CAPITAL SOUTHWEST CORP
AMENDMENT FOUR TO RETIREMENT PLAN
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>4
<FILENAME>capitalsw10kex107033103.txt
<DESCRIPTION>AMENDMENT FOUR TO RETIREMENT PLAN
<TEXT>

                                                                    Exhibit 10.7

                                AMENDMENT FOUR TO

                        RETIREMENT PLAN FOR EMPLOYEES OF

                CAPITAL SOUTHWEST CORPORATION AND ITS AFFILIATES

                 As Amended and Restated Effective April 1, 1989



     WHEREAS,  effective as of April 1, 1989, the Retirement  Plan for Employees
of Capital Southwest Corporation and Its Affiliates (the "Plan") was amended and
restated in its entirety;
     WHEREAS,  by the terms of Section 6.4 of the Plan, the Plan may be amended;
and
     WHEREAS,  it is necessary that certain technical  amendments be made to the
Plan in order to comply with the Economic  Growth and Tax Relief  Reconciliation
Act of 2001,  to adopt the 1994 GAR  mortality  table for  purposes of complying
with section  417(e)(3)  and section  415(b) of the Internal  Revenue  Code,  to
eliminate the description of claims  procedures  from the plan document,  and to
include "deemed section 125  compensation" in the definition of compensation for
purposes  of benefit  accrual and  complying  with  section 415 of the  Internal
Revenue Code;
     NOW,  THEREFORE,  the Plan is  hereby  amended,  effective  as of the dates
specified below, as follows:

EXCEPT AS  QUALIFIED BY THE CONTEXT OR  OTHERWISE  INDICATED,  THE TERMS USED IN
THIS AMENDMENT FOUR SHALL HAVE THE MEANINGS ASSIGNED TO THEM IN THE PLAN.

     1.  Effective  as of the dates  specified  below,  the Plan is  amended  to
incorporate the following  provisions  under Internal  Revenue Notice 2001-57 in
compliance with the requirement to adopt good faith EGTRRA plan amendments:

                                AMENDMENT OF THE PLAN FOR EGTRRA

                                            PREAMBLE

          1.   Adoption and Effective  Date of Amendment.  This amendment of the
               Plan is adopted to reflect  certain  provisions  of the  Economic
               Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). This
               amendment  is  intended  as  good  faith   compliance   with  the
               requirements  of EGTRRA and is to be construed in accordance with
               EGTRRA  and  guidance  issued  thereunder.  Except  as  otherwise


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               provided,  this amendment  shall be effective as of the first day
               of the first Plan Year beginning after December 31, 2001.

          2.   Supersession  of  Inconsistent  Provisions.  This amendment shall
               supersede  the  provisions  of  the  Plan  to  the  extent  those
               provisions   are   inconsistent   with  the  provisions  of  this
               amendment.

          3.   Definition  of "Code."  When used  herein,  the term "Code" shall
               mean the Internal Revenue Code of 1986, as amended.

          4.   Expiration of Amendment.  Notwithstanding any provision hereof to
               the  contrary,  this  amendment  of the Plan to  reflect  certain
               provisions of EGTRRA shall expire and cease to be effective after
               December 31, 2010,  unless such provisions of EGTRRA are extended
               by law.


          SECTION A. LIMITATIONS ON BENEFITS

          1.   Effective  Date.  This section shall be effective for  limitation
               years ending after December 31, 2001.

          2.   Effect on  Participants.  Benefit  increases  resulting  from the
               increase in the limitations of section 415(b) of the Code will be
               provided to all Employees  participating in the Plan who have one
               hour of service on or after the first day of the first limitation
               year ending after December 31, 2001.

          3.   Definitions.

          3.1  Defined Benefit Dollar  Limitation.  The "defined  benefit dollar
               limitation" is $160,000, as adjusted, effective January 1 of each
               year,  under  section  415(d)  of the Code in such  manner as the
               Secretary shall prescribe,  and payable in the form of a straight
               life annuity.  A limitation as adjusted under section 415(d) will
               apply to limitation years ending with or within the calendar year
               for which the adjustment applies.

