) give prompt notice thereof to the Lenders and the Borrower; and

(iv) promptly  deliver a copy of such Assignment and Acceptance to the
Borrower.

Within  five (5)  Business  Days after  receipt of notice,  the  Borrower  shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes,  a new Note or Notes to the order of such  Purchasing  Lender (to
the extent requested  thereby) in amounts equal to the Commitment  assumed by it
pursuant to such  Assignment and Acceptance and a new Note or Notes to the order
of the assigning Lender (to the extent requested  thereby) in an amount equal to
the Commitment  retained by it hereunder.  Such new Note or Notes shall be in an
aggregate  principal  amount  equal to the  aggregate  principal  amount of such
surrendered Note or Notes,  shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially  the form of the assigned
Notes delivered to the assigning Lender. Each surrendered Note or Notes shall be
canceled  and  returned  to  the  Borrower.  Notwithstanding  anything  in  this
Agreement to the contrary,  any Lender which has not been issued a Note or Notes
hereunder  may at any time deliver a written  request for a Note or Notes to the
Administrative  Agent and the  Borrower.  Within  five (5)  Business  Days after
receipt of notice,  the Borrower shall execute and deliver to the Administrative
Agent,  a Note or Notes (as  applicable)  to the order of such Lender in amounts
equal to the Commitment of such Lender. Upon receipt thereby, the Administrative
Agent shall promptly deliver such Note or Notes to such Lender.

(f)  Participations.  Each Lender may,  without notice to or the consent of
the  Borrower  or the  Administrative  Agent,  in  the  ordinary  course  of its
commercial  banking  business  and  in  accordance  with  Applicable  Law,  sell
participations  to one or more banks or other  entities  (any such bank or other
entity, a "Participant") in all or a portion of its rights and obligations under
this  Agreement  (including,  without  limitation,  all  or  a  portion  of  its
Extensions of Credit and the Notes held by it); provided that:

(i) each  such  participation  shall  be in an  amount  not less  than
$5,000,000;

(ii)  such  Lender's  obligations  under  this  Agreement  (including,
without limitation, its Commitment) shall remain unchanged;

(iii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations;

(iv) such Lender  shall  remain the holder of the Notes held by it for
all purposes of this Agreement;

(v) the Borrower, the Administrative Agent and the other Lenders shall
continue to deal solely and directly  with such Lender in  connection  with such
Lender's rights and obligations under this Agreement;

(vi)  such  Lender  shall not  permit  such  Participant  the right to
approve any waivers,  amendments or other modifications to this Agreement or any
other Loan Document other than waivers,  amendments or modifications which would
reduce  the  principal  of or the  interest  rate on any  Loan or  Reimbursement
Obligation, extend the term or increase the amount of the Commitment, reduce the
amount of any fees to which such  Participant is entitled,  extend any scheduled
payment  date for  principal of any Loan or,  except as  expressly  contemplated
hereby or thereby,  release  substantially all of the Collateral or any Security
Document; and

(vii) any such  disposition  shall  not,  without  the  consent of the
Borrower  require  the  Borrower  to  file a  registration  statement  with  the
Securities  and Exchange  Commission  to apply to qualify the Loans or the Notes
under the blue sky law of any state.

The Borrower agrees that each Participant shall be entitled to the benefits
of Section 4.7, Section 4.8, Section 4.9,  Section 4.10,  Section 4.11,  Section
4.12,  Section  4.13 and Section  13.3 to the same extent as if it were a Lender
and had acquired its interest by  assignment  pursuant to paragraph  (b) of this
Section 13.10;  provided that a Participant shall not be entitled to receive any
greater  payment  under  Section 4.7,  Section 4.8,  Section 4.9,  Section 4.10,
Section 4.11,  Section 4.12, and Section 4.13 than the  applicable  Lender would
have been  entitled to receive  with respect to the  participation  sold to such
Participant,  unless the sale of the  participation  to such Participant is made
with the  Borrower's  prior  written  consent  and such  Participant  shall have
delivered to the Administrative Agent all United States Internal Revenue Service
Forms required pursuant to Section 4.13(e).

(g) Disclosure of Information;  Confidentiality.  The Administrative  Agent
and the  Lenders  shall  hold all  non-public  information  with  respect to the
Borrower  obtained pursuant to the Loan Documents (or any Hedging Agreement with
a Lender  or the  Administrative  Agent)  in  accordance  with  their  customary
procedures   for  handling   confidential   information;   provided,   that  the
Administrative Agent may disclose information relating to this Agreement to Gold
Sheets and other similar bank trade publications, such information to consist of
deal terms and other  information  customarily  found in such  publications  and
provided further,  that the Administrative  Agent or any Lender may disclose any
such  information  to the  extent  such  disclosure  is (i)  required  by law or
requested  or required  pursuant to any legal  process,  (ii)  requested  by, or
required  to be  disclosed  to,  any rating  agency,  or  regulatory  or similar
authority (including,  without limitation, the National Association of Insurance
Commissioners)  or (iii) used in any suit,  action or proceeding for the purpose
of defending  itself,  reducing its liability or  protecting  any of its claims,
rights, remedies or interests under or in connection with the Loan Documents (or
any Hedging  Agreement with a Lender or the  Administrative  Agent).  Any Lender
may, in connection with any assignment,  proposed  assignment,  participation or
proposed   participation  pursuant  to  this  Section  13.10,  disclose  to  the
Purchasing   Lender,   proposed   Purchasing   Lender,   Participant,   proposed
Participant,  or to any  direct or  indirect  contractual  counterparty  in swap
agreements  or  such  contractual   counterparty's   professional   advisor  any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower;  provided, that prior to any such disclosure, each such Purchasing
Lender,  proposed  Purchasing  Lender,   Participant  or  proposed  Participant,
contractual  counterparty or professional advisor shall agree to be bound by the
provisions of this Section 13.10(g).

(h) Certain  Pledges or  Assignments.  Any Lender may at any time pledge or
assign a  security  interest  in all or any  portion  of its  rights  under this
Agreement  or any other Loan  Document  to secure  obligations  of such  Lender,
including, without limitation, any pledge or assignment to secure obligations to
a Federal Reserve Bank; provided that no such pledge or assignment of a security
interest  shall  release  a Lender  form  any of its  obligations  hereunder  or
substitute such pledgee or assignee for such Lender as a party hereto.

SECTION 13.11 Amendments,  Waivers and Consents.  Except as set forth below
or as specifically  provided in the Credit  Agreement or any other Loan Document
(including,  without limitation,  Section 2.9), any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents may be amended or
waived by the Lenders,  and any consent  given by the Lenders,  if, but only if,
such amendment,  waiver or consent is in writing signed by the Required  Lenders
(or by the  Administrative  Agent with the consent of the Required  Lenders) and
delivered to the Administrative  Agent and, in the case of an amendment,  signed
by the Borrower; provided that, except as specifically set forth in Section 2.9,
no  amendment,  waiver or consent  shall (a) increase (i) the  Commitment of any
Lender,  (ii)  the  Alternative  Currency  Commitment  or  (iii)  the  Swingline
Commitment,  (b)  reduce  the rate of  interest  or fees  payable on any Loan or
Reimbursement Obligation, (c) reduce or forgive the principal amount of any Loan
or Reimbursement  Obligation,  (d) extend the originally scheduled time or times
of payment of the principal of any Loan or Reimbursement  Obligation or the time
or times of payment of interest on any Loan or  Reimbursement  Obligation or any
fee or commission  with respect  thereto,  (e) permit any  subordination  of the
principal or interest on any Loan or Reimbursement  Obligation,  (f) release the
Borrower from the Obligations (other than Hedging  Obligations)  hereunder,  (g)
release any  Subsidiary  Guarantor  from its  obligations  under the  Subsidiary
Guaranty  Agreement,  (h)  permit any  assignment  (other  than as  specifically
permitted or contemplated in this Agreement) of any of the Borrower's rights and
obligations hereunder, (i) release any Collateral the fair market value of which
exceeds  $1,000,000  or release any  Security  Document  (other than asset sales
permitted  pursuant to Section 10.5 and as otherwise  specifically  permitted or
contemplated in this Agreement or the applicable Security  Document),  (j) amend
the definition of Alternative Currency, (k) amend the provisions of this Section
13.11  or the  definition  of  Required  Lenders,  (l)  extend  the  time of the
obligation of the Lenders to make or issue or  participate in Letters of Credit,
in each case,  without the prior written  consent of each Lender or (m) amend or
waive the provisions of Section  2.7(b).  In addition,  no amendment,  waiver or
consent to the  provisions  (a) of Article XII shall be made without the written
consent of the  Administrative  Agent,  (b) of Article III shall be made without
the written  consent of the Issuing  Lender,  (c) relating to Swingline Loans or
the  Swingline  Facility  shall  be made  without  the  written  consent  of the
Swingline  Lender  and  (d)  relating  to  Alternative  Currency  Loans  or  the
Alternative  Currency  Facility shall be made without the written consent of the
Alternative Currency Lender.

