COMPX INTERNATIONAL INC, S-1/A, 1998-02-05

COMPX INTERNATIONAL INC
S-1/A, 1998-02-05
MISCELLANEOUS FABRICATED METAL PRODUCTS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1998
REGISTRATION NO. 333-42643

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
Pre-effective Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------
COMPX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 57-0981653
(State or other 3499 (I.R.S. Employer
jurisdiction (Primary Standard Identification Number)
of incorporation or Industrial
organization) Classification Code
Number)

200 OLD MILL ROAD
MAULDIN, SOUTH CAROLINA 29662
(864) 297-6655
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

DAVID A. BOWERS
CHIEF EXECUTIVE OFFICER
COMPX INTERNATIONAL INC.
200 OLD MILL ROAD
MAULDIN, SOUTH CAROLINA 29662
(864) 297-6655
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------
Copies to:
EDWARD J. HARDIN, ESQ. JOHN W. WHITE, ESQ.
ROGERS & HARDIN CRAVATH, SWAINE & MOORE
2700 INTERNATIONAL TOWER WORLDWIDE PLAZA
229 PEACHTREE STREET, N.E. 825 EIGHTH AVENUE
ATLANTA, GEORGIA 30303 NEW YORK, NEW YORK 10019
(404) 522-4700 (212) 474-1000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement.
[ ]

If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE

<S> <C> <C> <C> <C>
Title of Each Amount to be Proposed Maximum Proposed Maximum Amount of
Class of Registered Offering Aggregate Registration
Securities to be Price per Unit Offering Price Fee (1)
Registered

Shares of Clas
A Common
Stock, $.01 pa 5,405,000 $20.00 $108,100,000 $31,890
value shares

</TABLE>

(1) Registration fee calculated on the basis of $295 per $1,000,000 or fraction
thereof of the proposed maximum offering price. $29,500 has been paid in
previous filings.
------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

Red Herring Language

[The following text appears along the left margin of the following page]

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

P R O S P E C T U S
4,700,000 SHARES
COMPX INTERNATIONAL INC.
CLASS A COMMON STOCK

All of the shares of Class A Common Stock, par value $.01 per share
(the "Class A
Common Stock"), being offered hereby (the "Offering") are being sold by CompX
International Inc. ("CompX" or the "Company"). A portion of the net proceeds
to the
Company from the Offering will be used to fully repay certain bank indebtedness
expected to be incurred to satisfy a $50 million note payable to Valcor,
Inc., the
Company's sole stockholder prior to the Offering. See "Use of Proceeds".

Each share of Class A Common Stock entitles its holder to one vote, and each
share of Class B Common Stock, par value $.01 per share (the "Class B Common
Stock"
and together with the Class A Common Stock, the "Common Stock"), of the Company
entitles its holder to one vote on all matters except the election of
directors on
which each share of Class B Common Stock is entitled to ten votes. All the
shares of
Class B Common Stock are owned by Valcor, Inc. Immediately after consummation
of the
Offering (assuming no exercise of the over-allotment option granted to the
Underwriters), Valcor will beneficially own shares of Common Stock having
approximately 68% of the combined voting power (95% for election of directors)
of the
outstanding shares of Common Stock.

Prior to the Offering, there has not been a public market for the Class A
Common
Stock of the Company. It is currently estimated that the initial public
offering
price will be between $17 and $20 per share of Class A Common Stock. See
"Underwriting" for information relating to the factors considered in determining
the
initial public offering price. The Company intends to apply to have the Class A
Common Stock approved for listing on the New York Stock Exchange (the "NYSE")
under
the symbol "CIX".

SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<S> <C> <C> <C>
Underwritin
Price g Proceeds
to Discounts to
and Company (2)
Commissions
Public
(1)

Per Share....................... $ $ $
Total(3)........................ $ $ $

</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses estimated at $500,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase
up to
705,000 additional shares of Class A Common solely to cover
over-allotments, if
any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be $
, $ and $ , respectively.

The shares of Class A Common Stock are being offered by the several
Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to
certain conditions. It is expected that certificates for the shares of Class A
Common Stock offered hereby will be available for delivery on or about
_______, 1998,
at the office of Smith Barney Inc., 333 West 34th Street, New York,
New York 10001.

SALOMON SMITH BARNEY
NATIONSBANC MONTGOMERY SECURITIES LLC
WHEAT FIRST UNION

FEBRUARY __, 1998

.................................................................

National Cabinet Lock(R), STOCK LOCKS(R), Waterloo Furniture Components
Limited(R), KeSet(R) and Leverlock(R) are registered trademarks of CompX
International Inc.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK,
INCLUDING OVERALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. As used in
this Prospectus, unless the context requires otherwise, the terms "Company" and
"CompX[trademark]" refer to CompX International Inc. and its subsidiaries.
Unless otherwise indicated or the context otherwise requires, all share and per-
share data in this Prospectus and all other information relating to the Offering
(i) assume no exercise of the Underwriters' over-allotment option; (ii) gives
effect to the amendment to the Company's certificate of incorporation to change
the Company's authorized capital stock to Class A Common Stock and Class B
Common Stock and preferred stock, par value $.01 per share (the "Preferred
Stock"), effected on February 4, 1998; and (iii) gives effect to the
reclassification of each outstanding share of the Company's current common
stock, par value $1 per share, into 10,000 shares of its newly created Class B
Common Stock which is also to be effected prior to consummation of the Offering.
The Company's operations are comprised of a 52 or 53 week fiscal year. Each of
the years ended December 31, 1993 through 1997 consisted of a 52 week year.

THE COMPANY

drawer slides and among the largest producers of medium-security cabinet locks.
In 1997, CompX[trademark] generated net sales of $108.7 million, a 22% increase
from 1996. During 1997, ergonomic computer support systems, precision ball
bearing drawer slides and medium-security mechanical locks accounted for
approximately 34%, 39% and 26% of net sales, respectively.

OFFICE FURNITURE INDUSTRY DYNAMICS

Approximately 75% of the Company's products are sold to the office
furniture manufacturing industry while the remainder (principally mechanical
locks) are sold for use in other products, such as vending equipment, postal
boxes, electromechanical enclosures and other non-office furniture and
equipment. The U.S. office furniture market generated wholesale sales of
approximately $11 billion in 1997, according to estimates by the Business and
Institutional Furniture Manufacturer's Association ("BIFMA"). The dollar value
of U.S. office furniture industry shipments has increased in 23 of the past 25
years and, according to BIFMA, is currently estimated to have grown at a
compound annual rate of approximately 8.4% over the four year period ended
December 31, 1997. BIFMA currently estimates that office furniture sales over
the next two years will grow at a compound annual rate of approximately 7%. The
rate of growth in this industry ultimately will be affected by certain
macroeconomic conditions such as service industry employment levels, corporate
cash flow and non-residential construction levels. CompX[trademark] management
believes that sales of its ergonomic computer support systems are experiencing
substantially higher rates of growth than the office furniture industry as a
whole.

<PAGE> 3

The Company believes that fundamental shifts in technology, health
considerations and work processes in the office workplace provide new growth
opportunities in the office furniture industry. Increased use of technology has
caused businesses to redesign their workspaces with greater emphasis on the
space efficient integration of computers and other office technologies into the
office workplace as well as the protection of computing equipment from damage
and theft. Additionally, increased regulatory sensitivity to ergonomic concerns
and heightened focus on the risks of repetitive stress injury have also
influenced redesign of the office workplace. In 1996, California became the
first state to adopt legislation relating to ergonomics in the workplace. Such
legislation should have a direct effect on the demand for ergonomically designed
office furniture products, which allow workers to adjust and re-arrange the
orientation of office equipment and supplies for greater comfort and
productivity. Businesses increasingly are seeking changes in work processes to
achieve more efficient workspace utilization, resulting in the creation of new
office furniture designs that embrace office sharing concepts such as office
"hoteling" and open office designs. The Company's products target manufacturers
of new furniture designed to address these industry dynamics as well as
customers that specialize in retrofitting existing office furniture.
COMPETITIVE STRENGTHS

CompX[trademark] believes that it is well positioned to realize continued
growth in market share in its existing markets and to build on its strengths to
expand into related product lines and markets.

INDUSTRY BRAND RECOGNITION AND MANAGEMENT EXPERIENCE. The Company's
business traces its roots to 1903 when it began manufacturing cabinet locks.
The Company is a supplier to major original equipment manufacturers ("OEMs") and
believes its brand names are well recognized in the industry. CompX[trademark]
currently markets its drawer slides and ergonomic computer support systems under
the Waterloo Furniture Components Limited(R) name and markets its medium-

security locks under the National Cabinet Lock(R) name. The top seven executive
management personnel have over 100 years of combined industry experience.

EMPHASIS ON CUSTOMER COLLABORATION. CompX[trademark] has been a leader in
collaborating with customers to develop innovative customized solutions to their
unique needs for product design, application, performance and cost. An
important ingredient to this approach is the Company's full-time engineering
staff of 25 and approximately $3 million in annual expenditures for product
design, development and engineering. Management believes that the Company's
responsiveness and commitment to work with customers has been critical to its
success to date.

EFFICIENT MANUFACTURING BASE. CompX[trademark] has established highly
automated manufacturing systems and uses statistical process control techniques
to achieve its demanding quality standards. The Company designs and custom
modifies certain of the high-volume equipment it uses to improve the
manufacturing and assembly of its products, and has invested substantial capital
in manufacturing automation and vertical integration. The Company believes that
these initiatives reduce the Company's costs and improve product quality,
productivity and delivery response time.

<PAGE> 4

INTEGRATED INFORMATION SYSTEMS. The Company regularly invests in its
information systems to reduce inventories, improve the efficiency of its
manufacturing processes and reduce customer order fulfillment times. With
recently installed systems upgrades both in Canada and the United States,
CompX[trademark] has fully integrated all stages of manufacturing process
information and order fulfillment. These investments have allowed the Company to
continually reduce order fulfillment times and increase the use of just-in-time
supplier relationships.

BREADTH OF PRODUCT LINE. CompX[trademark] has a broad product line in its
core product areas, which allows the Company to serve an increasing proportion
of its customers' requirements. This provides several benefits to the Company,
including the simplified logistics and reduced cost of shipping higher volumes
of product to its customers, closer working relationships with its key customers
and increased cross-selling opportunities.

GROWTH STRATEGY

The Company focuses on certain niche segments of the middle to high end of
the office furniture market. To achieve its targeted growth rates,
CompX[trademark] intends to pursue several growth initiatives:

CONTINUE TO CREATE INNOVATIVE PRODUCTS. The Company intends to continue
its focus on engineering and customer collaboration to develop and sell
customized versions of its core product line and to develop new versions of
existing product lines to meet the changing requirements of office furniture
manufacturers. The Company will attempt to increase its share of the total OEM
market for components such as electronic locking systems, a service workplace
safety-oriented "Cushion-Close[trademark]" drawer slide and a locking laptop
computer drawer. CompX[trademark] will also consider expanding its product line
to include other furniture components with similar attributes such as one or
more of the components used in the rapidly growing seating industry.

EXTEND INTO NON-FURNITURE APPLICATIONS. The Company's precision ball
bearing drawer slide products increasingly are designed for and used in
applications other than traditional office furniture. For example, the Company
has designed and currently sells precision ball bearing drawer slides to
facilitate the movement of component parts in imaging machines, for professional
tool storage cabinets and other uses. CompX[trademark] will continue to explore
alternative applications for its products based on core product design and
manufacturing strengths.

CONTINUE TO MAKE STRATEGIC ACQUISITIONS. In addition to internal growth,
the Company intends to grow through selective acquisitions. The markets in
which the Company competes have a large number of relatively small regional
manufacturers and consequently offer potential consolidation opportunities. The
Company seeks acquisitions that complement its existing products,
manufacturing/design skills or customer base. The Company historically has been
able to benefit from acquisitions through economies of scale in purchasing,

manufacturing, marketing and distribution and through the application of the
Company's manufacturing and management skills.

On February 3, 1998, the Company executed a definitive agreement concerning
the purchase of all of the outstanding stock of Fort Lock Corporation and the
net assets of Fortronics, Inc., an affiliate of Fort Lock Corporation by common
ownership (collectively the "Fort Lock Group"). The Fort Lock Group is a
vertically integrated manufacturer of highly engineered mechanical locks for a
diverse customer base of original equipment manufacturers and locksmith
distributors. See "Recent Developments".

<PAGE> 5

PROMOTE ALTERNATIVE DISTRIBUTION PROGRAMS. While office furniture OEMs are
expected to remain the Company's primary customers, CompX[trademark] also
intends to explore new distribution arrangements for the Company's products. The
Company's innovative STOCK LOCKS(R) distribution program, for example, offers a
broad range of products that generally ship within 48 hours of order placement
to customers that purchase the Company's locks in small quantities. Currently,
approximately 30% of the Company's lock sales are made through this program. In
1992, the Company began to implement similar alternative distribution programs
for its ergonomic computer support systems and precision ball bearing drawer
slides to allow the Company to reach an expanded range of customers of these
products on an economically attractive basis. Since their addition to the
Company's distributor product line in 1992, sales of these products to the
distributor market have increased and now represent approximately 10% of
combined ergonomic computer support systems and precision ball bearing drawer
slide net sales.

EXPAND INTO INTERNATIONAL MARKETS. While CompX[trademark] has historically
focused on marketing its products in North America, the Company has a small but
growing presence in international markets. The Company believes that there is
significant demand for its quality, precision products in overseas markets, and
intends to increase its international presence, particularly in Asia and Latin
America, via expanded distributor relationships and, potentially, joint venture
arrangements.

SECURITY OWNERSHIP

The Company is a wholly owned subsidiary of Valcor, a wholly owned
subsidiary of Valhi, Inc. Contran Corporation owns, directly and through
subsidiaries (Valhi Group, Inc.; National City Lines, Inc.; NOA, Inc.; Dixie
Rice Agricultural Corporation, Inc.; Dixie Holding Company and Southwest
Louisiana Land Company, Inc.), approximately 93% of the outstanding stock of
Valhi. Substantially all of Contran's outstanding voting stock is held by trusts
established for the benefit of the children and grandchildren of Harold C.
Simmons, of which Mr. Simmons is the sole trustee. Mr. Simmons, the Chairman of
the Board and Chief Executive Officer of each of the foregoing companies, may be
deemed to control each of such companies and the Company. See "Security
Ownership in the Company and its Affiliates."

RECENT DEVELOPMENTS

On December 12, 1997, the Company paid a $50 million dividend to Valcor in
the form of a demand note payable (the "Valcor Note"). The Note is unsecured
and bears interest at a fixed rate of 6% per annum.

Prior to the completion of the Offering, the Company plans to enter into a
new $100 million revolving bank credit facility (the "Revolving Senior Credit
Facility"). The Revolving Senior Credit Facility is expected to be an unsecured
five-year revolving facility. Borrowings are expected to be available for the
Company's general corporate purposes, including potential acquisitions. There
can be no assurance that any such new Revolving Senior Credit Facility will be
obtained. Prior to completion of the Offering, the Company intends to utilize
borrowings under the Revolving Senior Credit Facility to fully repay the Valcor
Note. Such borrowings under the Revolving Senior Credit Facility are expected
to be repaid with a portion of the net proceeds of the Offering.

On February 3, 1998, the Company executed a definitive agreement concerning
the acquisition of the Fort Lock Group. The Fort Lock Group, a vertically
integrated manufacturer of highly engineered mechanical locks for a diverse
customer base of original equipment manufacturers and locksmith distributors, is
headquartered in River Grove, Illinois. The Fort Lock Group has over 40 years
experience supplying cam locks, switch locks and special purpose locks to a wide
variety of industries which include personal
<PAGE> 6
computing, automotive products, security devices, office furniture, lockers,
safes and coin operated devices. Fortronics designs, manufactures and
distributes electronic locking systems to customers throughout the United
States. Similar to CompX[trademark], the Fort Lock Group emphasizes customized
engineering capabilities that permit collaboration with customers to develop
innovative products designed to specifically address unique end product
application requirements. The Company believes that the acquisition of the Fort
Lock Group will enhance the Company's product offerings and provide synergies
through the combined technical resources of both Companies. For its most recent
fiscal year ended June 28, 1997, the Fort Lock Group reported net sales of

approximately $26.8 million and net income of approximately $2.4 million. See
historical consolidated combined financial statements of the Fort Lock Group
presented elsewhere in this Prospectus.

CompX[trademark] will (i) acquire all of the outstanding stock of Fort Lock
Corporation for cash consideration of approximately $30 million, (ii) acquire
the net assets of Fortronics, Inc. for $.5 million and (iii) purchase Fort Lock
Corporation's manufacturing building owned by a shareholder of Fort Lock
Corporation for $2.5 million (collectively the "Fort Lock Acquisition"). The
aggregate purchase price is subject to possible reduction pending the completion
of a post closing audit. Funding of the Fort Lock Acquisition is expected to be
provided by available cash on hand, including net proceeds of the Offering
remaining after repayment of borrowings outstanding under the Revolving Senior
Credit Facility. The Company's obligation to consummate the Fort Lock
Acquisition is subject to the expiration of the applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
confirmation of the accuracy of certain representations, warranties and
covenants of the parties, the absence of certain material adverse developments,
receipt of required consents and certain other conditions. The Fort Lock
Acquisition is currently expected to be completed during the first quarter of
1998. There can be no assurance that the Fort Lock Acquisition will be
successfully completed or that completion of the transaction can be accomplished
on the terms set forth above.

<PAGE> 7

THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Class A Common Stock offered 4,700,000 shares

Common Stock to be
outstanding after the
Offering:(a)

Class A Common Stock ...... 4,781,100 shares

Class B Common Stock ...... 10,000,000 shares

Total................... 14,781,100 shares

Use of Proceeds.............. A portion of the net proceeds
of the Offering will be used to
repay borrowings expected to be
incurred under the Revolving
Senior Credit Facility. The
remainder will be available to
consummate the Fort Lock
Acquisition and for the
Company's general purposes.

Voting Rights................. The Class A Common Stock and
Class B Common Stock vote as a
single class on all matters,
except as otherwise required by
law, with each share of Common
Stock entitling its holder to
one vote on all matters except

the election of directors where
each share of Class B Common
Stock entitles its holder to
ten votes. All of the shares
of Class B Common Stock are
owned by Valcor. Immediately
after completion of the
Offering, Valcor will
beneficially own shares of
Common Stock having
approximately 68% of the
combined voting power (95% for
director elections) of the
outstanding shares of Common
Stock (approximately 65%, and
95%, respectively, if the
Underwriters' over-allotment
option is exercised in full).

Economic Interest ........... The shares of Class B Common
Stock will represent
approximately 68% of the
economic interest in the
Company (approximately 65% if
the Underwriters' over-
allotment option is exercised
in full).

Proposed NYSE Symbol......... CIX

</TABLE>

(a) Includes up to 81,100 shares of Class A Common Stock to be issued to
certain executives and directors upon completion of the Offering (the Management
Shares, as defined herein) and excludes approximately 1.4 million additional
shares reserved for issuance under the Incentive Plan (as defined herein). See
"Management - Incentive Compensation Plan."

<PAGE> 8

RISK FACTORS

See "Risk Factors" beginning on page 12 for a discussion of certain factors
that should be considered by prospective purchasers of the Class A Common Stock.

<PAGE> 9

SUMMARY FINANCIAL INFORMATION

The summary historical financial data as of December 31, 1993 through 1997
and for each of the years in the five-year period ended December 31, 1997 have
been derived from audited Consolidated Financial Statements of the Company. The
following summary financial and other information should be read in conjunction
with "Capitalization," "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Historical
Consolidated Financial Statements and the Unaudited Pro Forma Condensed
Consolidated Financial Statements of the Company appearing elsewhere in this
Prospectus.

The Company's operations are comprised of a 52 or 53 week fiscal year. Each
of the years ended December 31, 1993 through 1997 consisted of a 52 week year.

<TABLE>
<CAPTION>
Pro
Forma (b)
Years ended December 31,

1993 1994 1995 1996 1997 1997

($ in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA

Net sales $64.4 $70.0 $80.2 $88.7 $108.7 $137.9

Operating income 17.5 20.9 19.9 22.1 28.3 30.0

Income before income 17.5 20.7 19.9 22.1 27.7 29.5
taxes
Income taxes 8.0 8.8 7.8 9.1 11.0 12.2
Minority interest in - - -
losses

Net income 9.5 11.9 12.1 13.0 16.7 17.4

Net income per common
share
$ 1.18

OTHER DATA

Operating income margin 27% 30% 25% 25% 26% 22%

Cash flows from:
Operating activities $12.4 $ 9.7 $12.8 $10.4 $23.0
Investing activities (2.6) (3.1) (7.9) (2.0) (5.5)
Financing activities (4.6) (4.4) (6.3) (6.3) (5.9)

Total $ 5.2 $ 2.2 $(1.4) $ 2.1 $11.6

EBITDA (a) $19.2 $22.5 $22.1 $24.6 $ 31.2 $ 34.9
Depreciation and 1.6 1.7 2.2 2.5 2.8 4.9
amortization
Capital expenditures (c) 2.7 3.4 2.0 2.3 5.5
Dividends on common 4.4 4.6 6.0 6.2 6.1
shares (d)
</TABLE>

<TABLE>
<CAPTION>
December

31, 1997

Pro
Forma (b)
Actual

(In millions)
BALANCE SHEET DATA
<S> <C> <C>
Cash and other current assets $ 45.4 $ 49.3
Total assets 63.8 100.1
Current liabilities 64.4 18.0
Long-term debt, including 50.4 .8
current maturities
Stockholders' equity (deficit) (1.2) 79.8

</TABLE>

(a) EBITDA as presented represents operating income plus depreciation and
amortization. EBITDA is presented because the Company believes it is a
widely accepted financial indicator of a company's ability to incur and
service debt, although the Company's calculation of EBITDA may differ from
and therefore not be comparable to other companies' presentation of EBITDA.
However, EBITDA should not be considered by an investor as an alternative
to (i) operating income or net income as an indicator of a
<PAGE> 10
company's operating performance or (ii) cash flows from operating
activities as a measure of a company's liquidity. Trends in EBITDA are
generally consistent with trends in the Company's operating income. Pro
forma EBITDA and depreciation and amortization for 1997 is presented to
assist investors in an analysis of the Fort Lock Acquisition.
(b) Gives pro forma effect to (i) the Fort Lock Acquisition, (ii) repayment of
the Valcor Note utilizing borrowings under the Revolving Senior Credit
Facility, (iii) issuance of the Management Shares and (iv) the Offering and
the application of the net proceeds therefrom. See "Pro Forma Condensed
Consolidated Financial Statements."
(c) Assuming the Fort Lock Acquisition occurred January 1, 1997, capital
expenditures on a pro forma basis are $6.8 million in 1997.
(d) The Company does not intend initially to declare and pay regular quarterly
cash dividends following completion of the Offering. See "Dividend
Policy." In addition, the Company's ability to pay future dividends is
expected to be restricted by certain covenants contained in the Revolving
Senior Credit Facility.

<PAGE> 11

RISK FACTORS

Before making an investment decision, prospective purchasers of the Class A
Common Stock offered hereby should consider carefully the following information,
together with the other information set forth in this Prospectus.

HIGHLY COMPETITIVE INDUSTRY. Each of the markets served by the Company is
highly competitive, with a number of competitors offering similar products. The
Company focuses its efforts on the middle- and high-end segment of the market,
where product design, quality and durability are the primary competitive
factors. Certain competitors have innovative proprietary products with strong
acceptance in the marketplace. Future development of product designs that
compete with the Company's proprietary products could give them a competitive
advantage over the Company. The Company also faces significant price competition
from its competitors and may encounter competition from new market entrants. In
addition, certain of the Company's customers have significantly greater
resources than the Company and there can be no assurance that these customers
will not explore vertical integration opportunities to manufacture components
that are currently purchased from the Company. There can be no assurance that
the Company will be able to compete successfully in its markets in the future.
See "Business--Competition."

RISK OF CUSTOMER CONSOLIDATION. The office furniture industry is very
competitive and this environment has recently led to certain consolidation
opportunities. Any such consolidation could result in the combination of one of
the Company's customers with a customer of a competitor of the Company. Such a
consolidation could result in changes in product purchasing or sourcing
decisions or price erosion due to purchasing economies of scale and could result
in the loss of all or a portion of current sales volumes to a customer, which
could have a material adverse effect on the Company's financial condition and
results of operations. There can be no assurance in such circumstances that any

such lost sales that might occur as a result of industry consolidation could be
replaced with sales to new customers.

ECONOMIC FACTORS AFFECTING THE COMPANY'S BUSINESS. The future growth, if
any, of the office furniture industry will be affected by a variety of
macroeconomic factors, such as service industry employment levels, corporate
cash flows and non-residential commercial construction, as well as industry
factors such as corporate reengineering and restructuring, technology demands,
ergonomic, health and safety concerns and corporate relocations. There can be no
assurance that current or future economic or industry trends will not materially
adversely affect the business of the Company. See "Business--Industry Overview."

RISKS ASSOCIATED WITH ACHIEVING AND MANAGING GROWTH. Historically the
Company's ability to provide value-added custom engineered products that address
requirements of technology and space utilization has been a key element of the
Company's success. The introduction of new products by the Company requires the
coordination of the design, manufacturing and marketing of such products with
office furniture OEMs. The ability to implement such coordination may be
affected by factors beyond the Company's control. While the Company will
continue to emphasize the introduction of innovative new products that target
customer-specific opportunities, there can be no assurance that any new products
introduced by the Company will achieve the same degree of success as that
achieved by the Company's existing products.

Introduction of new products typically requires the Company to increase
production volume on a timely basis while maintaining product quality.
Manufacturers often encounter difficulties in increasing production volumes,
including delays, quality control problems and shortages of qualified personnel.
As it attempts to introduce new products in the future, there can
<PAGE> 12
be no assurance that the Company will be able to increase production volume
without encountering these or other problems, which might, individually or in

the aggregate, have a material adverse effect on the Company's financial
condition or results of operations.

The Company also intends to pursue a growth strategy through acquisitions
and internal development. The Company's ability to successfully grow through
acquisitions will depend on many factors, including, among others, the Company's
ability to identify suitable growth opportunities and to successfully integrate
acquired businesses. There can be no assurance that the Company will anticipate
all of the changing demands that expanding operations will impose on its
management and management information systems. Any failure by the Company to
adapt its systems and procedures to those changing demands could have a material
adverse effect on the Company's results of operations and financial condition.

RELIANCE ON KEY PERSONNEL. The Company believes that the breadth of
industry experience of key management individuals is integral to the Company's
success in understanding and serving its customers' needs. The top seven
executive management personnel have over 100 years of combined industry
experience. The loss of one or more of these key personnel could, among other
things, have an adverse effect upon the ability of the Company to develop and
market new products and to maintain customer relationships.

RELIANCE ON PATENTS AND OTHER INTELLECTUAL PROPERTY. The Company owns a
number of United States and foreign patents, trademarks and service marks in
order to protect certain of its innovations and designs. In addition, the
Company is a licensee of certain technology and possesses certain unpatented
proprietary know-how and manufacturing techniques that are important to
maintaining consistent quality. There can be no assurance that any patents,
trademarks or service marks issued or licensed to the Company will not be
challenged, invalidated, canceled, narrowed or circumvented, or that the rights
granted thereunder will provide significant proprietary protection or
competitive advantages to the Company.

The Company continually focuses its efforts on product innovation and
design improvements that enhance existing products and stimulate development of
new products. The Company's approach to custom engineered solutions may subject
the Company to claims of patent infringement by competitors. There can be no
assurance that any future successful assertion of patent infringement claims
will not result in material legal, royalty or other costs to the Company.

RISK OF ENVIRONMENTAL LIABILITIES. The operations of the Company are
subject to extensive and changing federal, state, local and foreign
environmental laws and regulations, including those 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. The nature of the Company's operations
exposes the Company to the risk of liabilities, claims and pollution control
requirements for a wide variety of environmental matters, including on-site and
off-site releases and emissions of hazardous substances, materials and wastes.
There can be no assurance that environmental matters will not have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Business - Environmental Matters."

EXCHANGE RATE FLUCTUATION. The Company has significant operations in
Canada. During 1997, about three-fourths of the Company's total net sales were
generated by its Canadian operations, of which about 60% are denominated in U.S.
dollars with the remainder denominated in various foreign currencies,
principally the Canadian dollar. Substantially all of the operating expenses
related to the Company's Canadian operations are incurred in Canadian dollars.
As a result, fluctuations in the value of the U.S. dollar relative to the
<PAGE> 13
Canadian dollar can impact the Company's reported operating results. There can
be no assurance that any future exchange rate fluctuations would not materially
adversely impact the Company's future operating results.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's quarterly
operating results may fluctuate due to factors such as the timing of new product
announcements and introductions by the Company, its major customers or its
competitors, delays in new product introductions by the Company, market
acceptance of new or enhanced versions of the Company's products, changes in the
product or customer mix of sales, changes in the level of operating expenses,
competitive pricing pressures, the gain or loss of significant customers,
increased research and development and sales and marketing expenses associated
with new product introductions, and general economic conditions. All the above
factors are difficult for the Company to forecast, and these or other factors
can materially adversely affect the Company's business, financial condition and
results of operations for one quarter or a series of quarters.

CONTROL BY PRINCIPAL STOCKHOLDER; ANTI-TAKEOVER EFFECTS. The holders of
Common Stock are entitled to one vote per share on all matters except the
election of directors, on which the holders of Class B Common Stock are entitled
to ten votes per share. Holders of Class A Common Stock are generally entitled
to vote with holders of the Class B Common Stock as one class on all matters as
to which the stockholders of the Company are entitled to vote. Immediately after
consummation of the Offering, Valcor, an indirect subsidiary of Contran, will
own all the outstanding 10,000,000 shares of Class B Common Stock, which will
represent approximately 68% of the combined voting power (95% for the election
of directors) of the outstanding shares of Common Stock (approximately 65% and
95%, respectively, if the over-allotment option is exercised in full). Transfer
of the shares of Class B Common Stock owned by any member of the Contran
Corporation Control Group (as hereafter defined), except for transfers between
members of the Contran Corporation Control Group or transfers made in connection
with a Tax-Free Spin-Off (as hereinafter defined) will result in the automatic
conversion of such shares of Class B Common Stock into shares of Class A Common
Stock. See "Description of Capital Stock -- Common Stock."

All of Valcor's common stock is owned by Valhi. Approximately 93% of
Valhi's common stock is beneficially owned, directly or indirectly, by Contran.
Substantially all of Contran's outstanding voting stock is held by trusts
established for the benefit of Mr. Harold Simmons' children and grandchildren.
As sole trustee of these trusts, Mr. Harold Simmons has the power to vote and
direct the disposition of the shares of Contran stock held by the trusts even
though Mr. Harold Simmons disclaims beneficial ownership thereof. As trustee
Mr. Harold Simmons has the power to elect the majority of the directors of
Contran and effectively control the Board of Directors of the Company and all
stockholders' decisions of the Company, and in general, determine (without the
consent of the Company's other stockholders) the outcome of any corporate
transaction or other matter submitted to the stockholders for approval,
including mergers, consolidations and the sale of all or substantially all of
the Company's assets. In addition, Mr. Harold Simmons has the power to prevent
or cause a change in control of the Company. See "Description of Capital
Stock," "Security Ownership in the Company and its Affiliates," and "Certain
Relationships and Related Transactions."

In addition, the Company's Certificate of Incorporation currently
authorizes the issuance of 1,000 shares of Preferred Stock. The Board of
Directors has the power to issue any or all of these additional shares without
stockholder approval, and such shares can be issued with such rights,
preferences and limitations as may be determined by the Board. The rights of
the holders of Class A Common Stock will be subject to, and may be adversely
affected by, the rights of any holders of Preferred Stock that may be issued in
the future. The Company presently has no commitments or contracts to issue
<PAGE> 14
any shares of Preferred Stock. Authorized and unissued Preferred Stock could
delay, discourage, hinder or preclude an unsolicited acquisition of the Company,
could make it less likely that stockholders receive a premium for their shares

as a result of any such attempt and could adversely affect the market price of
and the voting and other rights of the holders of outstanding shares of Common
Stock.

ABSENCE OF DIVIDENDS. The Company does not anticipate paying any cash
dividends on the Class A or Class B Common Stock in the foreseeable future. See
"Dividend Policy."

RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS. It is
anticipated that the terms of the Revolving Senior Credit Facility will impose
operating and financial restrictions on the Company. As a result, the ability
of the Company to respond to changing business and economic conditions and to
secure additional financing, if needed, may be significantly restricted, and the
Company may be prevented from engaging in transactions that might further its
growth strategy or otherwise be considered beneficial to the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

EFFECT OF NO PRIOR PUBLIC TRADING MARKET. Prior to the Offering, there has
been no public trading market for the Class A Common Stock. The public offering
price for the Class A Common Stock will be determined by negotiations between
the Company and the Underwriters based upon several factors and will not
necessarily bear any relationship to the Company's assets, book value, results
of operations or net worth or any other generally accepted criteria of value,
and should not be considered as indicative of the actual value of the Company.
Therefore, the market price of the Class A Common Stock may fall below the
public offering price of the Class A Common Stock at any time following the
Offering. See "Underwriting."

In addition, although the Company intends to file a listing application for
inclusion of the Class A Common Stock for trading on the NYSE, there can be no
assurance that such application will be granted or that an active trading market
will develop. To the extent an active trading market does develop, factors such
as quarterly variations in the Company's financial results, public announcements
by the Company or others, general market conditions or certain regulatory
pronouncements may cause the market price of the Class A Common Stock to
fluctuate substantially.

EFFECT OF SALES OF SUBSTANTIAL AMOUNTS OF COMMON STOCK. Immediately after
consummation of the Offerings, Valcor will beneficially own all the outstanding
10,000,000 shares of Class B Common Stock, which will represent approximately
68% of the combined voting power (95% for election of directors) of the
outstanding shares of Common Stock (approximately 65% and 95%, respectively, if
the Underwriters' over-allotment option is exercised in full). Subject to
applicable law and the terms of the Class B Common Stock, Valcor could sell all
or some of the shares of Class B Common Stock owned by it from time to time for
any reason. The Company cannot predict the effect, if any, that future sales of
outstanding Common Stock or the availability of Common Stock for sale will have
on the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock in the public market following the Offering,
or the perception that such sales could occur, could adversely affect prevailing
market prices of the Class A Common Stock.

<PAGE> 15

Each of the Company, Valcor, and executive officers and directors thereof
has agreed that, for a period of 180 days following the date of this Prospectus,
it will not issue or sell any shares of Class A Common Stock or securities
convertible into or exercisable for such stock, held by it now or in the future
without the prior written consent of the Underwriters. See "Shares Eligible for
Future Sale" and "Security Ownership in the Company and its Affiliates."

FORWARD-LOOKING STATEMENTS. This Prospectus includes forward-looking
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995 (the "Reform Act")). The "safe-harbor" protections of the Reform
Act are not available to initial public offerings, including this Offering.
These forward looking statements include, but are not limited to, statements
regarding, among other items, (i) the Company's anticipated growth strategies,
(ii) the Company's intention to introduce new products, (iii) anticipated trends
in the Company's businesses, including trends in the market for office furniture
and corporate concerns for worker health and safety, (iv) future expenditures
for capital projects and (v) the Company's ability to continue to control costs
and maintain quality. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
certain of which are beyond the Company's control. Actual results could differ
materially from these forward-looking statements as a result of many factors,
including, but not limited to, the factors described in "Prospectus Summary,"
"Risk Factors" and "Business" including, among other things, (i) changes in the
competitive marketplace, including the introduction of new products or pricing
changes by the Company's competitors, and (ii) changes in market trends for
office furniture, including changes in service industry employment. Other
factors that materially affect actual results include, among others, the
following: general economic and business conditions; industry capacity; changes
in customer preferences; demographic changes; competition; changes in methods of

marketing and in technology; changes in political, social and economic
conditions; regulatory factors and various other factors beyond the Company's
control. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, there can be no
assurance that the forward-looking information contained in this Prospectus will
in fact transpire.

POTENTIAL ACQUISITION. On February 3, 1998, the Company executed a
definitive agreement concerning the Fort Lock Acquisition. See "Recent
Developments".

The consummation of the acquisition is subject to the expiration of the
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, confirmation of the accuracy of certain
representations, warranties and covenants of the parties, the absence of certain
material adverse developments, receipt of required consents and certain other
conditions. While the Company believes that it will complete the Fort Lock
Acquisition during the first quarter of 1998, there can be no assurance that the
Fort Lock Acquisition will be successfully completed during the first quarter of
1998, if at all, or that completion of the transaction can be accomplished on
terms that are commercially advantageous or that the operations of the Fort Lock
Group can be successfully integrated into the Company's current businesses.

<PAGE> 16

DILUTION INCURRED BY INVESTORS. The per share price to the public of the
Class A Common Stock is substantially higher than the net tangible book value
per share of the Common Stock at December 31, 1997. Accordingly, at such date,
investors purchasing the Class A Common Stock offered hereby would have incurred
immediate, substantial dilution in the amount of $13.11 per share, assuming a
public offering price of $18.50 per share and after giving pro forma effect to
issuance of the Management Shares. Giving additional pro forma effect to the
Fort Lock Acquisition results in additional dilution to investors purchasing the
Class A Common Stock offered hereby of $1.47 per share.

<PAGE> 17

USE OF PROCEEDS

The net proceeds to the Company from the Offering (based on an assumed
offering price of $18.50 per share) will be approximately $80.4 million. The
Company will utilize the net proceeds of the Offering to repay indebtedness and
to complete the Fort Lock Acquisition. Approximately $50 million of the net
proceeds will be used to fully repay borrowings outstanding under the Revolving
Senior Credit Facility, which prior to completion of the Offering will be
utilized to satisfy the Valcor Note. The Valcor Note was paid as a dividend to
Valcor, the Company's sole stockholder, in December 1997. The Valcor Note is an
unsecured $50 million demand note that bears interest at a fixed rate of 6% per
annum. The Revolving Senior Credit Facility is expected to be an unsecured five-
year revolving facility and is expected to bear interest at LIBOR plus 30 to
102.5 basis points, depending upon certain financial covenant ratios. Prior to
completion of the Offering, the Company intends to utilize borrowings under the
Revolving Senior Credit Facility to fully repay the Valcor Note.

The remaining net proceeds of the Offering, together with cash on hand and
any borrowing availability under the Revolving Senior Credit Facility, will be
available to consummate the Fort Lock Acquisition and for the Company's general
corporate purposes. See "Recent Developments". There can be no assurance the
Fort Lock Acquisition will be consummated. See "Risk Factors -- Ability to
Consummate the Fort Lock Acquisition".

DIVIDEND POLICY

As a subsidiary of Valcor, the Company has historically been managed with a
focus on generating cash flow to pay dividends to Valcor. After the Offering,
the Company intends to seek to maximize stockholder value through growth. As a
result, following the Offering, the Company does not intend initially to declare
and pay regular quarterly cash dividends but intends, instead, to utilize
available cash to fund additional acquisition and expansion opportunities.
Determinations to pay cash dividends in the future will be made at the
discretion of the Board of Directors, and any payment of dividends in the future
will depend upon the Company's results of operations, earnings, capital
requirements and contractual restrictions and upon other factors deemed relevant
by the Company's Board of Directors. The Company's ability to pay future
dividends is expected to be restricted by certain covenants contained in the
Revolving Senior Credit Facility. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources," "Description of Capital Stock" and the
Historical Consolidated Financial Statements included in this Prospectus.

The Company paid dividends to Valcor aggregating $4.4 million in 1993, $4.6
million in 1994, $6.0 million in 1995, $6.2 million in 1996 and $6.1 million in
1997. In 1998 prior to completion of the Offering, the Company expects to pay
approximately $1.5 million of dividends to Valcor. In addition, on December 12,
1997, the Company paid a $50 million dividend to Valcor in the form of the
Valcor Note. The Company intends to use borrowings under the Revolving Senior
Credit Facility to repay the Valcor Note. A portion of the proceeds of the
Offering will be used to repay outstanding borrowings under the Revolving Senior
Credit Facility. See "Use of Proceeds."

<PAGE> 18

CAPITALIZATION

The following table sets forth as of December 31, 1997 (i) the historical
consolidated capitalization of the Company and (ii) as adjusted to reflect (w)
repayment of the Valcor Note from borrowings under the Revolving Senior Credit
Facility, (x) issuance of the Management Shares, (y) the Offering with assumed
net proceeds to the Company of $80.4 million (assuming an initial offering price
of $18.50 per share) and the application of such net proceeds and (z) the Fort
Lock Acquisition. See "Use of Proceeds" and "Pro Forma Condensed Consolidated
Financial Statements."

<TABLE>
<CAPTION>
As
adjusted
Actual

($ in millions,
except per share
amounts)
<S> <C> <C>
Long-term debt:
Revolving Senior Credit Facility (a) $ - $ -
Demand note payable to Valcor 50.0 -
Other .4 .8

Total long-term debt, including
current 50.4 .8
maturities

Less current maturities 50.1 .2

Total long-term debt .3 .6

Stockholders' equity (deficit):
Preferred stock, $.01 par value; 1,000
shares authorized, none issued - -
Class A Common Stock, $.01 par value;
20,000,000 shares authorized; 4,781,100
shares issued and outstanding (b) - .1
Class B Common Stock, $.01 par value;
10,000,000 shares authorized, issued

and outstanding .1 .1
Additional paid in capital 4.4 86.2
Retained earnings (deficit) (4.6) (5.5)
Currency translation adjustment (1.1) (1.1)

Total stockholders' equity (deficit (1.2) 79.8

Total capitalization $ (.9) $80.4

</TABLE>

(a) Prior to the Offering, the Company expects to enter into a new $100 million
Revolving Senior Credit Facility. See "Recent Developments." As adjusted,
the Company would have $100 million of borrowing availability under this
facility.

(b)Excludes approximately 1.4 million shares reserved for issuance under the
Incentive Plan (as defined herein), including shares of Class A Common
Stock subject to stock options which may be granted to the Company's
management concurrent with the Offering at the initial public offering
price of the Class A Common Stock. See "Management -- Incentive
Compensation Plan."

<PAGE> 19

DILUTION

Dilution is the amount by which the initial public offering price per share
paid by the purchasers of shares of Class A Common Stock in the Offering exceeds
the net tangible book value per share of Common Stock after the Offering. The
net tangible book value per share of Common Stock is determined by subtracting
the book value of total liabilities and intangible assets (consisting of
deferred costs) of the Company from the total book value of the total assets of
the Company and dividing the difference by the number of shares of Common Stock
outstanding on the date as of which such book value is determined.

The adjusted net tangible book value of the Company at December 31, 1997
was a deficit of approximately $1.2 million, or $(.12) per share of Common
Stock. After giving effect to (y) the sale of shares of Class A Common Stock by

the Company in the Offering at an assumed offering price of $18.50 per share and
the application of the estimated net proceeds therefrom and (z) issuance of the
Management Shares, the net tangible book value of the Company as of December 31,
1997 would have been $79.7 million, or $5.39 per share. This represents an
immediate increase in net adjusted tangible book value of $5.51 per share to the
holder of Class B Common Stock and an immediate dilution in net tangible book
value of $13.11 per share to purchasers of Class A Common Stock in the Offering,
as illustrated in the following table:

Assumed public offering price per share ...... $18.50
Adjusted net tangible book value per share at
December 31, 1997 ...... $(.12)
Increase per share attributable to new investors 5.51

Pro forma net tangible book value per share............ 5.39

Net tangible book value dilution per share to new investors $13.11

If the over-allotment option is exercised in full, the pro forma net
tangible book value per share of Class A Common Stock after giving effect to the
transaction described above would be $5.93 per share, the increase in the net
tangible book value per share would be $6.05 and the dilution to persons who
purchase shares of Class A Common Stock in the Offering would be $12.57 per
share (at an assumed offering price of $18.50 per share).

In addition, after giving pro forma effect to the Fort Lock Acquisition, the
net tangible book value per share of Class A common stock, the increase in the
net tangible book value per share as a result of this Offering to holders of

Class B Common Stock and the dilution per share to purchasers of Class A Common
Stock in the Offering would be $3.92, $4.04 and $14.58, respectively ($4.53,
$4.65 and $13.97, respectively, if the over-allotment option is exercised in
full).

<PAGE> 20

COMPX INTERNATIONAL INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited pro forma condensed consolidated financial
statements set forth the Company's pro forma condensed consolidated balance
sheet as of December 31, 1997, and the pro forma condensed consolidated
statement of income for the year ended December 31, 1997. These pro forma
financial statements are presented to illustrate the effect of certain
adjustments to the Company's Historical Consolidated Financial Statements
included in this Prospectus and reflect (i) repayment of a $50 million demand
note payable to Valcor utilizing borrowings under the Revolving Senior Credit
Facility, (ii) the Offering and repayment of the Revolving Senior Credit
Facility (iii) issuance of the Management Shares and (iv) the Fort Lock
Acquisition, as if such transactions had occurred on December 31, 1997 for
purposes of the unaudited pro forma condensed consolidated balance sheet and on
January 1, 1997 for purposes of the unaudited pro forma condensed consolidated
income statements. The Fort Lock Acquisition will be accounted for by the
purchase method of accounting and consolidated in the Company's historical
financial statements effective the date of consummation.

The accompanying unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the Company's and The Fort Lock
Group's historical consolidated financial statements and notes thereto included
elsewhere in the Prospectus. The pro forma condensed consolidated financial
statements are presented for information purposes only and do not purport to be
indicative of actual results had the transactions reflected therein occurred at
the dates indicated, nor do they purport to represent results of future
operations of the Company.

<PAGE> 21

COMPX INTERNATIONAL INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 1997
(Unaudited)
(In millions)

<TABLE>
<CAPTION>
Pro forma

adjustments

Senior Credit
Facility,

Historical Stock Offering and
Management Shares

Fort Lock
ASSETS Group Note
CompX Adjustments
1

<S> <C> <C> <C>
<C>
Current assets:
Cash and cash equivalents $19.2 $ .1 (a) $ 30.4

Accounts receivable 14.6 2.3 -
Inventories 11.1 4.0 -
Deferred income taxes .4 .2 -
Other current assets .1 .1 -

Total current assets 45.4 6.7 30.4

Goodwill - - -
Other assets .2 .2 -
Property and equipment, net 18.2 5.4 -

$63.8 $12.3 $ 30.4

LIABILITIES AND STOCKHOLDERS'
EQUITY

Current liabilities:

Demand note payable to $50.0 $ - (b) $(50.0)
Valcor
Notes payable and current
maturities of long-term .1 1.5 -
debt
Accounts payable and
accrued 11.7 4.1 (c) (.6)
liabilities
Income taxes 2.6 - -

64.4 5.6 (50.6)

Noncurrent liabilities:

Long-term debt .3 1.4 (b) 50.0
(a) (50.0)
Deferred income taxes .1 .2
Other .2 - -

.6 1.6 -

Minority interest - .2 -

Stockholders' equity (1.2) 4.9 (a) 80.4
(deficit)

$63.8 $12.3 $ 30.4

</TABLE>

Pro forma adjustment -
Fort Lock Acquisition

ASSETS Note 1 Pro forma
Adjustments

<S> <C> <C> <C>
Current assets:
Cash and cash equivalents (d) $(30.7)
(e) (2.5) $ 16.5
Accounts receivable - 16.9
Inventories - 15.1
Deferred income taxes - .6
Other current assets - .2

Total current assets (33.2) 49.3

Goodwill (f) 21.8 21.8
Other assets - .4
Property and equipment, net (e) 2.5
(f) 2.5 28.6

$ (6.4) $100.1

LIABILITIES AND STOCKHOLDERS'
EQUITY

Current liabilities:

Demand note payable to Valcor $ - $ -
Notes payable and current
maturities of long-term debt (f) (1.4) .2
Accounts payable and accrued
liabilities - 15.2
Income taxes - 2.6

(1.4) 18.0

Noncurrent liabilities:

Long-term debt

(f) (1.1) .6
Deferred income taxes (f) 1.0 1.3
Other - .2

(.1) 2.1

Minority interest - .2

Stockholders' equity (deficit)

(f) (4.9) 79.8

$ (6.4) $100.1

</TABLE>

<PAGE> 22

COMPX INTERNATIONAL INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

Note 1 - Pro forma adjustments:

Pro forma adjustments described below reflect (i) repayment of a $50 million
demand note payable to Valcor utilizing borrowings under the Revolving Senior
Credit
Facility, (ii) the Offering and repayment of the Revolving Senior Credit
Facility,
(iii) issuance of the Management Shares and (iv) the Fort Lock Acquisition,
as if
such transactions had occurred on December 31, 1997. These transactions are
more
fully described elsewhere in this Prospectus.