          3.2  Maximum Permissible Benefit. The "maximum permissible benefit" is
               the  lesser  of the  defined  benefit  dollar  limitation  or the
               defined  benefit  compensation  limitation  (both  adjusted where
               required,  as provided in (a) and, if  applicable,  in (b) or (c)
               below).

               (a)  If the Participant has fewer than 10 years of  participation
                    in the Plan, the defined benefit dollar  limitation shall be
                    multiplied by a fraction,  (i) the numerator of which is the
                    number of years (or part  thereof) of  participation  in the
                    Plan and (ii) the denominator of which is 10. In the case of
                    a  Participant  who has fewer than 10 years of service  with
                    Controlled Group Members,  the defined benefit  compensation
                    limitation  shall  be  multiplied  by a  fraction,  (i)  the
                    numerator of which is the number of years (or part  thereof)
                    of service with the  Controlled  Group  Members and (ii) the
                    denominator of which is 10.



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               (b)  If the benefit of a Participant  begins prior to age 62, the
                    defined   benefit  dollar   limitation   applicable  to  the
                    Participant at such earlier age is an annual benefit payable
                    in the form of a  straight  life  annuity  beginning  at the
                    earlier age that is the actuarial  equivalent of the defined
                    benefit dollar  limitation  applicable to the Participant at
                    age 62 (adjusted under (a) above, if required).  The defined
                    benefit dollar limitation  applicable at an age prior to age
                    62  is  determined  as  the  lesser  of  (i)  the  actuarial
                    equivalent  (at  such  age) of the  defined  benefit  dollar
                    limitation  computed  using the interest  rate and mortality
                    table  (or  other  tabular  factor)   specified  in  Section
                    1.1(B)(1) of the Plan and (ii) the actuarial  equivalent (at
                    such age) of the defined benefit dollar limitation  computed
                    using a 5 percent interest rate and the applicable mortality
                    table as  defined  in  Section  4.1(A)(2)  of the Plan.  Any
                    decrease in the defined benefit dollar limitation determined
                    in  accordance  with this  paragraph (b) shall not reflect a
                    mortality  decrement if benefits are not forfeited  upon the
                    death of the Participant. If any benefits are forfeited upon
                    death, the full mortality decrement is taken into account.

               (c)  If the benefit of a Participant begins after the Participant
                    attains  age  65,  the  defined  benefit  dollar  limitation
                    applicable to the Participant at the later age is the annual
                    benefit  payable  in the  form of a  straight  life  annuity
                    beginning at the later age that is actuarially equivalent to
                    the defined  benefit  dollar  limitation  applicable  to the
                    Participant  at  age  65  (adjusted   under  (a)  above,  if
                    required).  The actuarial  equivalent of the defined benefit
                    dollar  limitation  applicable  at an  age  after  age 65 is
                    determined as (i) the lesser of the actuarial equivalent (at
                    such age) of the defined benefit dollar limitation  computed
                    using  the  interest  rate and  mortality  table  (or  other
                    tabular factor)  specified in Section  1.1(B)(1) of the Plan
                    and  (ii) the  actuarial  equivalent  (at  such  age) of the
                    defined benefit dollar limitation computed using a 5 percent
                    interest rate assumption and the applicable  mortality table
                    as  defined  in  Section  4.1(A)(2)  of the Plan.  For these
                    purposes,  mortality  between  age 65 and the  age at  which
                    benefits commence shall be ignored.

               (d)  For  purposes  of  applying  the  compensation  limit  under
                    section   415(b)(1)(B)   of  the   Code  to  the   Plan,   a
                    multiemployer  plan  to  which  a  Controlled  Group  Member
                    contributes  shall not be  combined or  aggregated  with the
                    Plan.