SECTION 13.12 Performance of Duties. The Borrower's  obligations under this
Agreement  and  each of the  other  Loan  Documents  shall be  performed  by the
Borrower at its sole cost and expense.

SECTION 13.13 All Powers Coupled with Interest.  All powers of attorney and
other  authorizations  granted to the Lenders,  the Administrative Agent and any
Persons  designated by the  Administrative  Agent or any Lender  pursuant to any
provisions of this Agreement or any of the other Loan Documents  shall be deemed
coupled  with  an  interest  and  shall  be  irrevocable  so  long as any of the
Obligations  remain  unpaid or  unsatisfied,  any of the  Commitments  remain in
effect or the Credit Facility has not been terminated.

SECTION 13.14 Survival of Indemnities.  Notwithstanding  any termination of
this  Agreement,  the  indemnities  to which  the  Administrative  Agent and the
Lenders are  entitled  under the  provisions  of this Article XIII and any other
provision of this Agreement and the other Loan Documents  shall continue in full
force and effect and shall  protect  the  Administrative  Agent and the  Lenders
against events arising after such termination as well as before.

SECTION  13.15  Titles and  Captions.  Titles  and  captions  of  Articles,
Sections and  subsections  in, and the table of contents of, this  Agreement are
for  convenience  only,  and neither  limit nor amplify the  provisions  of this
Agreement.

SECTION 13.16  Severability of Provisions.  Any provision of this Agreement
or  any  other  Loan  Document  which  is  prohibited  or  unenforceable  in any
jurisdiction  shall, as to such jurisdiction,  be ineffective only to the extent
of such prohibition or  unenforceability  without  invalidating the remainder of
such  provision or the remaining  provisions  hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

SECTION 13.17 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate  counterparts,  each of
which when so executed  shall be deemed to be an  original  and shall be binding
upon all parties,  their successors and assigns, and all of which taken together
shall constitute one and the same agreement.

SECTION 13.18 Term of Agreement. This Agreement shall remain in effect from
the Closing  Date  through  and  including  the date upon which all  Obligations
arising  hereunder or under any other Loan Document shall have been indefeasibly
and  irrevocably  paid and  satisfied  in full  and all  Commitments  have  been
terminated. The Administrative Agent is hereby permitted to release all Liens on
the Collateral in favor of the Administrative  Agent, for the ratable benefit of
itself and the Lenders,  upon repayment of the outstanding  principal of and all
accrued  interest on the Loans,  payment of all  outstanding  fees and  expenses
hereunder and the  termination  of the Lender's  Commitments.  No termination of
this  Agreement  shall affect the rights and  obligations  of the parties hereto
arising  prior  to such  termination  or in  respect  of any  provision  of this
Agreement which survives such termination.

SECTION  13.19 Advice of Counsel.  Each of the parties  represents  to each
other party hereto that it has discussed this Agreement with its counsel.

SECTION 13.20 No Strict Construction.  The parties hereto have participated
jointly in the  negotiation  and  drafting  of this  Agreement.  In the event an
ambiguity or question of intent or interpretation  arises,  this Agreement shall
be construed as if drafted  jointly by the parties  hereto and no presumption or
burden of proof shall arise favoring or  disfavoring  any party by virtue of the
authorship of any provisions of this Agreement.

SECTION 13.21  Inconsistencies with Other Documents;  Independent Effect of
Covenants.

(a)  In the  event  there  is a  conflict  or  inconsistency  between  this
Agreement  and any  other  Loan  Document,  the  terms of this  Agreement  shall
control;  provided,  that any provision of the Security  Documents which imposes
additional  burdens on the Borrower or its Subsidiaries or further restricts the
rights of the Borrower or its Subsidiaries or gives the Administrative  Agent or
Lenders  additional rights shall not be deemed to be in conflict or inconsistent
with this Agreement and shall be given full force and effect.

(b) The  Borrower  expressly  acknowledges  and agrees  that each  covenant
contained in Articles VIII, IX, or X hereof shall be given  independent  effect.
Accordingly,  the  Borrower  shall not  engage in any  transaction  or other act
otherwise  permitted under any covenant contained in Articles VIII, IX, or X if,
before or after giving effect to such  transaction or act, the Borrower shall or
would be in breach of any other covenant contained in Articles VIII, IX, or X.

SECTION  13.22  Continuity of Contract.  The parties  hereto agree that the
occurrence or  non-occurrence  of EMU, any event or events  associated  with EMU
and/or the introduction of the euro in all or any part of the European Union (a)
will not result in the  discharge,  cancellation,  rescission or  termination in
whole or in part of this Agreement or any other Loan Document, (b) will not give
any party the right to cancel, rescind,  terminate or vary this Agreement or any
other Loan  Document or (c) will not give rise to an Event of  Default,  in each
case other than as specifically provided in this Agreement.

[Signature pages to follow]

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed  under seal by their duly  authorized  officers,  all as of the day and
year first written above.

BORROWER:

[CORPORATE SEAL]                  COMPX INTERNATIONAL INC., as Borrower

By:/s/David A. Bowers                    
---------------------------------------------
Name: David A. Bowers                    
---------------------------------------------
Title:President                              
---------------------------------------------

[Signature pages continued on the following page]

ADMINISTRATIVE AGENT AND LENDERS:

WACHOVIA BANK, NATIONAL
ASSOCIATION, as Administrative Agent
and Lender

By:/s/Thomas F. Snider                         
-----------------------------------------------
Name: Thomas F. Snider                      
-----------------------------------------------
Title:Vice President                           
-----------------------------------------------

[Signature pages continued on the following page]

COMPASS BANK, as Lender

By: /s/Key Coker                             
------------------------------------------------
Name:  Key Coker                                
------------------------------------------------
Title: Executive Vice President                 
------------------------------------------------

[Signature pages continued on the following page]

COMERICA BANK, as Lender

By:/s/Mark B. Grover                          
------------------------------------------------
Name: Mark B. Grover                           
------------------------------------------------
Title:First Vice President                    
------------------------------------------------

Schedule 1.1(a)
to
Credit Agreement

Lenders and Commitments

---------------------------------------------------- -------------------------- --------------------------------------
LENDER                                COMMITMENT                       COMMITMENT
PERCENTAGE
---------------------------------------------------- -------------------------- --------------------------------------
---------------------------------------------------- -------------------------- --------------------------------------
Wachovia Bank, National Association
Charlotte Plaza, CP-8

201 South College Street                                  52.6315789473%                   $25,000,000.00
Charlotte, North Carolina 28288-0680
Attention:  Syndication Agency Services
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288

---------------------------------------------------- -------------------------- --------------------------------------
---------------------------------------------------- -------------------------- --------------------------------------
Compass Bank
8080 N. Central Expway, Suite 250
Dallas, Texas  75206                                      26.3157894737%                   $12,500,000.00
Attention:  Key Coker
Telephone No.: 214-706-8044
Telecopy No.: 214-346-2746

---------------------------------------------------- -------------------------- --------------------------------------
---------------------------------------------------- -------------------------- --------------------------------------
Comerica Bank
U.S. Banking Department- South
4100 Spring Valley Road, Suite 400                        21.0526315790%                   $10,000,000.00
Dallas, Texas  75244
Attention:  Janet L. Wheeler
Telephone No.:  972-361-2652
Telecopy No.:   972-361-2550

---------------------------------------------------- -------------------------- --------------------------------------
---------------------------------------------------- -------------------------- --------------------------------------
TOTAL:                                                         100%                        $47,500,000.00
---------------------------------------------------- -------------------------- --------------------------------------

Schedule 1.1(b)
To
Credit Agreement

Mandatory Cost Rate

1.   The  Mandatory  Cost Rate is an addition to the interest rate to compensate
Lenders for the cost of compliance with (a) the requirements of the Bank of
England  and/or the United  Kingdom's  Financial  Services  Authority  (the
"Financial  Services  Authority")  (or, in either case, any other authority
which replaces all or any of its functions) or (b) the  requirements of the
European Central Bank.

2.   On  the  first  day  of  each  Interest  Period  (or as  soon  as  possible
thereafter),  the  Administrative  Agent shall  calculate,  as a percentage
rate,  a rate (the  "Additional  Cost Rate") for each Lender in  accordance
with  the  paragraphs  set out  below.  The  Mandatory  Cost  Rate  will be
calculated  by  the  Administrative  Agent  as a  weighted  average  of the
Lenders'  Additional  Cost Rates  (weighted in proportion to the percentage
participation of each Lender in the relevant Loan) and will be expressed as
a percentage rate per annum.

3.   The Additional  Cost Rate for any Lender lending from a Lending Office in a
Participating  Member State will be the percentage  notified by that Lender
to the  Administrative  Agent.  This  percentage  will be certified by that
Lender  in its  notice  to the  Administrative  Agent to be its  reasonable
determination  of the cost  (expressed  as a  percentage  of that  Lender's
participation in all Loans made from that Lending Office) of complying with
the minimum reserve requirements of the European Central Bank in respect of
loans made from that Lending Office.