<TABLE>
<CAPTION>
Senior Credit Facility and Stock Offering:

<S> <C> <C>
Amount

(In
(a) Proceeds of the Offering:
millions)
Issuance of 4,700,000 Class A Common Stock
at an assumed Offering price of $18.50 per share $ 87.0
Less underwriting discount (6.1)
Less estimated expenses of the Offering (.5)

80.4

Repayment of borrowings under the Revolving
Senior Credit Facility (50.0)

Net cash $ 30.4

(b) Repayment of the demand note payable to Valcor from borrowings
pursuant to the Revolving Senior Credit Facility.

Issuance of the Management Shares:

(c) Issuance of 81,100 shares of Class A Common Stock to certain
officers of the Company at an aggregate value of $1.5 million
(based on assumed Offering price of $18.50 per share), less a $.6
million current tax benefit at an effective federal and state tax

rate of 39%.

The Fort Lock Acquisition:

(d) The Company (i) acquires 100% of the outstanding stock of
Fort Lock Corporation for $30 million cash and acquires the
net assets of Fortronics, Inc., an affiliate of Fort Lock
Corporation by common ownership, for $.5 million cash
(collectively the "Fort Lock Group") and (ii) incurs
$200,000 in acquisition related costs.

<PAGE> 23

(e) The Company purchases Fort Lock Corporation's manufacturing
building owned by a shareholder of Fort Lock Corporation
for $2.5 million cash. The acquisition of the Fort Lock
Group and the purchase of such building is referred to as
the "Fort Lock Acquisition".

Allocate Fort Lock Group purchase price as follows.
(f)

Amount

(In
millions)

Purchase price to be allocated:
Cash paid to acquire Fort Lock Group $30.5
Transaction costs .2

30.7

Historical Fort Lock Group common equity 4.9

$25.8

Purchase price allocation:
Adjust the carrying value of the acquired
property, $ 2.5
plant and equipment to estimated fair
value
Deferred income tax consequences of the
above
adjustment, at effective federal and state (1.0)
tax
rate of 39%
Elimination of indebtedness not assumed 2.5
Goodwill 21.8

$25.8

Approximately $2.5 million of Fort Lock Group bank
indebtedness and Fort Lock Group loans from its
shareholders will be repaid by the sellers out of the
purchase price and will not become obligations of
CompX[trademark].

</TABLE>

<PAGE> 24

COMPX INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1997
(In millions, except per share amounts)

Pro Forma
Adjustments
Historical

Fort Lock Pro Forma
Group Consolida
CompX Note 1 Amount
ted

Total revenues $109.5 $29.2 $ - $138.7

Costs and expenses:
Cost of goods sold 70.6 20.0 (a) .3 90.9

Selling, general and 11.0 4.6 (b) 1.1
administrative
(g) 1.5 18.2

Interest
(e) (.2) .1

81.8 24.9 2.5 109.2

Income before income 27.7 4.3 (2.5) 29.5
taxes

Provision for income taxes 11.0 1.7 (d) -

(f) .1
(h) (.6) 12.2

Minority interest in net loss

Net income $ 16.7 $ 2.7 $(2.0) $ 17.4

Basic and diluted net income
per common $ 1.18
share

Weighted average common shares 14.8
outstanding

Other data:

Operating income $ 28.3 $ 30.0
EBITDA 31.2 34.9
</TABLE>

<PAGE> 25

COMPX INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1997

Note 1 - Basis of presentation:

The Unaudited Pro Forma Condensed Consolidated Statement of Income for the
year ended December 31, 1997 has been prepared to reflect (i) repayment of a $50
million demand note payable to Valcor utilizing borrowings under the Revolving
Senior Credit Facility, (ii) the Offering and repayment of the Revolving Senior
Credit Facility, (iii) issuance of the Management Shares and (iv) the Fort Lock
Acquisition, as if such transactions had occurred on January 1, 1997. These
transactions are more fully described elsewhere in this Prospectus.

Amounts reflected for the year-ended December 31, 1997 for the Fort Lock
Group are derived from the amounts reflected in the fiscal year end audited
financial statements of Fort Lock Group for the fiscal year ended June 28, 1997
and the unaudited financial statements for the 26 week periods ended December
1996 and 1997 presented elsewhere in this Prospectus.

Adjustments relating to the Fort Lock Acquisition:

(a) Increase in depreciation expense resulting from amortization of
purchase accounting basis differences over average remaining life
of 10 years.

(b) Amortization of goodwill related to the acquisition of Fort Lock
Group by the straight-line method over 20 years.

(d) Income tax expense of pro forma adjustment (a) and (c), at assumed
federal and state tax rate of 39%.

Adjustments relating to repayment of the $50 million note payable to
Valcor:

(e) Eliminate interest expense associated with the Valcor Note.

(f) Income tax expense of pro forma adjustment (e) at assumed federal and
state tax rate of 39%.

Adjustments relating to the issuance of the Management Shares:

(g) Issuance of shares of Class A Common Stock to certain officers of the
Company at an aggregate value of $1.5 million.

(h) Income tax benefit of pro forma adjustment (g) at assumed federal and
state tax rate of 39%.
<PAGE> 26
The historical statement of income for Fort Lock Group includes rental
expense pursuant to a lease of the manufacturing building currently owned by a
shareholder of Fort Lock Corporation. No pro forma adjustment is required to
reflect the Company's purchase of such building as depreciation expense with
respect to the building would approximate the historical lease expense. No pro
forma adjustment is required to reflect interest expense under the Revolving
Senior Credit Facility because borrowings under such facility will be repaid
using a portion of the net proceeds from the Offering.

The shares used in the calculation of pro forma basic and diluted earnings
per share assumes an Offering price to the public of $18.50 per share and is
based upon (i) 10,000,000 shares of the Company's Class B Common Stock
outstanding, (ii) 4,700,000 shares of Class A Common Stock to be issued in the
Offering, the net proceeds of which, along with available cash on hand, are
sufficient to fund repayment of the Revolving Senior Credit Facility and to
consummate the Fort Lock Group Acquisition, and (iii) issuance of 81,100 shares
of Class A Common Stock (the maximum number of Management Shares which will be
awarded).

Note 2 - Other data:

EBITDA as presented represents operating income plus depreciation and
amortization. EBITDA is presented because the Company believes it is a widely
accepted financial indicator of a company's ability to incur and service debt,
although the Company's calculation of EBITDA may differ from and therefore not
be comparable to other companies' presentation of EBITDA. EBITDA should not be
considered by an investor as an alternative to (i) operating income or net
income as an indicator of a company's operating performance or (ii) cash flows
from operating activities as a measure of a company's liquidity. Trends in
EBITDA are generally consistent with trends in the Company's operating income.
Pro forma EBITDA and depreciation and amortization for 1997 are presented to
assist investors in an analysis of the Fort Lock Acquisition.

<PAGE> 27

SELECTED FINANCIAL DATA

The historical selected financial data as of December 31, 1993 through 1997,
and for each of the years in the five-year period ended December 31, 1997, have
been derived from audited Consolidated Financial Statements of the Company. The
following selected financial and other data should be read in conjunction with
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Historical Consolidated Financial Statements of
the Company included in this Prospectus.

The Company's operations are comprised of a 52 or 53 week fiscal year. Each
of the years ended December 31, 1993 through 1997 consisted of a 52 week year.

Pro Forma
Years ended December

31,

1993 1994 1995 1996 1997 1997 (b)

($ in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA

Net sales $64.4 $70.0 $80.2 $88.7 $108.7 $137.9

Operating income 17.5 20.9 19.9 22.1 28.3 30.0

Income before income taxes 17.5 20.7 19.9 22.1 27.7 29.5
Income taxes 8.0 8.8
Minority interest in losses -

Net income 9.5 11.9 12.1 13.1 16.7 17.4

Net income per common share $1.18

OTHER DATA

Operating income margin 27% 30% 25% 25% 26% 22%

Cash flows from:
Operating activities $12.4 $ 9.7 $12.8 $10.4 $ 23.0
Investing activities (2.6) (3.1) (7.9) (2.0) (5.5)
Financing activities (4.6) (4.4) (6.3) (6.3) (5.9)

Total $ 5.2 $ 2.2 $(1.4) $ 2.1 $ 11.6

EBITDA (a) $19.2 $22.5 $22.1 $24.6 $ 31.2 $34.9
Depreciation and amortization 1.6 1.7 2.2 2.5 2.8 4.9
Capital expenditures (c) 2.7 3.4 2.0 2.3 5.5
Dividends on Common Stock (d) 4.4 4.6 6.0 6.2 6.1

BALANCE SHEET DATA
(AT PERIOD END)
Cash and other current assets $20.6 $25.9 $27.7 $32.2 $ 45.4 $ 49.3
Total assets 31.3 37.8 44.4 48.5 63.8 100.1
Current liabilities 9.5 8.9 9.6 8.1 64.4 18.0
Long-term debt, including .2 .1 .1 .2 50.4 .8
current maturities
Stockholders' equity (deficit) 19.4 26.2 32.6 39.2 (1.2) 79.8
</TABLE>

(a) EBITDA as presented represents operating income plus depreciation and
amortization. EBITDA is presented because the Company believes it is a
widely accepted financial indicator of a company's ability to incur and
service debt, although the Company's calculation of EBITDA may differ from
and therefore not be comparable to other companies' presentation of EBITDA.
EBITDA should not be considered by an investor as an alternative to (i)
operating income or net income as an indicator of a company's operating
performance or (ii) cash flows from operating activities as a measure of a
company's liquidity. Trends in EBITDA are generally consistent with trends
in the Company's operating income. Pro forma
<PAGE> 28
EBITDA and depreciation and amortization for 1997 are presented to assist
investors in an analysis of the Fort Lock Acquisition.
(b)
the Valcor Note utilizing borrowings under the Revolving Senior Credit
Facility, (iii) issuance of the Management Shares and (iv) the Offering and
the application of the net proceeds therefrom. See "Pro Forma Condensed
Consolidated Financial Statements."
(c) Assuming the Fort Lock Acquisition occurred January 1, 1997, capital
expenditures on a pro forma basis are $6.8 million in 1997.
(d) The Company does not intend initially to declare and pay regular quarterly
cash dividends following completion of the Offering. See "Dividend
Policy". In addition, the Company's ability to pay future dividends is
expected to be restricted by certain covenants contained in the Revolving
Senior Credit Facility.

<PAGE> 29

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Historical Consolidated Financial Statements of the Company and the notes
thereto appearing elsewhere in this Prospectus. Certain statements in the
following discussion are forward-looking statements or discussion of trends
which by their nature involve substantial risks and uncertainties that could
significantly affect expected results. Actual future results and trends may
differ materially from those described below depending on a variety of factors,
including those detailed under the caption "Risk Factors" and elsewhere in this
Prospectus.

OVERVIEW

The Company sells ergonomic computer support systems and precision ball
bearing drawer slides which are manufactured in two facilities located in
Kitchener, Ontario and medium-security mechanical locks which are manufactured
in a facility in Mauldin, South Carolina. The Company is a wholly-owned
subsidiary of Valcor, a wholly-owned subsidiary of Valhi. In 1993, Valhi formed
National Cabinet Lock, Inc. and contributed the assets of its Cabinet Lock
Division and the stock of Waterloo Furniture Components Limited. In 1996,
National Cabinet Lock, Inc. changed its name to CompX International Inc.

Approximately 75% of the Company's products are sold to the office
furniture manufacturing industry while the remainder (principally mechanical
locks) is sold for use in other products, such as vending equipment, postal
boxes, electromechanical enclosures and other furniture and equipment. According
to BIFMA, the dollar value of U.S. office furniture industry shipments has grown
in 23 of the past 25 years and is currently estimated to have grown at a
compound annual rate of approximately 8.4% over the four year period ended
December 31, 1997. Over the same period the Company's total net sales increased

at a compound annual rate of approximately 14%, and net sales in 1997 were 22%
higher compared to 1996. Management believes that the market for the Company's
ergonomic computer support systems is experiencing substantially higher rates of
growth than the office furniture industry as a whole. In 1997, ergonomic
computer support systems represented 34% of total net sales compared to 26% in
1994.

The Company does not expect net sales from its existing medium-security
cabinet lock business to achieve growth rates comparable to its ergonomic
computer support systems and precision ball bearing drawer slides. The Company
intends to pursue potential acquisition opportunities to provide future growth
in its medium-security cabinet lock business. On February 3, 1998, the Company
executed a definitive agreement concerning the Fort Lock Acquisition. See
"Recent Developments".

The Company's products are sold primarily to OEMs in the United States and
Canada. The ten largest customers accounted for approximately one-third of
sales during each of the past three years with at least five of such customers
in each year located in the United States.

In August 1995, the Company acquired the assets of a Canadian competitor.
The acquired operations contributed approximately $3 million in sales in 1995,
$6 million in 1996 and $6 million in 1997. Through the elimination of
unprofitable product lines and the integration of manufacturing operations, the
operating contribution from these operations improved from a slight loss in 1995
to operating margins in 1997 consistent with the Company's existing ergonomic
computer support systems and precision ball bearing drawer
<PAGE> 30

slide products, contributing to the majority of the improvement in operating
margins 1997 compared to 1996.

A portion of the Company's sales are made pursuant to a government
contract. In the first quarter of 1995, the Company completed shipments of
medium-security locks pursuant to a 1992 government contract. This contract was
not renewed until the end of 1996 due to excess supply and contributed to a $.9
million decline in sales of medium-security cabinet locks in 1996 compared to
1995. The Company signed a new $650,000 contract for medium-security locks with
the same government agency in December 1996, under which all shipments were made
in 1997.

The Company's profitability 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 raw materials such as zinc, copper, coiled steel and
plastic resins and of labor costs. Raw material costs represent approximately
45% of the Company's total cost of sales. Beginning in August 1997, steel prices
have increased approximately 4% per pound, resulting in an overall increase in
raw material cost of approximately 2% in 1997 compared to 1996. 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 the specified minimum monthly purchase quantities are met. The Company
currently anticipates entering into such arrangements for zinc, coiled steel and
plastic resins for 1998 and does not anticipate significant changes in the cost
of these materials from their current levels. 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 and consequently overall operating margins can
be affected by such raw material cost pressures.

Labor costs represent approximately 14% of the Company's total cost of
sales. The Company's U.S. employees are not represented by bargaining units and
wage increases historically have been in line with overall inflation indices.
Approximately two-thirds of the Company's Canadian employees are covered by a
three year collective bargaining agreement that expires in January 2000 and
provides for annual wage increases of 2 - 3%. Wage increases for these employees
historically have been in line with overall inflation indices.

Selling, general and administrative costs have been consistent as a
percentage of net sales and consist primarily of salaries, commissions and
advertising directly related to product sales.

The Company obtains certain management, financial and administrative
services on a fee basis from Valhi pursuant to an Intercorporate Services
Agreement. The Company believes such arrangements have been cost beneficial
compared to the cost of dedicated staff or consulting arrangements to otherwise
provide such services. Fees pursuant to these agreements were $284,000 in 1995,
$300,000 in 1996, and $260,000 in 1997. The Company intends to continue to
receive similar services from Valhi on a fee basis following the Offering.

<PAGE> 31

Certain employees of the Company have been granted options to purchase Valhi
common stock under the terms of Valhi's stock option plans. The Company pays
Valhi the aggregate difference between the option price and the market value of
Valhi's common stock on the exercise date of such options. For financial
reporting purposes, the Company accounts for the related expense (credit) of
$(12,000) in 1995, $9,000 in 1996 and $472,000 for 1997 in a manner similar to
accounting for stock appreciation rights. To the extent employees of the Company
continue to have options outstanding to purchase Valhi shares, future changes in
the market price of Valhi shares will result in additional expense or credits to
the Company's operating results. At December 31, 1997, employees of the Company
held options to purchase 204,000 Valhi shares at prices ranging from $4.76 to
$14.66 per share (185,000 shares at prices lower than the December 31, 1997
quoted market price of $9.44 per share).

Upon completion of the Offering, five of the Company's officers and
directors will be awarded 81,100 shares of Class A Common Stock under the
Incentive Plan (as defined herein) for their services in connection with the
Offering, with an option to receive one-half of the value of such shares in cash
to satisfy individual income taxes related thereto. The number of Class A
shares to be awarded is based upon the Price to Public. The Company will value
the Class A shares awarded at the Price to Public, and the aggregate value of
the Class A shares awarded will be approximately $1.5 million. The Company will
recognize a charge, at the time of the completion of the Offering, equal to the
aggregate value of the Class A shares awarded and cash payments made.

About three-fourths of the Company's net sales are generated by its Canadian
operations. About 60% of these Canadian-produced sales are denominated in U.S.
dollars while substantially all of the related costs are incurred in Canadian

dollars. Consequently, relative changes in the U.S. dollar/Canadian dollar
exchange rate affect operating results. Since U.S. dollar/Canadian dollar
exchange rates have not fluctuated significantly since 1993, the impact on
operating income of fluctuations in the value of the U.S. dollar relative to the
Canadian dollar since 1993 has not been material.

The Company is included in the consolidated U.S. federal income tax return
of Contran, and a tax sharing agreement provides for allocation of tax
liabilities and benefits to the Company, in general, as though it filed a
separate U.S. federal income tax return. The principal reasons for the
difference between the U.S. federal statutory income tax rate and the Company's
effective income tax rates are explained in Note 8 to the Company's Historical
Consolidated Financial Statements included in this Prospectus. Upon completion
of the Offering, the Company will no longer be included in the consolidated U.S.
federal income tax return of Contran.
<PAGE> 32
RESULTS OF OPERATIONS

The table set forth below summarizes the Company's operating expenses as a
percentage of net sales:

Years ended December

31,

1995 1996 1997

Net sales 100% 100% 100%
Cost of sales 65 65 65

Gross profit 35 35 35
Selling, general and administrative 10 10 9

Operating income 25 25 26

</TABLE>

Year ended December 31, 1997 compared to year ended December 31, 1996

Net Sales. Net sales increased $20.0 million, or 22%, to $108.7 million for
the year ended December 31, 1997 from $88.7 million for the year ended December
31, 1996. The increase was primarily due to increased volume in ergonomic
computer support systems, precision ball bearing drawer slides and medium-
security cabinet locks. Combined net sales from the Company's ergonomic computer
support systems and precision ball bearing drawer slide products increased $15.8
million, or 25%, based on higher unit volumes and relatively stable prices.
Medium-security cabinet lock sales increased $3.6 million, or 15% based
primarily on higher unit volumes and to a lesser degree on certain price
increases instituted at the beginning of 1997.

Operating income. Operating income increased $6.2 million, or 28%, to $28.3
million for the year ended December 31, 1997 from $22.1 million for the year
ended December 31, 1996, due primarily to increases in sales volumes. Operating
income margin improvement in the 1997 was primarily influenced by the
elimination of certain unprofitable or low-margin product lines acquired in 1995
and increased sales of higher margin ergonomic computer support systems and
precision ball bearing drawer slides. These improvements were partially offset
by higher raw material prices, primarily steel. Beginning in August 1997 steel
prices have increased approximately 4% per pound, resulting in an overall
increase in raw material cost of approximately 2% in 1997 compared to 1996.

On February 3, 1998, the Company signed a definitive agreement concerning
the Fort Lock Acquisition. On a pro forma basis, assuming the Fort Lock
Acquisition had occurred on January 1, 1997, the Company's net sales in 1997
would have been $137.9 million and operating income in 1997 would have been
$30.0 million. See "Recent Developments" and Pro Forma Condensed Consolidated
Financial Statements presented elsewhere in this Prospectus.

Year ended December 31, 1996 compared to year ended December 31, 1995

Net sales. Net sales increased $8.5 million, or 11%, to $88.7 million for
the year ended December 31, 1996 from $80.2 million for the year ended December
31, 1995. The increase was primarily due to increased volumes in
<PAGE> 33
ergonomic computer support systems and precision ball bearing drawer slides.
Combined net sales from the Company's ergonomic computer support systems and
precision ball bearing drawer slide products increased $8.8 million, or 16%,
based on higher unit volumes and relatively stable prices. Medium-security
cabinet lock sales decreased $.9 million, or 4%, as an increase in sales of the
Company's proprietary KeSet(R) locks was more than offset by lower sales volumes
from the government contract that was completed in early 1995.

Operating income. Operating income increased $2.2 million, or 11%, to $22.1
million for the year ended December 31, 1996 from $19.9 million for the year
ended December 31, 1995, due primarily to increases in sales volumes in
ergonomic computer support systems and precision ball bearing drawer slides.
Operating income margins for the Company's cabinet lock sales improved slightly
in 1996 primarily due to cost savings and efficiencies from the consolidation of
certain Canadian lock operations acquired in 1992. The improvement in operating

income margins for cabinet locks was offset by slight declines in operating
income margins of ergonomic computer support systems and precision ball bearing
drawer slides due in part to the adverse effect of certain unprofitable or low-
margin product lines acquired in August 1995.

Year 2000 Issue

As a result of certain computer programs being written using two digits
rather than four to define the applicable year, certain computer programs that
have date sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000 (the "Year 2000 Issue"). This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in normal business activities.

The Company's recently installed information systems upgrades for both its
U.S. and Canadian facilities contained, among many other features, software
compatibility with the Year 2000 Issue. The Company does not currently
anticipate spending significant additional funds to address software
compatibility with the Year 2000 Issue with respect to its own internal systems.

The Company intends to initiate formal communications with its significant
suppliers and large customers to determine the extent to which the Company may
be vulnerable to those third parties' failure to eliminate their own Year 2000
Issue. There can be no assurance that the systems of other companies on which

the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
Because the Company has not completed the evaluation of its Year 2000 Issue with
respect to such third parties, it is not able to quantify the costs that the
Company may incur with respect to the Year 2000 Issue of such third parties.

Impact of accounting standards not yet adopted

See Note 2 to the Company's Consolidated Financial Statements.

<PAGE> 34
LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows

Operating activities. Trends in cash flows from operating activities,
excluding changes in assets and liabilities, for 1995, 1996 and 1997, are
generally similar to the trends in the Company's earnings. Cash flow provided
by operating activities totaled $12.8 million, $10.5 million and $23.0 million
for the years ended December 31, 1995, 1996 and 1997, respectively, compared to
net income of $12.1 million, $13.0 million, and $16.7 million, respectively.
Depreciation and amortization increased in 1996 in part due to higher
depreciation associated with the August 1995 business acquisition discussed
above and increased in 1997 due to higher levels of capital expenditures
discussed below.

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 and result in trends in cash flows from
operating activities generally reflecting earnings trends.

Investing activities. Net cash used by investing activities totaled $8.0
million, $2.0 million and $5.5 million for the years ended December 31, 1995,
1996 and 1997, respectively. 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 increase in capital expenditures in 1997 relates primarily
to the additions of a third plating line and office building additions at the
Company's Kitchener facility. Net cash used by investing activities in 1995
includes $6.0 million related to the business acquisition discussed above.

Capital expenditures for 1998 are estimated at approximately $7 million,
(approximately $9 million assuming the Fort Lock Acquisition is completed) the
majority of which relate to projects that emphasize improved production
efficiency and increase production capacity. Firm purchase commitments for
capital projects not commenced at December 31, 1997 were not material.

Financing activities. Net cash used by financing activities totaled $6.3
million, $6.3 million and $5.9 million for the years ended December 31, 1995,
1996 and 1997, respectively. The Company paid dividends to its parent company
aggregating $6.0 million in 1995, $6.2 million in 1996 and $6.1 million in 1997.

Other

At December 31, 1997, approximately 70% of the Company's consolidated cash
and equivalents were invested in A1 or P1 - grade commercial paper issued by
various third parties having a maturity of three months or less.

On December 12, 1997, the Company paid a $50 million dividend to Valcor in
the form of the Valcor Note. The Valcor Note is unsecured and bears interest at
a fixed rate of 6%.

The Company plans to enter into a new $100 million Revolving Senior Credit
Facility and use the proceeds to repay the Valcor Note. The Revolving Senior
Credit Facility is expected to be an unsecured five-year revolving facility.
Borrowings are expected to be available for the Company's general corporate
purposes, including potential acquisitions. The Revolving Senior Credit
Facility is expected to contain provisions which, among other things, would
require the maintenance of minimum levels of net worth, require the
<PAGE> 35
maintenance of certain financial ratios, limit dividends and additional
indebtedness and contain other provisions and restrictive covenants customary in
lending transactions of this type. Prior to the Offering, the Company expects
to repay the Valcor Note with borrowings under the Revolving Senior Credit
Facility.

The net proceeds to the Company from the Offering (based on an assumed
offering price of $18.50 per share) will be approximately $80.4 million. Such
net proceeds will be available to repay borrowings under the Revolving Senior
Credit Facility and to fund the Fort Lock Acquisition.

On February 3, 1998, the Company executed a definitive agreement concerning
the Fort Lock Acquisition. See "Recent Developments". CompX[trademark] will
(i) acquire all of the outstanding stock of Fort Lock Corporation for cash
consideration of approximately $30 million, (ii) acquire the net assets of
Fortronics, Inc., for $.5 million and (iii) purchase Fort Lock Corporation's
manufacturing building owned by a shareholder of Fort Lock for $2.5 million
(collectively the "Fort Lock Acquisition"). The aggregate purchase price is
subject to possible reduction pending completion of a post closing audit.
Funding of the Fort Lock Acquisition is expected to be provided by available
cash on hand, including net proceeds of the Offering remaining after repayment
of borrowings outstanding under the Senior Credit Facility. Although, the
Company's obligations to conclude the purchase are not conditioned upon the
completion of the Offering or any other financing, the Company intends to use a
portion of the proceeds of the Offering to fund the acquisition. The
consummation of the purchase is subject to the expiration of the applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, confirmation of the accuracy of certain representations, warranties
and covenants of the parties, the absence of certain material adverse
developments, receipt of required consents and certain other conditions.
There can be no assurance that the Fort Lock Acquisition will be successfully
completed or that completion of the transaction can be accomplished on the terms
set forth above.

Management believes that the net proceeds to the Company from the Offering,
after repayment of borrowings under the Revolving Senior Credit Facility,
together with cash generated from operations and borrowing availability under
the Revolving Senior Credit Facility, will be sufficient to meet the Company's
liquidity needs for working capital, capital expenditures and debt service. See
also "Dividend Policy."
<PAGE> 36

BUSINESS
GENERAL

CompX[trademark] is a leading manufacturer of ergonomic computer support
systems, precision ball bearing drawer slides and medium-security mechanical
locks for office furniture and a variety of other applications. The Company's
products are principally designed for use in medium- to high-end applications,
where product design, quality and durability are critical to the Company's
customers. CompX[trademark] believes that, in the North American market, it is
among the largest producers of ergonomic computer support systems for office
furniture manufacturers, among the largest producers of precision ball bearing
drawer slides and among the largest producers of medium-security cabinet locks.
In 1997, CompX[trademark] generated net sales of $108.7 million, a 22% increase
from the corresponding prior-year period. In 1997, ergonomic computer support
systems, precision ball bearing drawer slides and medium-security mechanical
locks accounted for approximately 34%, 39% and 26% of net sales, respectively.

OFFICE FURNITURE INDUSTRY DYNAMICS

Approximately 75% of the Company's products are sold to the office
furniture manufacturing industry while the remainder (principally mechanical

locks) are sold for use in other products, such as vending equipment, postal
boxes, electromechanical enclosures and other non-office furniture and
equipment. The U.S. office furniture market generated wholesale sales of
approximately $10.0 billion in 1996, according to estimates by the BIFMA. The
dollar value of U.S. office furniture industry shipments has increased in 23 of
the past 25 years and, according to BIFMA, is estimated to have grown at a
compound annual rate of approximately 8.4% over the four year period ended
December 31, 1997. BIFMA currently estimates that office furniture sales over
the next two years will grow at a compound annual rate of approximately 7%. The
rate of growth in this industry ultimately will be affected by certain
macroeconomic conditions such as service industry employment levels, corporate
cash flow and non-residential construction levels. CompX[trademark] management
believes that the sales of its ergonomic computer support systems are
experiencing substantially higher rates of growth than the office furniture
industry as a whole.

office furniture designs that embrace office sharing concepts such as office
"hoteling" and open office designs. The Company's products target manufacturers
of new furniture designed to address these industry dynamics as well as
customers that specialize in retrofitting existing office furniture.
<PAGE> 37

The Company manufactures locks for a wide variety of enclosures, excluding
vehicles and homes. In addition to locks used by furniture manufacturers, the
Company's locks are used for postal boxes, vending equipment and parking meters.
These products are sold to markets which include institutional cabinets for
school and laboratory construction, household furniture and appliances,
industrial tool boxes, vending equipment, electromechanical imaging equipment,
locking electrical enclosures, banking equipment and mail boxes. The Company
also distributes approximately 30% of its lock sales through its innovative
STOCK LOCKS[registered trademark] programs which distribute locks to locksmith
and small manufacturer markets.

COMPETITIVE STRENGTHS

Industry brand recognition and management experience. The Company's
business traces its roots to 1903 when it began manufacturing cabinet locks.
The Company is a supplier to major OEMs and believes its brand names are well
recognized in the industry. CompX[trademark] currently markets its drawer
slides and ergonomic computer support systems under the Waterloo Furniture

Components Limited(R) name and markets its medium-security locks under the
National Cabinet Lock(R) name. The top seven executive management personnel
have over 100 years of combined industry experience.

Emphasis on customer collaboration. CompX[trademark] has been a leader in
collaborating with customers to develop innovative customized solutions to their
unique needs for product design, application, performance and cost. An
important ingredient to this approach is the Company's full-time engineering
staff of 25 individuals and approximately $3 million in annual expenditures for
product design, development and engineering. Management believes that the
Company's responsiveness and commitment to work with customers has been critical
to its success to date.

Efficient manufacturing base. CompX[trademark] has established highly
automated manufacturing systems and uses statistical process control techniques
to achieve its demanding quality standards. The Company designs and custom
modifies certain of the high-volume equipment it uses to improve the
manufacturing and assembly of its products, and has invested substantial capital
in manufacturing automation and vertical integration. The Company believes that
these initiatives reduce the Company's costs and improve product quality,
productivity and delivery response time.

Integrated information systems. The Company regularly invests in its
information systems to reduce inventories, improve the efficiency of its
manufacturing processes and reduce customer order fulfillment times. With
recently installed systems upgrades both in Canada and the United States,
CompX[trademark] has fully integrated all stages of manufacturing process
information and order fulfillment. These investments have allowed the Company to
continually reduce order fulfillment times and increase the use of just-in-time
supplier relationships.

<PAGE> 38

Breadth of product line. CompX[trademark] has a broad product line in its
core product areas, which allows the Company to serve an increasing proportion
of its customers' requirements. This provides several benefits to the Company,
including the simplified logistics and reduced cost of shipping higher volumes
of product to its customers, closer working relationships with its key customers
and increased cross-selling opportunities.

GROWTH STRATEGY

Continue to create innovative products. The Company intends to continue its
focus on engineering and customer collaboration to develop and sell customized
versions of its core product line and to develop new versions of existing
product lines to meet the changing requirements of office furniture
manufacturers. The Company will attempt to increase its share of the total OEM
market for components such as electronic locking systems, a service workplace
safety-oriented "Cushion-Close[trademark]" drawer slide and a locking laptop
computer drawer. CompX[trademark] will also consider expanding its product line
to include other furniture components with similar attributes such as one or
more of the components used in the rapidly growing seating industry.

Extend into non-furniture applications. The Company's precision ball
bearing drawer slide products increasingly are designed for and used in
applications other than traditional office furniture. For example, the Company
has designed and currently sells precision ball bearing drawer slides to
facilitate the movement of component parts in imaging machines, for professional
tool storage cabinets and other uses. CompX[trademark] will continue to explore
alternative applications for its products based on core product design and
manufacturing strengths.

Continue to make strategic acquisitions. In addition to internal growth,
the Company intends to grow through selective acquisitions. The markets in
which the Company competes have a large number of relatively small regional
manufacturers and consequently offer potential consolidation opportunities. The
Company seeks acquisitions that complement its existing products,
manufacturing/design skills or customer base. The Company historically has been
able to benefit from acquisitions through economies of scale in purchasing,

manufacturing, marketing and distribution and through the application of the
Company's manufacturing and management skills. On February 3, 1998, the Company
executed a definitive agreement concerning the purchase of the Fort Lock Group.
The Fort Lock Group is a vertically integrated manufacturer of highly engineered
mechanical locks for a diverse customer base of original equipment manufacturers
and locksmith distributors. See "Recent Developments".

<PAGE> 39

Promote alternative distribution programs. While office furniture OEMs are
expected to remain the Company's primary customers, CompX[trademark] also
intends to explore new distribution arrangements for the Company's products. The
Company's innovative STOCK LOCKS(R) distribution program, for example, offers a
broad range of products that generally ship within 48 hours of order placement
to customers that purchase the Company's locks in small quantities. Currently,
approximately 30% of the Company's lock sales are made through this program. In
1992, the Company began to implement similar alternative distribution programs
for its ergonomic computer support systems and precision ball bearing drawer
slides to allow the Company to reach an expanded range of customers of these
products on an economically attractive basis. Since their addition to the
Company's distributor product line in 1992, sales of these products to the
distributor market have increased and now represent approximately 10% of
combined ergonomic computer support systems and precision ball bearing drawer
slide net sales.

Expand into international markets. While CompX[trademark] has historically
focused on marketing its products in North America, the Company has a small but
growing presence in international markets. The Company believes that there is
significant demand for its quality, precision products in overseas markets, and
intends to increase its international presence, particularly in Asia and Latin

America, via expanded distributor relationships and, potentially, joint venture
arrangements.

The Company was incorporated in Delaware in 1993. Its principal corporate
offices are located at 200 Old Mill Road, Mauldin, South Carolina 29662 and
its telephone number is (864) 297-6655.

PRODUCTS

CompX[trademark] manufactures and sells components in three major product
lines: ergonomic computer support systems, precision ball bearing drawer slides
and medium-security cabinet locks. The Company's ergonomic computer support
systems and precision ball bearing drawer slides are sold under the Waterloo
Furniture Components Limited(R) name and the Company's medium-security cabinet
locks are sold under the National Cabinet Lock(R) name. The Company believes
that its brand names are well recognized in the industry.

Ergonomic computer support systems. CompX[trademark] is a leading
manufacturer and innovator in ergonomic computer support systems for office
furniture. Unlike products targeting the residential market, which is more
price sensitive with less emphasis on quality, the CompX[trademark] line
consists of more highly engineered products designed to provide ergonomic
benefits for business and sophisticated retail users.

The Company's ergonomic computer support systems include adjustable
computer keyboard support arms. These devices are designed to attach to office

desks in workplace environments where there exists a need to permit computer
users to adjust their computer keyboard to various heights and positions to
alleviate possible strains and stress which may result from repetitive
activities, such as typing. These products also maximize usable workspace and
permit the storage of the keyboard underneath the desk. CompX[trademark]
introduced its first ergonomic keyboard arm in 1983 and the Leverlock(R)
adjustment mechanism in 1989, which is designed to make the adjustment of the
keyboard arm easier for all (including impaired) users.

Adjustable computer table mechanisms address the need for flexibility and
adjustability in work surfaces. The Company's adjustable table mechanisms
<PAGE> 40
provide adjustable workspace heights that permit users to stand or sit and that
can be easily adjusted for different user needs.

The prevalence of computers in the workplace has also created a need for
safe and convenient storage solutions for the central processor unit ("CPU")
case. In 1997, the Company introduced a CPU storage device that can be mounted
under a work surface or on the side of desk panels to store the CPU case off the
floor to minimize the adverse effects of dust and moisture or damage from
accidental impact. The unit operates on a slide mechanism that also pivots to
provide ease of access to peripheral connections while allowing convenient,
unobtrusive storage.

CompX[trademark] also offers a number of complementary accessories to its
main products. These include ergonomic wrist rest aids, mouse pad supports and
computer monitor support arms, such as the Monitor Master for the adjustment of
heavy monitors to reduce eye strain.

Precision ball bearing drawer slides. CompX[trademark] manufactures a
complete line of precision ball bearing drawer slides for use in moving
containers and drawers both in office furniture as well as other applications.
Precision ball bearing drawer slides are manufactured to stringent industry
standards and are designed in conjunction with office furniture OEMs to meet the
needs of end users with respect to weight support capabilities and ease of
movement.

In addition to its basic product line, an increasing proportion of the
Company's sales is based on patented innovations. In 1994, CompX[trademark]
introduced the Butterfly[trademark] Take Apart System, which is designed to
easily disengage drawers from filing cabinets. The following year, the Company
began selling its Integrated Slide Lock ("ISL[trademark]"), with which a file
cabinet manufacturer can reduce the possibility of multiple drawers being opened
by the user at the same time, significantly reducing the risk of injury from a
falling cabinet. The Company's patented concept affords the cabinet OEMs cost
savings advantages in production, since the ISL[trademark] is designed as an
integral part of the drawer slide, compared to custom fabricated add-on
solutions previously utilized by most manufacturers.

In recent years, applications other than office furniture have represented
a rapidly growing source of demand for the Company's precision ball bearing
drawer slides. Recently, new opportunities in heavy-duty applications such as
tool storage cabinets and electromechanical applications have created new market
opportunities. As a result of the design efforts focused on these markets,
CompX[trademark] created the Ball Lock[trademark] to prevent heavily filled
drawers, such as auto mechanic tool boxes, from opening while cabinets are moved

during routine use in the field. The Company's products are used extensively in
professional toolboxes and, increasingly, in electromechanical imaging equipment
to facilitate the movement of machine components in the document reproduction
process.

Cabinet locks. The Company believes that it is among the largest North
American manufacturers of medium-security cabinet locks. The Company
manufactures lock mechanisms that generally fall into three categories: disc
tumbler locks, pin tumbler locks and KeSet[registered trademark] high security
locks. Completion of the Fort Lock Acquisition will expand the Company's
offering of lock-mechanisms to include tubular locks and locks for motorcycles.

Disc tumbler locks, also called wafer tumbler or plate tumbler, derive
their keying from a series of flat tumblers with a hole in the middle through
which the key passes to open the lock. This type of lock is normally limited
<PAGE> 41
to two levels of keying, a passkey and one master key. A disc tumbler lock is
the least secure of the medium-security cabinet locks manufactured by the
Company and also represents the lowest cost to produce, resulting in lower
selling prices to customers.

Pin tumbler locks are keyed with a series of small pins manufactured on
automatic screw machines. A stack of four or five pins is required for each cut
in a key. Due to the increased number of parts, this type of lock is more costly
to manufacture than disc tumbler locks, but is also more secure and offers
increased variety in keying with more than one level of master keying.

The Company's patented high security KeSet(R) security system, introduced
in 1980, is another version of a pin tumbler lock. However, parts are

manufactured with hardened steel components to prevent forced entry. A
significant feature of the product line is the ability to change the keying on a
single lock 64 times without removing the lock from its enclosure. This product
is used primarily to protect money in applications such as soft drink vending
machines, gaming machines and parking meters.

The Company's industrial sales are primarily to manufacturers of cabinet
enclosures, from office furniture to electrical circuit panels to vending
machines. CompX[trademark], like most cabinet lock companies, has a
standardized product line suitable for many customers. However, a substantial
portion of the Company's volume involves specialized adaptations to individual
manufacturer's enclosure specifications.

Each of the industries served with cabinet locks has a distribution segment
for replacement needs or for supply to small shops whose volume is not
substantial enough to buy direct from a lock manufacturer. CompX[trademark] has
met this need in part with its industry-unique STOCK LOCKS(R) inventory program.
Partially as a result of this program, the Company believes it holds the largest
cabinet lock market share in both locksmith and hardware component distribution.

The Company's STOCK LOCKS(R) distribution program represents 30% of its
cabinet lock sales. This program is comprised of over 900 stock keeping units
(also referred to as SKUs) of standardized locking products. This program
plans, manufactures and packages locks to inventory with a variety of keying and
finishes for shipment to customers generally within 48 hours of receipt of the
customer order.

Sales under this program are made both to a North American distribution
network as well as to large OEMs when special needs require either smaller
quantities or non-special products other than their normal volume requirements.
The distribution network supplies the Company's products both to after-market
replacement markets and to smaller cabinet shop manufacturers who do not
purchase direct from the Company due to their smaller size.

The established distributor network for STOCK LOCKS(R) has been used to
develop a standardized product line in other segments of the Company's products.
Currently both ergonomic computer support systems and, to a limited extent,
precision ball bearing drawer slides, are enjoying growing marketing success
through these and new ergonomic distribution channels.

PRODUCT DESIGN AND DEVELOPMENT

CompX[trademark] believes its ability to provide customized engineering to
respond to specific customer application requirements provides it a competitive
advantage, especially in middle- to high-end applications. A
<PAGE> 42
dedicated and knowledgeable engineering and marketing staff continually
collaborates with the Company's customers to identify and solve production and
marketing issues. The Company's commitment to precision design and engineering
to specific customer tolerances is a key element to its ability to serve
effectively the niche markets for its products. CompX[trademark] has 25 full
time engineers on staff and expends approximately $3 million annually for
product engineering, design and development to enhance and expand product
capabilities.

Customer product development needs and changing market characteristics are
the key drivers influencing the Company's product development efforts. Once a
customer has identified a concept, development engineers design solutions to
address the application requirements. Normally, several generations are
evaluated on the Company's CAD system. During this process, CompX[trademark]
engineers regularly communicate with the targeted customer to ensure that the
design meets the customer's specific needs. If the product is being developed
as a general line product, the basic design work is accomplished through
consultation between the Company's engineering, marketing and manufacturing
departments as well as from market intelligence derived from target customers.

In order to ensure that the product design is workable, a prototype sample
is produced for use during an initial market evaluation of the product's
functionality. The Company's engineers may make modifications of the initial
design at this stage to ensure proper aesthetics or functional capabilities.
Once the component design is finalized, the Company's engineers design and
produce tools to manufacture the components. Depending on the type of tools,
production time can be as little as a few weeks to as much as six months.

As one of the initial developers of ergonomic computer support systems in
the mid 1980s, CompX[trademark] has on numerous occasions introduced new and
unique products which have led the industry. Examples include the initial
introduction of the Model 4100 keyboard arm in 1983, the Leverlock(R), which
simplifies the adjustment of the keyboard arm, the Monitor Master, which
facilitates the adjustment of heavy monitors so as to reduce eye strain, and
various types of accessories such as mouse trays and pads of a unique and
proprietary nature. In 1997, the Company introduced a CPU storage device that
can be mounted off the floor either under a work surface or on the side of desk
panels to minimize dust contamination or damage from accidental impact. The

Company is currently working on several new generations of ergonomic products
such as a new version of easily adjustable keyboard arms, including aesthetic
improvements. In response to the increased use of laptop computers, a new
product is in the design process to address ease of use and security for these
computers.

During the 1990's, CompX[trademark] emerged as one of the more innovative
companies in the design and manufacture of precision ball bearing drawer slides.
The Company has designed and currently sells precision ball bearing drawer
slides to facilitate the movement of component parts in imaging machines, for
professional tool storage cabinets and other uses. Examples of other innovative
products include the patented ISL[trademark] and the patented Ball
Lock[trademark]. Development continues on a new "Cushion Close[trademark]"
drawer slide to aid in the safe operation of overhead storage bin doors, and
introduction of this new product is expected in mid-1998.

In 1980, the Company introduced the patented KeSet(R) Security System which
has since gained acceptance as a cost effective product in the vending industry
where protection of money collection is paramount. While many of the
<PAGE> 43
product development efforts in the cabinet lock industry are adaptations of
existing products in the pin tumbler or disc tumbler product line, products
introduced in the past few years include the pin tumbler "Advantage
Plus[trademark] System" allowing easy removal of the cylinder for re-keying in
the field without removing the lock from the original installation. A new
patented Snap-in locking system for institutional furniture allows either pin
tumbler or disc tumbler keying to be determined after installation, which
reduces customer inventories and allows improved delivery speed of their

products. In late 1997, the Company commenced customer field testing of an
electronic locking system and the product is experiencing good operating results
in its original test site.

SALES, MARKETING AND DISTRIBUTION

CompX[trademark] sells components to OEMs and to distributors through a
specialized sales force. The majority of the Company's sales is 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 salaried
field salespeople and independent manufacturer's representatives. Manufacturers'
representatives are selected based on special skills in certain markets or with
current or potential customers. Cabinet locks are sold by a separate network of
Company-employed salespeople and manufacturers' representatives as well as
factory-based national account managers.

A significant portion of the Company's cabinet lock sales and a growing
portion of ergonomic computer support systems and precision ball bearing drawer
slides sales are made through hardware component distributors. The Company also
has a significant market share of cabinet lock sales to the locksmith
distribution channel. CompX[trademark] 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(R) inventory program, similar programs have been implemented for
distributor sales of ergonomic computer support systems and to some extent

precision ball bearing drawer slides. Since their addition to the Company's
distributor product line in 1992, sales of these products to the distributor
market have grown to represent approximately 10% of combined ergonomic computer
support systems and precision ball bearing drawer slide net sales.

To afford a competitive advantage to the Company as well as to customers,
ergonomic computer support system and precision ball bearing drawer slides are
delivered primarily by means of a Company-owned tractor/trailer fleet. This
satellite-monitored fleet improves the timely and economic delivery of products
to customers. Another important economic advantage to the Company's customers
of an in-house trucking fleet is that it allows the shipment of many products in
returnable metal baskets (in lieu of corrugated paper cartons), which avoids
both the environmental and economic burden of disposal.

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 component products
operations. The ten largest customers accounted for about one-third of
component products sales in each of the past three years, with the largest
customer less than 10% in each year. In 1996, five of the ten largest customers
were located in the United States with four located in Canada. Of such
customers, all were primarily purchasers of slides and
<PAGE> 44
ergonomic computer support system components.

ACQUISITION STRATEGY

In addition to pursuing internal growth opportunities, the Company intends
to grow through acquisitions. The markets in which the Company competes have a
large number of relatively small regional manufacturers and consequently offer
potential consolidation opportunities. The Company seeks acquisitions that
complement its existing product lines, provide access to new market segments or

expand the offering of proprietary products. The Company believes that it has
been able to achieve synergies from acquisitions through economies of scale in
purchasing, manufacturing, marketing and distribution and through the
application of the Company's manufacturing and management skills.

Since 1990, the Company has utilized cash flow from operations to complete
two acquisitions. In 1992 the Company acquired in a bankruptcy liquidation the
assets of a Canadian manufacturer of precision ball bearing drawer slides and
cabinet locks for $2 million. At the time of acquisition the operations had
sales of approximately $3.2 million and operated at break-even operating profit.
In 1995 the Company acquired the assets of another Canadian manufacturer of
precision ball bearing drawer slides and ergonomic products for $6 million. At
the time of acquisition the operations had sales of approximately $5.6 million
and operated at a slight operating loss. As a result of integrating these
operations into the Company's operations and eliminating unprofitable product
lines, these operations currently contribute approximately $8 million in net
sales and $2 million in operating income annually.