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<PAGE>


               SECTION B.  INCREASE IN COMPENSATION LIMIT

               1.   Increase  in  Limit.   The  annual   Compensation   of  each
                    Participant  taken  into  account  in  determining   benefit
                    accruals in any Plan Year beginning after December 31, 2001,
                    shall  not  exceed  $200,000.   Annual   Compensation  means
                    Compensation  during the Plan Year or such other consecutive
                    12-month   period  over  which   Compensation  is  otherwise
                    determined under the Plan (the  determination  period).  For
                    purposes  of  determining  benefit  accruals  in a Plan Year
                    beginning   after  December  31,  2001,   Compensation   for
                    determination  periods  beginning  before  January  1, 2002,
                    shall  be  $200,000.

               2.   Cost-of-living  Adjustment.  The  $200,000  limit on  annual
                    Compensation   in   paragraph  1  shall  be   adjusted   for
                    cost-of-living   increases   in   accordance   with  section
                    401(a)(17)(B) of the Code. The cost-of-living  adjustment in
                    effect for a calendar  year  applies to annual  Compensation
                    for the determination period that begins with or within such
                    calendar year.


               SECTION C.  MODIFICATION OF TOP-HEAVY RULES

               1.   Effective  Date.  This  section  shall apply for purposes of
                    determining  whether  the  Plan is a  top-heavy  plan  under
                    section  416(g) of the Code for Plan Years  beginning  after
                    December  31,  2001,  and  whether  the Plan  satisfies  the
                    minimum benefits  requirements of section 416(c) of the Code
                    for such years. This section amends Section 4.6 of the Plan.

               2.   Determination of Top-heavy Status.

               2.1  Key  Employee.  Key  employee  means any  Employee or former
                    Employee  (including any deceased  Employee) who at any time
                    during the Plan Year that  includes the  determination  date
                    was an officer of a Controlled  Group Member  having  annual
                    compensation   greater  than  $130,000  (as  adjusted  under
                    section 416(i)(1) of the Code for Plan Years beginning after
                    December 31, 2002), a 5-percent owner of a Controlled  Group
                    Member,  or a 1-percent  owner of a Controlled  Group Member
                    having annual  compensation of more than $150,000.  For this
                    purpose,  annual  compensation means compensation within the
                    meaning of section  415(c)(3) of the Code. The determination
                    of who is a key  employee  will be made in  accordance  with
                    section 416(i)(1) of the Code and the applicable regulations
                    and  other   guidance   of  general   applicability   issued
                    thereunder.

               2.2  Determination  of Present  Values and Amounts.  This section
                    2.2 shall  apply for  purposes  of  determining  the present
                    values  of  accrued  benefits  and the  amounts  of  account
                    balances of employees as of the determination date.


               2.2.1Distributions  During Year Ending on the Determination Date.
                    The present  values of accrued  benefits  and the amounts of
                    account balances of an employee as of the determination date
                    shall be increased by the distributions made with respect to
                    the employee under the Plan and any plan aggregated with the
                    Plan under  section  416(g)(2) of the Code during the 1-year
                    period  ending  on the  determination  date.  The  preceding
                    sentence   shall  also  apply  to   distributions   under  a
                    terminated  plan which,  had it not been  terminated,  would
                    have   been   aggregated   with  the  Plan   under   section
                    416(g)(2)(A)(i)  of the Code. In the case of a  distribution
                    made for a reason other than separation from service, death,
                    or   disability,   this   provision   shall  be  applied  by
                    substituting "5-year period" for "1-year period."

               2.2.2Employees Not Performing  Services During Year Ending on the
                    Determination Date. The accrued benefits and accounts of any
                    individual  who has not performed  services for a Controlled
                    Group  Member   during  the  1-year  period  ending  on  the
                    determination date shall not be taken into account.


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<PAGE>


               3.   Minimum  Benefits.  For purposes of  satisfying  the minimum
                    benefit  requirements  of section  416(c)(1) of the Code and
                    the Plan, in determining  years of service with a Controlled
                    Group  Member,  any service with a  Controlled  Group Member
                    shall be  disregarded to the extent that such service occurs
                    during  a Plan  Year  when  the Plan  benefits  (within  the
                    meaning of section  410(b) of the Code) no key  employee  or
                    former key employee.