4.   The  Additional  Cost Rate for any Lender  lending from a Lending Office in
the  United  Kingdom  will be  calculated  by the  Administrative  Agent as
follows:

(a) in relation to a Loan denominated in Pounds Sterling:

[OBJECT OMITTED] percent per annum

(b) in relation to a Loan in denominated in any Alternative  Currency other
than Pounds Sterling:

[OBJECT OMITTED]
percent per annum.

Where:

A    is the percentage of Eligible  Liabilities  (assuming these to be
in excess of any stated  minimum)  which that Lender is from time
to time  required  to  maintain  as an  interest  free cash ratio
deposit  with the Bank of  England  to  comply  with  cash  ratio
requirements.

B    is LIBOR for the relevant Interest Period on the relevant Loan.

C    is the  percentage  (if any) of Eligible  Liabilities  which that
Lender is  required  from time to time to  maintain  as  interest
bearing Special Deposits with the Bank of England.

D    is the  percentage  rate per annum payable by the Bank of England
to the Administrative Agent on interest bearing Special Deposits.

E    is designed to compensate  Lenders for amounts  payable under the
Fees Rules and is calculated by the Administrative Agent as being
the  average of the most recent  rates of charge  supplied by any
applicable   reference  banks  (the  "Reference  Banks")  to  the
Administrative  Agent pursuant to paragraph 7 below and expressed
in pounds per (pound)1,000,000.

5.   For the purposes of this Schedule 1.1(b):

(a)  "Eligible  Liabilities"  has the meaning given to it from time to time
under or pursuant to the Bank of England Act 1998 or (as may be  appropriate) by
the Bank of England;

(b) "Fees  Rules"  means the rules on periodic  fees  contained  in the FSA
Supervision  Manual or such other law or regulation as may be in force from time
to time in respect of the payment of fees for the acceptance of deposits;

(c) "Fee Tariffs"  means the fee tariffs  specified in the Fees Rules under
the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated
fee required  pursuant to the Fees Rules but taking into account any  applicable
discount rate); and

(d) "Special Deposits" has the meanings given to it from time to time under
or pursuant to the Bank of England  Act 1998 or (as may be  appropriate)  by the
Bank of England;

(e) "Tariff Base" has the meaning given to it in, and will be calculated in
accordance with, the Fees Rules.

6.   In application of the above formulae, A, B, C and D will be included in the
formulae as percentages  (i.e. 5 percent will be included in the formula as
5 and not as 0.05).  A negative  result  obtained by  subtracting  D from B
shall be taken as zero.  The  resulting  figures  shall be  rounded to four
decimal places.

7.   If requested by the  Administrative  Agent,  each Reference Bank shall,  as
soon as practicable after publication by the Financial Services  Authority,
supply  to the  Administrative  Agent the rate of  charge  payable  by that
Reference  Bank to the Financial  Services  Authority  pursuant to the Fees
Rules in respect of the relevant  financial year of the Financial  Services
Authority  (calculated for this purpose by that Reference Bank as being the
average  of the Fee  Tariffs  applicable  to that  Reference  Bank for that
financial year) and expressed in pounds per  (pound)1,000,000 of the Tariff
Base of that Reference Bank.

8.   Each Lender shall  supply any  information  required by the  Administrative
Agent  for  the  purpose  of  calculating  its  Additional  Cost  Rate.  In
particular, but without limitation,  each Lender shall supply the following
information on or prior to the date on which it becomes a Lender:

(a) the jurisdiction of its Lending Office; and

(b) any other  information  that the  Administrative  Agent may  reasonably
require for such purpose.

Each Lender shall promptly notify the Administrative Agent of any change to
the information provided by it pursuant to this paragraph.

9.   The  percentages  of each  Lender for the  purpose of A and C above and the
rates of charge of each  Reference Bank for the purpose of E above shall be
determined by the Administrative  Agent based upon the information supplied
to it  pursuant to  paragraphs  7 and 8 above and on the  assumption  that,
unless a Lender  notifies the  Administrative  Agent to the contrary,  each
Lender's  obligations  in  relation  to cash  ratio  deposits  and  Special
Deposits are the same as those of a typical bank from its  jurisdiction  of
incorporation with a Lending Office in the same jurisdiction as its Lending
Office.

10.  The  Administrative  Agent  shall have no  liability  to any person if such
determination  results  in an  Additional  Cost  Rate  which  over or under
compensates any Lender and shall be entitled to assume that the information
provided by any Lender or Reference  Bank pursuant to paragraphs 3, 7 and 8
above is true and correct in all respects.

11.  The  Administrative  Agent shall distribute the additional amounts received
as a result of the  Mandatory  Cost Rate to the Lenders on the basis of the
Additional Cost Rate for each Lender based on the  information  provided by
each  Lender and each  Reference  Bank  pursuant to  paragraphs  3, 7 and 8
above.

12.  Any  determination  by the  Administrative  Agent pursuant to this Schedule
1.1(b) in relation to a formula,  the  Mandatory  Cost Rate,  an Additional
Cost Rate or any  amount  payable  to a Lender  shall,  in the  absence  of
manifest error, be conclusive and binding on all parties.

13.  The Administrative Agent may from time to time, after consultation with the
Borrower  and the  Lenders,  determine  and  notify to all  parties  of any
amendments  which are required to be made to this Schedule  1.1(b) in order
to comply with any change in law,  regulation or any requirements from time
to time imposed by the Bank of England, the Financial Services Authority or
the  European  Central  Bank (or, in any case,  any other  authority  which
replaces all or any of its functions) and any such determination  shall, in
the absence of manifest error, be conclusive and binding on all parties.

CREDIT AGREEMENT

dated as of January 22, 2003,

by and among

COMPX INTERNATIONAL INC.
as Borrower,

the Lenders referred to herein,
as Lenders,

and

WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent

WACHOVIA SECURITIES, INC.,
as Sole Lead Arranger and Sole Book Manager

TABLE OF CONTENTS

Page

ARTICLE I  DEFINITIONS................................................. 1
SECTION 1.1           Definitions.......................................1
SECTION 1.2           General...........................................19
SECTION 1.3           Effectiveness of Euro Provisions..................20
SECTION 1.4.          Other Definitions and Provisions..................20

ARTICLE II  REVOLVING CREDIT FACILITY...................................20
SECTION 2.1           Revolving Credit Loans............................20
SECTION 2.2           Alternative Currency Loans........................20
SECTION 2.3           Swingline Loans...................................22
SECTION 2.4           Procedure for Advances of Revolving Credit 
Loans, Alternative Currency Loans and 
Swingline Loans...................................25
SECTION 2.5           Repayment of Loans................................26
SECTION 2.6           Notes.............................................29
SECTION 2.7           Permanent Reduction of the 
Aggregate Commitment and the Alternative 
Currency Commitment...............................29
SECTION 2.8           Termination of Credit Facility....................31
SECTION 2.9           Increase of the Aggregate Commitment..............31

ARTICLE III  LETTER OF CREDIT FACILITY..................................32
SECTION 3.1           L/C Commitment....................................32
SECTION 3.2           Procedure for Issuance of Letters of Credit.......33
SECTION 3.3           Commissions and Other Charges.....................33
SECTION 3.4           L/C Participations................................34
SECTION 3.5           Reimbursement Obligation of the Borrower..........35
SECTION 3.6           Obligations Absolute..............................35
SECTION 3.7           Effect of Application.............................36

ARTICLE IV  GENERAL LOAN PROVISIONS.....................................36
SECTION 4.1           Interest..........................................36
SECTION 4.2           Notice and Manner of Conversion or 
Continuation of Loans.............................39
SECTION 4.3           Fees..............................................40
SECTION 4.4           Manner of Payment.................................40
SECTION 4.5           Crediting of Payments and Proceeds................42
SECTION 4.6           Adjustments.......................................42
SECTION 4.7           Nature of Obligations of Lenders 
Regarding Extensions of Credit; Assumption 
by the Administrative Agent.......................42
SECTION 4.8.          Redenomination of Alternative Currency Loans......43
SECTION 4.9.          Regulatory Limitation.............................44
SECTION 4.10          Changed Circumstances.............................44
SECTION 4.11         Indemnity..........................................47
SECTION 4.12         Capital Requirements...............................47
SECTION 4.13         Taxes..............................................48
SECTION 4.14.        Rounding and Other Consequential Changes...........49
SECTION 4.15.        Replacement of Lenders.............................51
SECTION 4.16.        Security...........................................51

ARTICLE V  CLOSING; CONDITIONS OF CLOSING AND BORROWING.................51
SECTION 5.1           Closing...........................................51
SECTION 5.2           Conditions to Closing and Initial 
Extensions of Credit..............................51
SECTION 5.3           Conditions to All Extensions of Credit............56