MANUFACTURING AND OPERATIONS

CompX[trademark] operates three manufacturing facilities which it owns and
leases one facility as a distribution center. The following table sets forth
the location, size and general product types produced for each of these
facilities.

<TABLE>
<CAPTION>
PRODUCTS
PRODUCED
FACILITY NAME LOCATION SIZE

(square
feet)
<S> <C> <C> <C>
Manitou Kitchener, 208,200 Ergonomic
Ontario products,
slides
Trillium Kitchener, 116,000 Ergonomic
Ontario products,
slides
Mauldin Mauldin, SC 159,200 Locks

Distribution Chino, CA 6,000 Product
Center Distribution
</TABLE>

<PAGE> 45

The Manitou and Mauldin facilities are ISO-9001 registered. ISO-9001
registration of the Trillium facility is anticipated in 1998. The Company
believes that all its facilities are well maintained and satisfactory for their
intended purposes.

The Company's facilities currently operate approximately two shifts per
day, five to six days per week.

CompX[trademark] has focused on its operating cost structure and timely
capital investment in equipment and processes. This investment has allowed the
Company to reduce lead times to its customers and to implement "just-in-time"
production methods to improve inventory turns. For example, the Company has
reduced the lead time for STOCK LOCKS(R) shipments from two weeks to 48 hours
through investments that focus on enhancing automation and managed information
systems. With the recently installed information systems upgrades,
CompX[trademark] has fully integrated all stages of manufacturing process
information.

Continued investment in automation should allow the Company to remain price
competitive in the marketplace and should also ensure consistent quality of the
products being produced. As speed of delivery continues to gain importance with
all OEM customers, automation provides production speed and the flexibility to
quickly react to sudden changes in customer demand.

RAW MATERIALS

Coiled steel is the major raw material used in the manufacture of precision
ball bearing drawer 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 medium-security cabinet
locks. These raw materials are purchased from several suppliers and 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 the specified minimum monthly purchase quantities are
met. The Company currently anticipates entering into such arrangements for zinc,
coiled steel and plastic resins for 1998 and does not anticipate significant
changes in cost of these materials from their current levels. 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 and consequently overall
operating margins can be affected by such raw material cost pressures.
<PAGE> 46

COMPETITION

The office furniture market is highly competitive. Suppliers to office
furniture OEMs compete on the basis of (i) product design, including ergonomic
and aesthetic factors, (ii) product quality and durability, (iii) price
(primarily in the middle and budget segments), (iv) on-time delivery and (v)
service and technical support. The Company focuses its efforts on the middle-
and high-end segments of the market, where product design, quality and
durability are placed at a premium.

The cabinet lock market is also highly competitive. This market is highly
fragmented with a number of small- to medium-sized manufacturers that supply the
market. Cabinet lock manufacturers compete on the basis of (i) product design,
(ii) custom engineering capability, (iii) price and (iv) order fulfillment lead
times.

The Company believes it derives a significant competitive advantage as a
result of its focus on (i) a collaborative approach to product design and
engineering, (ii) increased manufacturing and assembly automation and (iii)
implementation of distribution programs that reduce order fulfillment times.

The Company competes in its ergonomic computer support systems with a small
number of manufacturers that compete primarily on the basis of product quality
and features. The Company competes in the precision ball bearing drawer slide
market with one large manufacturer and a number of smaller manufacturers that
compete primarily on the basis of product quality and price. The Company's
medium-security cabinet locks compete with a variety of relatively small
competitors, which makes significant price increases difficult.

Certain of the Company's competitors may have greater financial, marketing,
manufacturing and technical resources than those of the Company. Although the
Company believes that it has been able to compete successfully in its markets to
date, there can be no assurance that it will be able to continue to do so in the
future. See "Risk Factors--Competition."

PATENTS AND TRADEMARKS

CompX[trademark] holds a number of patents relating to its component
products operations, none of which by itself is considered significant, and owns
a number of trademarks, including National Cabinet Lock(R), STOCK LOCKS(R) and
Waterloo Furniture Components Limited(R), which the Company believes are well
recognized in the component products industry.

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 has 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
with future laws and regulations governing worker health and safety will not
require the Company to incur significant
<PAGE> 47

additional expenditures, or that such additional costs would not have a material
adverse effect on the Company's business, results of operations, or financial
condition.

EMPLOYEES

As of December 31, 1997, the Company employed approximately 950 employees,
including 270 in the United States and 680 in Canada. Approximately 80% of the
Company's employees in Canada are represented by the United Steel Workers of
America labor union. The Company's collective bargaining agreement with such
union expires in January 2000. The Company believes that its labor relations
are satisfactory.

LEGAL PROCEEDINGS

The Company is involved, from time to time, in various environmental,
contractual, product liability and other claims and disputes incidental to its
business. Currently no 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.

<PAGE> 48

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL

Set forth below is certain information (ages as of February 1, 1998)
relating to the current directors, executive officers and key personnel of the
Company.

<TABLE>
<CAPTION>
NAME AGE OSITION(S)

Glenn R. Simmons..... 70 Chairman of the Board

David A. Bowers...... 60 President, Chief Executive
Officer and
Director

Robert W. Singer..... 61 Director

Edward J. Hardin..... 55 Director

Paul M. Bass, Jr..... 62 Director

Joseph S. 48 Executive Vice President, Chief
Compofelice.......... Financial Officer and Director

Ronald J. Simmons.... 59 Vice President; President,
Waterloo
Furniture Components Limited

Neil M. Poag......... 57 Vice President-Finance, Waterloo
Furniture Components Limited

Robert J. Ward....... 45 Vice President-Manufacturing,
Waterloo
Furniture Components Limited

David A. Carter...... 43 Vice President-Sales & Marketing,
Waterloo Furniture Components
Limited

Scott C. James....... 32 Vice President-Sales & Marketing,
National Cabinet Lock

Emory E. Hodges...... 35 Vice President-Operations,
National
Cabinet Lock

J. Mark 46 General Counsel
Hollingsworth........

Bobby D. O'Brien..... 40 Vice President and Treasurer

William J. Lindquist 40 Vice President and Tax Director
....................

Steven L. Watson..... 47 Vice President and Secretary
</TABLE>

GLENN R. SIMMONS has served as Chairman of the Board since the Company's
formation in 1993. Mr. Simmons is also a member of the Company's Management
Development and Compensation committee. Mr. Simmons has served as a director of
Valhi or certain of Valhi's predecessors since 1980. Mr. Simmons has been Vice
Chairman of the Board of Valhi and Contran, a diversified holding company, since
prior to 1993. Mr. Simmons' positions also include: director of Valhi's
majority owned subsidiary, NL Industries, Inc., a titanium dioxide
<PAGE> 49
pigments and specialty chemicals company; Vice Chairman of the Board and a
director of Valcor; Chairman of the Board and a director of Contran's less-than-
majority-owned affiliate, Keystone Consolidated Industries, Inc. ("Keystone"), a
steel fabricated wire products, industrial wire and carbon steel rod company;
and a director of Contran's less-than-majority-owned affiliate, Tremont
Corporation, a holding company engaged in the titanium metals and chemicals
industries ("Tremont"). Mr. Simmons has been an executive officer or director
of various companies related to Contran since 1969. Mr. Simmons is the brother
of Harold C. Simmons.

DAVID A. BOWERS has served as President, Chief Executive Officer and a
director of the Company since the Company's formation in 1993. Mr. Bowers has
been employed by the Company and its predecessors since 1960 in various sales,
marketing and executive positions, having been named President of the Company's
cabinet lock and related segments in 1979. Mr. Bowers is a trustee and Chairman
of the Board of Monmouth College, Monmouth, Illinois.

ROBERT W. SINGER has served as a director of the Company since the
Company's formation in 1993. Mr. Singer has served as Vice President of Valhi
and Contran since prior to 1993. Mr. Singer has also served as President and

Chief Operating Officer of Keystone since prior to 1993 to February 1997 and as
Chief Executive Officer of Keystone since February 1997. Mr. Singer has served
as an executive officer or director of various companies related to Valhi and
Contran since 1982.

EDWARD J. HARDIN has served as a director of the Company since December
1997 and is chairman of the Company's audit committee and a member of the
Company's Management Development and Compensation committee. Mr. Hardin has
been a partner of the law firm of Rogers & Hardin LLP since its formation in
1976. Mr. Hardin is a director of Westrup, Inc. (seed processing machinery) and
also serves as Chairman of the Board of the Harvard Center for the Study of
World Religions.

PAUL M. BASS, JR. has been a director of the Company since December 1997
and is a member of the audit committee and chairman of the Company's Management
Development and Compensation committee. Mr. Bass also serves as a director of
Keystone. Mr. Bass's principal occupation for the past five years has been to
serve as Vice Chairman of First Southwest Company, a privately owned investment
banking firm. Mr. Bass is also Chairman of Richman Gordman Half Price Stores,
Inc., Chairman of MorAmerica Private Equities Company, a director and chairman
of the audit committee of California Federal Bank, a director and member of the
executive committee of Source Services, Inc. and a director of Jayhawk
Acceptance Corp. Mr. Bass is currently serving as a member of the executive
committee of Zale Lipshy University Hospital and as Chairman of the Board of
Trustees of Southwestern Medical Foundation.

JOSEPH S. COMPOFELICE has served as Executive Vice President of the Company
since December 1997. Mr. Compofelice has also served as Executive Vice
President of Valhi since 1994, Vice President and Chief Financial Officer of NL
and Tremont since 1994, a director of NL since 1995, and since 1996 Vice

President and Chief Financial Officer of Titanium Metals Corporation ("TIMET"),
Tremont's 30% owned principal operating affiliate and, except for a period
during 1996, a director of TIMET since 1994. From prior to 1993 to 1994, Mr.
Compofelice was the Vice President and Chief Financial Officer of Baroid
Corporation, a company engaged in the petroleum services industry that Dresser
Industries, Inc. acquired in 1994. Mr. Compofelice has served as an executive
officer or director of various companies related to Valhi and Contran since
1988.

<PAGE> 50

RONALD J. SIMMONS has served as a Vice President of the Company since
December 1997 and has also served as President of the Company's wholly owned
subsidiary, Waterloo Furniture Components Limited, since prior to 1993. Before
joining the Company, he held senior positions with Canadian General Electric,
The Molsons Companies, and Emco, Limited, a division of Masco Limited. Mr.
Simmons also serves on the boards of Schneider Corporation, a Canadian food
processor, and ACS Limited, a manufacturer of components for OEM and aftermarket
off road vehicles.

NEIL M. POAG has served as Vice President-Finance of Waterloo since 1995.
Mr. Poag has also served as Vice President-Controller of Waterloo Furniture
Components Limited from 1985 to 1995 and as Controller of Waterloo Furniture
Components Limited from 1980 to 1985.

ROBERT J. WARD has served as Vice President-Manufacturing of Waterloo
Furniture Components Limited since 1996. Mr. Ward has also served as Manager,
Engineering of Waterloo Furniture Components Limited from 1989 to 1996. From
the time he joined Waterloo Furniture Components Limited in 1986 as the Plant
Engineer to 1989, Mr. Ward has served in various other managerial positions with
Waterloo Furniture Components Limited.

DAVID A. CARTER has served as Vice President-Sales & Marketing of Waterloo
Furniture Components Limited since 1995. From 1991 to 1995 Mr. Carter served as
Director of Marketing for Waterloo Furniture Components Limited. Immediately
prior to Mr. Carter's joining the Company, he was the Vice President of
Marketing for Delta Faucet (Canada) Limited and prior to that he was the
Director of Marketing for Emco Limited, a Canadian division of Masco Limited.

SCOTT C. JAMES has served as Vice President-Sales & Marketing, National
Cabinet Lock division, of the Company since 1994. Mr. James has also served as
National Accounts Manager of the National Cabinet Lock division from the time he
joined the Company in 1992 to 1994. Prior to joining the Company, Mr. James was
a Branch Sales Manager of Global Life and Accident Insurance Company.

EMORY E. HODGES has served as Vice President-Operations, National Cabinet
Lock division, of the Company since he joined the Company in 1994. Mr. Hodges
was an Engineering Supervisor for Michelin Americas Research and Development
Corporation from 1984 to the time he joined the Company in 1994.

J. MARK HOLLINGSWORTH has served as General Counsel of the Company since
June 1996 and Senior or Legal Counsel to the Company since its formation. Mr.
Hollingsworth has also served as General Counsel of Valhi and Contran since
1996. From prior to 1993 to 1996, Mr. Hollingsworth served as Senior or Legal
Counsel for Valhi and Contran. Mr. Hollingsworth has served as legal counsel of
various companies related to Valhi and Contran since 1983.

BOBBY D. O'BRIEN has served as Vice President and Treasurer of the Company
since June 1997. Mr. O'Brien has also served as Vice President of Valhi and
Contran since October 1996 and Treasurer of Valhi since May 1997 and Contran

since June 1997. Since 1993, Mr. O'Brien has served as Treasurer, Vice
President-Finance or Vice President of Medite Corporation, a wholly owned
subsidiary of Valcor that operated Valhi's former buildings products business.
From 1988 to 1994, Mr. O'Brien served as Assistant Controller of Valhi and
Contran. Mr. O'Brien has served in financial and accounting positions with
various companies related to Valhi and Contran since 1988.

WILLIAM J. LINDQUIST has served as Vice President and Tax Director of the
Company since 1994. Mr. Lindquist has also served as Vice President and Tax
Director of Valhi and Contran since prior to 1993. Mr. Lindquist has
<PAGE> 51
served as an executive officer or director of various companies related to Valhi
and Contran since 1980.

STEVEN L. WATSON has served as Vice President and Secretary of the Company
since its formation. Mr. Watson has also served as Vice President and Secretary
of Valhi and Contran since prior to 1993. Mr. Watson has served as an executive
officer or director of various companies related to Valhi and Contran since
1980.

Each of the above-named directors of CompX[trademark] serves until the next
annual meeting of the stockholders of the Company or until their respective
earlier removal or resignation. Each of the above-named officers of
CompX[trademark] serves at the pleasure of the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established an audit committee (the "Audit
Committee") and a management development and compensation committee (the "MD&C
Committee"). The Company does not have a nominating committee.

The Audit Committee is comprised of Mr. Bass and Mr. Hardin, who serves as
chairman. The principal responsibilities of the Audit Committee are to review
the selection of the Company's independent auditors and to make its
recommendation with respect to such selection to the Board of Directors; to
review with the independent auditors the scope and results of the annual
auditing engagement, the procedures for internal auditing, the system of
internal accounting controls and internal audit results; and to direct and
supervise special audit inquiries. The Audit Committee will convene when deemed
appropriate or necessary by its members.

The MD&C Committee is comprised of Mr. Hardin, Mr. Bass and Mr. Glenn R.
Simmons, who serves as chairman. The principal responsibilities of the MD&C
Committee are to review and approve certain matters involving executive
compensation, including making recommendations to the Board of Directors
regarding compensation matters involving the Chief Executive Officer; to review
and approve grants of stock options and other awards under the Incentive Plan;
and to review and administer such other compensation matters as the Board of
Directors may direct from time to time. The MD&C Committee will convene when
deemed appropriate or necessary by its members.

COMPENSATION OF DIRECTORS

Directors of the Company who are not employees of the Company will receive
an annual retainer of $12,000, payable in quarterly installments, plus a fee of
$750 per day for attendance at meetings and at a daily rate for other services
rendered on behalf of the Board of Directors or committees thereof. In

addition, directors who are members of the Audit Committee or the MD&C Committee
will receive an annual retainer of $1,000, paid quarterly in installments, for
each committee on which they serve. Directors are reimbursed for reasonable
expenses incurred in attending meetings and in the performance of other services
rendered on behalf of the Board of Directors or its committees. Directors are
also eligible for awards under the Incentive Plan.

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS

Summary Compensation Table. The Summary Compensation Table below provides
certain summary information concerning annual and long-term compensation paid or
accrued by the Company to or on behalf of the Company's
<PAGE> 52
Chief Executive Officer and the four other most highly compensated individuals
in 1997 for services rendered to the Company (the "named executive officers").

SUMMARY COMPENSATION TABLE (a)

<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER

NAME AND PRINCIPAL YEAR SALARY ONUS

POSITION

<S> <C> <C> <C> <C>
David A. Bowers.......... 1997 $147,000 $125,000 $20,500
President and
Chief Executive
Officer

Ronald J. Simmons........ 1997 117,753 86,667 4,638
Vice President;
President-Waterloo
Furniture Components
Limited

Emory E. Hodges ......... 1997 80,028 27,113 13,667
Vice President-
Operations-
National Cabinet Lock

Scott C. James .......... 1997 83,200 36,508 16,164
Vice President-
Sales and Marketing-
National Cabinet Lock

Neil M. Poag ............ 1997 65,428 37,752 3,611
Vice President-

Finance-
Waterloo Furniture
Components Limited
</TABLE>

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

(a) Columns required by the rules and regulations of the Securities and
Exchange Commission (the "Commission") that contain no entries have been
omitted.

(b) These amounts represent contributions the Company made to certain of the
Company's defined contribution plans.

The Company, Valhi, Contran and certain related corporations have entered
into certain intercorporate services agreements between each other
(collectively, the "ISAs"). Pursuant to each ISA, the parties to the ISA agreed
to render certain services to the other in exchange for agreed upon fees and
reimbursements of costs, including executive officer services rendered to one
party by employees of the other. The fees paid pursuant to the ISAs are
generally based upon the estimated percentage of time individual employees,
including executive officers, devote to certain matters on behalf of the
recipient of the services. See also "Certain Relationships and Related
Transactions."

Messrs. Glenn Simmons, Singer, Compofelice, Hollingsworth, O'Brien,
Lindquist and Watson render services to the Company under the ISAs and receive
their compensation from affiliate companies that employ them. No employer of an
executive officer of the Company who rendered services in 1997 to the Company
under the ISAs received fees in excess of $100,000 from the Company
<PAGE> 53
attributable to such officer's services.

It has been Valhi's policy to award certain key employees of the Company
shares of restricted Valhi common stock or grant options to purchase Valhi
common stock under the terms of Valhi's stock option plans. After the Offering,
Valhi does not intend to continue this policy.

The following table provides information with respect to the named
executive officers concerning the exercise of Valhi options during 1997 and the
value of unexercised options to acquire Valhi common stock held as of December
31, 1997. No Valhi stock was awarded nor were options to purchase Valhi stock
granted to the named executives during 1997.

AGGREGATED OPTION EXERCISES IN 1997 AND DECEMBER 31, 1997 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXPIRED IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS/SARS AT
ON DECEMBER 31, 1997 (#) DECEMBER 31, 1997 (A)
EXERCISE VALUE
(B)

NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE

DAVID A. 38,000 $113,550 43,000 29,000 $102,048 $66,578
BOWERS
RONALD J. - - 20,000 10,000 51,388 20,715
SIMMONS
EMORY E. - - 4,000 6,000 5,750 8,625
HODGES
SCOTT C. JAMES 7,000 17,748 - 8,000 - 14,670
NEIL M. POAG - - 5,000 5,000 13,998 10,358
</TABLE>

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

(a) The aggregate amount represents the difference between the exercise price
of the individual stock options and Valhi's $9.4375 per share closing price
as of December 31, 1997 as reported on the NYSE composite tape.

(b) Pursuant to an agreement between the Company and Valhi, Valhi receives the
full market value on the date of exercise of any Valhi common stock issued
to such person pursuant to the exercise of stock options granted to such
person. The employee pays Valhi the exercise price and the Company pays
Valhi the difference between the market value and the exercise price.

INCENTIVE COMPENSATION PLAN

Prior to completion of the Offering, the Company intends to adopt the
CompX[trademark] International Inc. 1997 Incentive Compensation Plan (the
"Incentive Plan".) The purpose of the Incentive Plan is to advance the
interests of the Company and its stockholders by providing incentives to certain
eligible persons who contribute significantly to the strategic and long-term
performance objectives and growth of the Company. The Incentive Plan provides
for awards or grants of stock options, stock appreciation rights, performance
grants and other awards deemed by the MD&C Committee to be consistent with the
purposes of the Plan (collectively, "Awards") Under the Incentive Plan, key
individuals employed by, or performing services for, the Company are eligible to
receive Awards. A person who is eligible to receive an Award may be a
nonemployee director or some other person who is not employed by the Company.
The MD&C Committee is the initial committee to administer the Incentive Plan.
The MD&C Committee determines the eligible persons to whom it grants Awards and
the type, size and terms of such Awards. The Company has reserved for

<PAGE> 54
issuance a maximum of 1,500,000 shares of Class A Common Stock for Awards under
the Incentive Plan, subject to certain adjustments. A stock option awarded
under the Incentive Plan may be an incentive stock option or non-qualified stock
option and the term of such stock option cannot exceed ten years. Awards may be
granted in conjunction with other Awards.

Upon completion of the Offering, five of the Company's officers and
directors will be awarded 81,100 shares of Class A Common Stock under the
Incentive Plan for their services in connection with the Offering, with an
option to receive one-half of the value of such shares in cash to satisfy
individual income taxes related thereto (the "Management Shares"). The number
of Class A shares to be awarded is based upon the public offering price to the
public. The Company will value the Class A shares awarded at such public
offering price, and the aggregate value of the Class A shares awarded will be
approximately $1.5 million. The Company will recognize a charge, at the time of
the completion of the public offering, equal to the aggregate value of the Class
A shares awarded and cash payments made.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1997, the Board of Directors did not have a compensation committee
and David A. Bowers, Glenn R. Simmons and Robert W. Singer comprised the entire
Board of Directors of the Company when the Board of Directors deliberated on
executive officer compensation. Messrs. Glenn Simmons, Bowers and Singer were
the Company's Chairman of the Board, President and Chief Executive Officer and
Vice President, respectively. During 1997, Mr. Glenn Simmons and Mr. Singer

also served as executive officers of Valhi, Keystone and Contran and Mr. Glenn
Simmons served as a director of Valhi, Keystone and Contran.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Relationships with Related Parties. As set forth under the caption
"Security Ownership in the Company and its Affiliates," Mr. Harold C. Simmons,
through Valcor, Valhi and Contran, may be deemed to control the Company. Mr.
Glenn R. Simmons, Chairman of the Board of the Company, is the brother of Mr.
Harold C. Simmons. Mr. Glenn R. Simmons and Mr. Singer are also directors of
the Company's parent company, Valcor, and of certain affiliates of the Company
and Valcor. See "Management - Directors, Executive Officers and Key Personnel."
Corporations that may be deemed to be controlled by or affiliated with Mr.
Harold C. Simmons, including the Company, 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.
<PAGE> 55

Although no specific procedures are in place that govern the treatment of
transactions among the Company and Contran, Valhi or other affiliated companies,
the Board of Directors of each of such publicly held companies, except for
Contran, includes one or more members who are not officers or directors of any
entity that may be deemed to be related to the Company. Additionally, under
applicable law, in the absence of stockholder ratification or approval by
directors who may be deemed disinterested, transactions involving contracts
among companies under common control must be fair to all companies involved.
Furthermore, directors and officers owe fiduciary duties of good faith and fair
dealing to all stockholders of the companies for which they serve.

The Company understands that Valhi and related entities may consider
acquiring or disposing of shares of Class A Common Stock through open-market or
privately negotiated transactions depending upon future developments including,
but not limited to, the availability and alternative uses of funds, the
performance of the Class A Common Stock in the market, an assessment of the
business of and prospects for the Company, financial and stock market conditions
and other factors. The Company does not presently intend, and understands that
Valhi does not presently intend, to engage in any transaction or series of
transactions that would result in the Class A Common Stock becoming eligible for
termination of registration under the Securities Exchange Act of 1934, as
amended, or ceasing to be traded on a national securities exchange.

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. In the Company's opinion,
the terms all of such transactions to which the Company has been a party in the
past are not materially different from those that would have been entered into
with unrelated parties.

Loans and Advances. From time to time the Company makes advances to and
borrows from Valcor, Valhi and other related parties pursuant to term and demand
loans. Such loans and advances are made principally for cash management
purposes. During 1994, the net borrowings of the Company from Valcor were
$250,000, which was repaid in 1995. During 1996 and 1997, the Company neither
borrowed money from nor loaned money to any related party, except with respect
to the Valcor Note. Interest expense with respect to the Valcor Note was
$164,000 in 1997. See "Recent Developments."

Contractual Arrangements. The ISA between the Company and Valhi (the
"Valhi ISA") provides that Valhi will render or provide certain management,
financial, and administrative services to the Company on a fee basis. Such fees
are based upon estimates of time devoted to the affairs of the Company by
individual Valhi employees and the salaries of such persons. The Company paid
fees to Valhi for services rendered under the Valhi ISA of $284,000, $300,000
and $260,000 in 1995, 1996 and 1997, respectively. The Valhi ISA is an annual
agreement and may be extended on a quarter-to-quarter basis, subject to
termination by advance notice by either party and amendment by mutual agreement.
Net charges from related parties for services provided in the ordinary course of
business, principally "pass-through" insurance charges for insuring and other

risks, aggregated $152,000 in 1995, $149,000 in 1996, and $208,000 in 1997.
These fees and charges are principally pass-through in nature and, in the
Company's opinion, are reasonable and not materially different from those that
would have been incurred with unrelated parties.

Certain employees of the Company have been awarded shares of restricted
Valhi common stock or granted options to purchase Valhi common stock under the
terms of Valhi's stock option plans. The Company will reimburse Valhi for the
<PAGE> 56
cost of shares of restricted Valhi common stock awarded to employees of the
Company as of the time the restrictions on such shares lapse, based on the
market value of Valhi common stock on such date. With respect to options to
acquire Valhi common stock granted to employees of the Company, the Company will
reimburse Valhi for the difference between the option exercise price and the
market price of Valhi common stock at the time of exercise. As of December 31,
1997, employees of the Company held options to acquire 204,000 shares of Valhi
common stock at exercise prices ranging from $4.76 per share to $14.66 per
share. All shares of restricted stock previously granted had vested at December
31, 1996. The Company has recorded an expense (credit) of ($6,000) in 1995,
$12,000 in 1996 and $472,000 in 1997 in connection with the grant of Valhi
restricted stock and stock options. To the extent employees of the Company
continue to have options outstanding to purchase Valhi common stock, future
changes in the market price of Valhi common stock will result in additional
expense or credits to the Company's operating results.

The Company, Valcor and Valhi are members of Contran's consolidated United
States federal income tax group (the "Contran Tax Group"). The policy for
intercompany allocation of federal income taxes provides that subsidiaries

included in the Contran Tax Group provide for federal income taxes on a separate
company basis. Subsidiaries of Valcor makes payments to, or receive payments
from, Valcor in the amount they would have paid to or received from the Internal
Revenue Service had they not been members of the Contran Tax Group. The
separate company provisions and payments are computed using the tax elections
made by Contran. The Company and Valcor have entered into a tax sharing
agreement (the "Tax Sharing Agreement") that provides for the allocation of tax
liabilities and tax payments as described above. For all periods presented, the
Company is a member of the Contran Tax Group. The Company is jointly and
severally liable for the federal income tax of Contran and the other companies
included in the Contran Tax Group for all periods in which the Company is
included in the Contran Tax Group. Valcor and Valhi have agreed, however, to
indemnify the Company for any liability for income taxes of the Contran Tax
Group in excess of the Company's tax liability computed in accordance with the
Tax Sharing Agreement. Upon consummation of the Offering, the Company will
become a separate United States taxpayer and will no longer be a member of the
Contran Tax Group.

Certain Litigation. In November 1991, a purported derivative complaint was
filed in the Court of Chancery of the State of Delaware, New Castle County (Alan
Russell Kahn v. Tremont Corporation, et al., No. 12339) in connection with
Tremont's agreement to purchase 7.8 million NL common shares from Valhi. In
addition to Tremont and Valhi, the complaint names as defendants the members of
Tremont's board of directors at the time, which included Mr. Glenn R. Simmons.
The complaint alleges, among other things, that Tremont's purchase of the NL
shares constitutes a waste of Tremont's assets and that Tremont's board of
directors breached its fiduciary duty to Tremont's public stockholders and
seeks, among other things, to rescind Tremont's consummation of the purchase of
the NL shares and award damages to Tremont for injuries allegedly suffered as a
result of the defendants' wrongful conduct. In March 1996, the trial court

ruled in favor of the defendants, and concluded that Tremont's purchase did not
constitute an overreaching of Tremont by its controlling stockholder (Valhi),
that Tremont's purchase price for the NL shares was fair and that in all other
respects the transaction was fair to Tremont. In June 1996, the plaintiffs
filed an appeal with the Delaware Supreme Court. A hearing before a three-judge
panel of the Delaware Supreme Court was held in December 1996, and an en banc
hearing before the full Supreme Court was held in February 1997. In June 1997,
the Delaware Supreme Court en banc reversed the trial court ruling and remanded
the matter to the lower court for further proceedings. The Supreme Court held,
in part, that the trial court had erred in placing the burden of proof on the
plaintiffs and
<PAGE> 57
remanded the matter so that the trial court could determine whether the
defendants had demonstrated the entire fairness of the transaction. In October
1997, oral arguments upon remand were heard and since then the judge has
requested additional testimony. The Company understands that Valhi, Tremont and
the other defendants believe that the action is without merit and that each
intends to defend the action vigorously.

In September 1996, a complaint was filed in the Superior Court of New
Jersey, Bergen County, Chancery Division (Frank D. Seinfeld v. Harold C.
Simmons, et al., No. C-336-96) against Valhi, NL and certain current and former
members of NL's board of directors including Mr. Glenn R. Simmons. The
complaint, a derivative action on behalf of NL, alleges, among other things,
that NL's August 1991 "Dutch auction" tender offer was an unfair and wasteful
expenditure of NL's funds. The complaint seeks, among other things, to rescind
NL's purchase of approximately 10.9 million shares of NL's common stock from
Valhi pursuant to the Dutch auction, and the plaintiff has stated that the
damages sought are $149 million. Valhi and the other defendants have answered
the complaint and have denied all allegations of wrongdoing. Discovery has been
completed. A trial date has yet to be set. The Company understands that Valhi
and each of the other defendants believe that the complaint is without merit and
that each intends to defend the action vigorously.

The Company is not a party to any of the litigation matters described
above.

SECURITY OWNERSHIP IN THE COMPANY AND ITS AFFILIATES

Prior to the Offering, no shares of the Company's Class A Common Stock were
outstanding, and all of the shares of the Company's Class B Common Stock were
held by Valcor, a wholly-owned subsidiary of Valhi.

As set forth below, Contran holds, directly or through subsidiaries,
approximately 93% of the outstanding Valhi common stock. Harold C. Simmons,
Chairman of the Board, President and Chief Executive Officer of Valcor, Valhi
and Contran, may be deemed to control each of such companies.

Immediately after completion of the Offering, the only shares of Class A
Common Stock that will be outstanding are those shares that will be issued in
the Offering (including any shares issued if the Underwriters' over-allotment
option is exercised) and approximately 81,100 Management Shares. After
completion of the Offering, all of the Company's shares of Class B Common Stock
will continue to be held by Valcor. Such shares of Class B Common Stock will
represent approximately 68% of the combined voting power (95% for election of
directors) of all shares of the Company's Common Stock outstanding (65% and 95%,
respectively, if the Underwriters' over-allotment option is exercised in full).

The following table sets forth as of January 26, 1998, the beneficial
ownership, as defined by the regulations of the Commission, of Valhi common
stock by (i) each person or group of persons known to the Company to
beneficially own more than 5% of the outstanding shares of Valhi common stock,
(ii) each director of the Company, (iii) each named executive officer of the
Company, and (iv) all executive officers and directors of the Company as a
group. Except as set forth below, no securities of the Company's parent
companies or subsidiary companies are beneficially owned by any director or
named executive officer of the Company. All information is taken from or based
upon ownership filings made by such persons with the Commission or upon
information provided by such persons to the Company.

<PAGE> 58

<TABLE>
<CAPTION>
VALHI COMMON STOCK

AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (A) CLASS (B)

Contran Corporation and subsidiaries:
Contran Corporation (c)......... 8,884,458 (d)(e) 7.7%
National City Lines, Inc. (c)... 11,491,009 (d) 10.0%
Valhi Group, Inc. (c)........... 85,644,496 (d) 74.7%
Paul M. Bass, Jr.................. 7,000 (f) *
David A. Bowers................... 64,000 (f) *
Joseph S. Compofelice............. 40,000 (f)(g) *
Edward J. Hardin.................. - *
Glenn R. Simmons.................. 425,533 (f)(h) *
Robert W. Singer.................. __,___ (i) *
Ronald J. Simmons................. 22,000 (f) *
Emory E. Hodges .................. 4,000 (f) *
Scott C. James ................... 11,000 (f) *
Neil M. Poag ..................... 6,000 (f) *
All directors and executive officers
as a group (16 persons) ........ 1,043,000 (f) 1.0%

- --------------------
</TABLE>

* Less than 1%.

(a) All beneficial ownership is sole and direct unless otherwise noted.

(b) The above table is based on 114,643,514 shares of Valhi common stock
outstanding as of February 2, 1998. For purposes of calculating the
outstanding shares of Valhi common stock as of February 2, 1998, 1,186,200
shares of Valhi common stock held by NL, a majority owned subsidiary of
Valhi, and 1,000,000 shares of Valhi common stock held by Valmont Insurance
Company, a wholly owned subsidiary of Valhi, are excluded from the amount
of Valhi common stock outstanding. Pursuant to Delaware corporate law,
Valhi treats these excluded shares as treasury stock for voting purposes.

(c) The business address of Valhi Group, Inc. ("VGI"), National City Lines,
Inc. ("National") and Contran is Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas 75240-2697.

(d) National, NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie Holding") are
the direct holders of approximately 73.3%, 11.4% and 15.3%, respectively,
of the outstanding common stock of VGI. Together, National, NOA and Dixie
Holding may be deemed to control VGI. Contran and NOA are the direct
holders of approximately 85.7% and 14.3%, respectively, of the outstanding
common stock of National and together may be deemed to control National.
Contran and Southwest Louisiana Land Company, Inc. ("Southwest") are the
direct holders of approximately 49.9% and 50.1%, respectively, of the
outstanding common stock of NOA and together may be deemed to control NOA.
Dixie Rice Agricultural Corporation, Inc. ("Dixie Rice") is the direct
holder of 100% of the outstanding common stock of Dixie Holding and may be
deemed to control Dixie Holding. Contran is the direct holder of
approximately 88.7% and 54.3% of the outstanding common stock of Southwest

and Dixie Rice, respectively, and may be deemed to control Southwest and
Dixie Rice.
<PAGE> 59
Mr. Harold C. Simmons is Chairman of the Board, President and Chief
Executive Officer of Valhi, VGI, National, NOA, Dixie Holding and Contran.
Mr. Simmons is also Chairman of the Board and Chief Executive Officer of
Dixie Rice and Southwest.

Substantially all of Contran's outstanding voting stock is held by two
trusts, the Harold C. Simmons Family Trust No. 1 dated January 1, 1964 and
the Harold C. Simmons Family Trust No. 2 dated January 1, 1964 (together,
the "Trusts"), established for the benefit of Mr. Simmons, children and
grandchildren, of which Mr. Simmons is the sole trustee. As sole trustee
of each of the Trusts, Mr. Simmons has the power to vote and direct the
disposition of the shares of Contran stock held by each of the Trusts. Mr.
Simmons, however, disclaims beneficial ownership of any shares of Contran
stock.

The Combined Master Retirement Trust (the "CMRT") directly holds
approximately 0.1% of the outstanding shares of Valhi common stock. The
CMRT is a trust formed by the Company to permit the collective investment
by trusts that maintain the assets of certain employee benefit plans
adopted by the Company and related companies. Mr. Simmons is the sole
trustee of the CMRT and the sole member of the trust investment committee
for the CMRT. Mr. Simmons is a participant in one or more of the employee
benefit plans that invest through the CMRT. Mr. Simmons, however,
disclaims beneficial ownership of any shares held by the CMRT, except to
the extent of his vested beneficial interest therein.

Mr. Simmons' spouse directly owns 77,000 shares of Valhi common stock, with
respect to all of which Mr. Simmons disclaims beneficial ownership. Mr.
Simmons also directly owns 3,383 shares of Valhi common stock.

By virtue of the holding of the offices, the stock ownership and his
service as trustee, all as described above, (a) Mr. Harold C. Simmons may
be deemed to control such entities and (b) Mr. Simmons and certain of such
entities may be deemed to possess indirect beneficial ownership of shares
directly held by certain of such other entities. However, Mr. Simmons
disclaims such beneficial ownership of the shares beneficially owned,
directly or indirectly, by any of such entities.

The Company understands that NL and Valmont Insurance Company ("Valmont")
directly hold 1,186,200 shares and 1,000,000 shares of Valhi common stock,
respectively. Valhi is the direct holder of approximately 58.3% of the
outstanding common stock of NL. Valhi is also the direct holder of 100% of
the outstanding common stock of Valmont. The Company further understands
that, pursuant to Delaware law, Valhi treats the shares of Valhi common
stock that Valmont and NL hold directly as treasury stock for voting
purposes. For the purposes of this prospectus, the shares of Valhi common
stock that Valmont and NL hold directly are not deemed outstanding.

Although the Company is not a party to the action, the Company is aware
that a lawsuit captioned In re: The Harold C. Simmons Family Trust No. 1
(No. 96-306-P) is pending in the Probate Court of Dallas County, Texas.
Pleadings filed in the action contain allegations by two of Mr. Harold C.
Simmons' four daughters who are among the beneficiaries of the Trusts) that
Mr. Simmons has breached his fiduciary duties as trustee of the Trusts.
The breaches of fiduciary duty claimed include, among others, allegedly
unfair self dealing, allegedly improper charitable contributions and
alleged violations of the federal election laws. Pleadings by Mr. Simmons
in the action assert that all actions taken by
<PAGE> 60
him as trustee were specifically permitted by the terms of the Trusts and
greatly benefited the Trusts and the beneficiaries. The relief sought by

the plaintiffs includes the removal of Mr. Simmons as trustee of the
Trusts. Mr. Simmons' other two daughters have filed pleadings in the
action opposing the relief sought by the plaintiffs. The first trial of
this matter ended in a mistrial. Unless this matter is resolved through
mediation or otherwise, a new trial is expected to begin in March 1998.
Mr. Simmons has advised the Company that the action has no merit; that he
denies all allegations of wrongdoing made by the plaintiffs; and that he
intends to continue to defend the action vigorously.

(e) The shares of Valhi common stock shown as owned by Contran include 189,400
shares (0.2% of the outstanding Valhi common stock) directly held by the
Contran Deferred Compensation Trust No. 2 (the "CDCT No. 2"). Boston Safe
Deposit and Trust Company serves as trustee of the CDCT No. 2 (the
"Trustee"). Contran established the CDCT No. 2 as an irrevocable "rabbi
trust" to assist Contran in meeting certain deferred compensation
obligations that it owes to Harold C. Simmons. If the CDCT No. 2 assets
are insufficient to satisfy such obligations, Contran must satisfy the
balance of such obligations. Pursuant to the terms of the CDCT No. 2,
Contran (i) retains the power to vote the shares held by the CDCT No. 2,
(ii) retains dispositive power over such shares and (iii) may be deemed the
indirect beneficial owner of such shares.

(f) The shares of Valhi common stock shown as beneficially owned by Glenn R.
Simmons, David A Bowers, Joseph S. Compofelice, Ronald J. Simmons, Emory E.
Hodges, Scott C. James, Neil M. Poag and all executive officers and
directors as a group include 380,000, 52,000, 30,000, 22,000, 4,000, 1,000,
6,000 and 1,043,000 shares, respectively, that such person or group has the
right to acquire upon the exercise within 60 days subsequent to February 2,
1998 of stock options granted pursuant to the Valhi, Inc. 1987 Stock Option
- Stock Appreciation Rights Plan, as amended.

(g) The shares of Valhi common stock shown as beneficially owned by Joseph S.
Compofelice include 10,000 shares held by Mr. Compofelice and his wife as
joint tenants.

(h) The shares of Valhi common stock shown as beneficially owned by Glenn R.
Simmons include 3,000 shares held by Mr. Simmons' wife, 800 shares held in
a retirement account for Mr. Simmons' wife, with respect to all of which
Mr. Simmons disclaims beneficial ownership.

(i) The shares of Valhi common stock shown as beneficially owned by Robert W.
Singer include 10,000 shares held in a retirement account for his benefit
and 5,000 shares held in the individual retirement account of Mr. Singer's
wife with respect to which such officers disclaim beneficial ownership.

CERTAIN INDEBTEDNESS

Prior to the completion of the Offering, the Company plans to enter into
the Revolving Senior Credit Facility. The Revolving Senior Credit Facility is
expected to be an unsecured five-year revolving facility. Borrowings are
expected to be available for the Company's general corporate purposes,
<PAGE> 61
including potential acquisitions. There can be no assurance that any such new
Revolving Senior Credit Facility will be obtained. The following summary of the
material provisions of the Revolving Senior Credit Facility is based upon a
preliminary term sheet and drafts of the proposed credit agreement. Because the
terms, conditions and covenants of the Revolving Senior Credit Facility are
subject to the negotiation, execution and delivery of the definitive loan
documents, certain of the actual terms, conditions and covenants thereof may
differ from those described below.

The Revolving Senior Credit Facility will mature in 2003. Borrowings of up
to $100 million will be available under the Revolving Senior Credit Facility
subject to limitation with respect to compliance with certain coverage ratios
and covenants as discussed below. The Revolving Senior Credit Facility has no
required principal amortization payments prior to maturity absent any uncured
event of default or Asset Disposition (as defined). Amounts drawn under the
Revolving Senior Credit Facility will bear interest, at the Company's option, at
either (i) a base rate equal to the higher of (x) the agent bank's prime rate
and (y) the Federal funds rate plus one-half of one percent (1/2%) or (ii) the
Eurodollar Rate plus an Applicable Margin as defined. The Applicable Margin will
be a rate between .30% and 1.025% that will fluctuate based on the Company's
Ratio of Consolidated Debt (as defined) to Consolidated EBITDA (as defined) for
the most recent prior four quarter period.

The Revolving Senior Credit Facility contains certain covenants and
restrictions customary in lending transactions of this type. These covenants
include requirements that the Company maintain specified levels of Net Worth (as
defined), generally limit the payment of dividends to 50% of net income of the
Company (as defined), require the Company to maintain a ratio of Consolidated
Debt (as defined) to Consolidated EBITDA (as defined) for the most recently
completed four quarters not to exceed 3.00 to 1.0 and maintain a ratio of
Consolidated EBITDA (as defined) for the most recently completed four quarters
to Consolidated Interest Expense (as defined) of not less than 4.25 to 1.0.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The following discussion of the capital stock of the Company assumes that
the Restated Certificate of Incorporation of the Company, which will become
effective before the Offering commences, is in effect.

The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, par value $.0l per share, of which 20,000,000 shares have been
designated as Class A Common Stock and 10,000,000 shares have been designated as
Class B Common Stock, and 1,000 shares of preferred stock, par value $.0l per
share (the "Preferred Stock"). Effective upon completion of the Offering,
4,781,100 shares of Class A Common Stock will be issued and outstanding
(5,486,100 if the Underwriters' over-allotment option is exercised in full),
including 81,100 Management Shares, 10,000,000 shares of Class B Common Stock
will be issued and outstanding, and no shares of Preferred Stock will be issued
and outstanding. In addition, approximately 1.4 million shares of Class A
Common Stock will be reserved for issuance pursuant to the Incentive Plan and
10,000,000 shares of Class A Common Stock will be reserved for issuance upon
conversion of the Class B Common Stock. The following summary does not purport
to be complete and is subject to the detailed provisions of, and qualified in
its entirety by reference to, the Company's
<PAGE> 62
Restated Certificate of Incorporation and Bylaws, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part, and to the applicable provisions of the Delaware General Corporation Law
of the State of Delaware ("DGCL").

COMMON STOCK

The shares of Class A Common Stock and Class B Common Stock are identical
in all respects, except for voting rights with respect to the election of
directors and certain conversion rights and transfer restrictions in respect of
the shares of the Class B Common Stock. The number of authorized shares of any
class or classes of capital stock of the Company may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the voting power of the Common Stock of the
Company entitled to vote generally in the election of directors irrespective of
the provisions of Section 242(b)(2) of the DGCL or any corresponding provisions
hereinafter enacted.

Voting Rights. The holders of Class A Common Stock are entitled to one
vote per share. Holders of Class B Common Stock are entitled to one vote per
share in all matters except the election of directors where such holders are
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. Immediately after the Offering, the shares of Class B Common
Stock will represent approximately 68% of the combined voting power (95% for
election of directors) of all classes of voting stock of the Company
(approximately 65% and 95%, respectively, if the Underwriters' over-allotment
option is exercised in full).

The Common Stock does not have cumulative voting rights, which means that
holders of the shares of Common Stock with a majority of the votes to be cast
for the election of directors can elect all directors then being elected. Since
the purchasers of the shares of Class A Common Stock offered hereby will acquire

shares entitling them to less than a majority of such votes, such stockholders
will be unable to elect a director without the affirmative vote of Valcor.

Dividends. Each share of Class A Common Stock and Class B Common Stock has
an equal and ratable right to receive dividends to be paid from the Company's
assets legally available therefor when, as and if declared by the Board of
Directors. Delaware law generally requires that dividends be paid only out of
the Company's surplus or current net profits in accordance with the DGCL. The
Company may not make any dividend or distribution to any holder of any class of
Common Stock unless simultaneously with such dividend or distribution the
Company makes the same dividend or distribution with respect to each outstanding
share of Common Stock regardless of class. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of the Common
Stock, is payable in shares of Common Stock, the number of shares of Common
Stock payable per share of Common Stock shall be equal in number.

The Company does not anticipate paying cash dividends in the foreseeable
future. See "Dividend Policy."

Conversion and Transfer. Class A Common Stock has no conversion rights.
Prior to a "Tax-Free Spin-Off" (as defined below), shares of Class B Common
Stock may be freely transferred (i) between members of the Contran Corporation
Control Group (as defined below) or (ii) outside the Contran Corporation
<PAGE> 63
Control Group (as defined below) in a transaction that is not a "Tax-Free Spin-
Off" (as defined below). However, shares of Class B Common Stock transferred to
a person who is not a member of the Contran Corporation Control Group (as
defined below) in a transaction that is not a "Tax-Free Spin-Off" (as defined
below) shall automatically convert into shares of Class A Common Stock as of the
date of such transfer. Transfers of Class B Common Stock between members of the
Contran Corporation Control Group (as defined below) shall have no effect other

than to change the beneficial ownership of such Class B Common Stock. For
purposes hereof, a member of the Contran Corporation Control Group shall be
Contran Corporation, a Delaware corporation, and any entity included in the
affiliated group as defined in Section1504 of the Internal Revenue Code of 1986,
as amended from time to time (the "Code"), of which Contran Corporation or its
successor is the common parent. For purposes hereof, "Tax-Free Spin-Off" shall
mean any transfer effected in connection with a distribution of Class B Common
Stock as a spin-off, split-up or split-off to stockholders of a member of the
Contran Corporation Control Group intended to be on a tax-free basis under
Section368 of the Code.