                SECTION D.  DIRECT ROLLOVERS OF PLAN DISTRIBUTIONS

               1.   Effective  Date.  This section shall apply to  distributions
                    made after December 31, 2001.

               2.   Modification of Definition of Eligible  Retirement Plan. For
                    purposes of the direct rollover provisions in Section 4.1(I)
                    of the Plan, an eligible  retirement plan shall also mean an
                    annuity contract described in section 403(b) of the Code and
                    an eligible plan under  section  457(b) of the Code which is
                    maintained by a state,  political subdivision of a state, or
                    any  agency  or  instrumentality  of a  state  or  political
                    subdivision  of a  state  and  which  agrees  to  separately
                    account  for  amounts  transferred  into such plan from this
                    Plan. The definition of eligible  retirement plan shall also
                    apply in the case of a distribution  to a surviving  spouse,
                    or to a spouse or former spouse who is the  alternate  payee
                    under a qualified  domestic  relation  order,  as defined in
                    section 414(p) of the Code.


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<PAGE>

     2.  Effective as of December 31, 2002,  the Plan is amended to  incorporate
the following  provisions  to comply with section 415 and section  417(e) of the
Internal Revenue Code, as required under Rev. Rul. 2001-62:


               ADOPTION OF 1994 GAR MORTALITY TABLE



               1.   Effective  Date.  This section shall apply to  distributions
                    with Annuity Starting Dates on or after December 31, 2002.

               2.   Notwithstanding  any other Plan  provisions to the contrary,
                    the  applicable   mortality   table  used  for  purposes  of
                    adjusting any benefit or limitation under ss.  415(b)(2)(B),
                    (C),  or (D) of the  Internal  Revenue  Code as set forth in
                    Section  4.1(A)  of the  Plan and the  applicable  mortality
                    table used for purposes of satisfying  the  requirements  of
                    ss.  417(e)  of the  Internal  Revenue  Code as set forth in
                    Section  1.1(B)(2)  of the Plan is the table  prescribed  in
                    Rev. Rul. 2001-62.


     3. Effective as of January 1, 2002,  Section 5.11 of the Plan is amended to
read in its entirety as follows:

               "5.11 - APPEAL TO COMMITTEE

                    A Participant  or  Beneficiary  who feels he is being denied
               any benefit or right  provided under the Plan must file a written
               claim with the Committee. All such claims shall be submitted on a
               form  provided  by the  Committee  which  shall be  signed by the
               claimant and shall be  considered  filed on the date the claim is
               received by the Committee.

                    The  Committee   shall   establish   claims   procedures  in
               compliance with applicable law, and such claims  procedures shall
               be set forth in the summary plan description for the Plan."


     4. Effective as of January 1, 1998, the Plan is amended to incorporate  the
following provisions to comply with Rev. Rul. 2002-27 concerning "deemed section
125 compensation":

               INCLUSION OF "DEEMED SECTION 125 COMPENSATION"

               1.   Effective  Date.  This section shall apply to plan years and
                    limitation years beginning on and after January 1, 1998.

               2.   For purposes of the definition of compensation under Section
                    1.1(A)(6)  and  Section  4.1(A)(4)(b)  of the plan,  amounts


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                    under  section 125 include  any amounts not  available  to a
                    participant in cash in lieu of group health coverage because
                    the  participant  is  unable to  certify  that he or she has
                    other  health  coverage.  An amount  will be  treated  as an
                    amount  under  section  125  only if the  Employer  does not
                    request or collect  information  regarding the participant's
                    other health coverage as part of the enrollment  process for
                    the health plan.



     IN  WITNESS  WHEREOF,   CAPITAL  SOUTHWEST   CORPORATION  has  caused  this
instrument  to be  executed by its duly  authorized  officer on this ____ day of
__________________, 20___.

                                                   CAPITAL SOUTHWEST CORPORATION



                                                   By___________________________

                                                   Title:_______________________























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