ARTICLE VI  REPRESENTATIONS AND WARRANTIES OF THE BORROWER..............57
SECTION 6.1           Representations and Warranties....................57
SECTION 6.2           Survival of Representations and Warranties, Etc...64

ARTICLE VII  FINANCIAL INFORMATION AND NOTICES..........................64
SECTION 7.1           Financial Statements and Projections..............65
SECTION 7.2           Officer's Compliance Certificate..................65
SECTION 7.3           Accountants' Certificate..........................65
SECTION 7.4           Other Reports.....................................66
SECTION 7.5           Notice of Litigation and Other Matters............66
SECTION 7.6           Accuracy of Information...........................67

ARTICLE VIII  AFFIRMATIVE COVENANTS.....................................67
SECTION 8.1           Preservation of Corporate Existence 
and Related Matters...............................67
SECTION 8.2           Maintenance of Property...........................67
SECTION 8.3           Insurance.........................................67
SECTION 8.4           Accounting Methods and Financial Records..........67
SECTION 8.5           Payment and Performance of Obligations............68
SECTION 8.6           Compliance With Laws and Approvals................68
SECTION 8.7           Environmental Laws................................68
SECTION 8.8           Compliance with ERISA.............................68
SECTION 8.9           Compliance With Agreements........................69
SECTION 8.10         Visits and Inspections.............................69
SECTION 8.11         Additional Subsidiaries and Additional Collateral..69
SECTION 8.12         Use of Proceeds....................................71
SECTION 8.13         Further Assurances.................................71

ARTICLE IX  FINANCIAL COVENANTS.........................................71
SECTION 9.1           Leverage Ratio....................................71
SECTION 9.2           Consolidated Net Worth............................71
SECTION 9.3           Interest Coverage Ratio...........................71
SECTION 9.4           Capital Expenditures..............................72

ARTICLE X  NEGATIVE COVENANTS...........................................72
SECTION 10.1         Limitations on Debt................................72
SECTION 10.2         Limitations on Liens...............................73
SECTION 10.3         Limitations on Loans, Advances, 
Investments and Acquisitions.......................74
SECTION 10.4         Limitations on Mergers and Liquidation.............76
SECTION 10.5         Limitations on Sale of Assets......................77
SECTION 10.6         Limitations on Dividends and Distributions.........77
SECTION 10.7         Limitations on Exchange and 
Issuance of Capital Stock..........................78
SECTION 10.8         Transactions with Affiliates.......................78
SECTION 10.9         Certain Accounting Changes; Organizational 
Documents..........................................78
SECTION 10.10        Amendments; Payments and Prepayments of 
Subordinated Debt..................................79
SECTION 10.11        Restrictive Agreements.............................79
SECTION 10.12        Nature of Business.................................79
SECTION 10.13        Impairment of Security Interests...................79

ARTICLE XI  DEFAULT AND REMEDIES........................................79
SECTION 11.1         Events of Default..................................79
SECTION 11.2         Remedies...........................................82
SECTION 11.3         Rights and Remedies Cumulative; Non-Waiver; etc....83
SECTION 11.4.        Judgment Currency..................................83

ARTICLE XII  THE ADMINISTRATIVE AGENT...................................84
SECTION 12.1         Appointment........................................84
SECTION 12.2         Delegation of Duties...............................84
SECTION 12.3         Exculpatory Provisions.............................84
SECTION 12.4         Reliance by the Administrative Agent...............84
SECTION 12.5         Notice of Default..................................85
SECTION 12.6         Non-Reliance on the Administrative Agent 
and Other Lenders..................................85
SECTION 12.7         Indemnification....................................86
SECTION 12.8         The Administrative Agent in Its 
Individual Capacity................................86
SECTION 12.9         Administrative Agent May File Proofs of Claim......86
SECTION 12.10        Resignation of the Administrative Agent; 
Successor Administrative Agent.....................86

ARTICLE XIII  MISCELLANEOUS.............................................88
SECTION 13.1         Notices............................................88
SECTION 13.2         Expenses; Indemnity................................89
SECTION 13.3         Set-off............................................89
SECTION 13.4         Governing Law......................................90
SECTION 13.5         Jurisdiction and Venue.............................90
SECTION 13.6         Binding Arbitration; Waiver of Jury Trial..........91
SECTION 13.7         Reversal of Payments...............................92
SECTION 13.8         Injunctive Relief; Punitive Damages................92
SECTION 13.9         Accounting Matters.................................92
SECTION 13.10        Successors and Assigns; Participations.............93
SECTION 13.11        Amendments, Waivers and Consents...................97
SECTION 13.12        Performance of Duties..............................97
SECTION 13.13        All Powers Coupled with Interest...................97
SECTION 13.14        Survival of Indemnities............................97
SECTION 13.15        Titles and Captions................................98
SECTION 13.16        Severability of Provisions.........................98
SECTION 13.17        Counterparts.......................................98
SECTION 13.18        Term of Agreement..................................98
SECTION 13.19        Advice of Counsel..................................98
SECTION 13.20        No Strict Construction.............................98
SECTION 13.21        Inconsistencies with Other Documents; 
Independent Effect of Covenants....................98
SECTION 13.22        Continuity of Contract.............................99

EXHIBITS AND SCHEDULES

EXHIBITS

Exhibit A-1          -        Form of Revolving Credit Note
Exhibit A-2          -        Form of Swingline Note
Exhibit A-3          -        Form of Alternative Currency Note
Exhibit B            -        Form of Notice of Borrowing
Exhibit C            -        Form of Notice of Account Designation
Exhibit D            -        Form of Notice of Prepayment
Exhibit E            -        Form of Notice of Conversion/Continuation
Exhibit F            -        Form of Officer's Compliance Certificate
Exhibit G            -        Form of Assignment and Acceptance
Exhibit H            -        Form of Subsidiary Guaranty Agreement
Exhibit I            -        Form of Collateral Agreement
Exhibit J            -        Form of Joinder Agreement

SCHEDULES

Schedule 1.1(a)      -        Lenders and Commitments
Schedule 1.1(b)      -        Mandatory Cost Rate
Schedule 6.1(a)      -        Jurisdictions of Organization and Qualification
Schedule 6.1(b)      -        Subsidiaries and Capitalization
Schedule 6.1(i)      -        ERISA Plans
Schedule 6.1(l)      -        Labor and Collective Bargaining Agreements
Schedule 6.1(s)      -        Debt and Guaranty Obligations
Schedule 6.1(t)      -        Litigation
Schedule 10.2        -        Existing Liens
Schedule 10.3        -        Existing Loans, Advances and Investments
Schedule 10.8        -        Transactions with Affiliates

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (this "Agreement") is entered into as of
the  date of the last  signature  affixed  to this  Agreement  between  Brent A.
Hagenbuch  ("Employee")  and COMPX  INTERNATIONAL  INC., a Delaware  corporation
("CompX"),  for itself and on behalf of its parent,  subsidiary or other related
or  affiliated  entities  or persons  (including,  without  limitation,  Contran
Corporation  and the  Harold  C.  Simmons  Family  Trusts)  and  such  entities'
predecessors,   successors,  assigns,  officers,  directors,  partners,  agents,
employees, trustees, insurers and attorneys, past and present (hereinafter CompX
and all such entities and persons other than Employee are collectively  referred
to as the "Company").

Recitals

A. Employee is an employee at will of CompX.

B.  Employee  resigned as president  and chief  executive  officer of CompX
effective May 22, 2002 (the "Resignation Date").

C. In exchange for a general  release  from  Employee of any and all claims
against the Company,  CompX has agreed,  among other things,  to employ Employee
through  the  earlier of (i)  November  30,  2002 and four  additional  weeks of
accrued vacation, which period shall terminate on December 27, 2002 (the "Salary
Payment  Date") or (ii) such time as Employee  terminates  his  employment  with
CompX  upon  notice to CompX,  in which  event  CompX will pay  Employee  in one
lump-sum his unpaid salary as if he had been employed through the Salary Payment
Date (the "Lump Sum  Payment").  The  earlier of  December  27, 2002 or the date
Employee  terminates his employment by notice to CompX shall be the  termination
date of Employee's employment with CompX (the "Termination Date").

D. Employee has been given at least 21 days to consider this  Agreement and
has been  advised and  encouraged  by receipt of this writing to consult with an
attorney prior to executing this Agreement.

E. This  Agreement  will not  become  effective  or  enforceable  until the
expiration of seven days following its execution and during such period Employee
may revoke the Agreement if he so desires.

Agreement

NOW,  THEREFORE,  IT IS AGREED, in consideration of the mutual undertakings
of the parties hereto, as follows:

Section 1. Recitals. The foregoing recitals are expressly incorporated
herein and made a part hereof.