Following a Tax-Free Spin-Off, shares of Class B Common Stock shall be
transferred as Class B Common Stock, subject to applicable laws; provided,
however, that shares of Class B Common Stock shall automatically convert into
shares of Class A Common Stock on the fifth anniversary of the Tax-Free Spin-
Off, unless prior to such Tax-Free Spin-Off, the distributing member of the
Contran Corporation Control Group, or its successor, as the case may be,
delivers to the Company an opinion of counsel reasonably satisfactory to the
Company to the effect that such conversion could adversely affect the ability of
the distributing member, or its successor, as the case may be, to obtain a
favorable ruling from the Internal Revenue Service that the transfer would be a
Tax-Free Spin-Off. If such an opinion is received, approval of such conversion
shall be submitted to a vote of the holders of the Common Stock as soon as
practicable after the fifth anniversary of the Tax-Free Spin-Off, unless the
distributing member or its successor, as the case may be, delivers to the
Company an opinion of counsel reasonably satisfactory to the Company prior to
such anniversary that such vote could adversely affect the status of the Tax-
Free Spin-Off, including the ability to obtain a favorable ruling from the
Internal Revenue Service; if such opinion is so delivered, such vote shall not
be held. Approval of such conversion will require the affirmative vote of the
holders of a majority of the shares of both Class A Common Stock and Class B
Common Stock present and voting, voting together as a single class, with each
share entitled to one vote for such purpose. No assurance can be given that any
such conversion would be consummated.

Prior to a Tax-Free Spin-Off, all shares of Class B Common Stock shall
automatically convert into shares of Class A Common Stock if the aggregate
number of outstanding shares of Class B Common Stock becomes less than 50% of
the aggregate number of outstanding shares of Common Stock.

Reclassification and Merger. In the event of a reclassification or other
similar transaction as a result of which the shares of Class A Common Stock are
converted into another security, then a holder of Class B Common Stock will be

entitled to receive upon conversion the amount of such other security that the
holder would have received if the conversion occurred immediately prior to the
record date of such reclassification or other similar transaction. No
adjustments in respect of dividends will be made upon the conversion of any
share of Class B Common Stock except if a share is converted subsequent to the
record date for the payment of a dividend or other distribution on shares of
Class B Common Stock but prior to such payment, then the registered holder of
such share at the close of business on such record date will be entitled to
receive the dividend or other distribution payable on such date regardless of
the conversion thereof or the Company's default in
<PAGE> 64
payment of the dividend due on such date.

In the event the Company enters into any consolidation, merger, combination
or other transaction in which shares of Common Stock are exchanged for or
changed into other stock or securities, cash or any other property, then, and in
such event, the shares of each class of Common Stock will be exchanged for or
changed into either (l) the same amount of stock, securities, cash or any other
property, as the case may be, into which or for which each share of any other
class of Common Stock is exchanged for or changed into, provided such shares so
exchanged for or changed into may differ to the extent and only to the extent
that the Class A Common Stock and the Class B Common Stock differ as provided in
the Company's Restated Certificate of Incorporation or (2) if holders of each
class of Common Stock are to receive different distributions of stock,
securities, cash or any other property, an amount of stock, securities, cash or
property per share having a value, as determined by an independent investment
banking firm of national reputation selected by the Board of Directors, equal to
the value per share into which or for which each share of any other class of
Common Stock is exchanged or changed.

Liquidation. 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 are

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.

Other. The holders of shares of Common Stock have no preemptive,
subscription or redemption rights and are not liable for further call or
assessment. All of the outstanding shares of Common Stock are, and the shares
of Class A Common Stock offered hereby will be, fully paid and nonassessable.

Prior to the date of this Prospectus, there has been no established public
trading market for the Common Stock. It is expected that the Common Stock will
be approved for listing on the NYSE under the symbol "CIX."

PREFERRED STOCK

The Board of Directors of the Company is authorized, without further
stockholder action, to divide any or all shares of authorized Preferred Stock
into series and to fix and determine the designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereon, of any series so established, including voting powers,
dividend rights, liquidation preferences, redemption rights and conversion or
exchange privileges. As of the date of this Prospectus, no shares of Preferred
Stock have been issued and the Board of Directors of the Company had not
authorized any series of Preferred Stock and there are no plans, agreements or
understandings for the issuance of any shares of Preferred Stock.

DELAWARE GENERAL CORPORATION LAW

Section 203 of the DGCL provides, in general, that a stockholder acquiring
more than 15% of the outstanding voting stock of a corporation subject to the

statute (an "Interested Stockholder") but less than 85% of such stock may not
engage in certain Business Combinations (as defined in Section 203) with the
corporation for a period of three years subsequent to the date on which the
stockholder became an Interested Stockholder unless (i) prior to such date the
corporation's board of directors approved either the Business
<PAGE> 65
Combination or the transaction in which the stockholder became an Interested
Stockholder or (ii) the Business Combination is approved by the corporation's
board of directors and authorized by a vote of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder. The provisions of Section 203 ("Section 203") of the DGCL do not
apply to the Company. Such provisions, if they were to apply to the Company,
would restrict the Company's ability to enter into business combinations with
certain stockholders of the Company and would render an unsolicited takeover
attempt of the Company more difficult.

Any action required to be taken at any annual or special meeting of the
Company's stockholders may be taken without a meeting, without prior notice and
without a vote, upon the written consent of the minimum number of stockholders
necessary to authorize such action.

LIMITATIONS ON DIRECTORS' LIABILITY

The Company's Restated Certificate of Incorporation provides that no
director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock purchases
or redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The effect of these provisions is to eliminate the

rights of the Company and its stockholders (through stockholders, derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of fiduciary duty as a director (including breaches resulting from
grossly negligent behavior), except in the situations described above. These
provisions do not limit the liability of directors under federal securities laws
and do not affect the availability of equitable remedies such as an injunction
or rescission based upon a director's breach of his duty of care.

TRANSFER AGENT AND REGISTRAR

Harris Trust and Savings Bank will act as the transfer agent and registrar
for the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
4,781,100 shares of Class A Common Stock (5,486,100 shares if the Underwriters'
over-allotment option is exercised in full) without taking into account any
options which may be granted and including 81,100 Management Shares granted to
officers and employees of the Company concurrent with the Offering. All of such
shares of Class A Common Stock sold hereby will be freely tradable without
restriction or further registration under the Securities Act of 1933 (the
"Securities Act") by persons other than "affiliates" of the Company (defined in
Rule 144 under the Securities Act as a person who directly or indirectly through
the use of one or more intermediaries controls, is controlled by, or is under
common control with, the Company). The 10,000,000 shares of Class B Common
Stock held by Valcor will be deemed restricted securities within the meaning of
Rule 144. Shares of Class A Common Stock acquired or to be acquired by officers
and employees of the Company pursuant to the exercise of options or restricted

stock grants will be, upon the filing of a Registration Statement on Form S-8
registering such shares, freely tradable without restriction or further
registration under the Securities Act by persons other than "affiliates."
Sales of restricted
<PAGE> 66
securities and shares of Class A Common Stock held by "affiliates" are subject
to certain volume, timing and manner of sale restrictions pursuant to Rule 144.
Any sales of substantial amounts of these shares in the public market might
adversely affect prevailing market prices for the shares of Class A Common
Stock.

In general, under Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned shares for at least one year, including
"affiliates" of the Company, would be entitled to sell within any three-month
period that number of shares that does not exceed the greater of (i) 1% of the
number of shares of Class A Common Stock then outstanding or (ii) the average
weekly trading volume of the Class A Common Stock during the four calendar weeks
preceding such sale. Sales pursuant to Rule 144 are subject to certain manner
of sale provisions, notice requirements and the availability of current public
information about the Company. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, would be entitled to sell
such shares under Rule 144(k) without regard to many of the requirements
described above. The Company is unable to estimate the number of restricted
shares or shares held by affiliates that will be sold under Rule 144 since this
will depend in part on the market price for the Class A Common Stock, the
personal circumstances of the holders of the shares and other factors.

The Company and Valcor, and each of their respective officers and directors
have agreed that, for a period of 180 days from the date of this Prospectus,
they will not, without the prior written consent of Smith Barney Inc., offer,
sell, contract to sell, or otherwise dispose of, any shares of Common Stock of
the Company or any securities convertible into, or exercisable or exchangeable
for, Common Stock of the Company. Thereafter, Valcor will be able to sell any
shares of Common Stock it owns in reliance upon Rule 144, subject to the resale,
volume and other limitations described above. Under certain circumstances
shares of Class B Common Stock may be automatically converted into shares of
Class A Common Stock. It is possible that Valcor or another member of the
Contran Corporation Control Group may cause the Company to register any such
converted shares of Class A Common Stock that may be owned by Valcor or another
member of the Contran Corporation Control Group to permit a further distribution
of such shares of Class A Common Stock by Valcor.

Prior to the Offering, there has been no public market for the Class A
Common Stock. Trading of the Class A Common Stock is expected to commence
following the completion of the Offering. There can be no assurance that an
active trading market will develop or continue after the completion of the
Offering or that the market price of the Class A Common Stock will not decline
below the initial public offering price. No prediction can be made as to the
effect, if any, that future sales of shares of Class A Common Stock, or the
availability of shares for future sale, will have on the market price prevailing
from time to time. Sales of substantial amounts of Class A Common Stock in the
public market, or the perception that such sales could occur, could adversely
affect the prevailing market price of the Class A Common Stock or the ability of
the Company to raise capital through a public offering of its equity securities.

CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

A general discussion of certain United States federal income and estate tax
consequences of the ownership and disposition of Common Stock applicable to Non-
U.S. Holders (as defined) of Common Stock is set forth below. In
<PAGE> 67
general, a "Non U.S. Holder" is a person other than: (i) a citizen or resident
(as defined for United States federal income or estate tax purposes, as the case
may be) of the United States; (ii) a corporation organized in or under the laws
of the United States or a political subdivision thereof; or (iii) an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source. The discussion is based on current law and is
provided for general information only. The discussion does not address aspects
of United States federal taxation other than income and estates taxation and
does not address all aspects of federal income and estate taxation. The
discussion does not consider any specific facts or circumstances that may apply
to a particular Non-U.S. Holder and does not address all aspects of United
States federal income tax law that may be relevant to Non-U.S. Holders that may
be subject to special treatment under such law (for example, insurance
companies, tax-exempt organizations, financial institutions or broker-dealers).
ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-U.S. CURRENT AND
POSSIBLE FUTURE INCOME AND OTHER TAX CONSEQUENCES OF HOLDING AND DISPOSING OF
CLASS A COMMON STOCK.

DIVIDENDS

In general, the gross amount of dividends paid to a Non-U.S. Holder will be
subject to United States withholding tax at a 30% rate (or any lower rate
prescribed by an applicable tax treaty) unless the dividends are (i) effectively
connected with a trade or business carried on by the Non-U.S. Holder within the

United States and a Form 4224 is filed with the withholding agent or (ii) if a
tax treaty applies, are attributable to a United States permanent establishment
of the Non-U.S. Holder. If either exception applies, the dividend will be taxed
at ordinary U.S. federal income tax rates. A Non-U.S. Holder may be required to
satisfy certain certification requirements in order to claim the benefit of an
applicable treaty rate or otherwise claim a reduction of, or exemption from, the
withholding obligation pursuant to the above described rules. In the case of a
Non-U.S. Holder that is a corporation, effectively connected income may also be
subject to the branch profits tax (which is generally imposed on a foreign
corporation at a rate of 30% of the deemed repatriation from the United States
of "effectively connected earnings and profits") except to the extent that an
applicable tax treaty provides otherwise.

The Company may pay dividends to Common Stock holders in the form of
additional Common Stock. In general, dividends of common stock paid pro rata to
holders of common stock are not taxable distributions. Holders who receive such
stock dividends must allocate the basis of the stock with respect to which the
distribution is made between such stock and the newly distributed stock in
proportion to the fair market values of each on the distribution date. In
certain circumstances stock dividends could be taxable distributions. However,
the Company does not currently expect to pay any stock dividends that would be
deemed taxable distributions.

SALE OF COMMON STOCK

Generally, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of his Common Stock unless:
(i) the Company has been, is, or becomes a "U.S. real property holding
corporation" for federal income tax purposes and certain other requirements are
met; (ii) the gain is effectively connected with a trade or business carried on
by the Non-U.S. Holder within the United States; or (iii) the Common Stock is

disposed of by an individual Non-U.S. Holder, who holds the Common Stock as a
capital asset and is present in the United States for
<PAGE> 68
183 days or more in the taxable year of the disposition, and the gains are
considered derived from sources within the United States. The Company believes
that it has not been, is not currently and, based upon its current business
plans, is not likely to become a U.S. real property holding corporation. A Non-
U.S. Holder also may be subject to tax pursuant to the provisions of United
States tax law applicable to certain United States expatriates. Non-U.S.
Holders should consult applicable treaties, which may exempt from United States
taxation gains realized upon the disposition of Common Stock in certain cases.

ESTATE TAX

Common Stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be includible in the individual's gross estate for United
States federal estate tax purposes, unless an applicable treaty provides
otherwise, and may be subject to United States federal estate tax.

BACKUP WITHHOLDING AND INFORMATION REPORTING REQUIREMENTS

On October 14, 1997, the IRS issued final regulations relating to
withholding, information reporting and backup withholding that unify current
certification procedures and forms and clarify reliance standards (the "Final
Regulations"). The Final Regulations generally will be effective with respect
to payments made after December 31, 1998.

Except as provided below, this section describes rules applicable to
payments made on or before December 31, 1998. Backup withholding (which
generally is a withholding tax imposed at the rate of 31% on certain payments to
persons that fail to furnish the information required under the United States
information reporting and backup withholding rules) generally will not apply to

(i) dividends paid to Non-U.S. Holders that are subject to the 30% withholding
discussed above (or that are not so subject because a tax treaty applies that
reduces or eliminates such 30% withholding) or (ii) dividends paid on the Common
Stock to a Non-U.S. Holder at an address outside the United States. The Company
will be required to report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect to, such holder,
regardless of whether any tax was actually withheld. This information may also
be made available to the tax authorities in the Non-U.S. Holder's country of
residence.

In the case of a Non-U.S. Holder that sells Common Stock to or through a
United States office of a broker, the broker must backup withhold at a rate of
31% and report the sale to the IRS, unless the holder certifies its Non-U.S.
status under penalties of perjury or otherwise establishes an exemption. In the
case of a Non-U.S. Holder that sells Common Stock to or through the foreign
office of a United States broker, or a foreign broker with certain types of
relationships to the United States, the broker must report the sale to the IRS
(but not backup withhold) unless the broker has documentary evidence in its
files that the seller is a Non-U.S. Holder or certain other conditions are met,
or the holder otherwise establishes an exemption. A non-U.S. Holder will
generally not be subject to information reporting or backup withholding if such
Non-U.S. Holder sells the Common Stock to or through a foreign office of a Non-
United States broker.

Any amount withheld under the backup withholding rules from a payment to a
holder is allowable as a credit against the holder's U.S. federal income tax,
which may entitle the holder to a refund, provided that the holder furnishes the
required information to the IRS. In addition, certain penalties may be imposed
by the IRS on a holder who is required to supply information
<PAGE> 69
but does not do so in the proper manner.

The Final Regulations eliminate the general current law presumption that
dividends paid to an address in a foreign country are paid to a resident of that
country. In addition, the Final Regulations impose certain certification and
documentation requirements on Non-U.S. Holders claiming the benefit of a reduced
withholding rate with respect to dividends under a tax treaty.

Prospective purchasers of the Class A Common Stock are urged to consult
their own tax advisors as to the effect, if any, of the Final Regulations on
their purchase, ownership and disposition of the Class A Common Stock.

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company has agreed to sell to such Underwriter, the
number of shares of Class A Common Stock set forth opposite the name of such
Underwriter.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES

<S> <C>
Smith Barney Inc...............................
NationsBanc Montgomery Securities LLC..........
Wheat First Securities, Inc. ..................

TOTAL.......................................... 4,700,000

</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Class A Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc., NationsBanc Montgomery
Securities LLC and Wheat First Union, a division of Wheat First Securities,
Inc., are acting as the Representatives, propose to offer part of the shares
directly to the public at the public offering price set forth on the cover page
of this Prospectus and part of the shares to certain dealers at a price which
represents a concession not in excess of $0. per share under the public offering
price. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $0. per share to certain other dealers. After the initial
offering of the shares to the public, the public offering price and such
concessions may be changed by the Representatives. The Representatives of the
Underwriters have advised the Company that the Underwriters do not intend to
confirm any Shares to any accounts over which they exercise discretionary
authority.

The Company has granted to the Underwriters an option, exercisable for
thirty days from the date of this Prospectus, to purchase up to 705,000
additional shares of Class A Common Stock at the price to public set forth on
the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose

of covering over-allotments, if any, in connection with the Offering of the
shares offered hereby. To the extent such option is exercised, each Underwriter
will be obligated, subject to certain conditions, to purchase
<PAGE> 70
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.

In connection with this Offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more Class A Common Stock) than the total
amount shown on the list of Underwriters and participations which appears above)
and may effect transactions which stabilize, maintain or otherwise affect the
market price of the Class A Common Stock at levels above those which might
otherwise prevail in the open market. Such transactions may include placing
bids for the Class A Common Stock or effecting purchases of the Class A Common
Stock for the purpose of pegging, fixing or maintaining the price of the Class A
Common Stock or for the purpose of reducing a syndicate short position created
in connection with the Offering. A syndicate short position may be covered by
exercise of the option described above in lieu of or in addition to open market
purchases. In addition, the contractual arrangements among the Underwriters
include a provisions whereby if the Representatives purchase Class A Common
Stock in the open market for the account of the underwriting syndicate and the
securities purchased can be traced to a particular Underwriter or member of the
selling group, the underwriting syndicate may require the Underwriter or selling

group member in question to purchase the Common Stock in question at the cost
price to the syndicate or may recover from (or decline to pay to) the
Underwriter or selling group member in question the selling concession
applicable to the securities in question. The Underwriters are not required to
engage in any of these activities and any such activities, if commenced, may be
discontinued at any time.

Prior to this Offering, there has not been any public market for the Class
A Common Stock of the Company. Consequently, the initial public offering price
for the Shares of Class A Common Stock included in this Offering has been
determined by negotiations between the Company and the Representatives. Among
the factors considered in determining such price were the history of and
prospects for the Company's business and the industry in which it competes, an
assessment of the Company's management and the present state of the Company's
development, the past and present revenues and earnings, the current state of
the economy in the United States and the current level of economic activity in
the industry in which the Company competes and in related or comparable
industries, and currently prevailing conditions in the securities markets,
including current market valuations of publicly traded companies which are
comparable to the Company.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

LEGAL MATTERS

Certain legal matters with respect to the shares offered hereby will be
passed upon for the Company by Rogers & Hardin LLP, Atlanta, Georgia, of which
Mr. Hardin, a director of the Company, is a partner. The Underwriters have been
represented by Cravath, Swaine & Moore, New York, New York.
<PAGE> 71

EXPERTS

The consolidated balance sheets as of December 31, 1996 and 1997, and the
related consolidated statements of income, cash flows and stockholder's equity
for each of the three years in the period ended December 31, 1997 included in
this Prospectus and elsewhere in the Registration Statement, have been included
herein in reliance upon the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.

The consolidated combined balance sheet of The Fort Lock Group as of June
29, 1996 and June 28, 1997, and the related consolidated combined statements of
income, cash flows and stockholders' equity for the fiscal years ended June 24,
1995, June 29, 1996 and June 28, 1997, included in the Prospectus, have been
included herein in reliance upon the report of Altschuler, Melvoin and Glasser
LLP, independent accountants, given on the authority of that firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a registration statement on Form
S-1 under the Securities Act (together with all amendments and exhibits thereto,
the "Registration Statement"), with respect to the shares of Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits filed as part thereof. For further information with
respect to the Company and the shares of Class A Common Stock offered hereby,

reference is made to the Registration Statement and to the exhibits filed as a
part thereof. Statements contained in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete
and are qualified in their entirety by reference to each such contract,
agreement or other document which is filed as an exhibit to the Registration
Statement. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, or at the Regional
offices of the Commission at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material may be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a
worldwide web site that contains reports, proxy statements and other information
regarding registrants, including the Company, that file electronically with the
Commission, at http://www.sec.gov.

<PAGE> 72

INDEX TO HISTORICAL FINANCIAL STATEMENTS

PAGE
NUMBER

HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF COMPX INTERNATIONAL INC.:

Report of Independent Accountants FA-1
Consolidated Balance Sheets -
December 31, 1996 and 1997 FA-2
Consolidated Statements of Income -
Years ended December 31, 1995, 1996 and 1997 FA-4
Consolidated Statements of Stockholder's Equity -
Years ended December 31, 1995, 1996 and 1997 FA-5
Consolidated Statements of Cash Flows -
Years ended December 31, 1995, 1996 and 1997 FA-6
Notes to Consolidated Financial Statements FA-7

HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF THE FORT LOCK GROUP:

Independent Auditors' Report FB-1
Consolidated Balance Sheets -
June 29, 1996 and June 28, 1997;
December 27, 1997 (unaudited) FB-2
Consolidated Statements of Income -
Fiscal years ended June 24, 1995,
June 29, 1996 and June 28, 1997;
26 weeks ended December 28, 1996 and
December 27, 1997 (unaudited) FB-4

Consolidated Statements of Stockholders' Equity -
Fiscal years ended June 24, 1995,
June 29, 1996 and June 28, 1997;
26 weeks ended December 27, 1997 (unaudited) FB-5
Consolidated Statements of Cash Flows-
Fiscal years ended June 24, 1995,
June 29, 1996 and June 28, 1997;
26 weeks ended December 28, 1996 and
December 27, 1997 (unaudited) FB-6
Notes to Consolidated Financial Statements FB-8
<PAGE> F-1

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheets of CompX
International Inc. as of December 31, 1996 and 1997, and the related
consolidated statements of income, cash flows and stockholder's equity (deficit)
for each of the three years in the period ended December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CompX International Inc. as of December 31, 1996 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in

the period ended December 31, 1997, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

Dallas, Texas
January 23, 1998, except
for Note 12 as to which
the date is February 4, 1998
<PAGE> FA-1

COMPX INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1996 AND 1997

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
ASSETS 1996 1997

<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,550 $19,187
Accounts receivable, less allowance for
doubtful accounts of $167 and $311 11,658 14,573
Receivable from affiliates 384 -
Inventories 10,879 11,073
Prepaid expenses 394 161
Deferred income taxes 343 438

Total current assets 32,208 45,432

Other assets:
Deferred income taxes - 133
Other 83 66

83 199

Property and equipment:
Land 394 383
Buildings 8,364 8,194
Equipment 20,668 24,343
Construction in progress 88 707

29,514 33,627
Less accumulated depreciation 13,355 15,464

Net property and equipment 16,159 18,163

$48,450 $63,794

</TABLE>

<PAGE> FA-2

COMPX INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

DECEMBER 31, 1996 AND 1997

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT 1996 1997

<S> <C> <C>
Current liabilities:
Demand note payable to Valcor $ - $50,000
Current maturities of long-term debt 88 113
Accounts payable and accrued liabilities 6,896 11,427
Other payable to affiliates 5 331
Income taxes 1,066 2,559

Total current liabilities 8,055 64,430

Noncurrent liabilities:
Long-term debt 74 262
Deferred income taxes 1,068 115
Other 11 150

Total noncurrent liabilities 1,153 527

Stockholder's equity (deficit):
Preferred stock, $.01 par value; 1,000 shares
authorized, none issued - -
Class A common stock, $.01 par value;
20,000,000 shares authorized, none issued - -
Class B common stock, $.01 par value;
10,000,000 shares authorized, issued and 100 100
outstanding
Additional paid-in capital 4,412 4,412

Retained earnings (deficit) 34,852 (4,596)
Currency translation adjustment (122) (1,079)

Total stockholder's equity (deficit) 39,242 (1,163)

$48,450 $63,794

</TABLE>

<PAGE> FA-3

Commitments and contingencies (Note 10)

COMPX INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1995 1996 1997

<S> <C> <C> <C>
Revenues:
Net sales $80,238 $88,744 $108,652
Other income 499 759 872

80,737 89,503 109,524

Costs and expenses:
Cost of sales 52,400 58,295 70,638
Selling, general and administrative 8,465 9,106 11,018
Interest 13 18 199

60,878 67,419 81,855

Income before income taxes 19,859 22,084 27,669

Provision for income taxes 7,758 9,055 11,019

Net income $12,101 $13,029 $ 16,650

Unaudited pro forma per share data:

Net income $16,650

Pro forma adjustment - reduction in ne
income for employee stock grants (915)

Pro forma net income $15,735

Basic and diluted pro forma net income
per
common share
$1.21

Common shares outstanding 13,005

</TABLE>

<PAGE> FA-3

COMPX INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996 1997

<S> <C> <C> <C>
Cash flows from operating activities:
Net income $12,101 $13,029 $16,650
Depreciation and amortization 2,193 2,483 2,811
Deferred income taxes (475) (625) (651)
Other, net 109 206 338
Change in assets and liabilities:
Accounts receivable (1,608) (1,093) (3,117)
Inventories (162) (1,662) (194)
Accounts payable and accrued 807 (1,277) 4,531
liabilities
Accounts with affiliates (292) (59) 710
Income taxes 111 (221) 1,502
Other, net 65 (306) 372

Net cash provided by operating 12,849 10,475 22,952
activities

Cash flows from investing activities:
Capital expenditures (2,013) (2,287) (5,536)
Purchase of business unit (5,982) - -
Other, net 25 263 15

Net cash used by investing (7,970) (2,024) (5,521)
activities

Cash flows from financing activities:

Long-term debt:
Additions - - 369
Principal payments (42) (74) (156)
Repayment of loans from affiliates (250) - -
Dividends (6,000) (6,247) (6,098)

Net cash used by financing (6,292) (6,321) (5,885)
activities

Cash and cash equivalents:
Net increase (decrease) from:
Operating, investing and financing (1,413) 2,130 11,546
activities
Currency translation 373 (128) (909)
Balance at beginning of year 7,588 6,548 8,550

Balance at end of year $ 6,548 $ 8,550 $19,187

Supplemental disclosures:
Cash paid for:
Interest $ 13 $ 18 $ 35
Income taxes 8,407 9,974 9,617

Dividend in the form of a demand note $ - $ - $50,000
payable
</TABLE>

<PAGE> FA-4

COMPX INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(IN THOUSANDS)

CLASS B ADDITIONAL
COMMON PAID-IN EARNINGS
STOCK (DEFICIT)

<S> <C> <C> <C>
Balance at December 31, 1994 $100 $ 4,412 $ 21,969

Net income - - 12,101
Cash dividends - - (6,000)
Adjustments, net - - -

Balance at December 31, 1995 100 4,412 28,070

Net income - - 13,029
Cash dividends - - (6,247)
Adjustments, net - - -

Balance at December 31, 1996 100 4,412 34,852

Net income - - 16,650
Dividends:

Cash - - (6,098)
Noncash - - (50,000)
Adjustments, net - - -

Balance at December 31, 1997 $100 $4,412 $ (4,596)

</TABLE>

<TABLE>
<CAPTION>
TOTAL
CURRENCY STOCKHOLDER'S
TRANSLATION EQUITY
ADJUSTMENT (DEFICIT)

<S> <C>
Balance at December 31, 1994 $ (294) $ 26,187

Net income - 12,101
Cash dividends - (6,000)
Adjustments, net 324 324

Balance at December 31, 1995 30 32,612

Net income - 13,029
Cash dividends - (6,247)
Adjustments, net (152) (152)

Balance at December 31, 1996 (122) 39,242

Net income - 16,650
Dividends:

Cash - (6,098)
Noncash - (50,000)
Adjustments, net (957) (957)

Balance at December 31, 1997 $(1,079) $ (1,163)

</TABLE>

<PAGE> FA-6

COMPX INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION:

CompX International Inc. is a wholly-owned subsidiary of Valcor, Inc., which
is a wholly-owned subsidiary of Valhi, Inc. (NYSE: VHI). The Company is a North
American manufacturer of component products (principally ergonomic computer
support systems, precision ball bearing drawer slides and cabinet locks) for
furniture and other markets.

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 the
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.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of consolidation. The accompanying consolidated financial
statements include the accounts of CompX International Inc. and its wholly-owned
Canadian subsidiary, Waterloo Furniture Components Limited (collectively the
"Company"). All material intercompany accounts and balances have been
eliminated.

Fiscal year. The Company's operations are comprised of a 52 or 53-week
fiscal year. The years ended December 31, 1995, 1996 and 1997 each consisted of
52 weeks.

Management estimates. The preparation of financial statements in
conformity with generally accepted accounting principles 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. Ultimate actual results may, in some instances,
differ from previously estimated amounts.

Foreign currency transactions. Assets and liabilities of the Company's
Canadian subsidiary 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, net of related deferred income tax
effects, are accumulated in the currency translation adjustment component of
stockholder's equity. Foreign currency transaction gains and losses are
recognized in income currently. The net foreign currency transaction gain,
included in other income, was $23,000 in 1995, $136,000 in 1996 and $303,000 in
1997.

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.
<PAGE> FA-7

Inventories and cost of sales. Inventories are stated at the lower of cost
or market. Inventories are based on average cost or the first-in, first-out
method.

Property, equipment and depreciation. Property and equipment, including
purchased computer software for internal use, are stated at cost. Maintenance,
repairs and minor renewals are expensed; major improvements are capitalized.
Depreciation is computed primarily on the straight-line method over the
estimated useful lives of 15 to 40 years for buildings and three to 10 years for
machinery and equipment.

Income taxes. CompX International, Valcor and Valhi are members of
Contran's consolidated United States federal income tax group (the "Contran Tax
Group"). The policy for intercompany allocation of federal income taxes
provides that subsidiaries included in the Contran Tax Group compute the
provision for federal income taxes on a separate company basis. Subsidiaries of
Valcor make payments to, or receive payments from, Valcor in the amount they
would have paid to or received from the Internal Revenue Service had they not
been members of the Contran Tax Group. The separate company provisions and
payments are computed using the tax elections made by Contran.

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 the
Company's investment in the Canadian subsidiary which is not a member of the
Contran Tax Group.

New accounting principles not yet adopted. The Company will adopt
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income, in the first quarter of 1998. Upon adoption of SFAS No.
130, the Company will present a new Statement of Comprehensive Income which will
report all changes in the Company's stockholder's equity other than transactions

with its stockholders. Comprehensive income pursuant to SFAS No. 130 would
include the Company's consolidated net income, as reported in the Consolidated
Statement of Income, plus the net change in the foreign currency translation
component of stockholder's equity.

The Company will adopt SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, no later than the fourth quarter of 1998.
SFAS No. 131 will supersede the business segment disclosure requirements
currently in effect under SFAS No. 14. SFAS No. 131, among other things,
establishes standards regarding the information a company is required to
disclose about its operating segments. SFAS No. 131 also provides guidance
regarding what constitutes a reportable operating segment. The Company expects
to have one operating segment pursuant to SFAS No. 131, the same one segment
currently in effect under SFAS No. 14. Accordingly, segment disclosures
pursuant to SFAS No. 131 are not expected to be materially different from the
current disclosures pursuant to SFAS No. 14.

Other. Advertising costs, expensed as incurred, were $432,000 in 1995,
$410,000 in 1996 and $555,000 in 1997. Research and development costs, expensed
as incurred, were $391,000 in 1995, $460,000 in 1996 and $468,000 in 1997.
Accounting and funding policies for retirement plans are described in Note 7.
<PAGE> FA-8
NOTE 3 - GEOGRAPHIC SEGMENTS:

<TABLE>
<CAPTION>
Years ended December 31,

1995 1996 1997

(In thousands)
<S> <C> <C> <C>
Net sales:
Point of origin:
Canada $58,123 $65,758 $ 80,632
United States 22,115 22,986 28,020

$80,238 $88,744 $108,652

Point of destination:
United States $55,442 $58,155 $ 70,354
Canada 22,788 27,763 33,974
Other 2,008 2,826 4,324

$80,238 $88,744 $108,652

Operating income:
Canada $13,425 $16,417 $ 20,533
United States 6,441 5,697 7,807

19,866 22,114 28,340

General corporate income (expense), net 6 (12) (472)
Interest expense )

Income before income taxes $19,859 $22,084 $ 27,699

</TABLE>

<TABLE>
<CAPTION>
December 31,

1996 1997

(In thousands)
<S> <C> <C>
Identifiable assets:
Canada $31,425 $35,061
United States 17,025 28,733

$48,450 $63,794

</TABLE>

Capital expenditures exclude amounts attributable to business units acquired
in business combinations accounted for by the purchase method. In 1995, the
Company's Canadian subsidiary purchased certain assets of a competitor for
approximately $6 million cash.

At December 31, 1997, the net assets of the Company's Canadian subsidiary
included in consolidated net assets approximated $24.3 million.
<PAGE> FA-9

NOTE 4 - INVENTORIES:

<TABLE>
<CAPTION>
December 31,

1996 1997

(In thousands)
<S> <C> <C>
Raw materials $ 2,556 $ 2,057
Work in process 4,974 5,193
Finished products 3,300 3,775
Supplies 49 48

$10,879 $11,073

</TABLE>

NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

<TABLE>
<CAPTION>
December 31,

1996 1997

(In thousands)
<S> <C> <C>
Accounts payable $3,112 $ 5,497
Accrued liabilities:
Employee benefits 2,265 3,490
Insurance 152 633
Royalties 476 447
Other 891 1,360

$6,896 $11,427

</TABLE>

NOTE 6 - INDEBTEDNESS:

At December 31, 1997 other long-term debt consists of capital lease
obligations due through 2001. See Note 9 for a discussion of the Company's
demand note payable to Valcor.

NOTE 7 - EMPLOYEE BENEFIT PLANS:

Substantially all employees are eligible to participate in Company-sponsored
contributory savings plans with partial matching Company contributions. In
addition, substantially all U.S. employees participate in a Company-sponsored
noncontributory defined contribution plan with Company contributions based on a
profit sharing formula. Company contributions to these plans aggregated
$838,000 in 1995, $842,000 in 1996 and $1,051,000 in 1997.
<PAGE> FA-10
NOTE 8 - INCOME TAXES:

<TABLE>
<CAPTION>
YEARS ENDED

DECEMBER 31,

1995 1996 1997

(IN THOUSANDS)
<S> <C> <C> <C>
Components of pre-tax income:
Canada $13,425 $16,417 $20,533
United States 6,434 5,667 7,136

$19,859 $22,084 $27,669

Expected tax expense, at the U.S. federal
statutory income tax rate of 35% $ 6,951 $ 7,729 $ 9,684

Non-U.S. tax rates 882 128 550

Incremental U.S. tax on earnings of
Canadian subsidiary 750 1,050 631

Rate change adjustment of deferred taxes
resulting from U.S./Canadian tax treaty (978) - -

State income taxes and other, net 153 148 154

$ 7,758 $ 9,055 $11,019

Provision for income taxes:
Currently payable:
U.S. federal $ 2,065 $ 1,676 $ 2,491
U.S. state 255 260 256
Canadian 5,913 7,744 8,923

8,233 9,680 11,670

Deferred taxes:
U.S. (561) (872) (85)
Canadian

(475) (625) (651)

$ 7,758 $ 9,055 $11,019

</TABLE>

<PAGE> FA-11
The components of net deferred tax assets (liabilities) are summarized
below. Deferred income taxes charged (credited) to the foreign currency
translation component of stockholder's equity were not material in any of the
past three years.

<TABLE>
<CAPTION>
DECEMBER 31,

1996 1997

(IN THOUSANDS)
<S> <C> <C>
Tax effect of temporary differences relating to:
Inventories $ 172 $ 198
Property and equipment (1,236) (717)
Accrued liabilities and other deductible 233 447
differences
Investment in Canadian subsidiary not a member of
the
106 627
consolidated tax group
Other taxable differences - (99)

$ (725) $ 456

Current deferred tax assets $ 343 $ 438
Noncurrent deferred tax assets - 133
Noncurrent deferred tax liabilities (1,068) (115)

$ (725) $ 456

</TABLE>

NOTE 9 - 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.

<TABLE>
<CAPTION>
DECEMBER 31,

1996 1997

(IN THOUSANDS)
<S> <C> <C>
Receivable from affiliates - income taxes $384 $ -

Payable to affiliates:
Demand note payable to Valcor $ - $50,000
Income taxes and other 5 331

$ 5 $50,331

</TABLE>

On December 12, 1997, the Company paid a $50 million dividend to Valcor in
the form of a $50 million demand note payable (the "Valcor Note"). The Valcor
Note is unsecured and bears interest at a fixed rate of 6%. Interest expense
related to the Valcor Note was $164,000 in 1997. See Note 12.

Under the terms of Intercorporate Service Agreements with Valhi, Valhi
performs certain management, financial and administrative services for the
Company on a fee basis. Such fees are based upon estimates of time devoted to
the affairs of the Company by individual Valhi employees and the salaries of
such persons. Fees pursuant to these agreements were $284,000 in 1995, $300,000
in 1996 and $260,000 in 1997. Net charges from related parties for services
provided in the ordinary course of business, principally charges for insuring
property and other risks, aggregated $152,000 in 1995, $149,000 in 1996 and
$208,000 in 1997. These fees and charges are principally pass-through in nature
and, in the Company's opinion, are reasonable and not materially different from
those that would have been incurred on a stand-alone basis.

Certain employees of the Company have been awarded shares of restricted
Valhi common stock and/or granted options to purchase Valhi common stock under
the terms of Valhi's stock option plans. Upon exercise of the options, the
Company will pay Valhi the aggregate difference between the option price and the
market value of Valhi's common stock on the exercise date of such options. For
financial reporting purposes, the Company accounts for the related expense
(credit) of $(12,000) in 1995, $9,000 in 1996 and $472,000 in 1997 in a manner
similar to accounting for stock appreciation rights. At December 31, 1997,
employees of the Company held options to purchase 204,000 Valhi shares at prices
ranging from $4.76 to $14.66 per share (185,000 shares at prices lower than the
December 31, 1997 quoted market price of $9.44 per share).

Restricted stock is forfeitable unless certain periods of employment are
completed. The Company will pay Valhi the market value of the restricted shares
on the dates the restrictions expire, and accrue the related expense over the
restriction period. Expense related to restricted stock was $6,000 in 1995 and
$3,000 in 1996. All outstanding restricted stock vested in 1996.

NOTE 10 - COMMITMENTS AND CONTINGENCIES:

Legal proceedings. The Company is involved in various routine legal
proceedings incidental to its normal business activities. The Company believes
none of such proceedings is material in relation to the Company's financial
position, results of operations or liquidity.

Income taxes. The Company is undergoing examinations of certain of its
income tax returns, and tax authorities have or may propose tax deficiencies.
<PAGE> FA-13
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.

The Company and Valcor have entered into a tax sharing agreement (the "Tax
Sharing Agreement") which provides for the allocation of tax liabilities and tax
payments as described in Note 2. The Company is jointly and severally liable
for the federal income tax of Contran and the other companies included in the
Contran Tax Group for all periods in which the Company is included in Contran
Tax Group. Valcor and Valhi has agreed, however, to indemnify the Company for
any liability for income taxes of the Contran Tax Group in excess of the
Company's tax liability computed in accordance with the Tax Sharing Agreement.

Concentration of credit risk. The Company's products are sold primarily to
original equipment manufacturers in the U.S. and Canada. The ten largest
customers accounted for approximately one-third of sales during each of the past
three years with at least five of such customers in each year located in the
United States.

At December 31, 1997, approximately 70% of the Company's cash and cash
equivalents was invested in A1 or P1-grade commercial paper issued by various
third parties having a maturity of three months or less (1996 - approximately
75% was on deposit with a single Canadian bank).

Other. Royalty expense was $622,000 in 1995, $601,000 in 1996, and $849,000
in 1997. Royalties relate principally to certain Canadian-produced products
sold in the United States and are based upon volume.

Rent expense, principally for equipment, was $295,000 in 1995, $387,000 in
1996 and $425,000 in 1997. At December 31, 1997, future minimum rentals under
noncancellable operating leases are approximately $260,000 in 1998, $190,000 in
1999, $145,000 in 2000, $85,000 in 2001 and $15,000 in 2002.
<PAGE> FA-14
NOTE 11 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):

<TABLE>
<CAPTION>
QUARTER ENDED

MARCH 31 JUNE 30 SEPT. 30 DEC. 31

(IN MILLIONS)
<S> <C> <C> <C> <C>
1995:
Net sales $20.1 $19.2 $19.4 $21.5
Operating income 5.5 5.1 4.5 4.8
Net income 3.2 3.0 2.7 3.2

1996:
Net sales $21.2 $21.7 $21.8 $24.1
Operating income 4.4 5.0 5.4 7.3
Net income 2.6 2.9 3.2 4.3

1997:
Net sales $25.8 $27.4 $27.0 $28.4
Operating income 6.3 6.9 6.9 8.2
Net income 3.7 4.2 4.1 4.7

</TABLE>

NOTE 12 - SUBSEQUENT EVENTS:

New credit facility. Prior to completion of a public offering of shares of
the Company's Class A common stock discussed below, the Company plans to enter
into a new $100 million revolving senior credit facility (the "Revolving Senior
Credit Facility"). The Revolving Senior Credit Facility is expected to be an
unsecured five-year revolving facility. Borrowings are expected to be available
for the Company's general corporate purposes, including potential acquisitions.
Prior to completion of the offering, the Company intends to utilize borrowings
under the Revolving Senior Credit Facility to fully repay the Valcor Note.

Recapitalization. On February 4, 1998, the Company amended and restated
its certificate of incorporation. The authorized capital stock of the Company
now consists of shares of Class A Common Stock (20,000,000 shares authorized)
and Class B Common Stock (10,000,000 shares authorized), each par value $.01 per
share, and 1,000 shares of preferred stock, par value $.01 per share. Upon the
effectiveness of the amendment and restatement of the certificate of
incorporation, the 1,000 shares of the Company's common stock, $1 par value,
previously outstanding and all held by Valcor, were reclassified into 10,000,000
shares of the Company's Class B Common Stock. The accompanying consolidated
financial statements have been retroactively restated to reflect this
recapitalization.

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. Holders of Class B Common Stock are
entitled to one vote per share in all matters except for election of directors
where such holders are 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
<PAGE> FA-15
ratable right to receive dividends to be paid from the Company's assets when, as
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 will 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.

Public offering. The Company has filed a preliminary registration
statement with the Securities and Exchange Commission for an initial public
offering of shares of the Company's Class A Common Stock. A majority of the net
proceeds to the Company from the offering is expected to be used to repay
borrowings under the Revolving Senior Credit Facility discussed above and to
consummate the potential acquisition discussed below. There can be no assurance
that any such public offering will be completed.

Incentive compensation plan. The Company's board of directors has
authorized, subject to successful completion of the public offering described
above, the adoption of the CompX International Inc. 1997 Incentive Compensation
Plan (the "Incentive Plan"). The Incentive Plan will provide 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
Incentive Plan. Stock options will be granted at prices not less than the
market price of the Company's stock on the date of grant, and will generally
vest over five years and expire ten years from the date of grant. The Company

expects to make an initial grant of stock options pursuant to the Incentive Plan
upon completion of the public offering at an exercise price equal to the public
offering price, although the number of options to be granted has not yet been
determined. Other than the Management Shares described below, the Company
currently has no plans to grant any stock awards under the Incentive Plan,
although it may do so in the future.

The Company will account for stock-based employee compensation in
accordance with Accounting Principles Board Opinion 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 not less than the market price on the date of grant.

Stock award grants. The Company's board of directors has authorized,
subject to successful completion of the public offering described above, the
grant of shares of Class A Common Stock and cash payments to certain employees
(the "Management Shares") for their services in connection with the public
offering. The number of Class A shares to be awarded will be based upon the
public offering price to the public. The Company will value the Class A shares
awarded at such public offering price, and the aggregate value of the Class A
shares awarded will be approximately $1.5 million. The employees will have the
option of receiving cash in lieu of a portion of their Class A shares. The
Company will recognize a charge, at the time of the completion of the public
offering, equal to the aggregate value of the Class A shares awarded and cash
payments made.

Potential acquisition. On February 3, 1998, the Company signed a
definitive agreement concerning the purchase a lock competitor for approximately
$33 million cash. The transaction is subject to regulatory approval and
negotiation and execution of a definitive agreement and is
<PAGE> FA-16

expected to be completed in the first quarter of 1998. There can be no
assurance that the acquisition will be completed.

Unaudited pro forma net income and net income per common share. The
unaudited pro forma net income in 1997 reflects the net-of-tax adjustment for
the award of the Management Shares described above. The unaudited pro forma
data assumes an initial public offering price to the public of $18.50 per Class
A share. Pro forma common shares outstanding used in the calculation of pro
forma earnings per share include (i) the 10,000,000 shares of Class B Common
Stock outstanding after the recapitalization discussed above, (ii) 81,100 shares
of Class A Common Stock (the maximum number) to be awarded pursuant to the
Management Shares and (iii) 2,924,000 shares of Class A Common Stock to be
issued in the public offering, the net proceeds of which will be used to repay
borrowings under the Revolving Senior Credit Facility incurred to repay the
Valcor Note.
<PAGE> FA-17

INDEPENDENT AUDITORS' REPORT

To the Boards of Directors
Fort Lock Corporation and Fortronics, Inc.

We have audited the accompanying consolidated combined balance sheets of FORT
LOCK GROUP as of June 29, 1996 and June 28, 1997, and the related consolidated
combined statements of income, changes in stockholders' equity and cash flows
for the fiscal years ended June 24, 1995, June 29, 1996 and June 28, 1997.
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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated combined financial position of Fort Lock
Group as of June 29, 1996 and June 28, 1997 and the results of its operations

and its cash flows for the fiscal years ended June 24, 1995, June 29, 1996 and
June 28, 1997, in conformity with generally accepted accounting principles.