Section 2. Amount of  Consideration.  Upon  satisfying  the  following
conditions:

(i) Employee executes this Agreement;

(ii) Employee executes the NOTICE OF RIGHTS and ACKNOWLEDGMENT OF
RECEIPT substantially in the form attached to this Agreement;

(iii)  Employee  executes  the  REAFFIRMATION  OF  AGREEMENT  AND
GENERAL RELEASE  substantially  in the form attached to this Agreement
(the "Reaffirmation"); and

(iv) Employee executes a written  resignation letter addressed to
the board of directors of CompX  stating that he resigns all director,
officer and all other elected or appointed  positions of CompX and its
subsidiaries effective as of the Resignation Date;

CompX  shall  employ  Employee at his  current  base  salary  rate with  medical
benefits  until the earlier of (i) the Salary  Payment Date or (ii) such time as
Employee  terminates  his employment  with CompX upon notice to CompX,  in which
event and as soon thereafter as reasonably  practicable  CompX will pay Employee
the  Lump-Sum  Payment.  In any event,  Employee's  employment  with CompX shall
terminate,  unless terminated  earlier pursuant to Section 6, on the Termination
Date.  CompX  shall not be  obligated  to pay  Employee  any  salary or  medical
benefits for periods  subsequent to the Resignation Date in excess of Employee's
accrued vacation as of the Resignation Date until Employee has satisfied all the
conditions set forth in this Section.

Section 3. 2002 Bonus and Profit-Sharing;  Stock Options. Employee will not
receive any bonuses or profit-sharing  benefits for 2002 from the Company. CompX
acknowledges  that Employee  currently  has the vested right to purchase  10,000
shares of CompX class A common stock, par value $0.01 per share ("Class A Common
Stock"),  at $12.06 per share pursuant to an Employee  Nonqualified Stock Option
Agreement  dated as of January 17, 2001 between  CompX and Employee  (the "Stock
Option  Agreement")  issued under the CompX  International  Inc. 1997  Long-Term
Incentive Plan.  Employee  waives his right under the Stock Option  Agreement to
purchase  any shares of Class A Common  Stock  that vest  after the  Resignation
Date.  Employee  agrees that he will only be able to purchase  10,000  shares of
Class A Common  Stock under the Stock Option  Agreement  until 90 days after his
employment with CompX terminates.

Section 4.  Employee's  Authority  After the  Resignation  Date.  After the
Resignation  Date,  Employee  shall be deemed an  active  employee  of CompX for
welfare benefit plan purposes but shall take no action on behalf of the Company,
or represent to others that he has the authority to do so. Except as provided in
Section  8,  Employee  has no duty,  nor is he  expected,  to appear at  CompX's
offices or facilities.  Any breach by Employee of this Section shall be deemed a
material breach of this Agreement.

Section  5.  General  Release.  Employee  agrees to the  following  General
Release (the "General Release"):

FOR VALUE  RECEIVED,  the  adequacy and  sufficiency  of which is
hereby  acknowledged,  Employee,  on behalf of himself  and his heirs,
executors,   attorneys,   administrators,   successors   and   assigns
(hereinafter  referred  to as  "Releaser")  hereby  fully and  forever
releases and discharges the Company from any and all claims,  demands,
liens,  agreements,  contracts,  covenants,  actions, suits, causes of
action, obligations,  controversies, debts, costs, expenses (including
but not limited to attorneys' fees and expenses),  damages, judgments,
orders and  liabilities of whatever kind or nature,  in law or equity,
by statute  or  otherwise,  whether  now known or  unknown,  vested or
contingent,  suspected or unsuspected, and whether or not concealed or
hidden,  that  have  existed  or may have  existed,  or that do exist,
including all claims arising in any manner  relating to his employment
with the Company.  This General Release shall include,  without in any
way limiting the  generality  of the foregoing  language,  any and all
claims  of   employment   discrimination   under  the  United   States
Constitution,  the  Constitution  of  the  state  of  Texas,  the  Age
Discrimination in Employment Act, Title VII of the Civil Rights Act of
1964, as amended,  the Civil Rights Act of 1991, 42 U.S.C.  1981,  the
Americans  with  Disabilities  Act, the Fair Labor  Standards Act, the
Equal Pay Act, the Worker Adjustment and Retraining  Notification Act,
the Employee  Retirement  Income  Security Act, the Family and Medical
Leave Act,  the Texas  Commission  on Human  Rights  Act, or under any
other  applicable  federal,  state or local laws,  ordinances or legal
restrictions on the Company's rights.

Unless otherwise  provided in this Agreement,  payment under this
Agreement  shall not alter or change the rights that the  Employee has
to  benefits  accrued  as of his  termination  date  under  the  CompX
Contributory  Retirement Plan, the CompX Capital  Accumulation Pension
Plan, the CompX  International  Inc. 1997 Long-Term  Incentive Plan or
pursuant to any agreement of limited liability or any  indemnification
available  to Releaser as a director or officer of CompX or any of its
subsidiaries,   whether   set  forth  in  such   applicable   entity's
certificate  of  incorporation,  bylaws,  resolutions  of the board of
directors or otherwise.  Unless otherwise  provided in this Agreement,
Employee's rights under these plans shall continue to be controlled by
the respective  plan documents and the  consideration  paid under this
Agreement shall not be included as compensation  for benefit  purposes
under these plans.  Also, this Agreement shall not increase,  decrease
or otherwise  affect  Releaser's  right to medical coverage during his
term of employment or thereafter at Releaser's expense under COBRA.

It is the intention of Releaser in executing this General Release
that it shall be effective  as a bar to each and every  claim,  demand
and cause of action  of  whatever  kind or  character  whether  or not
hereinabove  mentioned or implied;  and the Releaser hereby  knowingly
and  voluntarily  waives  any and all rights  and  benefits.  Releaser
expressly consents that this General Release shall be given full force
and  effect  according  to  each  and  all of its  express  terms  and
provisions,  including  those  relating  to  unknown  and  unsuspected
claims,  demands,  charges and causes of action  (notwithstanding  any
state statute that  expressly  limits the  effectiveness  of a general
release of unknown,  unsuspected and unanticipated claims), if any, as
well as those  relating  to any other  claims,  demands  and causes of
action  hereinabove  mentioned or implied.  Releaser  acknowledges and
agrees  that this waiver is an  essential  and  material  term of this
General  Release and without such waiver this Agreement would not have
been entered into.

Releaser  understands and agrees that this General Release is not
intended  to be and shall not be deemed,  construed  or treated in any
respect as an  admission  of liability by any person or entity for any
purpose.

Releaser  further  acknowledges  that he has  entered  into  this
General Release freely and without coercion,  that he has been advised
and encouraged in writing to consult with counsel and has been offered
a period  of time of at least 21 days to  consider  the  terms of this
General Release.  Releaser understands that he has seven days from the
date this  General  Release is executed to revoke this  Agreement  and
until the  expiration  of this  seven-day  period the General  Release
shall not be effective or enforceable.

Section 4. Contest, Grievance,  Earlier Termination and Liquidated Damages.
In the event Employee (i) contests the effectiveness of the General Release in a
proceeding  before a court of law, (ii) pursues a claim or grievance  arising on
or  before  the  effectiveness  of  this  Agreement  against  the  Company  in a
proceeding  before a court of law or (iii)  pursues a damage award arising on or
before  the  effectiveness  of this  Agreement  against  the  Company  before an
administrative official or agency of an applicable  governmental authority,  ten
days prior to instituting  any such proceeding or claim,  Employee's  employment
with CompX shall  immediately  terminate and Employee shall pay CompX a lump sum
as  liquidated  damages  equal to the  aggregate  salary CompX paid Employee for
periods  subsequent to the Resignation  Date plus lawful interest on such salary
from the time of each  applicable  pay  period at the lesser of 10% per annum or
the maximum lawful rate (the "Liquidated Damages").  If Employee fails to comply
with this Section, Employee agrees that CompX may seek injunctive relief for the
specific  performance of this Section and in the event that specific performance
is not obtained any damages that Employee may be entitled to as a result of such
proceeding shall be reduced by the amount of the Liquidated Damages. The General
Release provided in Section 5 shall remain effective against Employee whether or
not Employee pays the Liquidated Damages to CompX.

Section 7. Return of Company  Property.  Upon execution of this  Agreement,
Employee  further  agrees to return  and leave in the  custody  of CompX all the
Company's  documents and property  except (i) for routine expense reports needed
for income tax return preparation,  insurance policies, claim forms and the like
and (ii) with respect to CompX  equipment (such as computers,  cellular  phones,
pagers,  personal digital assistants and the like) in Employee's possession that
Employee would like to keep,  Employee  agrees to reimburse CompX for the agreed
upon  value of such  equipment  within 10 days of  Employee's  execution  of the
Reaffirmation.

Section 8. Cooperation in Legal Matters.  Employee acknowledges that in the
course of his  employment  with CompX,  he has gained  knowledge and  experience
and/or was a witness to events and circumstances that may arise in the Company's
defense or prosecution of subsequent  proceedings.  Employee agrees to cooperate
fully  and  truthfully  with  the  Company  and to  appear  upon  the  Company's
reasonable  request and expense as a witness  and/or  consultant in defending or
prosecuting  claims of all kinds,  including but not limited to any  litigation,
administrative actions or arbitrations.

Section 9.  Attorney  Fees for  Successful  Party.  The parties  agree that
should  one  party sue the other  party  for a breach of any  provision  of this
Agreement,  the  prevailing  party shall be  entitled to recover its  reasonable
attorney's  fees and costs of court if it is  successful  in  obtaining  a final
judgment against the other party. The parties hereby agree that each party shall
have the right to sue for specific performance of this Agreement and declaratory
and injunctive relief.

Section 10. Binding Effect.  This Agreement shall be binding upon and inure
to the  benefit  of  each  of the  parties  hereto  and  the  heirs,  executors,
administrators, successors and assigns of each of the parties, as applicable.

Section 11. Nondisclosure.  Employee shall refrain from all conduct, verbal
or otherwise,  that would damage the Company's reputation,  goodwill or standing
in the community or among its employees. Employee further agrees not to disclose
any privileged or proprietary  information  concerning the Company's operations,
except as may be required by  governmental  or  judicial  authorities.  Under no
circumstances is Employee  allowed to utilize  information from Company files or
electronic equipment to disclose, or allow to be obtained or disclosed,  through
the  use  of  agents  or  any  third  party  information  in  oral,  written  or
computerized data form, about such things as payroll information of any type, or
the  names,  addresses  or  telephone  numbers  of  Company  personnel,  or  any
non-public financial information about the Company, except as may be required by
governmental or judicial  authorities.  Employee  further agrees not to disclose
any  information  relating to the terms or  existence  of this  Agreement to any
other person or  organization,  including  but not limited to past,  present and
future  employees of the Company,  except as may be required by  governmental or
judicial authorities.

Section  12.  No  Other  Agreement.  This  Agreement  contains  the  entire
agreement  between the parties with respect to the subject matter hereof and the
parties acknowledge that there are no warranties, promises or representations of
any kind,  express or implied,  upon which the  parties  have relied in entering
into this Agreement.  The terms and conditions of this Agreement are contractual
and not a mere  recital.  No part of this  Agreement  may be  changed  except in
writing executed by the parties.

Section  13.   Governing  Law.  This  Agreement  shall  be  interpreted  in
accordance  with  the  laws of the  state  of  Texas.  Whenever  possible,  each
provision  of this  Agreement  shall be  interpreted  in such a manner  as to be
effective and valid under applicable law, but if any provision of this Agreement
shall  be held  to be  prohibited  by or  invalid  under  applicable  law,  such
provision  shall  be  ineffective  only to the  extent  of such  prohibition  or
invalidity,  without  invalidating  or  affecting in any manner  whatsoever  the
remainder of such provision or the remaining provisions

Section 14. Notice and Tenders. Any notice,  request or other communication
hereunder  to a party shall be in writing  and all notices and tenders  shall be
delivered or sent by postage  prepaid  first class mail or overnight  courier to
the  address of the party  appearing  beneath  such  party's  signature  to this
Agreement  or such  other  address  as such  party may  notify  the other  party
pursuant to this Section.

Section 15.  Counterparts.  This Agreement may be executed in any number of
counterparts.

IN WITNESS  WHEREOF,  the parties have executed this  Agreement and General
Release effective as of the date of the last signature affixed below.

READ CAREFULLY BEFORE SIGNING

I have read this Agreement and General Release and have had the opportunity
to consult  legal  counsel  prior to my signing of this  Agreement  and  General
Release.  I understand  that by executing this  Agreement and General  Release I
will relinquish any right or demand I may have against the Company.

Date:  June 18, 2002

/s/ Brent A. Hagenbuch
By:---------------------------------------
Brent A. Hagenbuch

Address:   5423 Harbor Town
Dallas, Texas   75287

Telephone No.:  972.380.4135

Social Security No.:  XXX-XX-XXXX

Date:  June 17, 2002           COMPX INTERNATIONAL INC.

/s/Glenn R. Simmons
By:-----------------------------------
Glenn R. Simmons, Chairman of the Board

Address:   Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas   75240-2697

Telephone No.:  972.448.1400

NOTICE OF RIGHTS

Attached  hereto you will find a proposed  AGREEMENT  AND  GENERAL  RELEASE
("Agreement")  with respect to your termination from employment.  It is required
by law that you be given at least  twenty-one (21) days from the date of receipt
of the proposed  Agreement within which to consider its terms. It is recommended
that you consult  with an attorney  regarding  your legal rights with respect to
the Agreement during this 21-day period.

ACKNOWLEDGMENT OF RECEIPT

I  acknowledge  that  I  received  a copy  of  CompX  International  Inc.'s
AGREEMENT AND GENERAL RELEASE by 10:00 a.m. (Dallas, Texas time) the 18th day of
June, 2002.

/s/ Brent A. Hagenbuch
------------------------------------
Brent A. Hagenbuch

REAFFIRMATION OF AGREEMENT AND GENERAL RELEASE
[to be signed at the conclusion of the 7 day waiting period]

I, Brent A. Hagenbuch,  acknowledge that I signed the AGREEMENT AND GENERAL
RELEASE  ("Agreement")  with CompX  International Inc. and that during the seven
(7) day period  immediately  following my execution of the Agreement,  I had the
right to revoke the Agreement at any time. By executing  the  Agreement,  I also
understand that I agreed that I would receive no benefits  thereunder unless and
until I executed this Reaffirmation.

By executing  this  Reaffirmation,  I now affirm and attest that I (a) have
not heretofore,  or contemporaneously  with the execution of this Reaffirmation,
revoked,  or  attempted  to  revoke  the  Agreement,  either  by notice to CompX
International  Inc., or otherwise,  and (b) am now, by virtue of my execution of
this  Reaffirmation,  on or after  seven  (7) days  after the  execution  of the
Agreement, fully bound by all of the terms and conditions of the Agreement.

EXECUTED in Dallas, Texas on June 25, 2002.

/s/ Brent A. Hagenbuch
-------------------------------------
Brent A. Hagenbuch

THE STATE OF TEXAS      

COUNTY OF DALLAS

BEFORE  ME,  the  undersigned,  a Notary  Public,  on this  day  personally
appeared  Brent  A.  Hagenbuch,  known  to me to be the  person  whose  name  is
subscribed to the foregoing  instrument and  acknowledged to me that he executed
the same for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this 25th day of June, 2002.

[SEAL]

/s/ Linda S. Roberts
------------------------------------
Notary Public, State of Texas

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (this "Agreement") is entered into as of
the date of the last  signature  affixed  to this  Agreement  between  Stuart M.
Bitting  ("Employee")  and COMPX  INTERNATIONAL  INC.,  a  Delaware  corporation
("CompX"),  for itself and on behalf of its parent,  subsidiary or other related
or affiliated entities or persons (including,  without limitation,  Valhi, Inc.,
Contran  Corporation and the Harold C. Simmons Family Trusts) and such entities'
predecessors,   successors,  assigns,  officers,  directors,  partners,  agents,
employees, trustees, insurers and attorneys, past and present (hereinafter CompX
and all such entities and persons other than Employee are collectively  referred
to as the "Company").

Recitals

A. Employee is an at will employee of CompX.

B. CompX has decided to terminate Employee's employment with CompX.

C. CompX has agreed to give  consideration  to Employee in exchange for his
execution of the general release set forth herein, among other things.

D. Such consideration is in addition to anything of value that Employee has
received or is entitled to receive as a result of his discharge.

E. Employee has been given at least 21 days to consider this  Agreement and
has been  advised and  encouraged  by receipt of this writing to consult with an
attorney prior to executing this Agreement.

F. This  Agreement  will not  become  effective  or  enforceable  until the
expiration of seven days following its execution and during such period Employee
may revoke the Agreement if he so desires.

Agreement

NOW,  THEREFORE,  IT IS AGREED, in consideration of the mutual undertakings
of the parties hereto, as follows:

Section 1.  Recitals.  The foregoing  recitals are  expressly  incorporated
herein and made a part hereof.

Section 2. Termination  Date.  Unless  terminated  earlier pursuant to this
Section,  Employee's  employment with CompX shall  terminate  effective July 31,
2002.  Either  party may  terminate  Employee's  employment  with  CompX at will
effective  prior to July 31, 2002 upon written notice to the other party of such
earlier termination date. In either event, the effective date of the termination
of Employee's  employment  with CompX shall be referred to in this  Agreement as
the "Termination Date."

Section  3.  Amount  of   Consideration.   Upon  satisfying  the  following
conditions:

(i) Employee executes this Agreement;

(ii) Employee  executes the NOTICE OF RIGHTS and  ACKNOWLEDGMENT OF RECEIPT
substantially in the form attached to this Agreement;

(iii) Employee  executes the REAFFIRMATION OF AGREEMENT AND GENERAL RELEASE
substantially in the form attached to this Agreement (the "Reaffirmation"); and

(iv) Employee executes a written  resignation letter addressed to the board
of directors  of CompX  stating  that he resigns all  director,  officer and all
other elected or appointed positions of CompX and its subsidiaries  effective as
of the Termination Date;

CompX shall pay Employee, on the later of the satisfaction of such conditions or
within three  business  days after the  Termination  Date,  the total sum of ONE
HUNDRED TWENTY SIX THOUSAND ONE HUNDRED TEN AND 82/100THS DOLLARS ($126,110.82),
less  applicable  withholding  taxes (the  "Severance  Pay").  The Severance Pay
includes any amount owed to Employee for accrued vacation time.