ALTSCHULER, MELVOIN AND GLASSER LLP

Chicago, Illinois
September 26, 1997
<PAGE> FB-1

FORT LOCK GROUP

CONSOLIDATED COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
ASSETS June 29, June 28, December 27,
(Substantially all pledged - Note 7) 1996 1997 1997

<S> (Unaudited)
Current assets: <C> <C> <C>
Cash $ 31,641 $ 18,289 $ 129,240
Accounts receivable, trade (net of
allowance for doubtful accounts of
$117,800, $105,121 and $111,121
respectively) 1,954,029 2,621,570 2,288,726
Inventories (Notes 1 and 4) 2,336,692 3,079,128 4,012,076
Deferred income taxes (Note 8) - 183,000 183,000
Income taxes refundable - - 150,453
Other current assets 347,798 132,522 40,154

4,670,160 6,034,509 6,803,649

Property and equipment (at cost, net of
accumulated depreciation--Notes 1 and 3,259,059 4,552,887 5,356,443
5)

Other assets 169,612 211,827 163,434

$8,098,831 $10,799,223 $12,323,526

</TABLE>

<PAGE> FB-2

FORT LOCK GROUP

CONSOLIDATED COMBINED BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
June 29, June 28, December 27,
1996 1997 1997

<S> (Unaudited)
<C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Checks issued in excess of funds on
deposit $ 311,707 $ 495,281 $ 879,045
Notes payable to bank (Note 6) 1,605,000 10,000 1,025,000
Accounts payable 1,724,300 2,371,635 2,285,656
Current portion of long-term
debt (Note 7) 309,195 439,816 479,410
Current portion of amounts due to
related parties (Notes 3 and 7) 70,497 116,388 60,000
Income taxes payable 43,162 651,944 -
Accrued expenses (Note 9) 587,953 839,348 878,003

4,651,814 4,924,412 5,607,114

Long-term liabilities:
Long-term debt 1,186,592 1,280,540 1,096,315
Due to related parties (Notes 3 and 7) 350,421 290,421 260,421
Deferred income taxes (Note 8) - 267,000 292,246

1,537,013 1,837,961 1,648,982

Minority interest in subsidiary (Note 1) 339,942 123,100 196,922

Stockholders' equity:
Common stock of Fort Lock Corporation,
$100 par value; 100 shares
authorized, 10,000 10,000 10,000
issued and outstanding
Common stock of Fortronics, Inc., no
par value; 100,000 shares authorized;
1,000 shares issued and outstanding 1,000 1,000 1,000
Retained earnings 1,580,130 3,959,301 4,981,422
Foreign currency translation (21,068) (56,551) (121,914)
adjustment

1,570,062 3,913,750 4,870,508

$8,098,831 $10,799,223 $12,323,526

</TABLE>

Commitments and contingencies (Note 10).
<PAGE> FB-3

FORT LOCK GROUP

CONSOLIDATED COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Fiscal years ended 26 weeks

ended

June 24, June 29, June 28, December December
1995
1996 1997

(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales (Note 1) $16,228,314 $19,977,460 $26,755,378 $12,559,719 $15,037,338

Cost of goods sold
(Note 1) 12,332,537 15,097,200 18,835,353 9,656,711 10,890,043

Gross profit 3,955,777 4,880,260 7,920,025 2,903,008 4,147,295

Operating expenses:
Engineering 847,422 1,040,429 971,489 519,537 569,183
Selling 1,328,388 1,564,568 1,551,471 758,180 702,216
General and
administrative 1,240,161 1,589,290 1,770,134 865,173 1,179,369

3,415,971 4,194,287 4,293,094 2,142,890 2,450,768

Income from operations 539,806 685,973 3,626,931 760,118 1,696,527

Other (income) expense:
Interest expense 257,185 279,649 306,263 140,541 113,041

Other (net) (11) (24,652) 14,984

(20,922) (17,525)

236,263 262,124 306,252 115,889 128,025

Income before income
taxes and minority
interest 303,543 423,849 3,320,679 644,229 1,568,502

Income tax provision
(Note 6) 76,000 154,000 1,132,000 144,338 642,849

227,543 269,849 2,188,679 499,891 925,653
Minority interest in
net loss of subsidiary - 79,302 190,492 226,640 96,468

Net income $ 227,543 $ 349,151 $ 2,379,171 $ 726,531 $ 1,022,121

</TABLE>

<PAGE> FB-4

FORT LOCK GROUP

CONSOLIDATED COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FISCAL YEARS ENDED June 24, 1995, June 29, 1996, June 28, 1997

And

26 WEEKS ENDED December 27, 1997 (Unaudited)

<TABLE>
<CAPTION>
Foreign
Fort Lock Fortronics, currency Total
Corporation Inc. translation Retained stockholders
common stock common stock adjustment earnings '
equity

Balance, June $10,000 $1,000 $ - $1,003,436 $1,014,436
26, 1994

Net income - - - 227,543 227,543

Balance, June 10,000 1,000 - 1,230,979 1,241,979
25, 1995

Foreign currency
translation - -
adjustment

Net income - - - 349,151 349,151

Balance, June 10,000 1,000 (21,068) 1,580,130 1,570,062
29, 1996

Foreign currency
translation - - (35,483) - (35,483)
adjustment

Net income - - - 2,379,171 2,379,171

Balance June 10,000 1,000 (56,551) 3,959,301 3,913,750
28, 1997

Unaudited:
Foreign
currency
translation -
adjustment

Net income - - - 1,022,121 1,022,121

Balance,
December 27, $10,000 $1,000 $(121,914) $4,981,422 $4,870,508
1997

</TABLE>

<PAGE> FB-5

FORT LOCK GROUP

CONSOLIDATED COMBINED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Fiscal years ended

June 24, June 29, June 28,
1995 1996 1997

<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 227,543 $ 349,151 $2,379,171
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization 395,923 426,960 602,739
Minority interest in net loss of - (79,302) (190,492)
subsidiary
Other, net - 206,656 22,166
(Increase) decrease in assets:
Accounts receivable, net (289,679) (367,769) (667,541)
Inventories 292,033 (131,446) (742,436)
Income taxes refundable (9,636) 15,136 -
Other assets (5,898) (466,162) 173,061
Increase (decrease) in liabilities:
Checks issued in excess of funds on 7,840 53,655 183,574
deposit
Accounts payable 599,669 (1,633) 647,336
Accrued expenses 24,885 91,787 251,395
Income taxes payable (76,377) 43,162 608,782

Net cash provided by operating activities 1,166,303 140,195 3,267,755

Cash flows from investing activities:
Purchases of property and equipment (724,601) (1,788,394) (1,896,567)
Proceeds from sale of equipment - 10,000 -
Proceeds from sale of shares in subsidiary - 30,061 -
Cash contributed by minority shareholder 205,800 201,820 -

Net cash used in investing activities (518,801) (1,546,513) (1,896,567)

</TABLE>

<TABLE>
<CAPTION>
26 weeks ended

December 28, December 27,
1996

(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 726,531 $ 1,022,121
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depreciation and amortization 212,133 307,494
Minority interest in net loss of (26,073) (96,468)
subsidiary
Other, net (30,151) (40,138)
(Increase) decrease in assets:
Accounts receivable, net (232,662) 332,844
Inventories (63,811) (932,948)
Income taxes refundable - (150,453)
Other assets 127,984 140,761
Increase (decrease) in liabilities:
Checks issued in excess of funds on (132,540) 383,764
deposit
Accounts payable 1,123,552 (85,979)
Accrued expenses 264,853 38,655
Income taxes payable (30,662) (651,924)

Net cash provided by operating 1,939,154 267,730
activities

Cash flows from investing activities:
Purchases of property and equipment (712,646) (1,111,050)
Proceeds from sale of equipment - -
Proceeds from sale of shares in - -
subsidiary
Cash contributed by minority shareholder - 170,290

Net cash used in investing activities (712,646) (940,760)

</TABLE>

<PAGE> FB-6

FORT LOCK GROUP

CONSOLIDATED COMBINED STATEMENT OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
Fiscal years ended

June 24, June 29, June 28,
1995 1996 1997

<S> <C> <C> <C>
Cash flows from financing activities:
Net borrowings (repayments) from
notes payable $(389,859) $ 123,333 $(1,595,000)
to bank
Repayments of shareholder and (31,073) (63,395) (70,497)
related-party loans
Proceeds from long-term debt 424,184 1,678,881 1,454,171
Repayment of long-term debt (122,937) (829,177) (1,173,214)

Net cash provided by (used in) (119,685) 909,642 (1,384,540)
financing activities

Net increase (decrease) in cash 527,817 (496,676) (13,352)

Cash, beginning of period 500 528,317 31,641

Cash, end of period $ 528,317 $ 31,641 $ 18,289

Supplemental disclosures of cash
flow information:

Cash paid during the year for:
Interest $ 261,702 $ 279,165 $ 206,373
Income taxes 160,013 90,000 355,000

Noncash investing and financing
activities:
Acquisition of assets under
notes payable and 17,126 56,175 139,064
capital leases

</TABLE>

<TABLE>
<CAPTION>
26 weeks ended

December 28, December 27,

(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net borrowings (repayments) from notes payable
to bank $ (876,000) $1,015,000
Repayments of shareholder and related-party (77,215) (30,000)
loans
Proceeds from long-term debt - -
Repayment of long-term debt (176,060) (201,019)

Net cash provided by (used in) financing (1,129,275) 783,981
activities

Net increase (decrease) in cash 97,233 110,951

Cash, beginning of period 528,317 18,289

Cash, end of period $ 625,550 $ 129,240

Supplemental disclosures of cash flow
information:
Cash paid during the year for:

Interest $ 127,876 $ 24,426
Income taxes 55,000 130,000

Noncash investing and financing activities:
Acquisition of assets under notes payable
and - -
capital leases

</TABLE>

<PAGE> FB-7

FORT LOCK GROUP

NOTES TO THE CONSOLIDATED COMBINED FINANCIAL STATEMENTS

Note 1 - Summary of significant accounting policies

Principles of consolidation and combination - The consolidated combined
financial statements include the consolidated financial statements of Fort Lock
Corporation and its subsidiaries and Fortronics, Inc. (collectively the
"Group"). The subsidiaries of Fort Lock Corporation (the "Corporation") include
the following: Fort Lock International, Ltd. (a Domestic International Sales
Corporation ("DISC")), Fort Lock (U.K.) Limited and Fort Securite S.A. (57%-
owned). The DISC has been inactive since January 1, 1985. All significant
intercompany accounts and transactions have been eliminated in consolidation and
combination. The 43% ownership of Fort Securite S.A. not owned by the
Corporation has been removed from income and equity and reflected as minority
interest.

Fortronics, Inc. is related to Fort Lock Corporation by means of common
ownership. The sole shareholder of Fortronics, Inc. contemplates transferring a
majority interest in Fortronics, Inc. to the Corporation in fiscal 1998.

Unaudited interim information - Information included in the consolidated
combined financial statements for the interim periods ended in December 28, 1996
and December 27, 1997 is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the information for the interim periods have been made. The

results of operations for the interim periods are not necessarily indicative of
the operating results for a full year or of future operations.

Fiscal year - The Group's operations are comprised of a 52 or 53 week year.
The fiscal years ended in 1995, 1996 and 1997 each consisted of 52 weeks, and
the interim periods ending in December 1996 and December 1997 each consisted of
26-week periods.

Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from the
estimates.

Inventories - Inventories are valued at the lower of cost, as determined
under the first-in, first-out (FIFO) method, or market.

Net sales - Sales are recorded when products are shipped.

Depreciation and amortization - Provisions for depreciation and amortization
of property and equipment are computed under the straight-line method for
financial reporting purposes and under accelerated methods as
<PAGE> FB-8
permitted under the Internal Revenue Code for tax reporting purposes. All such
assets are depreciated over periods within reasonable ranges of economic life.

Capital leases - Leases required to be capitalized under criteria of
Financial Accounting Standards Board Statement No. 13 are recorded at the
present value of future rental payments (Note 7). Amortization of capital
leases is computed under the straight-line method over the terms of the related

leases for financial reporting purposes and under accelerated methods for tax
reporting purposes.

Income taxes - See Note 8 for discussion of income taxes.

Research and development costs - Research and development costs are charged
to operations as incurred. Such costs approximated $959,000 in fiscal 1995,
$883,000 in fiscal 1996 and $839,000 in fiscal 1997, and were $437,000 and
$423,000 in the 1996 and 1997 interim periods, respectively.

Advertising costs - Advertising costs are charged to operations as incurred.
Such costs approximated $146,000 in fiscal 1995, $239,000 in fiscal 1996 and
$159,000 in fiscal 1997, and were $92,000 and $100,000 in the 1996 and 1997
interim periods, respectively.

Major customers - Sales to one major customer amounted to approximately 23%
of the Group's consolidated combined net sales for fiscal 1997. Sales to two
major customers amounted to 24% of the Group's consolidated combined sales in
fiscal 1996. Sales to two major customers amounted to approximately 18% of the
Group's consolidated net sales for fiscal 1995. No other single supplier
accounted for more than 10% of consolidated combined purchases in any period
presented.

Major supplier - Purchases from one major supplier amounted to approximately
12% of fiscal 1997 consolidated combined purchases. Purchases from two major
suppliers amounted to approximately 26% of fiscal 1996 consolidated combined
purchases. Purchases from one major supplier amounted to approximately 18% of
fiscal 1995 consolidated combined purchases. No other single supplier accounted
for more than 10% of consolidated combined purchases in any period presented.

Foreign currency translation - The financial statements of Fort Lock (U.K.)
Limited and Fort Securitie S.A. have been translated in accordance with the

requirements of Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation". Currency transaction gains and losses are recognized in
income currently and for all periods presented were not material.

Note 2 - Nature of activities

The Group operates in one business segment - the design, manufacture and
distribution of a wide variety of locks. The Corporation is engaged in the
manufacture and distribution of cam, switch and special purpose locks to
customers located throughout the United States. Operations are conducted from
<PAGE> FB-9
a manufacturing facility (leased from a related party - Note 3) in River Grove,
Illinois. Fort Lock (U.K.) Limited distributes locks in the United Kingdom.
Fort Securite S.A. is a French company which was formed to manufacture, market
and sell locks in the European market. Operations commenced March 1996 and are
conducted from a manufacturing facility in France. Fortronics, Inc. is engaged
in the design, manufacture and distribution of electronic locking systems to
customers located throughout the United States.

Geographic segment data is presented below:

<TABLE>
<CAPTION>
Fiscal years ended 26 weeks ended

June 24, June 29, June 28, December 28, December 27,
1995 1996

(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales:
Point of origin:
United States $16,151,869 $19,558,999 $25,454,688 $12,132,994 $14,161,934
France - 248,923 1,147,489 332,683 839,335
United Kingdom 577,430 1,594,488 1,021,913 512,821 203,998
Eliminations (440,985) (1,424,950) (868,712) (418,779) (167,929)

$16,288,314 $19,977,460 $26,755,378 $12,559,719 $15,037,338

Point of
destination:
United States $14,879,780 $17,128,481 $23,868,850 $11,353,806 $13,685,960
Europe 1,408,534 2,848,979 2,886,528 1,205,913 1,351,378

$16,288,314 $19,977,460 $26,755,378 $12,559,719 $15,037,338

Operating profit:
United States $ 480,681 $ 740,561 $ 4,019,130 $ 972,042 $ 1,866,238
France - (67,401) (401,261) (251,727) (155,405)

United Kingdom 59,125 12,813 9,062 39,803 (14,306)

$ 539,806 $ 685,973 $ 3,626,931 $ 760,118 $ 1,696,527

</TABLE>

<TABLE>
<CAPTION>
June 29, June 28, December 27,
1996 1997

(Unaudited)
<S> <C> <C> <C>
Identifiable assets:
United States $6,553,471 $ 8,972,178 $10,319,411
France 1,487,656 1,881,704 2,068,425
United Kingdom 245,575 234,376 159,635
Eliminations (187,871) (289,035) (223,945)

$8,098,831 $10,799,223 $ 12,323,526

</TABLE>

<PAGE> FB-10
Note 3 - Related-party transactions

The Corporation has entered into various loan agreements (Note 7) with
shareholders and certain members of their families. The interest expense on
these loans amounted to $52,000 in fiscal 1995, $49,000 in fiscal 1996 and
$48,000 in fiscal 1997, and was $24,000 and $21,000 in the 1996 and 1997 interim
periods, respectively.

The Corporation leases its manufacturing facilities (Note 10) from its
president, who is also a shareholder. Rent expense was $163,000 in each of
fiscal 1995 and 1996 and $168,820 in fiscal 1997, and was $84,000 and $94,000 in
the 1996 and 1997 interim periods, respectively.

The Corporation sold inventory to a former shareholder in the total amount
of approximately $50,000 during each of the past three fiscal years.

In fiscal 1995, lease payments of $11,378 were made to the Corporation's
president for a production machine.

Note 4 - Inventories

Inventories consisted of the following:

<TABLE>
<CAPTION>
June 29, June 28, December
27,
1996 1997 1997

(Unaudited)
<S> <C> <C> <C>
Raw materials, purchased parts and
subassemblies $1,773,418 $2,294,404 $3,127,977
Work in process 355,881 550,004 552,025
Finished goods 207,393 234,720 332,074

$2,336,692 $3,079,128 $4,012,076

</TABLE>

<PAGE> FB-11
Note 5 - Property and Equipment

Property and equipment stated at acquisition cost, consisted of the
following:

<TABLE>
<CAPTION>
June 29, June 28, December 27,
1996 1997

(Unaudited)
<S> <C> <C> <C>
Operating assets:
Machinery and equipment $3,629,040 $4,078,375 $3,278,918
Tools and dies 1,340,745 2,099,974 1,042,611
Office furniture and equipment 266,268 280,367 135,526
Leasehold improvements 874,223 1,117,132 942,699
Transportation equipment 271,670 223,989 151,229
Data processing equipment 529,266 538,556 287,776
Capital lease equipment 204,204 326,268 326,268

7,115,416 8,664,661 6,165,027
Less accumulated depreciation
and
amortization (including
capital 3,856,357 4,416,766 2,173,981
lease amortization of
$144,722,
$172,992 and $92,947,
respectively)
3,259,059 4,247,895 3,991,046
Construction in progress - 304,992 1,365,397

$3,259,059 $4,552,887 5,356,443

</TABLE>

Depreciation and amortization expense amounted to $395,923 in fiscal 1995,
$426,960 in fiscal 1996 and $602,739 in fiscal 1997, and $212,133 and $307,494
in the 1996 and 1997 interim periods, respectively.

Note 6 - Notes payable

Note payable to bank of $1,605,000 at June 29, 1996, $10,000 at June 28,
1997 and $1,025,000 at December 27, 1997 were owing to Harris Trust and Savings
Bank ("Harris") under revolving note agreements.

On October 11, 1995, the Corporation executed a Secured Credit Agreement
with Harris, which provides for a revolving line of credit. The revolving line
of credit commitment is secured by the Corporation's accounts receivable,
inventory and equipment.

Also on October 11, 1995, the Corporation executed a Term Credit Agreement
with Harris which provided for two term loans, the proceeds from which were used
to repay indebtedness to another bank. On December 31, 1996, the two term notes
were replaced with a single term note and additional borrowings totaling
$150,000 were made under the replacement term note. The term loan is secured by
the Corporation's accounts receivable, inventory and equipment and requires
monthly principal payments of $19,000 plus interest with final payment due
December 31, 2001.
<PAGE> FB-12

The significant provisions of the Harris agreements are summarized below:

<TABLE>
<CAPTION>
<S> <C>
Maximum Borrowings:
Revolving line of credit $2,500,000
Term loan (original amount) $ 996,000

Interest Rate:
Revolving line of credit Prime rate
Term loan Prime rate

Borrowing Base:
Eligible accounts receivable 85%
Eligible inventories:
Percent 50%
Maximum amount (limited to 50%
of $ 900,000
outstanding borrowings)

Personal guarantees of certain
shareholders $ 600,000
</TABLE>

The Harris agreement contains various financial, administrative and other
covenants customary in lending transactions of this type, including provisions
which limit additional indebtedness and require the maintenance of certain
financial ratios. At June 28, 1997 the Corporation was in violation of certain
covenants concerning limitations on the amount of capital expenditures and
limitations on additional permitted liens, indebtedness and advances to
subsidiaries and affiliates. The Company received waivers of these past
violations and subsequently amended the agreement to increase the amount of
permitted capital expenditures.
<PAGE> FB-13

Note 7 - Long-term debt

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
June 29, June 28,
1996 1997

<S> <C> <C>
Financial and Credit Institutions:
Term loan under agreement dated December 31,
1996, payable to $ - $ 901,000
Harris (due December 31, 2001 - See Note 6)

Term loans payable to Harris (repaid in full
during fiscal 912,000 -
1997 - See Note 6)

Equipment notes payable (secured by certain
automotive equipment; 79,612 42,106
payable in monthly installments totaling
$2,893)

Capitalized lease obligation, in the original
amount of $39,076
payable to Hewlett-Packard (secured by certain
computer equipment 33,143 26,391
and software; payable in monthly installments
of $889; final
payment due June 2000)

Capitalized lease obligation in the original
amount of $83,510
payable to Leasetec Corporation (secured by

certain computer - 67,465
software; payable in monthly installments of
$3,857; final payment
due January 1999)

Capitalized lease obligation in the original
amount of $38,554
payable to Ameritech (secured by certain
telephone equipment;
payable in monthly installments of $1,220,
final payment due
November 1999)

Note payable under agreement dated March 29,
1996, payable to
SOFIREM (unsecured, payable in annual
installments of $13,624 77,680 68,120
for years 1999 and 2004 ($27,248 for interim
years), plus interest
at 7% per annum, due June 30, 2004)

Note payable under agreement dated February 21,
1997 payable to
SOFIREM (unsecured payable in quarterly - 136,240
installments of $6,812
plus interest of 6% per annum, due December
30, 2003)

Note payable under agreement dated February 22,
1996, payable to
two French banks (maximum borrowings of
$510,900, secured by

certain equipment, payable in monthly
installments of $3,983 393,352 447,265
inclusive of interest and quarterly
installments and quarterly
installments $15,327 plus interest, interest
at 6.25% per annum,
due December 10, 2001)
1,495,787 1,720,356

Shareholders and other related parties:
Other subordinate long-term notes due to
shareholders and related
parties (unsecured; due on demand or absent
demand, payable under 420,918 406,809
various installment terms and rates of
interest - see below and
Note 3)
1,916,705 2,127,165
Less current portion 379,692 556,204

$1,537,013 $1,570,961

</TABLE>

<TABLE>
<CAPTION>
December 27,
1997

(Unaudited)
<S> <C>
Financial and Credit Institutions:
Term loan under agreement dated December 31, 1996,
payable to $ 787,000
Harris (due December 31, 2001 - See Note 6)

Term loans payable to Harris (repaid in full
during fiscal -
1997 - See Note 6)

Equipment notes payable (secured by certain
automotive equipment; 24,824
payable in monthly installments totaling $2,893)

Capitalized lease obligation, in the original
amount of $39,076
payable to Hewlett-Packard (secured by certain
computer equipment 22,673
and software; payable in monthly installments of
$889; final
payment due June 2000)

Capitalized lease obligation in the original
amount of $83,510
payable to Leasetec Corporation (secured by
certain computer 47,193

software; payable in monthly installments of
$3,857; final payment
due January 1999)

Capitalized lease obligation in the original
amount of $38,554
payable to Ameritech (secured by certain
telephone equipment; 25,708
payable in monthly installments of $1,220, final
payment due
November 1999)

Note payable under agreement dated March 29,
1996, payable to
SOFIREM (unsecured, payable in annual
installments of $13,624 65,960
for years 1999 and 2004 ($27,248 for interim
years), plus interest
at 7% per annum, due June 30, 2004)

Note payable under agreement dated February 21,
1997 payable to
SOFIREM (unsecured payable in quarterly 122,612
installments of $6,812
plus interest of 6% per annum, due December 30,
2003)

Note payable under agreement dated February 22,
1996, payable to
two French banks (maximum borrowings of $510,900,
secured by
certain equipment, payable in monthly

installments of $3,983 423,367
inclusive of interest and quarterly installments
and quarterly
installments $15,327 plus interest, interest at
6.25% per annum,
due December 10, 2001)
1,519,337

Shareholders and other related parties:
Other subordinate long-term notes due to
shareholders and related
parties (unsecured; due on demand or absent
demand, payable under 376,809
various installment terms and rates of interest -
see below and
Note 3)
1,896,146
Less current portion 539,410

$1,356,736

</TABLE>

One shareholder has indicated that he will not demand payment of his
subordinated notes ($350,421 at June 29, 1996, $290,421 at June 28, 1997 and
$260,421 at December 27, 1997) within the next twelve months of each respective
balance sheet date. Accordingly, this liability is reflected as long-term in
the accompanying balance sheet.
<PAGE> FB-14

Maturities of long-term debt as of June 28, 1997 are as follows:

Fiscal Year Amount

1998 $ 556,204
1999 707,573
2000 392,544
2001 363,937
2002 66,037
Thereafter 40,870

$2,127,165

Note 8 - Income taxes

In fiscal 1995, the difference between the effective income tax rate
reflected in the financial statements and the statutory federal income tax rate
of 34% is primarily due to alternative minimum taxes, utilization of credit
carryforwards and change in the valuation allowance. In fiscal 1996 and 1997
and the 1996 and 1997 interim periods, the effective tax rate approximates the
statutory tax rate.

The provisions for income taxes relates principally to the Group's U.S.
operations and is as follows:

<TABLE>
<CAPTION>
Fiscal years ended 26 weeks ended

June 24, June 29, June 28, December December
1995
1996 1997

(Unaudited)
<S> <C> <C> <C> <C> <C>
Currently payable $100,000 $ 98,000 $1,048,000 $ 102,338 $617,603
Deferred (58,000) 110,000 778,000 389,000 25,246
Utilization of general
business and alternative
minimum tax credit carry
forwards - - (360,000) (180,000) -
Change in valuation 34,000 (54,000) (167,000) -
allowance
(334,000)

Provision for income taxes $ 76,000 $154,000 $1,132,000 $ 144,338 $642,849

</TABLE>

Deferred income taxes are provided for temporary differences, which are
differences between the tax basis of an asset or liability and the amounts
reported in the financial statements that will result in taxable or deductible
amounts in future years when the reported amount of the asset or liability is
recovered or settled. Gross deferred tax liabilities consist primarily of
accelerated depreciation methods utilized for tax reporting purposes. Gross
deferred assets consist of uniform capitalization rules with respect to
additional inventory costs, allowance for doubtful accounts, inventory valuation
allowances, vacation pay, and in fiscal 1996, general business and alternative
minimum tax credit carryforwards.
<PAGE> FB-15

The Group's deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
June 29, June 28, December 27,
1996 1997 1997

(Unaudited)
<S> <C> <C> <C>
Gross deferred tax assets $543,000 $183,000 $ 183,000
Gross deferred tax liabilities 209,000 267,000 292,246

Net deferred tax asset (liability) 334,000 (84,000) (109,246)
Less valuation allowance 334,000 - -

Net deferred tax liability $ - $(84,000) $ (109,246)

</TABLE>

The valuation allowance at June 29, 1996 of $334,000 relates to certain
deferred tax assets for which realization requires substantial taxable income in
future years. At June 28, 1997, the Corporation has utilized all of its general
business and alternative minimum tax credit carryforwards.

Note 9 - Accrued expenses

Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
June 29, June 28, December 27,
1996 1997

(Unaudited)
<S> <C> <C> <C>
Accrued wages and vacation pay $338,996 $351,944 $314,877
Taxes, other than income 35,341 48,429 98,624
Rent and real estate taxes 89,444 93,400 90,702
Employee benefit plans (including
amounts 77,860 217,047 205,882
due to a foreign government)
Other 46,312 128,528 167,918

$587,953 $839,348 $878,003

</TABLE>

Note 10 - Commitments and contingencies

The Corporation leases from a related party (Note 3) its premises in River
Grove, Illinois under an operating lease (expiring on December 31, 2001), which
provides for a minimum annual rental of $168,820 plus payment of applicable real
estate taxes, utilities, insurance and maintenance.
<PAGE> FB-16

In addition, the Group has entered into various leases for machinery and
equipment, some of which have been capitalized for financial reporting purposes.
Future minimum lease payments to be made under the capitalized and operating
leases as of June 28, 1997 are as follows:

<TABLE>
<CAPTION>
Capital Operating
Fiscal Year Leases Lease

1998 $ 71,585 $286,284
1999 52,303 279,324
2000 16,731 269,580
2001 - 269,580
2002 - 236,552
Thereafter - 466,957

Total minimum lease payments 140,619 $1,808,277

Less amount representing
imputed 14,994
interest

Present value of net minimum
lease payments $125,625

</TABLE>

Rent expense charged to operations amounted to $163,200 in fiscal 1995,
$187,000 in fiscal 1996 and $280,815 in fiscal 1997, and $86,000 and $96,000 in
the 1996 and 1997 interim periods, respectively.

The Corporation and its president/shareholder have entered into a stock
repurchase agreement which (i) requires the president/shareholder to give the
Corporation a right of first refusal on his Corporation shares, prior to their
transfer or sale, (ii) if the Corporation does not exercise such right, then the
other shareholders have a secondary right to purchase such shares, prior to such
transfer or sale, and (iii) if the president/shareholder should die, or if his
employment is terminated, the Corporation is required to purchase his shares at
their book value, as defined in the agreement.

Note 11 - Employee benefit plan

The Corporation maintains the 401(k) Plan of the Fort Lock Corporation,
under the provisions of Section 401(k) of the Internal Revenue Code. The plan
provides for elective contributions by eligible participants plus matching
contributions from the Corporation at a rate of $0.25 for each $1.00 contributed
by the employee, to the extent of the first 5% of compensation. Employer-
matching contributions to the plan amounted to $25,263 in fiscal 1995, $35,448
in fiscal 1996 and $39,410 in fiscal 1997, and $18,482 and $22,833 in the 1996
and 1997 interim periods, respectively.

<PAGE> FB-17

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,

SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

TABLE OF CONTENTS

PAGE

Prospectus Summary . . . . . . . . . 3
Risk Factors . . . . . . . . . . . 12
Use of Proceeds . .. . . . . . . . 18
Dividend Policy . .. . . . . . . . 18
Capitalization . . . . . . . . . . . . 19
Dilution . . . . . . . . . . . . 20
Unaudited Pro Forma Condensed Consolidated
Financial Statements . . . . . . . . 21
Selected Financial Data . . . . . . . 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . 30
Business . . . . . . . .. . . . . . . 37
Management . . . . . . . . . . . . 49
Certain Relationships and Related
Transactions . . . . .. . . . . . . . 55
Security Ownership in the Company
and its Affiliates . . . . . . . 58

Certain Indebtedness . . . . . . . . . 61
Description of Capital Stock . . . . . 62
Shares Eligible for Future Sale . . 66
Certain United States Tax Consequences
to Non-United States Holders . . 67
Underwriting . . . . . . . . . . . . 70
Legal Matters . . . . . . . . . . . . 71
Experts . . . . . . . . . . . . . . . 72
Additional Information . . . . . . . 72
Index to Historical Financial Statements . F-1

Until February , 1998 (25 days after the commencement of the offering), all

dealers effecting transactions in the Class A Common Stock, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.

4,700,000 Shares

CompX International Inc.

Class A Common Stock

[CompX Logotype]

P R O S P E C T U S

FEBRUARY , 1998

SALOMON SMITH BARNEY

NATIONSBANC MONTGOMERY
SECURITIES LLC

WHEAT FIRST UNION

COMPX INTERNATIONAL INC.

INDEX TO FINANCIAL STATEMENT SCHEDULES

PAGE

Report of Independent Accountants S-2

Schedule I - Condensed Financial Information of Registrant S-3

Schedule II - Valuation and Qualifying Accounts S-8

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

REPORT OF INDEPENDENT ACCOUNTANTS

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

Our report on the consolidated financial statements of CompX International
Inc. as of December 31, 1996 and 1997, and for each of the three years in the
period ended December 31, 1997, is herein included in this Registration
Statement on Form S-1. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statement schedules based on our audits.

In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.

COOPERS & LYBRAND L.L.P.

Dallas, Texas
January 23, 1998

COMPX INTERNATIONAL INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEETS

DECEMBER 31, 1996 AND 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
ASSETS 1996 1997

<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,092 $13,973
Accounts receivable 3,185 3,173
Receivable from affiliates 578 251
Inventories 5,405 5,395
Prepaid expenses 138 25
Deferred income taxes 343 438

Total current assets 11,741 23,255

Other assets:
Investment in Waterloo Furniture Components 25,441 24,317
Limited
Deferred income taxes - 133

25,441 24,450

Property and equipment 11,135 12,196
Less accumulated depreciation 5,657 6,600

Net property and equipment 5,478 5,596

$42,660 $53,301

</TABLE>

COMPX INTERNATIONAL INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEETS (CONTINUED)

DECEMBER 31, 1996 AND 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT 1996 1997

<S> <C> <C>
Current liabilities:
Demand note payable to Valcor $ - $50,000
Current maturities of long-term debt 88 113
Accounts payable and accrued liabilities 2,776 3,661
Other payable to affiliates 9 331
Income taxes 74 3

Total current liabilities 2,947 54,108

Noncurrent liabilities:
Long-term debt 74 262
Deferred income taxes 388 -
Other 9 94

Total noncurrent liabilities 471 356

Stockholder's equity (deficit) 39,242 (1,163)

$42,660 $53,301

</TABLE>

COMPX INTERNATIONAL INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996 1997

<S> <C> <C> <C>
Revenues:
Net sales $22,611 $23,185 $28,020
Other income 3,216 2,764 3,640

25,827 25,949 31,660

Costs and expenses:
Cost of sales 14,929 15,253 18,147
Selling, general and administrative 4,451 5,011 6,178
Interest 13 18 199

19,393 20,282 24,524

Income before income taxes 6,434 5,667 7,136

Provision for income taxes 2,179 3,181 3,282

4,255 2,486 3,854

Equity in earnings of Waterloo Furniture
Components Limited
7,846 10,543 12,796

Net income $12,101 $13,029 $16,650

</TABLE>

COMPX INTERNATIONAL INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996 1997

<S> <C> <C> <C>
Cash flows from operating activities:
Net income $12,101 $ 13,029 $ 16,650
Equity in earnings of Waterloo (7,846) (10,543) (12,796)
Dividends from Waterloo 4,200 6,683 12,400
Depreciation and amortization 788 876 998
Deferred income taxes (561) (872) (85)
Other, net 9 13 23
Change in assets and liabilities, net (64) (2,003) 1,652

Net cash provided by operating 8,627 7,183 18,842
activities

Cash flows from investing activities:
Capital expenditures (679) (627) (1,123)
Other, net 6 43 15

Net cash used by investing (673) (584) (1,108)
activities

Cash flows from financing activities:
Indebtedness, net (42) (74) 213
Loans from affiliates:
Loans - - -
Repayments (250) - -
Dividends (6,000) (6,247) (6,098)

Net cash used by financing (6,292) (6,321) (5,885)
activities

Cash and cash equivalents:
Net increase (decrease) from:
Operating, investing and financing 1,662 278 11,849
activities
Currency translation - (39) 32
Balance at beginning of year 191 1,853 2,092

Balance at end of year $ 1,853 $ 2,092 $ 13,973

Supplemental disclosures:
Cash paid for:
Interest $ 13 $ 18 $ 35
Income taxes 3,030 4,028 2,887

Dividend in the form of a demand note
payable $ - $ - $ 50,000
</TABLE>

COMPX INTERNATIONAL INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION:

The Consolidated Financial Statements of the Company are incorporated herein
by reference. The Company's investment in Waterloo Furniture Components Limited
is presented herein by the equity method.

NOTE 2 - INVENTORIES:

<TABLE>
<CAPTION>
DECEMBER 31,

1996 1997

(IN THOUSANDS)

<S> <C> <C>
Raw materials $ 188 $ 232
Work in process 4,209 4,079
Finished products 959 1,036
Supplies 49 48

$5,405 $5,395

</TABLE>

COMPX INTERNATIONAL INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND RECOVERIES AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS AND OTHER OF YEAR

<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts - year ended:

December 31, $ 88 $142 $(158) $66 $138
1995

December 31, $138 $184 $(199) $44 $167
1996

December 31, $167 $193 $ (58) $ 9 $311
1997

</TABLE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following tables sets forth the expenses to be paid in connection with
the issuance and distribution of the securities being registered, other than
underwriting discounts and commissions, and all such expenses will be borne by
the Registrant. All amounts are estimates except for the Commission
registration fee, the National Association of Securities Dealers ("NASD") filing
fee and the NYSE listing fee.

Commission Registration Fee.....$ 31,890
NASD Fee..........................11,310
NYSE Listing Fee.................100,000
Printing and mailing expenses....100,000
Legal fees and expenses..........200,000
Accounting fees and expenses......30,000
Transfer Agent's fees and expenses10,000
Miscellaneous expenses............16,800

Total......................$500,000

______________________
* To be supplied by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102(b)(7) of the DGCL permits a Delaware corporation to limit the
personal liability of its directors in accordance with the provisions set forth
therein. The Restated Certificate of Incorporation of the Registrant provides

that the personal liability of its directors shall be limited to the fullest
extent permitted by applicable law.

Section 145 of the DGCL contains provisions permitting Delaware
corporations to indemnify directors, officers, employees or agents against
expenses, including attorneys, fees, judgments, fines, and amounts paid in
settlement actually and reasonably incurred in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person was or
is 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 corporation, partnership, joint venture, trust or other
enterprise, provided that (i) such person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the corporation's best
interest, and (ii) in the case of a criminal proceeding such person had no
reasonable cause to believe his or her conduct was unlawful. In the case of
actions or suits by or in the right of the corporation, no indemnification shall
be made in a case in which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall have determined upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses. Indemnification as described above shall only be
granted in a specific case upon a determination that indemnification is proper
in the circumstances because the indemnified person has met the applicable
standard of conduct. Such determination shall be made (a) by a majority vote of
the directors who are not parties to such proceeding, even though less than a
quorum, (b) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (c) by the stockholders of
the corporation. Notwithstanding the foregoing, to the extent that a director,
officer, employee or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in

subsections a, or (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys,
fees) actually and reasonably incurred by him in connection therewith. The
Restated Certificate of Incorporation and the Bylaws of the Registrant provide
for indemnification of its directors and officers to the fullest extent
permitted by applicable law.

The form of Underwriting Agreement attached hereto as Exhibit 1.1, which
provides for, among other things, the Registrant's sale to the Underwriters of
the securities being registered herein, will obligate the Underwriters to
indemnify the Registrant and Registrant's officers and directors against certain
liabilities under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

The following exhibits are filed pursuant to Item 601 of Regulation S-
K.

Exhibit
No. Description

1.1* Form of Underwriting Agreement.

3.1 Restated Certificate of Incorporation of Registrant.

3.2 Bylaws of Registrant.

4.1* Form of Common Stock certificate.

5.1* Opinion and Consent of Rogers & Hardin LLP.

10.1** Intercorporate Services Agreement between the Registrant and
Valhi, Inc. effective as of January 1, 1997.

10.2 CompX International Inc. 1997 Long-Term Incentive Plan.

10.3 Agreement between Haworth, Inc. and Waterloo Furniture
Components, Ltd. And Waterloo Furniture Components, Inc.
effective October 1, 1992.

10.4 Tax Sharing Agreement, among the Registrant, Valcor, Inc. and
Valhi, Inc., dated as of January 2, 1998.

10.5* [New Credit Agreement] between the Registrant
and__________________, dated as of ___________,1998.

10.6** Demand Promissory Note of the Registrant in the amount of $50
million payable to Valcor, Inc. dated December 12, 1997.

10.7 Stock Purchase Agreement between CompX International Inc. and
Shareholders of Fort Lock Corporation dated February 3, 1998

21.1** Subsidiaries of the Registrant.

23.1* Consent of Rogers & Hardin LLP (included in Exhibit S.1).

23.2 Consent of Coopers & Lybrand L.L.P.

23.3 Consent of Altschuler, Melvoin and Glasser L.L.P.

24.1** Powers of Attorney. See signature page to this Registration
Statement.

27.1 Financial Data Schedule for the year ended December 31, 1997.

(b) Financial Statement Schedules.

Page

Index of Financial Statement Schedules.........S-1
Report of Independent Accountant
on Financial Statement Schedules...............S-2
Schedule I - Condensed Financial
Information of Registrant......................S-3
Schedule II - Valuation and Qualifying
Accounts.....................................................S-8

Schedule III and IV are omitted because
they are not applicable.

* To be provided by amendment.
** Previously filed.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the

Registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-effective Amendment No. 1 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Mauldin, State of South Carolina, on the 4th day of February , 1998.

COMPX INTERNATIONAL INC.

By: *

David A. Bowers
President and Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this Pre-
effective Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE

<S> <C> <C>
*
Executive Officer and
David A. Bowers
Director (Principal
Executive Officer)

* Executive Vice February 4, 1998
President
Joseph S. Compofelice
and Director
(Principal
Financial Officer)

/s/ Bobby D. O'Brien Vice President and February 4, 1998
Treasurer (Principal

Accounting Officer)
Bobby D. O'Brien

* Chairman of the Board February 4, 1998

Glenn R. Simmons

* Director February 4, 1998

Robert W. Singer

* Director February 4, 1998

Edward J. Hardin

Paul M. Bass
</TABLE>

* By: /s/ Bobby D. O'Brien

Bobby D. O'Brien
Attorney-in-Fact

EXHIBIT INDEX

Sequentially Numbered
Exhibit No. Description Page No.

1.1* Form of Underwriting Agreement.

3.1 Restated Certificate of Incorporation of Registrant.

3.2 Bylaws of Registrant.

4.1* Form of Common Stock certificate.

5.1* Opinion and Consent of Rogers & Hardin LLP.

10.1** Intercorporate Services Agreement between the Registrant and
Valhi, Inc. effective as of January 1, 1997.

10.2 CompX International Inc. 1997 Long-Term Incentive Plan.

10.3 Agreement between Haworth, Inc. and Waterloo Furniture
Components, Ltd. and Waterloo Furniture Components, Inc.
effective October 1, 1992.

10.4 Tax Sharing Agreement among the Registrant, Valcor, Inc. and
Valhi, Inc. dated as of January 2, 1998.

10.5* [New Credit Agreement] between the Registrant
and__________________, dated as of ___________,1998.

10.6** Demand Promissory Note of the Registrant in the amount of $50
million payable to Valcor, Inc. dated December 12, 1997.

10.7 Stock Purchase Agreement between CompX International Inc. and
Shareholders of Fort Lock Corporation dated February 3, 1998

21.1** Subsidiaries of the Registrant.

23.1* Consent of Rogers & Hardin LLP (included in Exhibit S.1).

23.2 Consent of Coopers & Lybrand L.L.P.

23.3 Consent of Altschuler, Melvoin and Glasser L.L.P.

24.1** Powers of Attorney. See signature page to this Registration
Statement.

27.1 Financial Data Schedule for the year ended December 31, 1997.

* To be provided by amendment.
** Previously filed.

RESTATED CERTIFICATE OF INCORPORATION

COMPX INTERNATIONAL INC.

CompX International Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),

DOES HEREBY CERTIFY:

FIRST: That the present name of the Corporation is CompX International
Inc., the Corporation was originally incorporated under the name National
Cabinet Lock, Inc. and the original certificate of incorporation was filed with
the Secretary of State of Delaware on August 4, 1993.

SECOND: That the Corporation's original certificate of incorporation was
subsequently amended by the Certificate of Amendment to the Certificate of
Incorporation of National Cabinet Lock, Inc. filed with the Secretary of State
of the State of Delaware on September 4, 1996 (the "Amended Certificate of
Incorporation").

THIRD: That by unanimous action by written consent in lieu of a meeting
of the board of directors of the Corporation (the "Board of Directors")
effective as of February 4, 1998, resolutions were duly adopted setting forth a
proposed amendment and restatement of the certificate of incorporation of said
Corporation (the "Certificate of Incorporation") and recommending that such
Certificate of Incorporation be approved by the sole stockholder.
FOURTH: That thereafter, by written consent in lieu of a special meeting
of the sole stockholder of the Corporation pursuant to Section 228(a) of the
General Corporation Law of the State of Delaware, 8 Delaware Code Section 101
et. seq. (the "DGCL"), stockholders of the Corporation having not less than the
minimum number of votes that would be necessary to authorize such action at a
meeting at which all shares entitled to vote thereon were present and voted
adopted a resolution approving the Certificate of Incorporation.

FIFTH: That this Certificate of Incorporation restates and amends the
Amended Certificate of Incorporation, and has been duly adopted in accordance
with Sections 242 and 245 of the DGCL.

SIXTH: That the text of the Certificate of Incorporation is hereby
restated and amended to read in its entirety as follows:

ARTICLE ONE

The name of the corporation is CompX International Inc.

ARTICLE TWO

The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, County of New Castle, Wilmington, Delaware, 19801. The
name of its registered agent at such address is The Corporation Trust Company.

ARTICLE THREE

The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the DGCL.
ARTICLE FOUR

I. Authorized Stock. The total number of shares of stock which the

Corporation shall have authority to issue is thirty million one thousand
(30,001,000) shares, consisting of (i) twenty million (20,000,000) shares of
Class A Common Stock, par value $.01 per share (hereinafter referred to as
"Class A Common Stock"), and ten million (10,000,000) shares of Class B Common
Stock, par value $.01 per share (hereinafter referred to as "Class B Common
Stock") (the Class A Common Stock and the Class B Common Stock being hereinafter
collectively referred to as the "Common Stock"), and (ii) one thousand (1,000)
shares of Preferred Stock, par value $.01 per share (hereinafter referred to as
"Preferred Stock").

(B) Common Stock. The following is a statement of the relative powers,

preferences and participating, optional or other special rights, and the
qualifications, limitations and restrictions of the Class A Common Stock and the
Class B Common Stock of the Corporation:

(i) Except as otherwise set forth in this Article Four, the relative
powers, preferences and participating, optional or other special rights,
and the qualifications, limitations and restrictions of the Class A Common
Stock and the Class B Common Stock shall be identical in all respects.

(ii) Subject to the rights of holders of Preferred Stock, and subject
to any other provisions of this Certificate of Incorporation, holders of
Class A Common Stock and Class B Common Stock shall be entitled to receive
such dividends and other distributions in cash, stock or property of the
Corporation as may be declared thereon by the Board of Directors from time
to time out of assets or funds of the Corporation legally available
therefor. If any dividend or other distribution in cash or other property
is paid with respect to Class A Common Stock or with respect to Class B
Common Stock, a like dividend or other distribution in cash or other
property shall also be paid with respect to shares of the other class of
Common Stock, in an amount equal per share. Neither the shares of Class A
Common Stock nor the shares of Class B Common Stock may be reclassified,
subdivided or combined unless such reclassification, subdivision or
combination occurs simultaneously and in the same proportion for each
class.

(iii) (a) At each meeting of the stockholders of the Corporation,
each holder of Common Stock shall be entitled to one vote in person or by
proxy for each share of Class A Common Stock or Class B Common Stock
standing in his or her name on the transfer books of the Corporation,
except in connection with the election of directors, in which case each
holder of Class A Common Stock shall be entitled to one vote in person or
by proxy for each share of Class A Common Stock standing in his or her name
on the transfer books of the Corporation and each holder of Class B Common
Stock shall be entitled to ten votes in person or by proxy for each share
of Class B Common Stock standing in his or her name on the transfer books
of the Corporation. Except as may be otherwise required by law or by this
Article Four, the holders of Class A Common Stock and Class B Common Stock
shall vote together as a single class, subject to any voting rights which
may be granted to holders of Preferred Stock, on all matters submitted to a
vote of stockholders of the Corporation.

(b) Except as otherwise provided by law, and subject to any
rights of the holders of Preferred Stock, the provisions of this
Certificate of Incorporation shall not be modified, revised, altered or
amended, repealed or rescinded in whole or in part, without the approval of
a majority of the votes entitled to be cast by the holders of the Class A
Common Stock and the Class B Common Stock, voting together as a single
class; provided, however, that with respect to any proposed amendment of
this Certificate of Incorporation which would alter or change the powers,
preferences or special rights of the shares of Class A Common Stock or
Class B Common Stock so as to affect them adversely, the approval of a
majority of the votes entitled to be cast by the holders of the shares
affected by the proposed amendment, voting separately as a class, shall be
obtained in addition to the approval of a majority of the votes entitled to
be cast by the holders of the Class A Common Stock and the Class B Common
Stock voting together as a single class as hereinbefore provided. Any
increase in the authorized number of shares of any class or classes of
stock of the Corporation or creation, authorization or issuance of any
securities convertible into, or warrants, options or similar rights to
purchase, acquire or receive, shares of any such class or classes of stock
shall be deemed not to affect adversely the powers, preferences or special
rights of the shares of Class A Common Stock or Class B Common Stock.
(c) Each reference in this Certificate of Incorporation to a
majority or other proportion of shares of Common Stock, Class A Common
Stock or Class B Common Stock shall refer to such majority or other
proportion of the votes to which such shares of Common Stock, Class A
Common Stock or Class B Common Stock, as applicable, are entitled.

(iv) In the event of any dissolution, liquidation or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment
in full of the amounts required to be paid to the holders of Preferred
Stock, the remaining assets and funds of the Corporation shall be
distributed pro rata to the holders of Class A Common Stock and Class B
Common Stock (and, for the avoidance of doubt, such distribution shall be
irrespective of the difference in voting rights between such classes of
stock). For purposes of this paragraph (B)(iv), the voluntary sale,
conveyance, lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
assets of the Corporation or a consolidation or merger of the Corporation
with one or more other corporations or other Persons (whether or not the
Corporation is the corporation surviving such consolidation or merger)
shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary. For purposes hereof "Person" shall mean any
individual, firm, corporation or other entity.