Section 4. COBRA  Benefits.  If Employee and Employee's  dependents wish to
continue  health  benefits,  Employer  agrees to pay on behalf of  Employee  the
actual  expense of Employee's  and his eligible  dependents'  benefits under the
Consolidated  Omnibus Budget  Reconciliation  Act of 1985, as amended ("COBRA"),
for the period from the  Termination  Date  through  January 31,  2003,  or such
shorter period if Employee  becomes  ineligible for COBRA  benefits.  Employer's
payment of COBRA  expenses for Employee  and his eligible  dependents'  benefits
pursuant  to this  Section  shall NOT extend the period  that  Employee  and his
dependents are eligible for COBRA  benefits.  If Employee and his dependents are
eligible for COBRA  benefits  after January 31, 2003,  and they wish to continue
such  benefits,  Employee  must make the  payments for such  benefits  beginning
February  1, 2003.  Employee  and his  dependents  will not  receive any further
notice to make such payments beginning February 1, 2003.

Section 5. 2002 Bonus and  Profit-Sharing;  Vacation Pay. Employee will not
receive any bonuses or profit-sharing benefits for 2002 from the Company.

Section  6.  General  Release.  Employee  agrees to the  following  General
Release (the "General Release"):

FOR VALUE  RECEIVED,  the adequacy and  sufficiency of which is hereby
acknowledged,  Employee,  on behalf of himself  and his  heirs,  executors,
attorneys, administrators,  successors and assigns (hereinafter referred to
as "Releaser") hereby fully and forever releases and discharges the Company
from any and all claims, demands, liens, agreements,  contracts, covenants,
actions, suits, causes of action, obligations, controversies, debts, costs,
expenses  (including  but not  limited to  attorneys'  fees and  expenses),
damages,  judgments,  orders and liabilities of whatever kind or nature, in
law or equity,  by  statute or  otherwise,  whether  now known or  unknown,
vested  or  contingent,  suspected  or  unsuspected,  and  whether  or  not
concealed  or hidden,  that have  existed or may have  existed,  or that do
exist,  including  all  claims  arising  in  any  manner  relating  to  his
employment or the  termination  of his  employment  with the Company.  This
General  Release shall include,  without in any way limiting the generality
of the foregoing language, any and all claims of employment  discrimination
under the United  States  Constitution,  the  Constitution  of the state of
Texas,  the Age  Discrimination  in Employment  Act, Title VII of the Civil
Rights Act of 1964,  as amended,  the Civil  Rights Act of 1991,  42 U.S.C.
1981, the Americans with  Disabilities  Act, the Fair Labor  Standards Act,
the Equal Pay Act, the Worker  Adjustment and Retraining  Notification Act,
the Employee  Retirement  Income Security Act, the Family and Medical Leave
Act,  the Texas  Commission  on Human  Rights  Act,  any  other  statutory,
regulatory and common law  requirements of the state of Texas, or under any
other  applicable  federal,  state  or  local  laws,  ordinances  or  legal
restrictions on the Company's rights.

Unless  otherwise  provided  in this  Agreement,  payment  under  this
Agreement  shall not alter or change the rights  that the  Employee  has to
benefits  accrued as of his termination  date under the CompX  Contributory
Retirement Plan, the CompX Capital  Accumulation  Pension Plan or the CompX
International  Inc.  1997  Long-Term  Incentive  Plan  or  pursuant  to any
agreement of limited liability or any indemnification available to Releaser
as a director or officer of CompX or any of its  subsidiaries,  whether set
forth in such applicable  entity's  certificate of  incorporation,  bylaws,
resolutions  of the  board of  directors  or  otherwise.  Unless  otherwise
provided  in this  Agreement,  Employee's  rights  under  these plans shall
continue  to be  controlled  by  the  respective  plan  documents  and  the
consideration   paid  under  this  Agreement   shall  not  be  included  as
compensation  for benefit  purposes  under  these  plans.  Also,  except as
otherwise  provided in this  Agreement,  this Agreement shall not increase,
decrease or otherwise  affect  Releaser's  right to medical coverage during
his term of employment or thereafter at Releaser's expense under COBRA.

It is the intention of Releaser in executing this General Release that
it shall be effective as a bar to each and every claim, demand and cause of
action of whatever kind or character  whether or not hereinabove  mentioned
or implied;  and the Releaser hereby  knowingly and voluntarily  waives any
and all rights and  benefits  arising  through the date of this  Agreement.
Releaser  expressly  consents that this General Release shall be given full
force  and  effect  according  to each  and all of its  express  terms  and
provisions,  including  those relating to unknown and  unsuspected  claims,
demands,  charges and causes of action  (notwithstanding  any state statute
that expressly  limits the  effectiveness  of a general release of unknown,
unsuspected and unanticipated claims), if any, as well as those relating to
any other  claims,  demands and causes of action  hereinabove  mentioned or
implied.  Releaser acknowledges and agrees that this waiver is an essential
and  material  term of this  General  Release and without  such waiver this
Agreement would not have been entered into.

Releaser  understands  and  agrees  that this  General  Release is not
intended to be and shall not be deemed, construed or treated in any respect
as an admission of liability by any person or entity for any purpose.

Releaser  further  acknowledges  that he has entered into this General
Release  freely  and  without  coercion,  that  he  has  been  advised  and
encouraged in writing to consult with counsel and has been offered a period
of time of at least 21 days to consider the terms of this General  Release.
Releaser  understands  that he has seven  days  from the date this  General
Release is executed to revoke this  Agreement  and until the  expiration of
this  seven-day  period  the  General  Release  shall not be  effective  or
enforceable.

Section 4. Contest, Grievance,  Earlier Termination and Liquidated Damages.
In the event Employee (i) contests the effectiveness of the General Release in a
proceeding  before a court of law, (ii) pursues a claim or grievance  arising on
or  before  the  effectiveness  of  this  Agreement  against  the  Company  in a
proceeding before a court of law or (iii) pursues a damage award arising against
the  Company  before an  administrative  official  or  agency  of an  applicable
governmental  authority,  ten days prior to instituting  any such  proceeding or
claim  Employee  shall pay CompX a lump sum as  liquidated  damages equal to the
Severance Pay plus lawful interest from the date Employer paid the Severance Pay
to  Employee  at the  lesser of 10% per annum or the  maximum  lawful  rate (the
"Liquidated Damages").  If Employee fails to comply with this Section,  Employee
agrees that CompX may seek  injunctive  relief for the specific  performance  of
this Section and, in the event that specific  performance  is not obtained,  any
damages that Employee may be entitled to as a result of such proceeding shall be
reduced by the amount of the Liquidated Damages. The General Release provided in
Section 6 shall remain  effective  against Employee whether or not Employee pays
the Liquidated Damages to CompX.

Section 8. Return of Company Property.  On the Termination  Date,  Employee
agrees to return and leave in the custody of CompX all the  Company's  documents
and property except (i) for routine expense reports needed for income tax return
preparation,  insurance policies, claim forms and the like and (ii) with respect
to CompX equipment (such as computers, cellular phones, pagers, personal digital
assistants  and the like) in Employee's  possession  that Employee would like to
keep,  Employee  agrees to  reimburse  CompX for the  agreed  upon value of such
equipment within two business days after the Termination Date. If Employee fails
to pay CompX for any such  equipment  that he decides to keep,  CompX may deduct
the fair value of such equipment from the Severance Pay.

Section 9. Cooperation in Legal Matters.  Employee acknowledges that in the
course of his  employment  with CompX,  he has gained  knowledge and  experience
and/or was a witness to events and circumstances that may arise in the Company's
defense or prosecution of subsequent  proceedings.  Employee agrees to cooperate
fully  and  truthfully  with  the  Company  and to  appear  upon  the  Company's
reasonable  request and expense as a witness  and/or  consultant in defending or
prosecuting  claims of all kinds,  including but not limited to any  litigation,
administrative actions or arbitrations.

Section 10.  Attorney  Fees for  Successful  Party.  The parties agree that
should  one  party sue the other  party  for a breach of any  provision  of this
Agreement,  the  prevailing  party shall be  entitled to recover its  reasonable
attorney's  fees and costs of court if it is  successful  in  obtaining  a final
judgment against the other party. The parties hereby agree that each party shall
have the right to sue for specific performance of this Agreement and declaratory
and injunctive relief.

Section 11. Binding Effect.  This Agreement shall be binding upon and inure
to the  benefit  of  each  of the  parties  hereto  and  the  heirs,  executors,
administrators, successors and assigns of each of the parties, as applicable.