(v) (a) Prior to a "Tax-Free Spin-Off" (as defined below), shares of
Class B Common Stock may be transferred to (i) a member of the Contran
Corporation Control Group (as defined in this paragraph (B)(v)(a) below) as
Class B Common Stock or (ii) a Person (as defined in paragraph (B)(iv)
above) outside the Contran Corporation Control Group in a transaction that
is not a "Tax-Free Spin-Off" whereupon such shares of Class B Common Stock
shall automatically be converted into shares of Class A Common Stock. A
transfer of Class B Common Stock which results in such a conversion shall
be effected by the presentation at the Office of the Secretary of the
Corporation (or at such additional place or places as may from time to time
be designated by the Secretary of the Corporation) of the certificate(s)
for such shares, in proper form for transfer and accompanied by all
requisite stock transfer tax stamps and of a written notice executed by the
transferring member of the Contran Corporation Control Group which states
that the shares evidenced by the certificate(s) presented should be
converted into the same number of shares of Class A Common Stock and
requesting that the Corporation issue all of such shares of Class A Common
Stock to Person(s) named therein, setting forth the number of shares of
Class A Common Stock to be issued to each such Person(s) and the
denominations in which the certificates therefor are to be issued. To the
extent permitted by law, such conversion shall be deemed to have been
effected at the close of business on the date of such surrender. Following
a Tax-Free Spin-Off, shares of Class B Common Stock shall no longer be
convertible into shares of Class A Common Stock except as set forth in
paragraph (B)(v)(b) below. For purposes hereof, a member of the Contran
Corporation Control Group shall be Contran Corporation, a Delaware
corporation, and any entity included in the affiliated group as defined in
Section1504 of the Internal Revenue Code, as amended from time to time (the
"Code"), of which Contran Corporation or its successor is the common parent
(such group being hereinafter referred to as "CCCG"). Any shares of Class
B Common Stock transferred to any Person other than a member of the CCCG
(other than in a Tax-Free Spin-Off) shall automatically convert into shares
of Class A Common Stock. For purposes hereof, a "Tax-Free Spin-Off shall
be any transfer effected in connection with a distribution of Class B
Common Stock as a spin-off, split-up or split-off to stockholders of a
member of the CCCG intended to be on a tax-free basis under the Code. For
purposes of this paragraph (B)(v), a Tax-Free Spin-Off shall be deemed to
have occurred at the time shares are first transferred to stockholders of a
member of the CCCG who are not members of the CCCG, following receipt of an
affidavit described in clause (2) of the first sentence of paragraph
(B)(v)(d) below.
(b) In the event of a Tax-Free Spin-Off, shares of Class B
Common Stock shall automatically convert into shares of Class A Common
Stock on the fifth anniversary of the date on which shares of Class B
Common Stock are first transferred to stockholders of a member of the CCCG
in a Tax-Free Spin-Off unless, prior to such Tax-Free Spin-Off, the
distributing member of the CCCG or its successor, as the case may be,
delivers to the Corporation an opinion of counsel, reasonably satisfactory
to the Corporation, to the effect that such conversion could adversely
affect the ability of the distributing member of the CCCG, or its
successor, as the case may be, to obtain a favorable ruling from the
Internal Revenue Service (the "IRS") that the distribution would be a Tax-
Free Spin-Off under the Code. If such an opinion is received, approval of
such conversion shall be submitted to a vote of the holders of the Common
Stock as soon as practicable after the fifth anniversary of the Tax-Free
Spin-Off unless the distributing member of the CCCG or its successor, as
the case may be, delivers to the Corporation an opinion of counsel,
reasonably satisfactory to the Corporation, prior to such anniversary to
the effect that such vote could adversely affect the status of the Tax-Free
Spin-Off (including without limitation the ability to obtain a favorable
ruling from the IRS); if such opinion is so delivered, such vote shall not
be held. At the meeting of stockholders called for such purpose, each
holder of Common Stock shall be entitled to one vote in person or by proxy
for each share of Common Stock standing in his or her name on the transfer
books of the Corporation. Approval of such conversion shall require the
approval of a majority of the votes, on the per share voting basis provided
in the preceding sentence, entitled to be cast by the holders of the Class
A Common Stock and the Class B Common Stock present and voting, voting
together as a single class, and the holders of the Class B Common Stock
shall not be entitled to a separate class vote. Such conversion shall be
effective on the date on which such approval is given at a meeting of
stockholders called for such purpose.
The Corporation will provide notice of any automatic conversion of all
outstanding shares of Class B Common Stock to all holders of record of the
Common Stock as soon as practicable following such conversion; provided,
however, that the Corporation may satisfy such notice requirement by
providing such notice prior to such conversion. Such notice shall be
provided by mailing notice of such conversion first class postage prepaid,
to each holder of record of the Common Stock at such holder's address as it
appears on the transfer books of the Corporation; provided, further, that
no failure to give such notice nor any defect therein shall affect the
validity of the automatic conversion of any shares of Class B Common Stock.
Each such notice shall state, as appropriate, the following:

(1) the automatic conversion date;
(2) that all outstanding shares of Class B Common Stock are automatically
converted;
(3) the place or places where certificates for such shares are to be
surrendered for conversion; and
(4) that no dividends of Class B Common Stock will be declared after such
conversion date.

(c) Immediately upon any conversion of the Class B Common Stock
into Class A Common Stock made pursuant to this Article Four, the rights of
the holders of such shares of Class B Common Stock as such shall cease and
such holders shall be treated for all purposes as having become the record
owners of the shares of Class A Common Stock issuable upon such conversion;
provided, however, that such Persons shall be entitled to receive when paid
dividends, if any, declared on the Class B Common Stock as of a record date
preceding the time of such conversion and unpaid as of the time of such
conversion, subject to paragraph (B)(v)(g) below.

(d) Prior to a Tax-Free Spin-Off, shares of Class B Common Stock
may be freely transferred. Such shares of Class B Common Stock shall be
transferred on the books of the Corporation and a new certificate therefor
issued, upon presentation at the office of the Secretary of the Corporation
(or at such additional place or places as may from time to time be
designated by the Secretary of the Corporation) of the certificate for such
shares, in proper form for transfer and accompanied by all requisite stock
transfer tax stamps, only if such certificate when so presented shall also
be accompanied by any one of the following:

(1) an affidavit from the transferring member of the CCCG stating
that such certificate is being presented to effect a transfer by the
transferring member of the CCCG of such shares to another member of
the CCCG; or

(2) an affidavit from the transferring member of the CCCG stating
that such certificate is being presented to effect a transfer by the
transferring member of the CCCG of such shares to the stockholders of
a member of the CCCG in connection with a Tax-Free Spin-Off.

Each affidavit of a record holder furnished pursuant to this paragraph
(B)(v)(d) shall be verified as of a date not earlier than five days prior
to the date of delivery thereof, and, where such record holder is a
corporation or partnership, shall be verified by an officer of the
corporation or by a general partner of the partnership, as the case may be.

The delivery by a record holder of shares of Class B Common Stock of a
certificate for such shares, endorsed by him or her for transfer or
accompanied by an instrument of transfer signed by him or her, to a Person
who receives such shares in connection with and as security for a bona fide
obligation, then such Person or any successive transferee of such
certificate may treat such endorsement or instrument as authorizing him or
her on behalf of such record holder to convert such shares for the purpose
of the transfer to himself or herself of the shares of Class A Common Stock
issuable upon such conversion, and to give on behalf of such record holder
the written notice of conversion, and may convert such shares of Class B
Common Stock accordingly.

If a record holder of shares of Class B Common Stock shall deliver a
certificate for such shares, endorsed by him or her for transfer or
accompanied by an instrument of transfer signed by him or her, to a Person
who receives such shares in connection with a transfer which does not meet
the qualifications set forth in this paragraph (B)(v)(d), then such Person
or any successive transferee of such certificate may treat such endorsement
or instrument as authorizing him or her on behalf of such record holder to
convert such shares in the manner above provided for the purpose of the
transfer to himself or herself of the shares of Class A Common Stock
issuable upon such conversion, and to give on behalf of such record holder
the written notice of conversion above required, and may convert such
shares of Class B Common Stock accordingly.

If such shares of Class B Common Stock shall improperly have been
registered in the name of such a Person (or in the name of any successive
transferee of such certificate) and a new certificate therefor issued, such
Person or transferee shall surrender such new certificate for cancellation,
accompanied by the written notice of conversion above required, in which
case (1) such Person or transferee shall be deemed to have elected to treat
the endorsement on (or instrument of transfer accompanying) the certificate
so delivered by such former record holder as authorizing such Person or
transferee on behalf of such former record holder so to convert such shares
and so to give such notice, (2) the shares of Class B Common Stock
registered in the name of such former record holder shall be deemed to have
been surrendered for conversion for the purpose of the transfer to such
Person or transferee of the shares of Class A Common Stock issuable upon
conversion, and (3) the appropriate entries shall be made on the books of
the Corporation to reflect such action. In the event that the Board of
Directors of the Corporation (or any committee of the Board of Directors,
or any officer of the Corporation, designated for the purpose by the Board
of Directors) shall determine, upon the basis of facts not disclosed in any
affidavit or other document accompanying the certificate for shares of
Class B Common Stock when presented for transfer, that such shares of Class
B Common Stock have been registered in violation of the provisions of this
paragraph (B)(v), or shall determine that a Person is enjoying for his or
her own benefit the special rights and powers of shares of Class B Common
Stock in violation of such provisions, then the Corporation shall take such
action at law or in equity as is appropriate under the circumstances.
Without limiting the generality of the preceding sentence, an unforeclosed
pledge made to secure a bona fide obligation shall not be deemed to violate
such provisions.

(e) Prior to the occurrence of a Tax-Free Spin-Off, each
certificate for shares of Class B Common Stock shall bear a legend on the
face thereof reading as follows:

"The transfer of shares of Class B Common Stock represented by this
certificate prior to a Tax-Free Spin-Off will result in the automatic
conversion of such shares into Class A Common Stock unless such shares
of Class B Common Stock are transferred to a person or entity that
meets the qualifications set forth in paragraph (B)(v) of Article Four
of the Certificate of Incorporation of this corporation. Any person
who receives such shares in connection with a transfer which does not
meet the qualifications prescribed by said Article Four will become
the registered record holder of such shares of Class A Common Stock.
Each holder of this certificate, by accepting the same, accepts and
agrees to all of the foregoing."

Upon and after the transfer of shares of Class B Common Stock in a Tax-Free
Spin-Off, shares of Class B Common Stock shall no longer bear the legend
set forth above in this paragraph (B)(v)(e).
(f) Upon any conversion of shares of Class B Common Stock into
shares of Class A Common Stock pursuant to the provisions of this paragraph
(B)(v), any dividend, for which the record date or payment date shall be
subsequent to such conversion, which may have been declared on the shares
of Class B Common Stock so converted shall be deemed to have been declared,
and shall be payable, with respect to the shares of Class A Common Stock
into or for which such shares of Class B Common Stock shall have been so
converted, and any such dividend which is a Common Stock dividend shall be
deemed to have been declared, and shall be payable, in shares of Class A
Common Stock.

(g) The Corporation shall not reissue or resell any shares of
Class B Common Stock which shall have been converted into shares of Class A
Common Stock pursuant to or as permitted by the provisions of this
paragraph (B)(v), or any shares of Class B Common Stock which shall have
been acquired by the Corporation in any other manner. The Corporation
shall, from time to time, take such appropriate action as may be necessary
to retire such shares and to reduce the authorized amount of Class B Common
Stock accordingly. The Corporation shall at all times reserve and keep
available, out of its authorized but unissued Common Stock, such number of
shares of Class A Common Stock as would become issuable upon the conversion
of all shares of Class B Common Stock then outstanding.

(h) In connection with any transfer or conversion of any stock
of the Corporation pursuant to or as permitted by the provisions of this
paragraph (B)(v) or in connection with the making of any determination
referred to in this paragraph (B)(v):

(1) the Corporation shall be under no obligation to make any
investigation of facts unless an officer, employee or agent of the
Corporation responsible for making such transfer or determination or
issuing Class A Common Stock pursuant to such conversion has
substantial reason to believe, or unless the Board of Directors (or a
committee of the Board of Directors designated for the purpose)
determines that there is substantial reason to believe, that any
affidavit or other document is incomplete or incorrect in a material
respect or that an investigation would disclose facts upon which any
determination referred to in paragraph (B)(v) above should be made, in
either of which events the Corporation shall make or cause to be made
such investigation as it may deem necessary or desirable in the
circumstances and have a reasonable time to complete such
investigation; and

(2) neither the Corporation nor any director, officer, employee or
agent of the Corporation shall be liable in any manner for any action
taken or omitted in good faith.

(i) The Corporation will not be required to pay any documentary,
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Class A Common Stock on the conversion of shares of Class
B Common Stock pursuant to this paragraph (B)(v), and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.

(vi) All rights to vote and all voting power (including, without
limitation thereto, the right to elect directors) shall be vested
exclusively in the holders of Common Stock, voting together as a single
class, except as otherwise expressly provided in this Certificate of
Incorporation, in a Preferred Stock Designation or as otherwise expressly
required by applicable law.

(vii) No stockholder shall be entitled to exercise any right of
cumulative voting.
(viii) Immediately upon the effectiveness of this Certificate of
Incorporation, each share of common stock of the Corporation, par value
$1.00 per share, issued and outstanding immediately prior to such
effectiveness shall be changed into and reclassified as 10,000 shares of
Class B Common Stock. Promptly after such effectiveness, each record
holder of a certificate that, immediately prior to such effectiveness,
represented common stock of the Corporation, par value $1.00 per share,
shall be entitled to receive in exchange for such certificate, upon
surrender of such certificate to the Corporation, a certificate for the
number of shares of Class B Common Stock to which such holder is entitled
as a result of the changes in the common stock effected by the preceding
sentence (the "Reclassification"). Until surrendered and exchanged in
accordance herewith, each certificate that, immediately prior to such
effectiveness, represented common stock shall represent the number of
shares of Class B Common Stock to which the holder is entitled as a result
of the Reclassification.

any time and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series with such designations, preferences and
relative, participating, optional or other special rights, and such
qualifications, limitations or restrictions thereof, as shall be expressed in
the resolution or resolutions providing for the issuance thereof adopted by the
Board of Directors (a "Preferred Stock Designation") and as are not inconsistent
with this Certificate of Incorporation or any amendment hereto, and as may be
permitted by the DGCL. Except as otherwise expressly required by law and except
for such voting powers as may be stated in the Preferred Stock Designation
relating to any series of Preferred Stock, the holders of any such series shall
not have voting power whatsoever.

(D) Record Holders. The Corporation shall be entitled to treat the Person

(as defined in paragraph (B)(iv) of Article Four) in whose name any share of its
stock is registered as the owner thereof for all purposes and shall not be bound
to recognize any equitable or other claim to, or interest in, such share on the
part of any other Person, whether or not the Corporation shall have notice
thereof, except as expressly provided by applicable law.

ARTICLE FIVE

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make, alter
or repeal the Bylaws of the Corporation.

ARTICLE SIX

The Corporation shall, to the fullest extent permitted by law, including
Section 145 of the DGCL, as the same may be amended and supplemented, indemnify
any and all officers and directors whom it shall have power to indemnify under
said section from and against any and all of the expenses, liabilities, or other
matters referred to in or covered by said Section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, trustee, fiduciary or agent and shall inure to the benefit of
the heirs, executors, and administrators of such a person.

ARTICLE SEVEN

No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not apply
to any liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit. Any repeal or modification
of this Article Nine by the stockholders of the Corporation shall not adversely
affect an right or protection of a director of the Corporation existing at the
time of such repeal or modification.
ARTICLE EIGHT

The Corporation expressly elects not to be governed by Section 203 of the
DGCL.

ARTICLE NINE

Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction with the
State of Delaware may, on the application in a summary way of the Corporation or
of any creditor or stockholder thereof or on the application of any receiver or
receivers appointed for the Corporation under the provisions of Section 291 of
the DGCL or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the DGCL order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and said reorganization shall, if sanctioned by the
court to which the said application has been made, be binding on all creditors
or class of creditors, and/or on all the stockholders or class of stockholders,
of the Corporation, as the case may be, and also on the Corporation.

ARTICLE TEN

The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.

IN WITNESS WHEREOF, COMPX INTERNATIONAL INC. has caused this certificate to
be signed by its Secretary this 4th day of February, 1998.

By:__/s/ Steven L. Watson___

Steven L. Watson, Secretary

EXHIBIT 3.2

BYLAWS

COMPX INTERNATIONAL INC.
A DELAWARE CORPORATION
(INCORPORATED ON AUGUST 4, 1993)

AS OF DECEMBER 16, 1997

BYLAWS

COMPX INTERNATIONAL INC.

A DELAWARE CORPORATION
(INCORPORATED ON AUGUST 4, 1993)

AS OF DECEMBER 16, 1997

ARTICLE I.{TC \L 1 "ARTICLE I."}
OFFICES

SECTION 1.1. REGISTERED OFFICE{TC \L 2 "SECTION 1.1. REGISTERED
OFFICE"}. The registered office of the corporation shall be located at such
place within the State of Delaware as the board of directors may from time to
time determine. The initial registered office of the corporation shall be as
specified in the certificate of incorporation of the corporation.

SECTION 1.2. OTHER OFFICES{TC \L 2 "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.{TC \L 1 "ARTICLE II."}
MEETINGS OF STOCKHOLDERS

SECTION 2.1. PLACE AND TIME OF MEETINGS{TC \L 2 "SECTION 2.1. PLACE AND
TIME OF MEETINGS"}. All meetings of the stockholders shall be held at such
place, within or without the State of Delaware as shall be determined, from time
to time, by the board of directors, and the place at which such meeting shall be
held shall be stated in the notice and call of the meeting or a duly executed
waiver of notice thereof. The annual meeting of the stockholders of the
corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held on such date and
at such time and place as shall be fixed by a majority of the board of
directors. 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%
of the shares of the corporation that would be entitled to vote at such a
meeting.

SECTION 2.2. BUSINESS TO BE TRANSACTED AT MEETINGS{TC \L 2
"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
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 ten days following the date on which notice of the
date of the annual meeting was mailed or public disclosure of the date of the
meeting was made. A stockholder's notice to the secretary with regard to an
annual meeting shall set forth as to each matter that the stockholder proposes
to bring before the meeting (a) a brief description of the 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.

Error! Bookmark not defined.SECTION 2.3. NOTICE{TC \L 2
"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 mailing written or printed notice
of the same not less than ten, nor more than sixty, 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.

Error! Bookmark not defined.SECTION 2.4. LIST OF STOCKHOLDERS{TC \L 2
"SECTION 2.4. LIST OF STOCKHOLDERS"}. The officer or agent having charge of
the stock transfer books of the corporation shall make, at least ten 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, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
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 prima facie evidence as to
who are the stockholders entitled to examine such list or transfer book or to
vote at any such meeting of stockholders.

Error! Bookmark not defined.SECTION 2.5. QUORUM{TC \L 2
"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
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.

Error! Bookmark not defined.SECTION 2.6. PROXIES{TC \L 2
"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 similar transmission by the stockholder,
or a photographic, photostatic, facsimile or similar reproduction of a writing
executed 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{TC \L 2
"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.

Error! Bookmark not defined.SECTION 2.8. APPOINTMENT OF INSPECTORS OF
ELECTION{TC \L 2 "SECTION 2.8. APPOINTMENT OF INSPECTORS OF ELECTION"}. The
board of directors shall, in advance of sending to the stockholders any notice
of a meeting of the holders of any class of shares, 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 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.

Error! Bookmark not defined.SECTION 2.9. INFORMAL ACTION{TC \L 2
"SECTION 2.9. INFORMAL ACTION"}.

(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 sixty (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, telex, cablegram or similar transmission by a
stockholder, or a photographic, photostatic, facsimile or other similar
reproduction of a writing signed 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.

Error! Bookmark not defined.SECTION 2.10. FIXING A RECORD DATE{TC \L 2
"SECTION 2.10. FIXING A RECORD DATE"}. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or 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
that shall be not more than sixty days nor less than ten days prior to the date
of such meeting, nor more than sixty days prior to any other action. If no
record date has been fixed by the board of directors, the record date for
determining the 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. If no record date
has been fixed by the board of directors, the record date for determining the
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the board of directors is required by the
Delaware General Corporation Law, shall be the first date on which a signed
written consent is duly delivered to the corporation. 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.

Error! Bookmark not defined.SECTION 2.11. TELEPHONE MEETINGS{TC \L 2
"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.

Error! Bookmark not defined.SECTION 2.12. MINUTES{TC \L 2
"SECTION 2.12. MINUTES"}. The stockholders shall keep regular minutes of their
proceedings, and such minutes shall be placed in the minute book of the
corporation.

Error! Bookmark not defined.ARTICLE III.{TC \L 1 "ARTICLE III."}
DIRECTORS

Error! Bookmark not defined.SECTION 3.1. NUMBER, QUALIFICATIONS AND TERM
OF OFFICE{TC \L 2 "SECTION 3.1. NUMBER, QUALIFICATIONS AND TERM OF
OFFICE"}. The business and affairs of the corporation shall be managed by a
board of directors consisting of not less than one, nor more than fifteen,
members. The exact number of directors within the minimum and maximum
limitations specified in the preceding sentence 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.

Error! Bookmark not defined.SECTION 3.2. NOMINATION OF DIRECTOR
CANDIDATES{TC \L 2 "SECTION 3.2. NOMINATION OF DIRECTOR CANDIDATES"}. Subject
to the rights of the holders of preferred stock or any other class of capital
stock of the corporation (other than common stock) 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
directors at a meeting may nominate persons for election as directors 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, ninety days in advance of such
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.

Error! Bookmark not defined.SECTION 3.3. REMOVALS{TC \L 2
"SECTION 3.3. REMOVALS"}. Subject to the rights of the holders of preferred
stock or any other class of capital stock of the corporation (other than common
stock) or any series of any of the foregoing that is then outstanding, any
director, or the entire board of directors, may be removed from office at any
time by 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 directors.

Error! Bookmark not defined.SECTION 3.4. VACANCIES{TC \L 2
"SECTION 3.4. VACANCIES"}. Subject to the rights of the holders of preferred
stock or any other class of capital stock of the corporation (other than common
stock) or any series of any of the foregoing that is then outstanding, 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 Delaware General Corporation Law, 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.

Error! Bookmark not defined.SECTION 3.5. ANNUAL MEETING{TC \L 2
"SECTION 3.5. ANNUAL MEETING"}. The annual meeting of the board of directors
shall be held without other notice than this bylaw immediately after the annual
meeting of stockholders at the location of the stockholder's meeting.

Error! Bookmark not defined.SECTION 3.6. OTHER MEETINGS AND NOTICE{TC \L
2 "SECTION 3.6. OTHER MEETINGS AND NOTICE"}. Regular meetings, other than the
annual meeting, 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 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.

Error! Bookmark not defined.SECTION 3.7. QUORUM{TC \L 2
"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.

Error! Bookmark not defined.SECTION 3.8. COMMITTEES{TC \L 2
"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.
Error! Bookmark not defined.SECTION 3.9. COMMITTEE RULES{TC \L 2
"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.

Error! Bookmark not defined.SECTION 3.10. TELEPHONIC MEETINGS{TC \L 2
"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.

Error! Bookmark not defined.SECTION 3.11. PRESUMPTION OF ASSENT{TC \L 2
"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 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.

Error! Bookmark not defined.SECTION 3.12. INFORMAL ACTION{TC \L 2
"SECTION 3.12. INFORMAL ACTION"}. 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.

Error! Bookmark not defined.SECTION 3.13. COMPENSATION{TC \L 2
"SECTION 3.13. COMPENSATION"}. The board of directors shall have the authority
to fix the compensation of directors.

Error! Bookmark not defined.SECTION 3.14. MINUTES{TC \L 2
"SECTION 3.14. MINUTES"}. The board of directors shall keep regular minutes of
its proceedings, and such minutes shall be placed in the minute book of the
corporation.

Error! Bookmark not defined.ARTICLE IV.{TC \L 1 "ARTICLE IV."}
OFFICERS

Error! Bookmark not defined.SECTION 4.1. NUMBER{TC \L 2
"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.

Error! Bookmark not defined.SECTION 4.2. ELECTION AND TERM OF OFFICE{TC
\L 2 "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.

Error! Bookmark not defined.SECTION 4.3. THE CHAIRMAN OF THE BOARD{TC \L
2 "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 be
the chief executive officer of the corporation and 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.

The chairman of the board may, from time to time, appoint an attorney-in-
fact or attorneys-in-fact, or an agent or agents, of the corporation in the name
and on behalf of the corporation to cast as a stockholder, in any other
corporation, any of the securities that may be held by the corporation, at
meetings of the holders of such securities of such corporation, or to consent in
writing to any such action by any such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such votes or the
giving of any consent, or may execute or cause to be executed on behalf of the
corporation and under its corporate seal or otherwise such written proxies,
consents, waivers, or other instruments as he or she may deem necessary or
proper, or he or she may attend any meeting of the holders of such securities of
any such other corporation and thereat vote or exercise any or all other powers
of the corporation as the holder of such securities of such corporation.

Error! Bookmark not defined.SECTION 4.4. THE VICE CHAIRMAN OF THE BOARD{TC
\L 2 "SECTION 4.4. THE VICE CHAIRMAN OF THE BOARD"}. The vice chairman of the
board shall be the corporation's executive officer next in authority to the
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.

Error! Bookmark not defined.SECTION 4.5. THE PRESIDENT{TC \L 2
"SECTION 4.5. THE PRESIDENT"}. The president shall be the corporation's
executive officer next in authority to the vice chairman of the board and shall
be its 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.

Error! Bookmark not defined.SECTION 4.6. VICE PRESIDENTS{TC \L 2
"SECTION 4.6. 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. 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.

Error! Bookmark not defined.SECTION 4.7. THE SECRETARY AND ASSISTANT
SECRETARY{TC \L 2 "SECTION 4.7. 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, 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 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.

Error! Bookmark not defined.SECTION 4.8. THE TREASURER AND ASSISTANT
TREASURER{TC \L 2 "SECTION 4.8. 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 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 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.

Error! Bookmark not defined.SECTION 4.9. VACANCIES{TC \L 2
"SECTION 4.9. 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.

Error! Bookmark not defined.SECTION 4.10. OTHER OFFICERS, ASSISTANT
OFFICERS AND AGENTS{TC \L 2 "SECTION 4.10. 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 shall be
determined from time to time by the board of directors.

Error! Bookmark not defined.ARTICLE V.{TC \L 1 "ARTICLE V."}
INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND OTHERS

Error! Bookmark not defined.SECTION 5.1. THIRD-PARTY ACTIONS{TC \L 2
"SECTION 5.1. THIRD-PARTY ACTIONS"}. The corporation shall indemnify and hold
harmless any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed proceeding (other than an action by or in
the right of the corporation) by reason of the fact that he or she is or was a
director or officer of the corporation, against expenses (including reasonable
attorneys' fees), judgments, fines, liabilities, losses and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation and with respect to any criminal proceeding, had no reasonable cause
to believe his or her conduct was unlawful. The termination of any proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interest of the corporation, and, with respect to any
criminal proceeding, had reasonable cause to believe that his or her conduct was
unlawful.

Error! Bookmark not defined.SECTION 5.2. DERIVATIVE ACTIONS{TC \L 2
"SECTION 5.2. DERIVATIVE ACTIONS"}. The corporation shall indemnify and hold
harmless any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed proceeding by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director or officer of the corporation, against expenses
(including reasonable attorneys' fees) actually and reasonably incurred by him
or her in connection with the defense or settlement of such proceeding if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses that the court
shall deem proper.

Error! Bookmark not defined.SECTION 5.3. RIGHT TO INDEMNIFICATION OF
EXPENSES{TC \L 2 "SECTION 5.3. RIGHT TO INDEMNIFICATION OF EXPENSES"}. To the
extent that a director or officer of a corporation has been successful on the
merits or otherwise in defense of any proceeding referred to in SECTIONS 5.1 and
5.2 or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including reasonable attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.

Error! Bookmark not defined.SECTION 5.4. DETERMINATION OF
INDEMNIFICATION{TC \L 2 "SECTION 5.4. DETERMINATION OF INDEMNIFICATION"}. Any
indemnification under SECTIONS 5.1 and 5.2 (unless ordered by a court) shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he or she has met the applicable standards of conduct set
forth in SECTIONS 5.1 and 5.2. Such determination shall be made (A) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, (B) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion or (C) by the
stockholders.

Error! Bookmark not defined.SECTION 5.5. EXPENSES OF CONTESTED
INDEMNIFICATION CLAIMS{TC \L 2 "SECTION 5.5. EXPENSES OF CONTESTED
INDEMNIFICATION CLAIMS"}. If a claim under SECTION 5.1 or 5.2 is not paid in
full by the corporation within thirty days after a written claim has been
received by the corporation, 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.

Error! Bookmark not defined.SECTION 5.6. ADVANCEMENT OF EXPENSES{TC \L 2
"SECTION 5.6. ADVANCEMENT OF EXPENSES"}. Expenses (including reasonable
attorneys' fees) incurred by a director or officer in defending any proceeding
or prosecuting a claim under SECTION 5.5 shall be paid by the corporation in
advance of the final disposition of such proceeding or suit 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.

Error! Bookmark not defined.SECTION 5.7. INDEMNIFICATION NOT EXCLUSIVE{TC
\L 2 "SECTION 5.7. 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 disinterested directors or otherwise,
both as to action in his or her official capacity and as to action in another
capacity while holding such office.

Error! Bookmark not defined.SECTION 5.8. SURVIVAL OF INDEMNIFICATION AND
ADVANCEMENT OF EXPENSES{TC \L 2 "SECTION 5.8. SURVIVAL OF INDEMNIFICATION AND
ADVANCEMENT OF EXPENSES"}. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article shall, unless otherwise
provided when authorized or ratified, 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 5.9. EMPLOYEES, AGENTS AND OTHERS{TC \L 2
"SECTION 5.9. EMPLOYEES, AGENTS AND OTHERS"}. The corporation may, to the
fullest extent of the provisions of this Article with respect to directors and
officers and to the extent authorized from time to time by the board of
directors, grant rights of indemnification and advancement of expenses to any
employee or agent of the corporation or any other person who is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.

Error! Bookmark not defined.SECTION 5.10. CONTRACT RIGHT{TC \L 2
"SECTION 5.10. 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.

Error! Bookmark not defined.SECTION 5.11. INSURANCE{TC \L 2
"SECTION 5.11. INSURANCE"}. The corporation shall have power to purchase and
maintain insurance on behalf of any person 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 corporation,
partnership, joint venture, trust or other 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.

Error! Bookmark not defined.SECTION 5.12. CERTAIN REFERENCES UNDER ARTICLE
V{TC \L 2 "SECTION 5.12. CERTAIN REFERENCES UNDER ARTICLE V"}. For purposes
of this Article, the following references shall have the following meanings:

(A) "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger that, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he or
she would have with respect to such constituent corporation if its separate
existence had continued;
(B) "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan;

(C) a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation."

(D) "other enterprises" shall include employee benefit plans;

(E) "proceeding" shall include any pending or completed action, suit
or proceeding, whether formal or informal or civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding.

(F) "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation that
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and

Error! Bookmark not defined.ARTICLE VI.{TC \L 1 "ARTICLE VI."}
CERTIFICATES OF STOCK

Error! Bookmark not defined.SECTION 6.1. FORM{TC \L 2
"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. In the case of
any officer who has signed, or whose facsimile signature has been used on a
certificate, has ceased 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.

Error! Bookmark not defined.SECTION 6.2. TRANSFERS{TC \L 2
"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.

Error! Bookmark not defined.SECTION 6.3. LOST OR DESTROYED CERTIFICATES{TC
\L 2 "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.

Error! Bookmark not defined.SECTION 6.4. REGISTERED STOCKHOLDERS{TC \L 2
"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 the other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Delaware.

Error! Bookmark not defined.ARTICLE VII.{TC \L 1 "ARTICLE VII."}
CERTAIN BUSINESS COMBINATIONS

The provision of Section 203, Subchapter VI, Chapter 1, Title 8 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, Subchapter VI, Chapter 1, Title 8 of the Delaware General
Corporation Law.

Error! Bookmark not defined.ARTICLE VIII.{TC \L 1 "ARTICLE VIII."}
GENERAL PROVISIONS

Error! Bookmark not defined.SECTION 8.1. DIVIDENDS{TC \L 2
"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 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.

Error! Bookmark not defined.SECTION 8.2. MONEYS{TC \L 2
"SECTION 8.2. MONEYS"}. The moneys of the corporation shall be deposited in
the name of the corporation in such bank or banks or trust company or trust
companies as the board of directors shall designate, and shall be drawn out only
by check signed by the chairman of the board or the president and countersigned
by the secretary, assistant secretary, treasurer or the assistant treasurer, or
signed and countersigned by such other persons as shall be designated by
resolution of the board of directors, except that the chairman of the board may
designate one or more officers to transfer by letter or wire funds from an
account of the corporation in one bank to an account of the corporation or a
subsidiary in another bank and the chairman of the board shall have the
authority on bank accounts to designate that one signature of an officer or
other person shall be sufficient.

Error! Bookmark not defined.ARTICLE IX.{TC \L 1 "ARTICLE IX."}
NOTICES

Error! Bookmark not defined.SECTION 9.1. GENERAL{TC \L 2
"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. Whenever any notice whatever is required to be
given under the provisions 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 thereto.

Error! Bookmark not defined.SECTION 9.2. WAIVERS{TC \L 2
"SECTION 9.2. WAIVERS"}. Whenever any notice is required to be given to any
stockholder, director or committee member under the 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 such notice, whether before or after
the time stated therein, shall be equivalent to the giving of such notice.

Error! Bookmark not defined.SECTION 9.3. ATTENDANCE AS WAIVER{TC \L 2
"SECTION 9.3. ATTENDANCE AS WAIVER"}. Attendance of a director or member of a
committee at a meeting shall constitute a waiver of notice of such meeting,
except where a director or committee member attends a meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.

Error! Bookmark not defined.SECTION 9.4. OMISSION OF NOTICE TO
STOCKHOLDERS{TC \L 2 "SECTION 9.4. OMISSION OF NOTICE TO STOCKHOLDERS"}. Any
notice required to be given to any stockholder under any statutory provision,
the corporation's certificate of incorporation or these bylaws need not be given
to the stockholder if (1) notice of two consecutive annual meetings and all
notices of meetings held during the period between those annual meetings, if
any, or (2) all (but in no event less than two) payments (if sent by first class
mail) of distributions or interest on securities during a twelve (12) month
period have been mailed to that person, addressed at his 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 then
current address, the requirement that notice be given to that person shall be
reinstated.

ADOPTED BY THE BOARD OF DIRECTORS AS OF
DECEMBER 16, 1997

/s/ Steven L. Watson

Steven L. Watson, Vice President and Secretary

EXHIBIT 10.2
COMPX INTERNATIONAL INC.

1997 LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSE. The purpose of this Plan is to advance the interests
of CompX and its stockholders by providing incentives to certain Eligible
Persons who contribute significantly to the strategic and long-term performance
objectives and growth of the Company.

SECTION 2. DEFINITIONS. The following terms shall have the meaning
indicated:

(A) "ACTUAL VALUE" has the meaning set forth in SECTION 9.

(B) "ASSOCIATED AWARD" shall mean an Award granted concurrently or
subsequently in conjunction with another Award.

(D) "AWARD PERIOD" has the meaning set forth in SUBSECTION 9(B).

(E) "BENEFICIARY" has the meaning set forth in SECTION 16.

(F) "BOARD" shall mean the board of directors of CompX.

(G) "CLASS A COMMON SHARES" shall mean shares of class A common
stock, par value $.01 per share, of CompX and stock of any other class into
which such shares may thereafter be changed.

(H) "CODE" shall mean the Internal Revenue Code of 1986, as it now
exists or may be amended from time to time, and the rules and regulations
promulgated thereunder, as they may exist or may be amended from time to
time.

(I) "COMMITTEE" shall mean a committee of the Board, if any,
designated by the Board to administer this Plan that is comprised of not
fewer than two directors. The membership of the Committee or any successor
committee (i) shall consist of "nonemployee directors" (as defined in Rule
16b-3) and meet any other applicable requirements so as to comply at all
times with the applicable requirements of Rule 16b-3, (ii) shall consist of
"outside directors" (as defined in Treasury Regulation Section1.162-
27(e)(3)(i) or any successor regulation) and meet any other applicable
requirements so as to comply at all times with the applicable requirements
of Section 162(m) (if the Board decides at some latter date that compliance
with Section 162(m) is warranted) and (iii) shall meet any applicable
requirements of any stock exchange or other market quotation system on
which Class A Common Shares are listed. References to the Committee
hereunder shall include the Board or the Designated Administrator where
appropriate.

(J) "COMPANY" shall mean CompX and any parent or subsidiary of CompX.

(K) "COMPX" shall mean CompX International Inc., a Delaware
corporation.

(L) "DESIGNATED ADMINISTRATOR" has the meaning set forth in SECTION
3.

(M) "EFFECTIVE DATE" shall mean the date the Board adopts this Plan
(which adoption date may be a date subsequent to the date of the actual
action taken by the Board if the Board action sets forth such subsequent
adoption date).

(N) "ELIGIBLE PERSON(S)" shall mean those persons who are key
employees of the Company or other key individuals who perform services for
the Company, including, without limitation, directors who are not employees
of the Company.
(O) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
it now exists or may be amended from time to time, and the rules
promulgated thereunder, as they may exist or may be amended from time to
time.

(P) "FAIR MARKET VALUE" shall mean such value rounded up to the
nearest cent as determined by the BOARD in accordance with applicable law.

(Q) "INCENTIVE STOCK OPTION" shall mean a Stock Option that is an
incentive stock option as defined in Section 422 of the Code. Incentive
Stock Options are subject, in part, to the terms, conditions and
restrictions described in SECTION 6.

(R) "MAXIMUM VALUE" has the meaning set forth in SUBSECTION 9(A).

(S) "NONQUALIFIED STOCK OPTION" shall mean a Stock Option that is not
an incentive stock option as defined in Section 422 of the Code.
Nonqualified Stock Options are subject, in part, to the terms, conditions
and restrictions described in SECTION 6.

(T) "OTHER COMPX SECURITIES" shall mean CompX securities (which may
include, but need not be limited to, unbundled stock units or components
thereof, debentures, preferred stock, warrants, securities convertible into
Class A Common Shares or other property) other than Class A Common Shares.

(U) "PARTICIPANT" shall mean an Eligible Person to whom an Award has
been granted under this Plan.

(V) "PERFORMANCE GRANT" shall mean an Award subject, in part, to the
terms, conditions and restrictions described in SECTION 9, pursuant to
which the recipient may become entitled to receive cash, Class A Common
Shares, Other CompX Securities or property, or other forms of payment, or
any combination thereof, as determined by the Board.

(W) "PLAN" shall mean this CompX International Inc. 1997 Long-Term
Incentive Plan.

(X) "PURCHASED OPTION" shall mean a Stock Option that is sold to an
Eligible Person at a price determined by the BOARD. Purchase Options are
subject, in part, to the terms, conditions and restrictions described in
SECTION 6.

(Y) "RESTRICTED PERIOD" has the meaning set forth in SUBSECTION 8(B).

(Z) "RESTRICTED STOCK" shall mean an Award of Class A Common Shares
that are issued subject, in part, to the terms, conditions and restrictions
described in SECTION 8.

(AA) "RULE 16B-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act and any successor rule.

(BB) "SECTION 162(M)" shall mean Section162(m) of the Code, any rules
or regulations promulgated thereunder, as they may exist or may be amended
from time to time, or any successor to such section.

(CC) "STOCK APPRECIATION RIGHT" shall mean an Award of a right to
receive (without payment to CompX) cash, Class A Common Shares, Other CompX
Securities or property, or other forms of payment, or any combination
thereof, as determined by the Board, based on the increase in the value of
the number of Class A Common Shares specified in the Stock Appreciation
Right. Stock Appreciation Rights are subject, in part, to the terms,
conditions and restrictions described in SECTION 7.

(DD) "STOCK OPTION" shall mean an Award of a right to purchase Class A
Common Shares. The term Stock Option shall include Nonqualified Stock
Options, Incentive Stock Options and Purchased Options.

(EE) "TEN PERCENT EMPLOYEE" shall mean an employee of the Company who
owns stock representing more than ten percent of the voting power of all
classes of stock of CompX or any parent or subsidiary of CompX.

(FF) "TREASURY REGULATION" shall mean a final, proposed or temporary
regulation of the Department of Treasury under the Code and any successor
regulation.

SECTION 3. ADMINISTRATION. Unless the Board shall designate the Committee
or a Designated Administrator to administer this Plan, this Plan shall be
administered by the Board. If at any time Rule 16b-3 so permits without
adversely affecting the ability of Awards to executive officers of CompX to
comply with the conditions for Rule 16b-3, the Board may delegate the
administration of this Plan and any of its power and authority in whole or in
part, on such terms and conditions, and to such person or persons as it may
determine in its discretion (a "DESIGNATED ADMINISTRATOR").

The Board has all the powers vested in it by the terms of this Plan, such
powers to include exclusive authority to select the Eligible Persons to be
granted Awards under this Plan, to determine the type, size and terms of the
Award to be made to each Eligible Person selected, to modify the terms of any
Award that has been granted, to determine the time when Awards will be granted,
to establish performance objectives, to make any adjustments necessary or
desirable as a result of the granting of Awards to Eligible Persons located
outside the United States and to prescribe the form of the agreements embodying
Awards made under this Plan. The Board is authorized to interpret this Plan and
the Awards granted under this Plan, to establish, amend and rescind any rules
and regulations relating to this Plan, and to make any other determinations that
it deems necessary or desirable for the administration of this Plan. The Board
may correct any defect or supply any omission or reconcile any inconsistency in
this Plan or in any Award in the manner and to the extent the Board deems
necessary or desirable to carry it into effect. Any decision of the Board in
the interpretation and administration of this Plan, as described herein, shall
lie within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned. The Board may act only by a majority of its
members in office, except that the members thereof may authorize any one or more
of their members or any officer of the Company to execute and deliver documents
or to take any other ministerial action on behalf of the Board with respect to
Awards made or to be made to Participants.

No member of the Board and no officer of the Company shall be liable for
anything done or omitted to be done by him, by any other member of the Board or
by any officer of the Company in connection with the performance of duties under
this Plan, except for his own willful misconduct or as expressly provided by
statute. In addition to all other rights of indemnification and reimbursement
to which a member of the Board and an officer of the Company may be entitled,
the Company shall indemnify and hold harmless each such member or officer who
was or is a party or is threatened to be made a party to any threatened, pending
or completed proceeding or suit in connection with the performance of duties
under this Plan against expenses (including reasonable attorneys' fees),
judgments, fines, liabilities, losses and amounts paid in settlement actually
and reasonably incurred by him in connection with such proceeding or suit,
except for his own willful misconduct or as expressly provided otherwise by
statute. Expenses (including reasonable attorneys' fees) incurred by a such a
member or officer in defending any such proceeding or suit shall be paid by the
Company in advance of the final disposition of such proceeding or suit upon
receipt of a written affirmation by such member or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification and
a written undertaking by or on behalf of such member or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Company as authorized in this Section.

SECTION 4. PARTICIPATION. Consistent with the purposes of this Plan, the
Board shall have exclusive power to select the Eligible Persons who may
participate in this Plan and be granted Awards under this Plan. Eligible Persons
may be selected individually or by groups or categories, as determined by the
Board in its discretion.

SECTION 5. AWARDS UNDER THIS PLAN.

(A) Types of Awards. Awards under this Plan may include, but need
not be limited to, one or more of the following types, either alone or in
any combination thereof: (i) Stock Options, (ii) Stock Appreciation
Rights, (iii) Restricted Stock, (iv) Performance Grants and (v) any other
type of Award deemed by the Board in its discretion to be consistent with
the purposes of this Plan (including, but not limited to, Awards of or
options or similar rights granted with respect to unbundled stock units or
components thereof, and Awards to be made to Participants who are foreign
nationals or are employed or performing services outside the United
States).

(B) Maximum Number of Shares that May be Issued. There may be issued
under this Plan (as Restricted Stock, in payment of Performance Grants,
pursuant to the exercise of Stock Options or Stock Appreciation Rights or
in payment of or pursuant to the exercise of such other Awards as the
Board, in its discretion, may determine) an aggregate of not more than
1,500,000 Class A Common Shares, subject to adjustment as provided in
SECTION 15. No Eligible Person may receive Awards under this Plan for more
than 500,000 Class A Common Shares in any one fiscal year of CompX, subject
to adjustment as provided in SECTION 15. Class A Common Shares issued
pursuant to this Plan may be either authorized but unissued shares,
treasury shares, reacquired shares or any combination thereof. If any
Class A Common Shares issued as Restricted Stock or otherwise subject to
repurchase or forfeiture rights are reacquired by the Company pursuant to
such rights or, if any Award is canceled, terminates or expires
unexercised, any Class A Common Shares that would otherwise have been
issuable pursuant thereto will be available for issuance under new Awards.

(C) Rights with Respect to Class A Common Shares and Other
Securities. Except as provided in SUBSECTION 8(C) with respect to Awards
of Restricted Stock and unless otherwise determined by the Board in its
discretion, a Participant to whom an Award is made (and any person
succeeding to such a Participant's rights pursuant to this Plan) shall have
no rights as a stockholder with respect to any Class A Common Shares or as
a holder with respect to other securities, if any, issuable pursuant to any
such Award until the date of the issuance of a stock certificate to him for
such Class A Common Shares or other instrument of ownership, if any. Except
as provided in SECTION 15, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and
whether in cash, securities, other property or other forms of
consideration, or any combination thereof) for which the record date is
prior to the date such stock certificate or other instrument of ownership,
if any, is issued. In all events, a Participant with whom an Award
agreement is made to issue Class A Common Shares in the future, shall have
no rights as a stockholder with respect to Class A Common Shares related to
such agreement until issuance to him of a stock certificate representing
such shares.

SECTION 6. STOCK OPTIONS. The Board may sell Purchased Options or grant
other Stock Options either alone, or in conjunction with Associated Awards,
either at the time of grant or by amendment thereafter; provided that an
Incentive Stock Option may be granted only to Eligible Persons who are employees
of the Company and have an Associated Award only to the extent that such
Associated Award does not disqualify the Incentive Stock Option's status as such
under the Code. Each Stock Option granted or sold under this Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with this Plan and shall comply with the applicable terms and
conditions of this Section and this Plan, and with such other terms and
conditions, including, but not limited to, restrictions upon the Stock Option or
the Class A Common Shares issuable upon exercise thereof, as the Board, in its
discretion, shall establish.

(A) The exercise price of a Stock Option may be less than, equal to,
or greater than, the Fair Market Value of the Class A Common Shares subject
to such Stock Option at the time the Stock Option is granted, as determined
by the Board; provided, however, that in the case of an Incentive Stock
Option granted to an employee of the Company, the exercise price shall not
be less than the Fair Market Value of the Class A Common Shares subject to
such Stock Option at the time the Stock Option is granted, or if granted to
a Ten Percent Employee, such exercise price shall not be less than 110% of
such Fair Market Value at the time the Stock Option is granted. In no
event, however, will the exercise price per share of a Stock Option be less
than the par value per share of a Common Share.

(B) The Board shall determine the number of Class A Common Shares to
be subject to each Stock Option. In the case of a Stock Option awarded in
conjunction with an Associated Award, the number of Class A Common Shares
subject to an outstanding Stock Option may be reduced on an appropriate
basis to the extent that the Associated Award has been exercised, paid to
or otherwise received by the Participant, as determined by the Board.

(C) Any Stock Option may be exercised during its term only at such
time or times and in such installments as the Board may establish.

(D) A Stock Option shall not be exercisable:

(I) in the case of any Incentive Stock Option granted to a Ten
Percent Employee, after the expiration of five years from the date it
is granted, and, in the case of any other Stock Option, after the
expiration of ten years from the date it is granted; and
(II) unless payment in full is made for the shares being acquired
thereunder at the time of exercise as provided in SUBSECTION 6(I).

(E) The Board shall determine in its discretion and specify in each
agreement embodying a Stock Option the effect, if any, the termination of
the Participant's employment with or performance of services for the
Company shall have on the exercisability of the Stock Option; provided,
however, that an Incentive Stock Option shall not be exercisable at a time
that is beyond the time an Incentive Stock Option may be exercised in order
to qualify as such under the Code.

(F) In the case of an Incentive Stock Option, the amount of the
aggregate Fair Market Value of Class A Common Shares (determined at the
time of grant of the Stock Option) with respect to which incentive stock
options are exercisable for the first time by an employee of the Company
during any calendar year (under all such plans of his employer corporation
and its parent and subsidiary corporations) shall not exceed $100,000.

(G) It is the intent of CompX that Nonqualified Stock Options granted
under this Plan not be classified as Incentive Stock Options, that the
Incentive Stock Options granted under this Plan be consistent with and
contain or be deemed to contain all provisions required under Section 422
and the other appropriate provisions of the Code and any implementing
regulations (and any successor provisions thereof), and that any
ambiguities in construction shall be interpreted in order to effectuate
such intent.

(H) A Purchased Option may contain such additional terms not
inconsistent with this Plan, including but not limited to the circumstances
under which the purchase price of such Purchased Option may be returned to
the holder of the Purchased Option, as the Board may determine in its sole
discretion.

(I) For purposes of payments made to exercise Stock Options, such
payment shall be made in such form (including, but not limited to, cash,
Class A Common Shares, the surrender of another outstanding Award under
this Plan or any combination thereof) as the Board may determine in its
discretion; provided, however, that for purposes of making such payment in
Class A Common Shares, such shares shall be valued at their Fair Market
Value on the day of exercise and shall have been held by the Participant
for a period of at least six (6) months.

SECTION 7. STOCK APPRECIATION RIGHTS. The Board may grant Stock
Appreciation Rights either alone, or in conjunction with Associated Awards,
either at the time of grant or by amendment thereafter. Each Award of Stock
Appreciation Rights granted under this Plan shall be evidenced by an agreement
in such form as the Board shall prescribe from time to time in accordance with
this Plan and shall comply with the applicable terms and conditions of this
SECTION 7 and this Plan, and with such other terms and conditions, including,
but not limited to, restrictions upon the Award of Stock Appreciation Rights or
the Class A Common Shares issuable upon exercise thereof, as the Board, in its
discretion, shall establish.

(A) The Board shall determine the number of Class A Common Shares to
be subject to each Award of Stock Appreciation Rights. In the case of an
Award of Stock Appreciation Rights awarded in conjunction with an
Associated Award, the number of Class A Common Shares subject to an
outstanding Award of Stock Appreciation Rights may be reduced on an
appropriate basis to the extent that the Associated Award has been
exercised, paid to or otherwise received by the Participant, as determined
by the Board.

(B) The Award of Stock Appreciation Rights shall not be exercisable:
(I) unless the Associated Award, if any, is at the time
exercisable;

(II) if the Associated Award is a Stock Option and the Fair
Market Value per share of the Class A Common Shares on the exercise
date does not exceed the exercise price per share of such Stock
Option; or

(III) if the Associated Award is an Incentive Stock Option
and the exercise of the Award of Stock Appreciation Rights would
disqualify the Incentive Stock Option as such under the Code.

(C) The Board shall determine in its discretion and specify in each
agreement embodying an Award of Stock Appreciation Rights the effect, if
any, the termination of the Participant's employment with or performance of
services for the Company shall have on the exercisability of the Award of
Stock Appreciation Rights.

(D) An Award of Stock Appreciation Rights shall entitle the holder to
exercise such Award or to surrender unexercised an Associated Award (or any
portion of such Associated Award) to CompX and to receive from CompX in
exchange thereof, without payment to CompX, that number of Class A Common
Shares having an aggregate value equal to (or, in the discretion of the
Board, less than) the excess of the Fair Market Value of one share, at the
time of such exercise, over the exercise price, times the number of shares
subject to the Award or the Associated Award, or portion thereof, that is
so exercised or surrendered, as the case may be. The Board shall be
entitled in its discretion to elect to settle the obligation arising out of
the exercise of a Stock Appreciation Right by the payment of cash or Other
CompX Securities or property, or other forms of payment or any combination
thereof, as determined by the Board, equal to the aggregate value of the
Class A Common Shares it would otherwise be obligated to deliver. Any such
election by the Board shall be made as soon as practicable after the
receipt by the Board of written notice of the exercise of the Stock
Appreciation Right.

(E) A Stock Appreciation Right may provide that it shall be deemed to
have been exercised at the close of business on the business day preceding
the expiration date of the Stock Appreciation Right or of the related Stock
Option (or other Award), or such other date as specified by the Board, if
at such time such Stock Appreciation Right has a positive value. Such
deemed exercise shall be settled or paid in the same manner as a regular
exercise thereof as provided in SUBSECTION 7(D) hereof.

SECTION 8. RESTRICTED STOCK. The Board may grant Awards of Restricted
Stock either alone, or in conjunction with Associated Awards, either at the time
of grant or by amendment thereafter. Each Award of Restricted Stock under this
Plan shall be evidenced by an agreement in such form as the Board shall
prescribe from time to time in accordance with this Plan and shall comply with
the applicable terms and conditions of this Section and this Plan, and with such
other terms and conditions as the Board, in its discretion, shall establish.

(A) The Board shall determine the number of Class A Common Shares to
be issued to a Participant pursuant to the Award of Restricted Stock, and
the extent, if any, to which they shall be issued in exchange for cash,
other consideration, or both.

(B) Until the expiration of such period as the Board shall determine
from the date on which the Award is granted and subject to such other terms
and conditions as the Board in its discretion shall establish (the
"RESTRICTED PERIOD"), a Participant to whom an Award of Restricted Stock is
made shall be issued, but shall not be entitled to the delivery of, a stock
certificate representing the Class A Common Shares subject to such Award.

(C) Unless otherwise determined by the Board in its discretion, a
Participant to whom an Award of Restricted Stock has been made (and any
person succeeding to such a participant's rights pursuant to this Plan)
shall have, after issuance of a certificate for the number of Class A
Common Shares awarded and prior to the expiration of the Restricted Period,
ownership of such Class A Common Shares, including the right to vote such
Class A Common Shares and to receive dividends or other distributions made
or paid with respect to such Class A Common Shares (provided that such
Class A Common Shares, and any new, additional or different shares, or
Other CompX Securities or property, or other forms of consideration that
the Participant may be entitled to receive with respect to such Class A
Common Shares as a result of a stock split, stock dividend or any other
change in the corporation or capital structure of CompX, shall be subject
to the restrictions hereinafter described as determined by the Board in its
discretion), subject, however, to the options, restrictions and limitations
imposed thereon pursuant to this Plan.

(D) The Board shall determine in its discretion and specify in each
agreement embodying an Award of Restricted Stock the effect, if any, the
termination of the Participant's employment with or performance of services
for the Company during the Restricted Period shall have on such Award of
Restricted Stock.

SECTION 9. PERFORMANCE GRANTS. The Board may grant Awards of Performance
Grants either alone, or in conjunction with Associated Awards, either at the
time of grant or by amendment thereafter. The Award of a Performance Grant to a
Participant will entitle him to receive a specified amount determined by the
Board (the "ACTUAL VALUE"), if the terms and conditions specified in this Plan
and in the Award are satisfied. Each Award of a Performance Grant shall be
subject to the applicable terms and conditions of this Section and this Plan,
and to such other terms and conditions, including but not limited to,
restrictions upon any cash, Class A Common Shares, Other CompX Securities or
property, or other forms of payment, or any combination thereof, issued with
respect to the Performance Grant, as the Board, in its discretion, shall
establish, and shall be embodied in an agreement in such form and substance as
is determined by the Board.

(A) The Board shall determine the value or range of values of a
Performance Grant to be awarded to each Participant selected for an Award
and whether or not such a Performance Grant is granted in conjunction with
an Associated Award. As determined by the Board, the maximum value of each
Performance Grant (the "MAXIMUM VALUE") shall be: (i) an amount fixed by
the Board at the time the Award is made or amended thereafter, (ii) an
amount that varies from time to time based in whole or in part on the then
current value of the Class A Common Shares, Other CompX Securities or
property, or other securities or property, or any combination thereof or
(iii) an amount that is determinable from criteria specified by the Board.
Performance Grants may be issued in different classes or series having
different names, terms and conditions. In the case of a Performance Grant
awarded in conjunction with an Associated Award, the Performance Grant may
be reduced on an appropriate basis to the extent that the Associated Award
has been exercised, paid to or otherwise received by the Participant, as
determined by the Board.

(B) The award period ("AWARD PERIOD") related to any Performance
Grant shall be a period determined by the Board. At the time each Award is
made, the Board shall establish performance objectives to be attained
within the Award Period as the means of determining the Actual Value of
such a Performance Grant. The performance objectives shall be based on
such measure or measures of performance, which may include, but need not be
limited to, the performance of the Participant, the Company or one or more
of its divisions or units, or any combination of the foregoing, as the
Board shall determine, and may be applied on an absolute basis or be
relative to industry or other indices or any combination thereof. The
Actual Value of a Performance Grant shall be equal to its Maximum Value
only if the performance objectives are attained in full, but the Board
shall specify the manner in which the Actual Value of Performance Grants
shall be determined if the performance objectives are met in part. Such
performance measures, the Actual Value or the Maximum Value, or any
combination thereof, may be adjusted in any manner by the Board in its
discretion at any time and from time to time during or as soon as
practicable after the Award Period, if it determines that such performance
measures, the Actual Value or the Maximum Value, or any combination
thereof, are not appropriate under the circumstances.

(C) The Board shall determine in its discretion and specify in each
agreement embodying a Performance Grant the effect, if any, the termination
of the Participant's employment with or performance of services for the
Company during the Award Period shall have on such Performance Grant.

(D) The Board shall determine whether the conditions of a Performance
Grant have been met and, if so, shall ascertain the Actual Value of the
Performance Grant. If the Performance Grant has no Actual Value, the Award
and such Performance Grant shall be deemed to have been canceled and the
Associated Award, if any, may be canceled or permitted to continue in
effect in accordance with its terms. If the Performance Grant has any
Actual Value and:

(I) was not awarded in conjunction with an Associated Award, the
Board shall cause an amount equal to the Actual Value of the
Performance Grant earned by the Participant to be paid to him or his
permitted assignee or Beneficiary; or

(II) was awarded in conjunction with an Associated Award, the
Board shall determine, in accordance with criteria specified by the
Board (A) to cancel the Performance Grant, in which event no amount
with respect thereto shall be paid to the Participant or his permitted
assignee or Beneficiary, and the Associated Award may be permitted to
continue in effect in accordance with its terms, (B) to pay the Actual
Value of the Performance Grant to the Participant or his permitted
assignee or Beneficiary as provided below, in which event the
Associated Award may be canceled or (C) to pay to the Participant or
his Beneficiary, the Actual Value of only a portion of the Performance
Grants, in which event all or a portion of the Associated Award may be
permitted to continue in effect in accordance with its terms or be
canceled, as determined by the Board.

Such determination by the Board shall be made as promptly as practicable
following the end of the Award Period or upon the earlier termination of
employment or performance of services, or at such other time or times as the
Board shall determine, and shall be made pursuant to criteria specified by the
Board.

(E) Payment of any amount with respect to the Performance Grants that
the Board determines to pay as provided above shall be made by CompX as
promptly as practicable after the end of the Award Period or at such other
time or times as the Board shall determine, and may be made in cash,
Class A Common Shares, Other CompX Securities or property, or other forms
of payment, or any combination thereof or in such other manner, as
determined by the Board in its discretion. Notwithstanding anything in
this Section to the contrary, the Board may, in its discretion, determine
and pay out the Actual Value of the Performance Grants at any time during
the Award Period.

SECTION 10. DEFERRAL OF COMPENSATION. The Board shall determine whether
or not an Award shall be made in conjunction with the deferral of the
Participant's salary, bonus or other compensation, or any combination thereof,
and whether or not such deferred amounts may be:

(A) forfeited to the Company or to other Participants or any
combination thereof, under certain circumstances (which may include, but
need not be limited to, certain types of termination of employment or
performance of services for the Company);

(B) subject to increase or decrease in value based upon the
attainment of or failure to attain, respectively, certain performance
measures; and/or

(C) credited with income equivalents (which may include, but need not
be limited to, interest, dividends or other rates of return) until the date
or dates of payment of the Award, if any.

SECTION 11. DEFERRED PAYMENT OF AWARDS. The Board may specify that the
payment of all or any portion of cash, Class A Common Shares, Other CompX
Securities or property, or any other form of payment, or any combination
thereof, under an Award shall be deferred until a later date. Deferrals shall
be for such periods or until the occurrence of such events, and upon such terms,
as the Board shall determine in its discretion. Deferred payments of Awards may
be made by undertaking to make payment in the future based upon the performance
of certain investment equivalents (which may include, but need not be limited
to, government securities, Class A Common Shares, other securities, property or
consideration, or any combination thereof), together with such additional
amounts of income equivalents (which may be compounded and may include, but need
not be limited to, interest, dividends or other rates of return or any
combination thereof) as may accrue thereon until the date or dates of payment,
such investment equivalents and such additional amounts of income equivalents to
be determined by the Board in its discretion.

SECTION 12. TRANSFERABILITY OF AWARDS. Except as may be approved by the
Board, a Participant's rights and interest under this Plan or any Award may not
be assigned or transferred, hypothecated or encumbered in whole or in part
either directly or by operation of law or otherwise (except in the event of a
Participant's death), including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner; provided,
however, that any Incentive Stock Option granted pursuant to this Plan shall not
be transferable other than by will or the laws of descent and distribution and
shall be exercisable during the Participant's lifetime only by him.

SECTION 13. AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THIS PLAN. The
terms of any outstanding Award under this Plan may be amended or modified from
time to time by the Board in its discretion in any manner that it deems
appropriate (including, but not limited to, acceleration of the date of exercise
of any Award and/or payments thereunder) if the Board could grant such amended
or modified Award under the terms of this Plan at the time of such amendment or
modification; provided that no such amendment or modification shall adversely
affect in a material manner any right of a Participant under the Award without
his written consent, unless the Board determines in its discretion that there
have occurred or are about to occur significant changes in the Participant's
position, duties or responsibilities, or significant changes in economic,
legislative, regulatory, tax, accounting or cost/benefit conditions that are
determined by the Board in its discretion to have or to be expected to have a
substantial effect on the performance of the Company, or any affiliate, division
or department thereof, on this Plan or on any Award under this Plan. The Board
may, in its discretion, permit holders of Awards under this Plan to surrender
outstanding Awards in order to exercise or realize the rights under other
Awards, or in exchange for the grant of new Awards, or require holders of Awards
to surrender outstanding Awards as a condition precedent to the grant of new
Awards under this Plan.

SECTION 14. TERMINATION OF A PARTICIPANT. For all purposes under this
Plan, the Board shall determine whether a Participant has terminated employment
with, or the performance of services for, the Company; provided, however, an
absence or leave approved by the Company, to the extent permitted by applicable
provisions of the Code, shall not be considered an interruption of employment or
performance of services for any purpose under this Plan.

SECTION 15. DILUTION AND OTHER ADJUSTMENTS. In the event of any change
in the outstanding Class A Common Shares by reason of any stock split, dividend,
split-up, split-off, spin-off, recapitalization, merger, consolidation, rights
offering, reorganization, combination or exchange of shares, a sale by CompX of
all or substantially all of its assets, any distribution to stockholders other
than a normal cash dividend, or other extraordinary or unusual event, if the
Board shall determine, in its discretion, that such change equitably requires an
adjustment in the terms of any Award or the number of Class A Common Shares
available for Awards, such adjustment may be made by the Board and shall be
final, conclusive and binding for all purposes of this Plan. Each adjustment
made pursuant to this Section shall be made with a view toward preserving the
value of the affected Award had prior to the event or transaction giving cause
to such adjustment.

In the event of the proposed dissolution or liquidation of CompX, all
outstanding Awards shall terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of CompX or the merger
of CompX with or into another corporation, all restrictions on any outstanding
Awards shall lapse and Participants shall be entitled to the full benefit of all
such Awards immediately prior to the closing date of such sale or merger, unless
otherwise provided by the Board.

SECTION 16. DESIGNATION OF BENEFICIARY BY PARTICIPANT. A Participant may
name a beneficiary to receive any payment to which he may be entitled with
respect to any Award under this Plan in the event of his death, on a written
form to be provided by and filed with the Board, and in a manner determined by
the Board in its discretion (a "BENEFICIARY"). The Board reserves the right to
review and approve Beneficiary designations. A Participant may change his
Beneficiary from time to time in the same manner, unless such Participant has
made an irrevocable designation. Any designation of a Beneficiary under this
Plan (to the extent it is valid and enforceable under applicable law) shall be
controlling over any other disposition, testamentary or otherwise, as determined
by the Board in its discretion. If no designated Beneficiary survives the
Participant and is living on the date on which any amount becomes payable to
such a Participant's Beneficiary, such payment will be made to the legal
representatives of the Participant's estate, and the term "BENEFICIARY" as used
in this Plan shall be deemed to include such person or persons. If there are
any questions as to the legal right of any Beneficiary to receive a distribution
under this Plan, the Board in its discretion may determine that the amount in
question be paid to the legal representatives of the estate of the Participant,
in which event the Company, the Board, the Committee, the Designated
Administrator (if any), and the members thereof, will have no further liability
to anyone with respect to such amount.

SECTION 17. FINANCIAL ASSISTANCE. If the Board determines that such
action is advisable, the Company may assist any Participant in obtaining
financing from the Company (or under any program of the Company approved
pursuant to applicable law), or from a bank or other third party, on such terms
as are determined by the Board, and in such amount as is required to accomplish
the purposes of this Plan, including, but not limited to, to permit the exercise
of an Award, the participation therein, and/or the payment of any taxes with
respect thereto. Such assistance may take any form that the Board deems
appropriate, including, but not limited to, a direct loan from the Company, a
guarantee of the obligation by the Company or the maintenance by the Company of
deposits with such bank or third party.

SECTION 18. MISCELLANEOUS PROVISIONS.

(A) Any proceeds from Awards shall constitute general funds of CompX.

(B) No fractional shares may be delivered under an Award, but in lieu
thereof a cash or other adjustment shall be made as determined by the Board
in its discretion.

(C) No Eligible Person or other person shall have any claim or right
to be granted an Award under this Plan. Determinations made by the Board
under this Plan need not be uniform and may be made selectively among
Eligible Persons under this Plan, whether or not such Eligible Persons are
similarly situated. Neither this Plan nor any action taken hereunder shall
be construed as giving any Eligible Person any right to continue to be
employed by or perform services for the Company, and the right to terminate
the employment of or performance of services by Eligible Persons at any
time and for any reason is specifically reserved.

(D) No Participant or other person shall have any right with respect
to this Plan, the Class A Common Shares reserved for issuance under this
Plan or in any Award, contingent or otherwise, until written evidence of
the Award shall have been delivered to the recipient and all the terms,
conditions and provisions of this Plan and the Award applicable to such
recipient (and each person claiming under or through him) have been met.

(E) No Class A Common Shares, Other CompX Securities or property,
other securities or property or other forms of payment shall be issued
hereunder with respect to any Award unless counsel for CompX shall be
satisfied that such issuance will be in compliance with applicable law and
any applicable rules of any stock exchange or other market quotation system
on which Class A Common Shares are listed.

(F) It is the intent of CompX that this Plan comply in all respects
with Rule 16b-3 with respect to Awards granted to executive officers of
CompX, that any ambiguities or inconsistencies in construction of this Plan
be interpreted to give effect to such intention and that if any provision
of this Plan is found not to be in compliance with Rule 16b-3, such
provision shall be deemed null and void with respect to Awards granted to
executive officers of CompX to the extent required to permit such Awards to
comply with Rule 16b-3. It is also the intent of CompX that this Plan
comply in all respects with the provisions of the Code providing favorable
treatment to Incentive Stock Options, that any ambiguities or
inconsistencies in construction of this Plan be interpreted to give effect
to such intention and that if any provision of this Plan is found not to be
in compliance with the Incentive Stock Option provisions of the Code, such
provision shall be deemed null and void with respect to Incentive Stock
Options granted to employees of the Company to the extent required to
permit such Incentive Stock Options to receive favorable treatment under
the Code.

(G) The Company shall have the right to deduct from any payment made
under this Plan any federal, state, local or foreign income or other taxes
required by law to be withheld with respect to such payment. It shall be a
condition to the obligation of CompX to issue Class A Common Shares, Other
CompX Securities or property, other securities or property, or other forms
of payment, or any combination thereof, upon exercise, settlement or
payment of any Award under this Plan, that the Participant (or any
Beneficiary or person entitled to act) pay to CompX, upon its demand, such
amount as may be required by the Company for the purpose of satisfying any
liability to withhold federal, state, local or foreign income or other
taxes. If the amount requested is not paid, CompX may refuse to issue
Class A Common Shares, Other CompX Securities or property, other securities
or property, or other forms of payment, or any combination thereof.
Notwithstanding anything in this Plan to the contrary, the Board may, in
its discretion, permit an Eligible Person (or any Beneficiary or person
entitled to act) to elect to pay a portion or all of the amount requested
by the Company for such taxes with respect to such Award, at such time and
in such manner as the Board shall deem to be appropriate (including, but
not limited to, by authorizing CompX to withhold, or agreeing to surrender
to CompX on or about the date such tax liability is determinable, Class A
Common Shares, Other CompX Securities or property, other securities or
property, or other forms of payment, or any combination thereof, owned by
such person or a portion of such forms of payment that would otherwise be
distributed, or have been distributed, as the case may be, pursuant to such
Award to such person, having a Fair Market Value equal to the amount of
such taxes).

(H) The expenses of this Plan shall be borne by the Company;
provided, however, the Company may recover from a Participant or his
Beneficiary, heirs or assigns any and all damages, fees, expenses and costs
incurred by the Company arising out of any actions taken by a Participant
in breach of this Plan or any agreement evidencing such Participant's
Award.

(I) This Plan shall be unfunded. The Company shall not be required
to establish any special or separate fund or to make any other segregation
of assets to assure the payment of any Award under this Plan, and rights to
the payment of Awards shall be no greater than the rights of the Company's
general creditors.

(J) By accepting any Award or other benefit under this Plan, each
Participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of,
and consent to, any action taken under this Plan by the Company, the Board,
the Committee (if applicable) or the Designated Administrator (if
applicable).

(K) The appropriate officers of the Company shall cause to be filed
any reports, returns or other information regarding Awards hereunder of any
Class A Common Shares issued pursuant hereto as may be required by
applicable law and any applicable rules of any stock exchange or other
market quotation system on which Class A Common Shares are listed.

(L) The validity, construction, interpretation, administration and
effect of this Plan, and of its rules and regulations, and rights relating
to this Plan and to Awards granted under this Plan, shall be governed by
the substantive laws, but not the choice of law rules, of the State of
Delaware.

(M) Records of the Company shall be conclusive for all purposes under
this Plan or any Award, unless determined by the Board to be incorrect.

(N) If any provision of this Plan or any Award is held to be illegal
or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions of this Plan or any Award, but such provision
shall be fully severable, and this Plan or Award, as applicable, shall be
construed and enforced as if the illegal or invalid provision had never
been included in this Plan or Award, as applicable.

(O) The terms of this Plan shall govern all Awards under this Plan
and in no event shall the Board have the power to grant any Award under
this Plan that is contrary to any of the provisions of this Plan.

(P) For purposes of interpretation of this Plan, the masculine
pronoun includes the feminine and the singular includes the plural wherever
appropriate.

SECTION 19. PLAN AMENDMENT OR SUSPENSION. This Plan may be amended or
suspended in whole or in part at any time from time to time by the Board. No
amendment of this Plan shall adversely affect in a material manner any right of
any Participant with respect to any Award previously granted without such
Participant's written consent, except as permitted under SECTION 13.

SECTION 20. PLAN TERMINATION. This Plan shall terminate upon the earlier
of the following dates or events to occur:

(A) upon the adoption of a resolution of the Board terminating this
Plan; or

(B) the tenth anniversary of the Effective Date; provided, however,
that the Board may, prior to such date, extend the term of this Plan for an
additional period of up to five years for the grant of Awards other than
Incentive Stock Options. No termination of this Plan shall materially
alter or impair any of the rights or obligations of any person, without his
consent, under any Award previously granted under this Plan, except that
subsequent to termination of this Plan, the Board may make amendments or
modifications permitted under SECTION 13.

SECTION 21. EFFECTIVE DATE. This Plan shall be effective, and Awards may
be granted under this Plan, on or after the Effective Date; provided, however,
if this Plan is not approved by at least a majority of the votes cast by the
stockholders of CompX at a meeting of stockholders at which a quorum is present
within one year after the Effective Date then, in such event, this Plan and all
Awards granted pursuant to this Plan shall be null and void.

ADOPTED BY THE BOARD: December 16, 1997
APPROVED BY THE STOCKHOLDERS: December 16, 1997
EFFECTIVE DATE: December 16, 1997

EXECUTED to evidence this CompX International Inc. 1997 Long-Term Incentive
Plan adopted by the Board and the stockholder on December 16, 1997.

CompX International Inc.

By: /s/ Steven L. Watson

Steven L. Watson, Secretary

AGREEMENT

Between

HAWORTH, INC.

and

WATERLOO FURNITURE COMPONENTS, LTD.

and

WATERLOO FURNITURE COMPONENTS, INC.
AGREEMENT

This Agreement effective October 1, 1992, by and between Haworth, Inc., a
Michigan corporation having a place of business at One Haworth Center, 1400
Highway M-40. Holland, Michigan 49423, hereinafter referred to as "HAWORTH,"
and Waterloo Furniture Components, Ltd., a corporation organized under the laws
of the province of Ontario, having a place of business at 501 Manitou Drive,
Kitchener, Ontario, Canada, N2C 1L2, and Waterloo Furniture Components, Inc., a
corporation organized under the laws of the state of Nevada, having a place of
business at 200 Old Mill Road, Mauldin, South Carolina, hereinafter collectively
referred to as "WATERLOO."

WITNESSETH:

WHEREAS, HAWORTH is the owner of all right, title and interest in and to an
invention in an articulated keyboard support device and in particular United
States Patent No. 4,616,798 issued October 14, 1986, and entitled "ADJUSTABLE
SUPPORT FOR CRT KEYBOARD" (hereinafter referred to as the "'798 patent" or the
"Licensed Patent");

WHEREAS, WATERLOO has manufactured and sold articulated keyboard support
devices subsequent to October 14, 1986, including the Model 6100 Series and
Model 4100 Series products, some of which devices are asserted by Haworth to
directly and/or contributorily infringe one or more of the claims of the '798
patent;

WHEREAS, HAWORTH and WATERLOO agree that HAWORTH has no patent protection
prohibiting WATERLOO from continuing to manufacture and sell its existing
articulated keyboard support products in Canada and HAWORTH has not, and will
not in the future, seek damages or royalties for the manufacture of such
products for sale and use in Canada.
WHEREAS, WATERLOO disputes HAWORTH's allegations of infringement and has
challenged the validity of the '798 patent, but desires to avoid the expense of
additional litigation.

WHEREAS, WATERLOO represents that the WATERLOO Model 6100 series products
are within the scope of the claims of U.S. Patent No. 5,037,054 owned by
WATERLOO, and HAWORTH acknowledges such representation.

WHEREAS, HAWORTH and WATERLOO are desirous of amicably settling pending
litigation and resolving the outstanding controversy therebetween with respect
to the allegedly infringing keyboard support devices manufactured and/or sold by
WATERLOO subsequent to October 14, 1986;

WHEREAS, WATERLOO is desirous of also obtaining a license under the '798
patent to permit, without the threat of alleged infringement or litigation, the
continued manufacture and/or sale of such devices beginning as of the effective
date of this Agreement;

WHEREAS, HAWORTH is also desirous of resolving this controversy without
further litigation.

NOW, THEREFORE, in consideration of the mutual covenants and promises
herein set forth, HAWORTH and WATERLOO agree as follows:

SECTION I
DEFINITIONS

I-1. The term "Licensed Patent" shall refer to aforesaid U.S. Patent No.
4,616,798 (hereinafter also referred to as the '798 patent).

I-2. The term "Licensed Unit(s)" shall refer to an articulated keyboard
support device (either with or without the pad which directly supports a
keyboard) which is adapted to be mounted on a work surface and (1) which HAWORTH
heretofore alleged to fall or (2) which in the future falls within the scope of
one or more claims of the Licensed Patent so as to give rise to direct or
contributory infringement thereof. The current WATERLOO models for which
royalties shall be paid are identified on Addendum A.

I-3. If the Licensed Unit is sold without the pad, then the term "Selling
Price" shall mean the price of the Licensed Unit (without the pad) in an arm's
length transaction for a separate specified consideration payable in money, less
any sales or use taxes, less any discounts allowed and taken in amounts
customary in the trade such as quantity discounts, and less duty, freight or
shipping charges, if separately itemized on the invoice, but before deductions
of cash discounts or agents' commissions. If the Licensed Unit is sold with a
pad, then the price of the pad shall not be included in the "Selling Price" as
defined herein if the price of the pad is separately itemized on the invoice.
As to all Licensed Units sold with pads prior to the date of signing of this
Agreement, it is not a requirement of this Agreement that the selling price of
the pad be separately itemized on the invoice, and in situations where the
Licensed Unit included a pad, then WATERLOO shall be entitled to deduct the cost
of the pad from the "selling price."

I-4. The term "sell" or "sale" and conjugate terms shall include lease,
transfer, deliver, or otherwise dispose of for consideration. The "sale" of a
Licensed Unit shall be considered to have occurred or such Licensed Unit shall
be considered to be "sold" when such Licensed Unit is billed out, or if not
billed out, then when delivered, or disposed of by WATERLOO for purposes other
than that of soliciting sales from customers or when paid for if paid for before
delivery.

I-5. The term "Licensed Territory" shall include the United States of
America including its territories and possessions. WATERLOO may sell Licensed
Units anywhere in the world except Japan.
I-6. The term "Agreement Year" in reference to the length of term of this
Agreement shall have reference to a twelve (12) month interval extending from
either the effective date hereof or the annual anniversary of the effective date
hereof, and the term "quarter(s)" will refer to three (3) month intervals within
said Agreement Year and ending as of the last day of the months of September,
December, March and June.

SECTION II
GUARANTEED PAYMENTS

II-1. In exchange for HAWORTH's agreement to settle pending litigation
between HAWORTH and WATERLOO, and to refrain from legal action against
WATERLOO's customers for infringement of the '798 patent based on sales and uses
of WATERLOO keyboard support devices occurring prior to October 1, 1992,
WATERLOO shall pay to HAWORTH a Guaranteed Total Sum of One Million Five Hundred
Fifty Thousand Dollars ($1,550,000.00), payable as follows:

1.1 An initial payment of Five Hundred Fifty Thousand Dollars
($550,000) within ten (10) days of the execution of this Agreement; and

1.2 An Annual Settlement Payment of Two Hundred Thousand Dollars
($200,000) during each of the first, second, third, fourth and fifth
Agreement years. The Annual Settlement Payment for each said Agreement
Year shall be paid in equal quarterly installments on the thirtieth (30th)
day of the month following each quarter (that is the thirtieth (30th) day
of January, April, July and October). Any quarterly payments having a
payment date prior to the execution of this agreement shall be paid within
ten (10) days of the execution of this agreement.

II-2. No interest shall be charged with respect to said Guaranteed
Total Sum, provided that all payments are timely made.
II-3. WATERLOO guarantees payment of the Guaranteed Total Sum specified
in Section II-1 above, in settlement of the controversy between the parties,
except as provided under section VII-5 below. In the event that any claim of
the '798 patent is held unpatentable, unenforceable or invalid for any reason in
any litigation or re-examination, no part of said Guaranteed Total Sum shall be
forgiven, or be discharged or be refundable to WATERLOO.

SECTION III
GRANT AND TERM

III-1. HAWORTH hereby grants to WATERLOO a non-exclusive right and
license to manufacture, have manufactured, use and sell Licensed Units within
said Licensed Territory. WATERLOO shall not have the right to grant sublicenses
hereunder, except to affiliated companies.

III-2. No license is granted expressly or by implication by virtue of
this Agreement under any other patent of HAWORTH, domestic or foreign. No
current WATERLOO keyboard support device is an infringement or within the scope
of any claim of any other U.S. or Canadian patent or patent application of
HAWORTH.

III-3. The effective date of this Agreement and the license granted
herein shall be October 1, 1992.

III-4. This Agreement shall be effective only when executed by both
parties and shall continue for the full term of said Licensed Patent, unless
this Agreement is earlier terminated pursuant to the provisions hereof.
SECTION IV
ROYALTIES

IV-1. In consideration of the grant by HAWORTH to WATERLOO of the
license under Section III, WATERLOO agrees to pay to HAWORTH a royalty as
follows:

1.1 (1) Ten percent (10%) of the selling price (as defined in
Section I-3 above) for the first One Hundred Thousand (100,000) Licensed
units sold by WATERLOO during each Agreement Year; (2) Eight percent (8%)
of the Selling Price (as defined in Section I-3 above) for the second One
Hundred Thousand (100,000) Licensed Units sold by WATERLOO during each
agreement year; and (3) Three percent (3%) of the Selling Price (as defined
in Section I-3 above) for any Licensed Units over Two Hundred Thousand
(200,000) Licensed Units sold by WATERLOO during each agreement year.
1.2 However, as a matter of accounting convenience WATERLOO may elect
to calculate and pay royalties at the following per unit rates based upon
an average selling price of $35.00 per unit: (1) Three Dollars and Fifty
Cents ($3.50) per Licensed Unit for the first One Hundred Thousand
(100,000) Licensed units sold by WATERLOO during each Agreement Year; (2)
Two Dollars and Eighty Cents ($2.80) per Licensed Unit for the second One
Hundred Thousand (100,000) Licensed Units sold by WATERLOO during each
agreement year; and (3) One Dollar and Five Cents ($1.05) per Licensed Unit
for Licensed Units over Two Hundred Thousand (200,000) Licensed Units sold
by WATERLOO during each agreement year.

1.3 It is understood that WATERLOO must elect, in writing, whether to
calculate royalties under paragraph IV-1.1 or paragraph IV-1.2 at the time
of the first quarterly payment and all future payments will be made on the
same basis.

IV-2. WATERLOO shall be entitled to deduct from the royalties due
Haworth, during each of the initial five Agreement Years, the Annual Settlement
Payment (as defined in Section II-1.2) paid to HAWORTH for the same Agreement
Year. The Initial Settlement Payment of Section II-1.1 above shall not be
deductible from royalties.

IV-3. Royalties shall be payable from WATERLOO to HAWORTH on a
quarterly basis, with the quarterly royalty payment being due by no later than
the thirtieth (30th) day of the month following the end of each quarter (i.e.,
the quarterly royalties being due on the 30th day of January, April, July and
October). Each Quarterly royalty payment may be reduced by the amount of the
quarterly Annual Settlement Payment paid for the same quarter, and the royalty
payment owed by WATERLOO to HAWORTH for the Agreement Year (as paid quarterly)
shall be the difference between the total computed royalty for the Agreement
Year (including any credit as described in paragraph IV-5 below) minus the total
Annual Settlement Payment paid by WATERLOO to HAWORTH for the same Agreement
Year.

IV-4. WATERLOO shall not be entitled to pay Settlement Payments or
royalty payments into escrow accounts.

IV-5. With respect to sales of Licensed Units on or after October 1,
1992, WATERLOO may claim a credit for any royalty previously paid or due to
HAWORTH for Licensed Units that have been returned to WATERLOO for credit by
customers of WATERLOO in proportion to the amount of any credit against the
Selling Price that has been allowed by WATERLOO to said customers. No credit
may be claimed with respect to any keyboard support devices sold prior to
October 1, 1992.

SECTION V
GENERAL PROVISIONS RELATING TO ROYALTIES

V-1. WATERLOO shall keep complete and accurate records of all Licensed
Units sold or otherwise disposed of by WATERLOO. On or before the thirtieth
(30th) day of each of January, April, July and October (the "payment date"),
WATERLOO shall render a written statement to HAWORTH setting forth by model,
style or catalog number, the quantity of Licensed Units sold by WATERLOO during
the preceding quarter, and the amount of royalties due. If royalty payments are
based upon a percentage of the Selling Price (as defined in paragraph I-3 above)
then the written statement shall also include the Selling Price of the Licensed
Units. WATERLOO shall contemporaneously pay the royalties due to HAWORTH in the
manner set forth in this Agreement. The first royalty "payment date" shall be
January 30, 1993, and the respective statement and royalty payment shall be for
the fourth quarter, 1992. If no Licensed Units have been sold during any
quarter, WATERLOO shall render a written statement to HAWORTH of such fact. The
royalty statements of WATERLOO, if requested by HAWORTH, shall be certified as
to correctness by a corporate officer of WATERLOO or by an independent certified
public accountant.

V-2. Within thirty (30) days after expiration or termination of this
Agreement, WATERLOO shall render a statement to HAWORTH containing the
information called for in Section V-1 and covering any period prior to
expiration or termination for which a statement has not been previously rendered
and shall contemporaneously pay the royalties due for said period.

V-3. HAWORTH may require WATERLOO to pay interest upon any and all amounts
of royalty or settlement payments due to HAWORTH that are unpaid more than
fifteen (15) days following the applicable payment date, from the applicable
payment date to the date of payment, the rate of such interest being the prime
rate at the Bank of America on the applicable payment date.

V-4. WATERLOO agrees to permit the records referred to in Section V-1
hereof to be examined (at HAWORTH's expense) during normal business hours and no
more frequently than once each calendar year by an auditor or independent
certified public accountant mutually acceptable to HAWORTH and WATERLOO in order
to verify the accuracy of WATERLOO's statements and of the payments required to
be made hereunder. WATERLOO shall make prompt adjustments to correct any errors
or omissions in WATERLOO's statements or payments disclosed by such audit.
Neither HAWORTH's right to audit nor its right to receive adjustment shall be
effected by any statement to the contrary appearing on checks or otherwise. In
the event that such examination determines underpayment of royalties in excess
of two percent (2%) for any Agreement Year, then WATERLOO shall bear the cost of
the examination. In the event that such examination determines overpayment of
royalties, HAWORTH shall promptly refund WATERLOO the overpayment to correct any
errors, alternatively, at WATERLOO's sole discretion, the overpayment may be
credited to future royalty payments.

V-5. If any claim or claims of the '798 patent are subsequently declared
invalid, unpatentable or unenforceable by any final and nonappealable decision
by a Federal Court, the United States International Trade Commission or the
Patent and Trademark Office, then WATERLOO's obligation to pay royalties with
respect to said claim or claims shall cease as of the day the decision becomes
final and nonappealable. Furthermore, in the event that hereafter either (1)
The United States Patent and Trademark Office or a Court of competent
jurisdiction in a final non-appealable determination or (2) HAWORTH construes
the claims of the '798 patent to have a scope of coverage which excludes any
WATERLOO model(s) listed on Addendum A, then (1) WATERLOO is not estopped from
asserting non-infringement by said model(s), (2) no subsequent royalty is due
hereunder as to said model(s) and (3) no presumption of claim coverage or
infringement shall be applied to said model(s) by virtue of this Agreement.

V-6 In any case WATERLOO's obligation to pay royalties shall cease as of
the day the '798 patent expires.

SECTION VI
NOTICE AND TERMINATION

VI-1. Any notice which HAWORTH or WATERLOO is required or permitted to
give pursuant to any of the provisions of this Agreement by either party to the
other, shall be regarded as properly given if the same is embodied in a letter
signed by a duly authorized officer or agent of the party sending notice, sent
by Certified or Registered Mail, Return Receipt Requested, and addressed to the
parties as follows:

If to HAWORTH: If to WATERLOO FURNITURE COMPONENTS,
LTD.

Haworth, Inc. Waterloo Furniture Components, Ltd.
One Haworth Center 501 Manitou Drive
1400 Highway M-40 Kitchener, Ontario N2C 1L2
Holland, Michigan 49423 CANADA

Attention: President Attention: President

If to WATERLOO FURNITURE COMPONENTS,
INC.

Waterloo Furniture Components, Inc.
200 Old Mill Road
Mauldin, South Carolina 29662

Attention: President

The effective date of said notice shall be the date of receipt by the addressee.

VI-2. Any payment made to HAWORTH under this Agreement shall be
addressed to:

Haworth, Inc.
One Haworth Center
1400 Highway M-40
Holland, Michigan 49423

Attention: Vice President of Finance,

or to any other location subsequently authorized by HAWORTH in writing.

VI-3. WATERLOO shall have the right to terminate this Agreement and the
license granted to it hereunder by written notice to HAWORTH. This Agreement
and the rights granted to WATERLOO hereunder shall terminate upon receipt of
such termination notice by HAWORTH. There shall be no refund or return of any
monies paid to HAWORTH by WATERLOO prior to said termination, and WATERLOO shall
not thereby be relieved or discharged of paying either the Guaranteed Total Sum
specified in Section II hereof or the full sum for past royalties set forth in
Section IV hereof.

VI-4. If WATERLOO shall at any time default in making any payment
required under this Agreement or in making any report hereunder, or commit any
breach of any covenant or Agreement herein contained, and shall fail to remedy
any such default or breach within sixty (60) days after receipt of written
notice from HAWORTH specifying such default or breach, then by notice in writing
to this effect and at its option, HAWORTH may terminate this Agreement and the
license hereunder, but such termination shall not prejudice HAWORTH's rights
which shall have accrued to the date of such termination, nor its rights to
recover any royalty or any payment due at the time of such termination nor shall
it prejudice any cause of action or claims of HAWORTH accrued or to accrue on
account of any breach or default by WATERLOO. This Agreement and the rights
granted to WATERLOO hereunder shall terminate upon receipt of such termination
notice by WATERLOO.

VI-5. HAWORTH shall have the right to terminate this Agreement at any
time upon or after the filing by WATERLOO of a petition in bankruptcy or
insolvency, or upon or after any adjudication that WATERLOO is bankrupt or
insolvent, or upon or after the filing by WATERLOO of any petition or answer
seeking reorganization, readjustment, or rearrangement of WATERLOO under any law
relating to bankruptcy or insolvency, or upon or after the appointment of a
receiver for all or substantially all of the property of WATERLOO, or upon or
after the making by WATERLOO of any assignment or attempted assignment for the
benefit of creditors, or upon or after the institution by WATERLOO of any
assignment or attempted assignment for the benefit of creditors, or upon or
after the institution by WATERLOO of any proceedings for the liquidation or
winding up of its business, and upon the exercise of such right, this Agreement
shall terminate thirty (30) days after notice in writing to that effect has been
sent by HAWORTH to WATERLOO. It is, however, understood that should either
entity, Waterloo Furniture Components, Ltd. or Waterloo Furniture Components,
Inc. liquidate, wind-up business or otherwise take or be subject to an action
covered by this paragraph, while the other entity continues business, HAWORTH
has no right, under this paragraph, to terminate this Agreement with respect to
the entity continuing business.

VI-6. HAWORTH shall have the right to terminate this Agreement if
WATERLOO voluntarily (i.e. absent a court order, a subpoena or other similar
process) assists any third party in contesting the validity, patentability,
enforceability or scope of coverage of the '798 patent.

VI-7. Expiration or termination of this Agreement shall not release
WATERLOO from any of its obligations hereunder with regard to Licensed Units
manufactured prior to expiration or termination, and shall not rescind or give
rise to any right to rescind anything done or to claim return of, or
cancellation of any payment, obligation occurring, or other consideration given
to HAWORTH hereunder, prior to the time of expiration or termination.

VI-8. Failure or delay on the part of HAWORTH to exercise its right of
termination hereunder for any one or more breaches or defaults shall not be
deemed a waiver of its right of termination for such or for any other subsequent
breach or default. Likewise, failure or delay on the part of WATERLOO to
exercise its right of termination hereunder for any one or more breaches or
defaults shall not be deemed a waiver of its right of termination for such or
for any other subsequent breach or default.
SECTION VII
GENERAL PROVISIONS

VII-1. WATERLOO shall mark all Licensed Units with the number of the
Licensed Patent, such as by using the phrase "Patent No. 4,616,798" or
equivalent.

VII-2. If, during the term of this Agreement, HAWORTH grants a license
to thereafter make, use or sell under the '798 patent to a direct competitor of
WATERLOO at a more favorable royalty than that contained in Section IV-1 hereof,
and if the royalty is a primary tangible consideration received or receivable by
HAWORTH for grant of the license, then such more favorable royalty will be
automatically offered to WATERLOO and shall be effective as of the date said
royalty comes into effect with respect to said competitor, provided that
WATERLOO accepts said more favorable royalty together with any less favorable
terms that may be in such other license. However, if such license granted by
HAWORTH to a direct competitor of WATERLOO provides to HAWORTH non-monetary
considerations, which are unique to such competitor, then WATERLOO may adopt the
terms of such license, if WATERLOO offers to HAWORTH non-monetary considerations
which are substantially equivalent to such unique non-monetary considerations.
The intent of HAWORTH and WATERLOO is to provide that WATERLOO is treated no
less favorably than direct competitors of WATERLOO in regard to licensing of the
'798 patent. HAWORTH's competitors in the office furniture business arc
acknowledged to not be direct competitors with WATERLOO within the meaning of
this provision. In the event that HAWORTH enters into any license agreement
under the '798 patent with any direct competitor of WATERLOO, then HAWORTH shall
provide written notice of such agreement and the terms thereof to WATERLOO
within thirty (30) days following the execution thereof.

VII-3. HAWORTH agrees to make no attempt to commercially use the fact
that WATERLOO is licensed under the '798 patent, and more specifically, will not
use this license relationship in promoting or attempting to sell HAWORTH's
products to prospective customers. If WATERLOO has reason to believe that
HAWORTH has failed to fully comply with this commitment, then WATERLOO shall
notify HAWORTH so as to enable HAWORTH to take necessary action to resolve the
matter and insure compliance with this provision. In those situations where
HAWORTH is attempting to enforce and/or license the '798 patent, then HAWORTH
shall have the right to disclose that WATERLOO is licensed under the '798
patent.

VII-4. HAWORTH agrees to make reasonable efforts consistent with its
sound business judgment to enforce the '798 patent against infringers.

4.1 If WATERLOO becomes aware of an infringement by a direct
competitor of WATERLOO (as defined in paragraph VII-2 above) then WATERLOO
shall promptly notify HAWORTH, in writing, of the infringement and show the
extent of infringement to enable HAWORTH to evaluate same. If such
infringement is a Substantial Infringement (as set forth below), and in the
event HAWORTH fails, within twelve (12) months from the date of such
notification showing Substantial Infringement, to: (1) cause such
infringement to cease or become reduced to less than Substantial
Infringement; or (2) demonstrate by a reasonable showing, diligent
prosecution toward termination of Substantial Infringement; or (3) bring
suit and prosecute the same with reasonable diligence against said
infringer in response to the notification served by WATERLOO, then WATERLOO
shall be entitled to withhold royalties which would otherwise accrue
thereafter under this agreement. However, upon a subsequent reasonable
showing by HAWORTH to WATERLOO of diligent prosecution toward termination
of Substantial Infringement, WATERLOO shall resume payment of royalties
effective as of the date of said showing and shall also pay to HAWORTH
royalties accrued during the period of time during which WATERLOO withheld
royalties in accordance with the above. The term "Substantial
Infringement" shall mean the unlicensed manufacture, use or sale over a
period of at least two consecutive accounting quarters of products which
infringe the Licensed Patent where there is reason to believe the sales
volume of such infringement is equal to or exceeds an annual volume of
Twenty Five Thousand (25,000) Units by a single infringer. The burden of
initially showing Substantial Infringement shall be upon WATERLOO by a
preponderance, and the burden of subsequently showing termination or lack
of Substantial Infringement shall be upon HAWORTH by a preponderance.
However, HAWORTH's ongoing litigation with Steelcase shall not be
considered as activity against an infringer identified by WATERLOO
hereunder. Further, if HAWORTH is at any time litigating the '798 patent
against an infringer, other than the pending litigation with Steelcase,
then HAWORTH shall have no obligation to simultaneously litigate the patent
against other infringers.