Section 12. Nondisclosure.  Employee shall refrain from all conduct, verbal
or otherwise,  that would damage the Company's reputation,  goodwill or standing
in the community or among its employees. Employee further agrees not to disclose
any privileged or proprietary  information  concerning the Company's operations,
except as may be required by  governmental  or  judicial  authorities.  Under no
circumstances is Employee  allowed to utilize  information from Company files or
electronic equipment to disclose, or allow to be obtained or disclosed,  through
the  use  of  agents  or  any  third  party  information  in  oral,  written  or
computerized data form, about such things as payroll information of any type, or
the  names,  addresses  or  telephone  numbers  of  Company  personnel,  or  any
non-public financial information about the Company, except as may be required by
governmental or judicial  authorities.  Employee  further agrees not to disclose
any  information  relating to the terms or  existence  of this  Agreement to any
other person or  organization,  including  but not limited to past,  present and
future  employees of the Company,  except as may be required by  governmental or
judicial  authorities.  Employee's  breach  of this  Section  will be  deemed  a
material breach of this Agreement.

Section  13.  No  Other  Agreement.  This  Agreement  contains  the  entire
agreement  between the parties with respect to the subject matter hereof and the
parties acknowledge that there are no warranties, promises or representations of
any kind,  express or implied,  upon which the  parties  have relied in entering
into this Agreement.  The terms and conditions of this Agreement are contractual
and not a mere recital.  No part of this  Agreement  may be changed  except in a
writing executed by both parties.

Section  14.  Governing  Law.  This  Agreement  shall  be  governed  by and
construed  in  accordance  with the laws of the state of Texas,  without  giving
effect to any choice of law or conflict of law provision or rule (whether of the
state of Texas or any other  jurisdiction)  that would cause the  application of
the laws of any jurisdiction  other than the state of Texas.  Whenever possible,
each provision of this Agreement  shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall  be held  to be  prohibited  by or  invalid  under  applicable  law,  such
provision  shall  be  ineffective  only to the  extent  of such  prohibition  or
invalidity,  without  invalidating  or  affecting in any manner  whatsoever  the
remainder of such provision or the remaining provisions.

Section 15. Notice and Tenders. Any notice,  request or other communication
hereunder  to a party shall be in writing  and all notices and tenders  shall be
delivered or sent by postage  prepaid  first class mail or overnight  courier to
the  address of the party  appearing  beneath  such  party's  signature  to this
Agreement  or such  other  address  as such  party may  notify  the other  party
pursuant to this Section.

Section 16.  Counterparts.  This Agreement may be executed in any number of
counterparts.

IN WITNESS  WHEREOF,  the parties have executed this  Agreement and General
Release effective as of the date of the last signature affixed below.

READ CAREFULLY BEFORE SIGNING

I have read this Agreement and General Release and have had the opportunity
to consult  legal  counsel  prior to my signing of this  Agreement  and  General
Release.  I understand  that by executing this  Agreement and General  Release I
will relinquish any right or demand I may have against the Company.

Date:  July 16, 2002

/s/ Stuart M. Bitting
---------------------------------------
Stuart M. Bitting

Address:   500 Carter Drive
Coppell, Texas   75019

Telephone No.:  972.393.8153

Social Security No.:  XXX-XX-XXXX

Date:  July 16, 2002               COMPX INTERNATIONAL INC.

/s/ Glenn R. Simmons
By:----------------------------------------
Glenn R. Simmons, Chairman of the Board

Address:   Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas   75240-2697

Telephone No.:  972.448.1400

NOTICE OF RIGHTS

Attached  hereto you will find a proposed  AGREEMENT  AND  GENERAL  RELEASE
("Agreement")  with respect to your termination from employment.  It is required
by law that you be given at least  twenty-one (21) days from the date of receipt
of the proposed  Agreement within which to consider its terms. It is recommended
that you consult  with an attorney  regarding  your legal rights with respect to
the Agreement during this 21-day period.

ACKNOWLEDGMENT OF RECEIPT

I  acknowledge  that  I  received  a copy  of  CompX  International  Inc.'s
AGREEMENT AND GENERAL RELEASE by 10:00 a.m. (Dallas, Texas time) the 16th day of
July, 2002.

/s/Stuart M. Bitting
------------------------------------------
Stuart M. Bitting

REAFFIRMATION OF AGREEMENT AND GENERAL RELEASE
[to be signed at the conclusion of the 7 day waiting period]

I, Stuart M. Bitting,  acknowledge  that I signed the AGREEMENT AND GENERAL
RELEASE  ("Agreement")  with CompX  International Inc. and that during the seven
(7) day period  immediately  following my execution of the Agreement,  I had the
right to revoke the Agreement at any time. By executing  the  Agreement,  I also
understand that I agreed that I would receive no benefits  thereunder unless and
until I executed this Reaffirmation.

By executing  this  Reaffirmation,  I now affirm and attest that I (a) have
not heretofore,  or contemporaneously  with the execution of this Reaffirmation,
revoked,  or  attempted  to  revoke  the  Agreement,  either  by notice to CompX
International  Inc., or otherwise,  and (b) am now, by virtue of my execution of
this  Reaffirmation,  on or after  seven  (7) days  after the  execution  of the
Agreement, fully bound by all of the terms and conditions of the Agreement.

EXECUTED in Dallas, Texas on July 23, 2002.

/s/Stuart M. Bitting
------------------------------------------
Stuart M. Bitting

THE STATE OF TEXAS               

COUNTY OF Dallas 

BEFORE  ME,  the  undersigned,  a Notary  Public,  on this  day  personally
appeared  Stuart  M.  Bitting,  known  to me to be  the  person  whose  name  is
subscribed to the foregoing  instrument and  acknowledged to me that he executed
the same for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this 24th day of July, 2002.

[SEAL]

/s/Linda Roberts
-----------------------------------------
Notary Public, State of Texas

EXHIBIT 21.1     SUBSIDIARIES OF THE REGISTRANT

% of Voting
Securities
Jurisdiction of        Held at December
Incorporation or              31,
Name of Corporation                                                          Organization               2002
-----------------------------------                                        ----------------          -------

Waterloo Furniture Components Limited                                  Canada                             100

CompX Security Products Inc.                                           Delaware                           100

CompX Europe B.V.                                                      the Netherlands                    100
Thomas Regout Holding B.V.                                           the Netherlands                    100
Thomas Regout Nederland B.V.                                       the Netherlands                    100
Thomas Regout B.V.                                                 the Netherlands                    100
Thomas Regout International B.V.                                   the Netherlands                    100

Thomas Regout U.S.A., Inc.                                             Michigan                           100

CompX Asia Holding Corporation                                         Malaysia                           100
Dynaslide Corporation                                                Taiwan                             100
CompX (H.K.) Corp.                                                 British Virgin                     100
Islands
CompX SFC, Inc.                                                        Delaware                           100

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in CompX International  Inc.'s
(i)  Registration  Statement  (Form S-8 No.  333-47539)  and related  Prospectus
pertaining to the CompX  International  Inc. 1997  Long-Term  Incentive Plan and
(ii)  Registration  Statement  (Form S-8 No.  333-56163) and related  Prospectus
pertaining  to the CompX  Contributory  Retirement  Plan,  of our  report  dated
February 13, 2003 on our audits of the  consolidated  financial  statements  and
financial  statement  schedule  of CompX  International  Inc.  and  Subsidiaries
included  in this  Annual  Report on Form 10-K for the year ended  December  31,
2002.

PricewaterhouseCoopers LLP

Dallas, Texas
March 14, 2003

EXHIBIT 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of CompX  International  Inc. (the Company)
on Form 10-K for the year ending  December 31, 2002 as filed with the Securities
and Exchange  Commission  on the date hereof (the  Report),  I, David A. Bowers,
Vice  Chairman  of the  Board,  President  and Chief  Operating  Officer  (Chief
Executive Officer) of the Company,  certify,  pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The 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 Report fairly  presents,  in all material
respects, the financial condition and result of operations of the Company.

/s/  David A. Bowers
-------------------------------------------
David A. Bowers
Vice Chairman of the Board, President and Chief Executive Officer
(Chief Executive Officer)
March 14, 2003

EXHIBIT 99.3

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of CompX  International  Inc. (the Company)
on Form 10-K for the year ending  December 31, 2002 as filed with the Securities
and Exchange  Commission on the date hereof (the Report),  I, Darryl R. Halbert,
Vice President and Controller (Chief Financial Officer) of the Company, certify,
pursuant  to  18  U.S.C.   ss.1350,   as  adopted  pursuant  to  ss.906  of  the
Sarbanes-Oxley Act of 2002, that:

(1)  The 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 Report fairly  presents,  in all material
respects, the financial condition and result of operations of the Company.

/s/  Darryl R. Halbert
----------------------------------
Darryl R. Halbert
Vice President, Chief Financial Officer and Controller
March 14, 2003