4.2 With respect to HAWORTH's competitors in the office furniture
business which are considered not to be direct competitors with WATERLOO,
HAWORTH agrees to make reasonable efforts consistent with its sound
business judgment to enforce the '798 patent against such infringers,
provided however, that HAWORTH's opinion and decision as to whether to
initiate litigation against parties that are not direct competitors with
WATERLOO shall be accepted as final by WATERLOO.

VII-5. HAWORTH agrees not to license the '798 patent or any
corresponding foreign patent for manufacture outside of Canada or the United
States of America for importation into the United States of America. If HAWORTH
issues a license for such importation, then WATERLOO shall submit appropriate
written notice to HAWORTH and, if HAWORTH fails to take steps to stop such
importation within sixty (60) days following receipt of such notice, then
WATERLOO shall continue to be licensed, but may cease payment of royalties and
any outstanding Settlement Payments due hereunder, without any future obligation
to HAWORTH for such ceased payments. Thereafter, at such time as HAWORTH stops
such licensed importation, royalty on sales subsequent to the cessation of
licensed importation shall be due and payable pursuant to section IV-1 above.
It is understood that it is not a license under this paragraph to provide an
importer a waiver of damages for past sales in settlement of an infringement
dispute.

VII-6. WATERLOO and/or its customers shall be solely responsible for the
design and manufacture of the Licensed Units. HAWORTH makes no warranty, either
expressed or implied, relative to the Licensed Units or the applications
thereof. WATERLOO agrees that it will be solely responsible for any and all
liability or damage which may arise solely as a result of said Licensed Units
which are manufactured by WATERLOO, and that it will indemnify, hold harmless
and defend HAWORTH relative to any such liability or damage. Provided, however,
to the extent HAWORTH purchases, uses or sells Licensed Units manufactured by
WATERLOO, WATERLOO will not indemnify, hold harmless or defend HAWORTH against
liability or damage relating to HAWORTH's actions with respect to such Licensed
Units, except to the extent such indemnification is required by law.

VII-7. WATERLOO expressly covenants that neither this Agreement nor
rights hereunder shall be, directly or indirectly, assigned, transferred,
divided or shared by WATERLOO to or with any other individual, firm, corporation
or association whatsoever, without the prior written consent of HAWORTH;
provided, however, that this Agreement may be assigned to a successor to
substantially all of the business of WATERLOO. No acquisition of the shares or
assets of WATERLOO nor any assignment of this Agreement, with or without the
consent of HAWORTH, shall operate to absolve any successor or assignee of
liability to HAWORTH for infringement of the Licensed Patent arising from acts
committed by the successor or assignee prior to the date of assignment.

VII-8. This Agreement shall be binding upon and shall, to the extent
provided in Section VII-7 above, inure to the benefit of the respective
successor and assigns of HAWORTH and WATERLOO.

VII-9. Nothing contained in this Agreement shall be construed as a
warranty or representation by HAWORTH that anything made, used or sold by
WATERLOO hereunder will be free from infringement of patents of any third party.
VII-10. Nothing contained in this agreement shall be construed as an
admission by WATERLOO that the '798 patent is valid.

VII-II. This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter of this Agreement and merges all
prior discussions between them, and neither of the parties shall be bound by any
conditions, definitions, warranties or representations other than as
expressively provided in this Agreement or as duly set forth on or subsequent to
the date hereof in writing and signed by a proper and duly authorized
representative of the party to be bound thereby.

VII-12. The various provisions of this Agreement, including Sections and
Subsections, shall be considered legally severable. In the event any term or
provision of the Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not effect any other term or provision hereof; and, in such event, this
Agreement shall be interpreted and construed as if such term or provision, to
the extent that same shall have been held to be invalid, illegal or
unenforceable, have never been contained herein.

VII-13. This Agreement is deemed to be executed and delivered within the
State of Michigan, and shall be construed, interpreted and applied in accordance
with the laws of the State of Michigan.

VII-14. WATERLOO acknowledges that HAWORTH's models AKP-10, AKP-19
keyboard support devices, as presently sold, do not infringe any U.S. patents of
WATERLOO. HAWORTH represents that the models AKPP-4, AKPT-3, AKP-2, AKPT- 1,
NAK-3, NAK-2 and NAK- 1, as presently sold, do not infringe any U.S. patents of
WATERLOO and WATERLOO acknowledges that representation.

IN WITNESS WHEREOF, this Agreement is executed in duplicate by duly
authorized representatives of the parties hereto as indicated below.

HAWORTH, INC. WATERLOO FURNITURE COMPONENTS, LTD.

By: /s/ Alvin Elders__________ By: /s/David Bowers__________

Title: VP Quality_________ Title: ____Chairman_______

Date12/23/92________________ Date: 12/28/92________________

WATERLOO FURNITURE COMPONENTS, INC.

By: /s/ David Bowers
Tite: Chairman

Date: 12/28/92

Attachment: Addendum A

Witness: Witness:
/s/ Virginia M. Conklin /s/ Kay Rice

ADDENDUM

Waterloo Furniture Components, Ltd. Products Within The License:

Model 4110
Model 4120
Model 4130
Model 4140
Model 4150
Model 4160
Model 4190
Model 6130
Model 6135
Model 6140
Model 6150
Model 6170
Model 6175
Model 6180
Model 6190
Model 5900
Model 4123
Model 4137
Model 4138
Model 4139
Model 4179
Model 6137

AMENDED SUMMARY
OF THE VOLUME OF WATERLOO UNITS
SOLD IN THE U.S.A.

Arm 1986 1987 1988 1989 1990 1991 Jan -
Nov

1992

4100 1,015 5,143 11,716 3,039 1,800 0 0
4110 2 129 683 138 3 0 0
4120 1,784 13,464 14,823 13,490 2,438 19 0
4130 2,211 9,732 12,050 16,695 8,602 12 0
4140 3,199 7,122 10,426 11,341 3,281 0 0
4150 901 8,510 6,272 5,300 2,297 0 0
4160 1,719 18,063 27,879 400 102 145 0
4190 470 4,697 7,530 6,637 1,988 0 0

6130 0 0 0 3,954 29,218 50,379 81,421
6140 0 0 0 3,040 155,45 158,44 162,62
7 4 2
6150 0 0 0 0 1,850 6,569 15,091
6170 0 0 0 0 0 0 6,962
6180 0 0 0 0 1 801 0
6190 0 0 2,938 4,202 6,600

5900* 0 0 0 0 0 0 395

Total 11,301 66,860 91,379 64,034 209,97 220,57 273,09
5 1 1

Conversion Kit

4123 0 0 0 0 0 0 0
4137 0 0 0 0 102 0 0
4138 0 0 0 0 80 0 0
4139 0 50 100 100 100 0 0
4179 0 0 0 0 0 0 0
6137 0 0 0 0 0 161 5
In the above chart, the 1986 numbers are from October 14
(issue date of the patent-in-suit) to the end of year. The
1992 numbers are year to date as of December 1, 1992.

TAX SHARING AGREEMENT
AMONG VALCOR, INC.
COMPX INTERNATIONAL INC. AND
VALHI, INC.

This Tax Sharing Agreement (this "AGREEMENT") is made this 2nd day of
January, 1998 among Valcor, Inc., a Delaware corporation ("VALCOR"), CompX
International Inc., a Delaware corporation and a wholly owned subsidiary of
Valcor ("COMPX") and Valhi, Inc., a Delaware corporation and the sole
stockholder of Valcor ("VALHI"). Valhi is a party to this Agreement solely for
the purposes set forth in SECTION 9. All capitalized terms not otherwise
defined in this Agreement shall have the meanings given such terms in SECTION 1.

RECITALS

A. It is contemplated that CompX shall publicly offer shares of its Class
A Common Stock, par value $0.01 per share (the "OFFERING").

B. After the Offering, CompX shall no longer be a Member of the
Affiliated Group of which Contran is the Common Parent for federal Tax purposes,
but will continue to file certain state Tax returns on a combined basis with
Contran.

AGREEMENT

In consideration of the following mutual covenants and agreements and
other, good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows.

SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(a) "AFFILIATED GROUP" shall have the meaning attributed to that term
in Section 1504 of the Code.

(b) "AGREEMENT" shall have the meaning given such term in the preface
to this Agreement.

(c) "CONTRAN TAX GROUP" shall mean the group of corporations at any
given time consisting of the Affiliated Group of which Contran is the
Common Parent.

(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.

(e) "COMMON PARENT" shall have the meaning attributed to that term in
the Consolidated Return Regulations (Treas. Reg. Section 1.1502-1, et seq.)
promulgated pursuant to Section 1502 of the Code.

(f) "COMPX" shall have the meaning given such term in the preface to
this Agreement.

(g) "CONTRAN" shall mean Contran Corporation, a Delaware corporation
and the controlling stockholder of Valhi, and Contran Corporation's
successors.

(h) "OFFERING" shall have the meaning given such term in RECITAL A.

(i) "OFFERING DATE" shall mean the date on which the Offering is
consummated.

(j) "IRS" shall mean the Internal Revenue Service.

(k) "MEMBER" shall mean a corporation that qualifies to be an
includible corporation of an Affiliated Group under Section 1504(b) of the
Code.

(l) "TAX ATTRIBUTES" shall mean any losses, credits and other items
of income or Tax that may be carried forward or back by any Member of the
Contran Tax Group or CompX on a separate return or consolidated basis to a
taxable year other than the taxable year in which such attribute is
recognized. Tax Attributes include, but are not limited to, net operating
losses, capital losses, investment Tax credits, foreign Tax credits and
research and development credits.

(m) "TAXES" shall mean (i) all federal income taxes and state, local
and foreign income and franchise taxes, plus (ii) any penalties, fines or
additions to Tax with respect thereto, plus (iii) any interest with respect
to the items contained in (i) and (ii).

(n) "VALCOR" shall have the meaning given such term in the preface to
this Agreement.

(o) "VALHI" shall have the meaning given such term in the preface to
this Agreement.

SECTION 2. PAYMENT OF TAXES.

(a) Where allowed by applicable law and Contran deems it
advantageous, Contran shall include the income of CompX (including any
deferred income triggered into income by Reg. Section1.1502-13 and Reg.
Section1.1502-14 and any excess loss accounts taken into income under Reg.
Section1.1502-19) on Contran's consolidated or combined Tax returns and
Contran shall pay on behalf of CompX any Taxes attributable to such income.

(b) Within five business days prior to a required quarterly estimated
Tax payment filing date or final Tax payment filing date, as applicable,
for any Tax return of Contran that is filed on a consolidated or combined
basis that includes items that pertain to CompX, CompX shall pay to Valcor
(or Valcor shall pay to CompX, as the case may be) an amount equal to the
Tax liability that would be imposed if such return contained only those
items actually shown on the return that pertain to CompX using the Tax
elections made by Contran or any other common parent for state Tax
purposes.

(c) Contran and all other Members of the Contran Tax Group shall be
responsible for the payment of all Taxes due for the Contran Tax Group that
arise as a result of filing consolidated or combined Tax returns.

(d) CompX shall be solely responsible for the payment of all Taxes
due for CompX with respect to Tax returns that are filed by CompX on a
separate company basis.

(e) The income of CompX for the period up to and including the
Offering Date shall be determined by closing the books of CompX as of the
end of the Offering Date.

SECTION 3. FILING OF TAX RETURNS.

(a) Contran shall be responsible for the preparation and filing of
all Tax returns required to be filed by Contran or the Contran Tax Group.

(b) All Tax returns of CompX that are filed by CompX on a separate
company basis shall be prepared and filed by CompX.

(c) Where applicable law allows Contran to include CompX in Contran's
consolidated or combined Tax returns, Contran shall not file such return
without affording CompX the opportunity to review and comment on the items
that pertain to CompX in such return.

SECTION 4. TAX DEFICIENCIES, TAX REFUNDS AND SUCCESSOR LIABILITY
ATTRIBUTABLE TO PERIODS PRIOR TO THE OFFERING DATE.

(a) CompX shall indemnify Valcor and hold it and its affiliates
harmless from and against any deficiency in Taxes that is attributable to
CompX that may be due to Contran.

(b) CompX shall be entitled to receive a payment from Valcor equal to
the amount of any Tax refund received by Contran (or any amount credited
against Contran's Taxes) that is attributable to CompX that may be due to
CompX.

(c) Contran shall file claims for refund as requested by CompX;
provided however, that Contran shall not be obligated to file a claim for
refund that might result in additional Tax being assessed against Contran
or any other Member of the Contran Tax Group; and

(d) Valcor shall indemnify CompX and hold it and its affiliates
harmless from and against any liability for Taxes attributable to Contran
or any other Member of the Contran Tax Group other than CompX.

SECTION 5. TAX CONTESTS.

(a) Except as provided below, Contran shall have sole and complete
authority to conduct any and all Tax contests (including Tax audits, IRS
examinations and Tax litigation) with respect to any Tax returns filed by
Contran or the Contran Tax Group. CompX shall have sole and complete
authority to conduct any and all Tax contests (including Tax audits, IRS
examinations and Tax litigation) with respect to any separate company Tax
return filed by CompX. The authority to conduct such Tax contests includes
the power to negotiate and enter into settlements with any Taxing authority

(b) Notwithstanding the foregoing, with respect to any Tax contests
that relate to Tax returns filed on a consolidated or combined basis by
Contran and that include items pertaining to CompX, if such Tax contest
could result in CompX being obligated to make a payment to Contran pursuant
to SECTION 2(B) or 4(A) of this Agreement or being entitled to receive a
refund pursuant to SECTION 2(B) or 4(B) of this Agreement, CompX shall be
entitled to participate in such Tax contest at its own expense and Contran
will not enter into any settlement of such Tax contest (insofar as it
affects CompX's obligation to indemnify Contran under SECTION 2(B) or 4(A)
or CompX's entitlement to receive a refund under SECTION 2(B) or 4(B))
without the approval of CompX, and such approval shall not be unreasonably
withheld. Contran will provide CompX prompt notice of any Tax contest in
which, pursuant to this Agreement, CompX has the right to participate.

(c) Contran (and the Members of the Contran Tax Group) and CompX
shall each provide the assistance reasonably requested by the other with
respect to any Tax contest that relate to Tax returns filed on a
consolidated or combined basis by Contran and that include items pertaining
to CompX. Such assistance shall include providing reasonable access to
books, records, Tax returns and supporting workpapers and providing any
powers of attorney required to conduct any Tax contest.

SECTION 6. ASSISTANCE IN THE PREPARATION OF TAX RETURNS. Contran (and
Members of the Contran Tax Group) and CompX shall provide each other with such
cooperation, assistance and information as either of them reasonably may request
of the other with respect to the filing of any Tax return, amended return, claim
for refund or other document with any Taxing authority. Where applicable law
allows Contran to include the income of CompX on Contran's consolidated or
combined Tax returns, CompX shall furnish all Tax information to Contran for
inclusion in such Tax returns in such a format and timely manner as Contran may
reasonably request in order for Contran to file such returns timely.

SECTION 7. RETENTION OF RECORDS. Contran shall retain all Tax returns,
Tax reports, related workpapers and all schedules (along with all documents that
pertain to any such Tax returns, reports or workpapers) that relate to a Tax
period in which Contran included items pertaining to CompX in Contran's
consolidated or combined Tax return. Contran shall make such documents
available to CompX at CompX's request. Contran shall not dispose of such
documents without the permission of CompX.

SECTION 8. CARRYBACKS OF TAX ATTRIBUTES.

(a) If, for any Taxable year, CompX recognizes a Tax Attribute that
CompX, under the applicable provisions of the Code and treasury regulations
promulgated under Section 1502 thereof and using the elections made by
Contran or any other common parent for state Tax purposes, is permitted or
required to carry back to a prior Taxable year of the Contran Tax Group
that relates to a Tax return that contains items pertaining to CompX,
Contran shall file appropriate refund claims within a reasonable period
after being requested to do so by CompX. Contran shall promptly remit to
CompX any refunds it receives with respect to any Tax Attribute of CompX so
carried back.

(b) If, for any Taxable year that relates to a Tax return that
contains items pertaining to CompX, Contran or a Member of the Contran Tax
Group (exclusive of CompX) recognizes a Tax Attribute that Contran or the
Member of the Contran Tax Group, under the applicable provisions of the
Code and Treasury Regulations promulgated under Section 1502 thereof and
using the elections made by Contran or any other common parent for state
Tax purposes, is permitted or required to carry back to one of its prior
Taxable years, Contran or the Member of the Contran Tax Group may file
appropriate refund claims and shall be entitled to any refund resulting
from such claims (exclusive of CompX).

SECTION 9. INDEMNIFICATION AGAINST BREACHES OF THIS AGREEMENT. Valcor
shall indemnify CompX and hold it and its affiliates harmless from and against a
material breach by Contran of any of its obligations to CompX as set forth in
this Agreement. Valhi shall indemnify CompX and hold it and its affiliates
harmless from and against a material breach by Valcor of any of its obligations
to CompX as set forth in this Agreement.

SECTION 10. MISCELLANEOUS.

(a) Notices. All notices and other communications under the
Agreement shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt
requested) or sent by telephone facsimile (the receipt of which is
confirmed) to the parties at the following addresses (or at such other
address for a party as shall be specified in like notice):

VALCOR, INC. COMPX INTERNATIONAL INC.
Three Lincoln Centre 200 Old Mill Road
5430 LBJ Freeway, Suite 1700 Mauldin, South Carolina
Dallas, Texas 75240-2697 29662
Attn: Tax Director Attn: President
Telephone Facsimile No.: (972) Telephone Facsimile
450-4278 No.: (864) 297-1202

(b) Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes any prior understandings,
agreements or representations between the parties, written or oral, to the
extent they related in any way to the subject matter of this Agreement.

(c) Survival. All agreements and covenants made by Contran and CompX
herein shall survive the consummation of the Distribution and shall
continue in full force and effect.

(d) Successors, Assigns and Third Party Beneficiaries. The Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties. The Agreement is intended by the parties
to benefit solely Contran and CompX, their subsidiaries and affiliates, and
the successors and assigns of the foregoing. This Agreement is intended to
establish the rights of CompX versus the Members of the Contran Tax Group,
and vice versa.

(e) Amendment and Waiver. The Agreement may only be amended, and the
observance of any term of this Agreement may only be waived, in a writing
signed by Contran and CompX.

(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws, and not the law of conflicts, of the
state of Delaware.

(g) Counterparts. Two or more duplicate originals of the Agreement
may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and the same instrument.

SECTION 11. EFFECTIVENESS OF AGREEMENT. This Agreement shall become
effective on the Offering Date.
The parties hereto have caused this Agreement to be duly executed by their
respective corporate officers as of the day and year first above written.

COMPX INTERNATIONAL INC. VALCOR, INC.

By: /s/ David A. Bowers By: /s/ William J. Lindquist

David A. Bowers William J. Lindquist
President and Chief Executive Vice President and Tax
Officer Director

VALHI, INC.

By:/s/ William J. Lindquist

William J. Lindquist
Vice President and Tax
Director

STOCK PURCHASE AGREEMENT

BETWEEN

COMPX INTERNATIONAL INC.

AND THE

SHAREHOLDERS OF FORT LOCK CORPORATION

February 3, 1998
TABLE OF CONTENTS

SCHEDULES/EXHIBITS
SCHEDULE I Disclosure Schedule
SCHEDULE II Financial Statements
EXHIBIT A Form of Asset Purchase Agreement
EXHIBIT B Real Estate Purchase Agreement
EXHIBIT C Form of Escrow Agreement
EXHIBIT D Form of Legal Opinion - Acquired Corporation's Counsel
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
February 3, 1998, by and between CompX International Inc., a Delaware
corporation (the "Buyer"), and the undersigned shareholders (collectively, the
"Seller") of Fort Lock Corporation. The Buyer and the Seller are referred to
individually as a "Party" and collectively as the "Parties."
The Seller holds all of the outstanding capital stock of Fort Lock
Corporation, an Illinois corporation (the "Acquired Corporation").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of Acquired Corporation in return for cash.
Now, therefore, in consideration of the premises and the mutual
promises, representations, warranties and covenants set forth below, the Parties
agree as follows.
Error! Bookmark not defined.1. Definitions{tc \l 1 "1. Definitions"}.

"Acquired Assets
Agreement.
"Acquired Corporation" has the meaning set forth in the preface above.

"Acquired Corporation Share
value, of Acquired Corporation.
"Acquired Subsidiaries
S.A., corporations organized under the laws of the United Kingdom and France,
respectively.
"Additional Taxes" has the meaning set forth in Section 8(e) below.

"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group
meaning of Code Section 1504(a).
"Applicable Rate
Journal Money Rates section from time to time as the base rate of interest for
corporate loans.
"Calculation" has the meaning set forth in Section 9(b)(i) below.

"Calculation Notice" has the meaning set forth in Section 9(b)(i) below.

"Buyer" has the meaning set forth in the preface above.

"Cash" means cash and cash equivalents (including marketable securities,
short term investments and any cash or checks held in lockbox accounts)
calculated in accordance with GAAP applied on a basis consistent with the
preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 2(d) below.

"Closing Balance Sheet
below.
"Closing Date" has the meaning set forth in Section 2(d) below.

"Closing Date Offset" has the meaning set forth in Section 2(c) below.

"Code" means the Internal Revenue Code of 1986, as amended.

"Confidential Information " has the meaning set forth in Section
6(c)(iii) hereof.
"Contract" has the meaning set forth in Section 4(m) below.

"Disclosure Schedule" has the meaning set forth in Section 3(a) below.

"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement that is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement that is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement that is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan
3(2).
"Employee Welfare Benefit Plan
3(1).
"Environmental Laws
the environment, including laws relating to emissions, discharges, generation,
storage, releases or threatened releases of Waste into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling or Waste including, without limitation, the Federal Water Pollution
Control Act (33 U.S.C. Section1321 et seq.), the Clean Air Act (42 U.S.C.
Section7401 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section6962 et seq.), the Toxic Substances Control Act (15 U.S.C. Section2601 et
seq.) and the Comprehensive Environmental Responsibility, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section9601 et seq.) ("CERCLA") and
their state and local counterparts. Environmental Laws shall also include any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter used, entered, promulgated, or approved under the Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent
Escrow Agreement.
"Escrow Agreement" has the meaning set forth in Section 2(b)(i) below.

"Final Calculation" has the meaning set forth in Section 9(b)(i) below.

"Final Offset" has the meaning set forth in Section 2(c) below.

"Financial Statements" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act
Act of 1976, as amended.
"Holdback" has the meaning set forth in Section 2(b)(i) below.

"Income Tax
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto.
"Indemnified Party" has the meaning set forth in Section 8(d) below.

"Indemnifying Party" has the meaning set forth in Section 8(d) below.

"Initial Payment" has the meaning set forth in Section 2(b)(i) below.

"Knowledge" of a person means if such person, after making reasonable
inquiry of the appropriate parties with respect to a particular fact or matter,
actually knows of the existence of such fact or matter. "Knowledge" of the
Acquired Corporation and Acquired Subsidiaries in Section 4 hereof shall refer
only to the Knowledge of Jay Fine, Lloyd D. Falk, Michael Hoare, Gary Myers and
Ted Skiba.
"Letter of Intent
between Buyer and Acquired Corporation.
"Losses" has the meaning set forth in Section 8(a) below.

"Most Recent Financial Statements
4(g) below.
"Most Recent Interim Statements
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).

"Net Worth Adjustment" has the meaning set forth in Section 2(b)(ii) below.

"Ordinary Course of Business
consistent with past custom and practice (including, without limitation, with
respect to quantity and frequency).
"Party" has the meaning set forth in the preface above.

"PBGC" means the Pension Benefit Guaranty Corporation.

"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Post-Closing Audit" has the meaning set forth in Section 2(b)(ii) below.

"Purchase Price" has the meaning set forth in Section 2(b)(i) below.

"Purchase Price Adjustment
below.
"Purchase Price Adjustment Closing" means the closing of the Purchase Price
Adjustment which shall be held as soon as reasonably possible after the Parties
have agreed upon the Closing Balance Sheet.
"Real Estate Purchase Agreement
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.

"Returns" means all returns, declarations, reports, statements and other
documents required to be filed in respect of Taxes, and the term "Return" means
any one of the foregoing Returns.
"Securities Act" means the Securities Act of 1933, as amended.

"Securities Exchange Act
amended.
"Security Interest
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.

"Subsidiary" means any corporation or other entity with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or other equity interests, or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or other persons
performing similar functions with respect to such entity.
"Taxes" means all federal, state, local, foreign and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, customs, duties or other taxes,
fees, assessments or charges of any kind whatever, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
and the term "Tax" means any one of the foregoing Taxes.
"Third Party Claim" has the meaning set forth in Section 8(d) below.

"Trustee" means any person identified as a Trustee on the signature pages
of this Agreement.
"Waste" means pollutant, contaminate, chemicals or industrial, toxic,
hazardous, or petroleum-based substances or wastes.
{PRIVATE }2. Purchase and Sale of Acquired Corporation Shares
"2. Purchase and Sale of Acquired Corporation Shares"}.

{PRIVATE }(a) Basic Transaction{tc \l 2 "(a) Basic Transaction"
the terms and subject to the conditions of this Agreement, the Buyer agrees to
purchase from the Seller, and the Seller agrees to sell to the Buyer, at
Closing, all of the issued and outstanding Acquired Corporation Shares for the
consideration specified below in this Section 2.
{PRIVATE }(b) Purchase Price{tc \l 2 "(b) Purchase Price"}.

{PRIVATE }(i) Purchase Price Amount{tc \l 3 "(i) Purchase
Price Amount"
$29,500,000 (subject to adjustment pursuant to Section 5(f), the "Initial
Payment") and to pay to the Escrow Agent under the Escrow Agreement at the
Closing U.S. $500,000 (the "Holdback," together with the Initial Payment, the
"Purchase Price") by, with respect to the Initial Payment, delivery of cash in
the applicable amount payable by wire transfer or delivery of other immediately
available funds at such bank account or accounts as Seller has designated in
writing to Buyer, and with respect to the Holdback, by delivery of cash in the
applicable amount by the wire transfer or delivery of other immediately
available funds to the Escrow Agent pursuant to the Escrow Agreement by and
between the Escrow Agent, Seller and Buyer, the form of which is attached as
Exhibit C, which shall govern the distribution of the Holdback.
{PRIVATE }(ii) Purchase Price Adjustment{tc \l 3 "(ii)
Purchase Price Adjustment"
cause Coopers & Lybrand LLP to prepare and deliver to the Parties an audited
consolidated balance sheet of the Acquired Corporation and the Acquired
Subsidiaries within 45 days after the Closing (the "Post-Closing Audit"), which
shall be prepared in accordance with GAAP and generally consistent with the
accounting principles and methodology utilized in prior audits of the Acquired
Corporation and Acquired Subsidiaries. If within 20 days after the date such
balance sheet is delivered to the Seller, Seller has not given written notice to
Buyer setting forth any objection to such balance sheet, then such balance sheet
shall constitute the "Closing Balance Sheet." In the event Seller, within such
20 day period, gives written notice to Buyer of any objection to such balance
sheet, Seller and Buyer shall use their best efforts to reach agreement on all
differences within the 20 day period following the giving of notice. If Seller
and Buyer are unable to reach agreement within such 20 day period, the matter
shall be submitted to a firm of independent public accountants (the "Independent
Accountants") to be mutually selected by Buyer and Seller, the decision of which
shall be final and binding upon the Parties. The balance sheet agreed upon by
Buyer and Seller or determined by the Independent Accountants shall constitute
the "Closing Balance Sheet." Seller and Buyer shall bear equally the expenses
if the Independent Accountants, if necessary. The Parties agree that the
Closing Balance Sheet shall not reflect the repayment of debt contemplated by
Section 2(c). The Purchase Price shall be reduced on a dollar-for-dollar basis
to the extent that the consolidated net worth as set forth on the Closing
Balance Sheet, as adjusted to reflect reserves for inventory obsolescence based
upon an aging of inventory on hand in a manner to be mutually agreed to by the
Parties prior to Closing (or, if the Parties cannot agree on the manner or
amount of such adjustment, such determination will be made in the Post-Closing
Audit described above) (the "Net Worth") is less than U.S. $4.5 million (the
"Net Worth Adjustment"). The Purchase Price shall also be subject to reduction
pursuant to Sections 2(c) and 10(b). The sum of the Net Worth Adjustment and
any reductions made pursuant to Sections 2(c) and 10(b) shall be the "Purchase
Price Adjustment." If the Purchase Price Adjustment exceeds the amount of the
Holdback, Escrow Agent shall pay to Buyer the Holdback and Seller shall promptly
pay over to Buyer an amount equal to the excess of the Purchase Price Adjustment
over the Holdback. If the Purchase Price Adjustment is equal to or less than
the amount of the Holdback, Escrow Agent shall pay to the Buyer out of the
Holdback an amount equal to the Purchase Price Adjustment and Escrow Agent and
shall remit to Seller the balance of the Holdback, if any.
{PRIVATE }(c) Repayment of Debt{tc \l 2 "(c) Repayment of Debt
Except as provided below, simultaneously with the Closing, Seller shall, on
behalf of the Acquired Corporation, pay in full and terminate all of the
outstanding obligations (including the aggregate amount of checks issued in
excess of funds on deposit exclusive of outstanding employee payroll checks (the
"Bank Overdrafts"), if any) and commitments of the Acquired Corporation as set
forth on Section 2(c) of the Disclosure Schedule; provided, however, that Seller
will receive an offset on the Closing Date (the "Closing Date Offset"), against
its obligation to pay in full such Bank Overdrafts equal to the amount, if any,
that the consolidated net worth of the Acquired Corporation and the Acquired
Subsidiaries as shown on the Most Recent Interim Statements exceeds $4.8
million. A final offset (the "Final Offset") equal to the amount, if any, that
the Net Worth as determined in the Post-Closing Audit and set forth on the
Closing Balance Sheet exceeds $4.8 million, will also be calculated. If the
amount of the Final Offset exceeds the amount of the Closing Date Offset,
Acquired Corporation shall pay to Seller an amount equal to such excess. If the
amount of the Closing Date Offset exceeds the amount of the Final Offset, Seller
shall pay to Acquired Corporation an amount equal to such excess. Seller
acknowledges that, in addition to Seller's obligation to repay the outstanding
obligations set forth in Section 2(c) of the Disclosure Schedule, Seller shall
also be wholly responsible for the repayment of any obligation of Acquired
Corporation for the repayment of money to any person where such obligation stems
from the advance of money to Acquired Corporation without regard to the
limitations of Section 8 below. Seller shall provide Buyer with reasonable
proof of termination and release of liens or encumbrances under such outstanding
obligations.
{PRIVATE }(d) The Closing{tc \l 2 "(d) The Closing"}. The closing of
the transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of Buyer in Dallas, Texas, commencing at 9:00 a.m. local time on
the second business day following the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transactions contemplated by
this Agreement (other than conditions with respect to actions the respective
Parties will take at the Closing itself) or such other date as the Buyer and the
Seller may mutually determine (the "Closing Date"); provided, however that the
Closing Date shall be no later than February 28, 1998.

{PRIVATE }(e) Deliveries at the Closing{tc \l 2 "(e) Deliveries at
the Closing"}. At the Closing, (i) the Seller will execute,
acknowledge (if appropriate), and deliver to the Buyer the
various certificates, instruments,
and documents referred to in Section 7(a) below, (ii) the Buyer will execute,
acknowledge (if appropriate), and deliver to the Seller the various
certificates, instruments, and documents referred to in Section 7(b) below,
(iii) the Seller will deliver to the Buyer stock certificates representing 100%
of the outstanding shares of Acquired Corporation and all of the Acquired
Subsidiary Shares held by Acquired Corporation or Sellers, and, as to Acquired
Corporation's Shares, endorsed in blank or accompanied by duly executed
assignment documents, and (iv) the Buyer will deliver to the Seller the
consideration specified in Section 2(b)(i) above.
{PRIVATE }(f) Additional Transactions{tc \l 2 "(f) Additional
Transactions"}. Subsequent to Closing (but on the date thereof) the closing of
the transactions contemplated by (i) the Asset Purchase Agreement by and between
the Acquired Corporation and Fortronics, Inc., an Illinois corporation (the
"Asset Purchase Agreement") for the consideration U.S. $500,000 set forth
therein, and (ii) the Real Estate Purchase Agreement by and between Buyer and
Itasca Bank and Trust Company, as trustee under Trust Agreement dated April 21,
1992 and known as Trust No. 11014 (the "Real Estate Purchase Agreement"), the
form of which is attached hereto as Exhibit B will occur and which agreements
shall be deemed executed simultaneously with this Agreement.
{PRIVATE }3. Representations and Warranties Concerning the Transaction{tc
\l 1 "3. Representations and Warranties Concerning the Transaction"}.

{PRIVATE }(a) Representations and Warranties of the Seller{tc \l 2 "(a)
Representations and Warranties of the Seller"}. Each Seller represents and
warrants to the Buyer that the statements contained in this Section 3(a) are
correct and complete as of the date of this Agreement as they relate to such
Seller and will be correct and complete as of the Closing Date as they relate to
such Seller (as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this Section 3(a)), except as set
forth in the disclosure schedule attached hereto as Schedule I and incorporated
in this Agreement by this reference (the "Disclosure Schedule"). The Disclosure
Schedule may be amended prior to the Closing Date in the manner set forth in
Section 5(e) hereof. Further, unless otherwise indicated herein, all Section
references in the Disclosure Schedule are to Sections of this Agreement,
provided, however, that references herein to a particular Section or Sections of
this Agreement are not intended to limit, and shall not be construed as
limiting, disclosures contained herein which may be applicable to another
Sections or Sections. The disclosures in the Disclosure Schedule are made in
response to the representations and warranties of the Acquired Corporation,
Acquired Subsidiaries and Seller and certain covenants of the Acquired
Corporation, Acquired Subsidiaries and Seller contained in this Agreement
without fully taking into consideration the standard of materiality set forth in
certain of such representations, warranties or covenants, and no disclosure made
herein shall (i) constitute an admission or determination that any fact or
matter so disclosed is material to the Acquired Corporation or the Acquired
Subsidiaries taken as a whole, or (ii) be deemed to modify in any respect the
standard of materiality set forth in any representation, warranty, covenant or
other provision contained in this Agreement.
{PRIVATE } (i) The Seller{tc \l 3 " (i) The Seller "}.
The Seller is comprised of Persons who are either (i) residents of the
state of
Illinois, or (ii) trust(s) organized under the laws of the state of Illinois.
{PRIVATE } (ii) Authorization of Transaction{tc \l 3 " (ii)
Authorization of Transaction
authority where applicable to execute and deliver this Agreement and to perform
its respective obligations under this Agreement and the execution and delivery
of this Agreement has been approved where necessary by the appropriate trustees
and/or guardians. This Agreement constitutes the valid and legally binding
obligation of each Seller, enforceable in accordance with its terms and
conditions except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditor's rights generally, and by
general equitable principles.
{PRIVATE } (iii) Noncontravention{tc \l 3 " (iii)
Noncontravention"}. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (A) to the Knowledge of each Seller, violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
each Seller is subject or any provision of its governing instruments or
agreements where applicable or (B) to the Knowledge of each Seller, conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or consent under any agreement, contract,
lease, license, instrument, or other arrangement to which the Seller is a party
or by which it is bound or to which any of its assets is subject, except where
together with all other such violations, conflicts, breaches, defaults,
accelerations, terminations, modifications, cancellations or failure to give
notices would not reasonably be expected to have a material adverse effect on
the financial condition or results of operation of the Acquired Corporation or
its Acquired Subsidiaries. Other than in connection with the provisions of the
Hart-Scott-Rodino Act, each Seller does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
{PRIVATE } (iv) Brokers' Fees{tc \l 3 " (iv) Brokers' Fees
Seller has no liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement except Seller shall be fully responsible for all fees payable to
Business Search Ltd. in connection with the transactions contemplated by this
Agreement.
{PRIVATE } (v) Acquired Corporation Shares{tc \l 3 " (v)
Acquired Corporation Shares
beneficially (except each Trustee has only legal title to the Acquired
Corporation Shares) the number of Acquired Corporation Shares set forth in
Section 3(a)(v) of the Disclosure Schedule, free and clear of any restrictions
on transfer (other than restrictions on transfer imposed by the Securities Act
and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. No
Seller is a party to any option, warrant, purchase right, or other contract or
commitment (other than this Agreement) that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock of Acquired Corporation that
will exist after the Closing. No Seller is a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any capital
stock of Acquired Corporation that will exist after the Closing.
{PRIVATE }(b) Representations and Warranties of the Buyer{tc \l 2 "(b)
Representations and Warranties of the Buyer
warrants to the Seller that the statements contained in this Section 3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3(b)), except as set forth in the Disclosure Schedule.
{PRIVATE } (i) Organization of the Buyer{tc \l 3 " (i)
Organization of the Buyer
and in good standing under the laws of the jurisdiction of its incorporation.
{PRIVATE } (ii) Authorization of Transaction{tc \l 3 " (ii)
Authorization of Transaction
authority to execute and deliver this Agreement and to perform its obligations
hereunder and the execution and delivery of this Agreement has been approved by
the Buyer's Board of Directors. No other or further corporate act or proceeding
on the part of the Buyer is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by the Buyer hereunder,
or the consummation of the transaction contemplated hereby and thereto. This
Agreement constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditor's rights generally, and by general equitable principles.
{PRIVATE } (iii) Noncontravention{tc \l 3 " (iii)
Noncontravention"}. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or any
provision of its charter or bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice or
consent under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to which
any of its assets is subject, which has not been given or obtained. Other than
in connection with the provisions of the Hart-Scott-Rodino Act, the Buyer does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
{PRIVATE } (iv) Brokers' Fees{tc \l 3 " (iv) Brokers' Fees
The Buyer has no liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which any Seller could become liable or obligated.
{PRIVATE }(v) Investment{tc \l 3 "(v) Investment"}. The Buyer
is acquiring Acquired Corporation Shares for investment and not with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act.

{PRIVATE }(vi) Liquidity{tc \l 3 "(vi) Liquidity"}. Buyer will,
at Closing, have adequate financial resources to consummate the transactions
contemplated by this Agreement and the closing of the transactions contemplated
by this Agreement is not contingent upon consummation of the initial public
offering of Buyer.
{PRIVATE }(vii) Compliance With Laws{tc \l 3 "(vii)
Compliance With Laws"
state securities law which would have the effect of creating any liability for
Seller.
{PRIVATE }4. Representations and Warranties Concerning Acquired
Corporation and Its Acquired Subsidiaries{tc \l 1 "4. Representations and
Warranties Concerning Acquired Corporation and Its Acquired Subsidiaries"}.

Acquired Corporation and Acquired Subsidiaries represent and warrant
to the Buyer that the statements contained in this Section 4 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as
set forth in Disclosure Schedule.
{PRIVATE }(a) Organization, Qualification, and Corporate Power
"(a) Organization, Qualification, and Corporate Power
Corporation and its Acquired Subsidiaries is a corporation validly existing, and
in good standing under the laws of the jurisdiction of its incorporation. Each
of Acquired Corporation and its Acquired Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Each of Acquired Corporation and its
Acquired Subsidiaries has the corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Acquired Corporation holds of record and owns beneficially all
of the outstanding shares of each Acquired Subsidiary of Acquired Corporation
except as set forth in Section 4(a) and Section 4(f) of the Disclosure Schedule.
Section 4(a) of the Disclosure Schedule lists all the directors and executive
officers of each of Acquired Corporation and its Acquired Subsidiaries holding
such office prior to Closing.
{PRIVATE }(b) Capitalization{tc \l 2 "(b) Capitalization"}. The
authorized capital stock of Acquired Corporation consists of 10,000 Acquired
Corporation Shares, all of which are common stock shares, no par value. There
are 100 shares of Acquired Corporation common stock issued and outstanding. No
Acquired Corporation Shares are held in treasury. All of the issued and
outstanding Acquired Corporation Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the Seller.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Acquired Corporation to issue, sell, or otherwise
cause to become outstanding any of its capital stock that will exist at Closing.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Acquired Corporation.
{PRIVATE }(c) Noncontravention{tc \l 2 "(c) Noncontravention"}.
Neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated by this Agreement, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which any of Acquired Corporation and its Acquired Subsidiaries is
subject, (ii) violate any provision of the charter or bylaws of any of Acquired
Corporation and its Acquired Subsidiaries or (iii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice or consent under any Contract to which any of Acquired Corporation and
its Acquired Subsidiaries is a party or by which it is bound or to which any of
its assets is subject which has not been given or obtained (or result in the
imposition of any Security Interest upon any of its assets). Other than in
connection with the provisions of the Hart-Scott-Rodino Act and regulations,
none of Acquired Corporation and its Acquired Subsidiaries needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
{PRIVATE }(d) Brokers' Fees{tc \l 2 "(d) Brokers' Fees
Acquired Corporation and its Acquired Subsidiaries has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
{PRIVATE }(e) Title to Tangible Assets{tc \l 2 "(e) Title to Tangible
Assets"}. Except as set forth in Section 4(e) to the Disclosure Schedule,
Acquired Corporation and its Acquired Subsidiaries have good title to, or a
valid leasehold interest in, the material tangible assets (including items of
personal property) they purport to own or that are reflected in the Financial
Statements free and clear of any Security Interest(s) and that such assets are
sufficient for the conduct and future operation of the businesses.
{PRIVATE }(f) Acquired Subsidiaries{tc \l 2 "(f) Acquired
Subsidiaries"}. Section 4(f) of the Disclosure Schedule sets forth for each
Acquired Subsidiary of Acquired Corporation (i) its name and jurisdiction of
incorporation, (ii) the number of shares of authorized capital stock of each
class of its capital stock, (iii) the number of issued and outstanding shares of
each class of its capital stock, the names of the holders thereof, and the
number of shares held by each such holder, and (iv) the number of shares of its
capital stock held in treasury.
{PRIVATE }(g) Financial Statements{tc \l 2 "(g) Financial Statements"
Attached hereto as Schedule II
(collectively, the "Financial Statements"): (i) audited consolidated balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal years ended June 24, 1995, June 29, 1996, and June 28,
1997 (the June 28, 1997 audited consolidated balance sheet and related
statements of income and changes in stockholders' equity, and cash flow being
referenced hereto as the "Most Recent Financial Statements
Corporation and its Acquired Subsidiaries; and (ii) unaudited consolidated
balance sheets and statements of income, changes in stockholders' equity, and
cash flow as of and for the six months ended December 27, 1997 (the "Most Recent
Interim Statements
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of Acquired
Corporation and its Acquired Subsidiaries as of such dates and the results of
operations of Acquired Corporation and its Acquired Subsidiaries for such
periods; provided, however, that the Most Recent Interim Statements are subject
to normally occurring year-end adjustments, lack footnotes and do not include a
physical inventory.
{PRIVATE }(h) Events Subsequent to Most Recent Interim Statements{tc \l 2
"(h) Events Subsequent to Most Recent Interim Statements
1997 there has not been any material adverse change in the financial condition
or results of operations of Acquired Corporation and its Acquired Subsidiaries.
Without limiting the generality of the foregoing, since that date, except as
disclosed in Section 4(h) of the Disclosure Schedule, none of Acquired
Corporation and its Acquired Subsidiaries has engaged in any practice, taken any
action, or entered into any transaction outside the Ordinary Course of Business.
{PRIVATE }(i) Legal Compliance{tc \l 2 "(i) Legal Compliance
of Acquired Corporation and its Acquired Subsidiaries has complied with all
applicable and valid laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof),
except where the failure to comply would not have an adverse effect upon the
financial condition or results of operations of Acquired Corporation or its
Acquired Subsidiaries except as set forth in Section 4(i) of the Disclosure.
{PRIVATE }(j) Tax Matters{tc \l 2 "(j) Tax Matters"}.

(i) Each of Acquired Corporation and its Acquired Subsidiaries
has filed on a timely basis, all Returns that it was required to file, and has
paid all Taxes shown thereon as owing, except where the failure to file Returns
or to pay Taxes would not have an adverse effect on the financial condition of
Acquired Corporation or its Acquired Subsidiaries.
(ii) Section 4(j) of the Disclosure Schedule lists all Income Tax
Returns filed with respect to any of Acquired Corporation and its Acquired
Subsidiaries for taxable periods ended on or after June 30, 1993, indicates
those Income Tax Returns that have been audited, and indicates those Income Tax
Returns that currently are the subject of audit. Except to the extent shown on
Section 4(j) of the Disclosure Schedule, all deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or are
fully reflected as a liability on the respective financial statements of each of
the Acquired Corporation and its Acquired Subsidiaries. The Seller has
delivered to the Buyer correct and complete copies of all Income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by any of Acquired Corporation and its Acquired Subsidiaries for taxable
periods ended on or after June 30, 1993.
(iii) None of Acquired Corporation and its Acquired
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency.
(iv) None of Acquired Corporation and its Acquired Subsidiaries
is a party or subject to any Income Tax allocation or sharing agreement.
(v) None of Acquired Corporation and its Acquired Subsidiaries
has been a member of an Affiliated Group filing a consolidated federal Income
Tax Return.
(vi) The Acquired Corporation's tax basis in each Acquired
Subsidiary is set forth in Section 4(j)(vi) of the Disclosure Schedule as of the
date of Acquired Corporation's most recently filed Income Tax return. The
earnings and profits for each Acquired Subsidiary is set forth in Section
4(j)(vi) of the Disclosure Schedule as of the date of Acquired Corporation's
most recently filed Income Tax return.
(vii) The Acquired Corporation does not have a permanent
establishment in any foreign country as defined in any applicable Tax Treaty
between the United States and such foreign country.
{PRIVATE }(k) Real Property{tc \l 2 "(k) Real Property"}.

(i) Acquired Corporation and its Acquired Subsidiaries do not
own any real property.
(ii) Section 4(k)(ii) of the Disclosure Schedule lists all real
property leased or subleased to any of Acquired Corporation and its Acquired
Subsidiaries. The Seller has delivered to the Buyer correct and complete copies
of the leases and subleases listed in Section 4(k)(ii) of the Disclosure
Schedule (as amended to date). Each lease and sublease listed in Section
4(k)(ii) of the Disclosure Schedule is legal, valid, binding, enforceable in
accordance with its terms, and in full force and effect, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principals.
{PRIVATE }(l) Intellectual Property{tc \l 2 "(l) Intellectual
Property"}. Section 4(l) of the Disclosure Schedule identifies each patent or
trademark registration that has been issued to any of Acquired Corporation and
its Acquired Subsidiaries with respect to any of its intellectual property,
identifies each pending patent application or application for trademark
registration that any of Acquired Corporation and its Acquired Subsidiaries has
made with respect to any of its intellectual property, and identifies each
license, agreement, or other permission that any of Acquired Corporation and its
Acquired Subsidiaries has granted to any third party with respect to any of its
intellectual property. Except as disclosed on Section 4(l) of the Disclosure
Schedule, each of the patents and trademarks listed in Section 4(l) of the
Disclosure Schedule is owned by the Acquired Corporation or its Acquired
Subsidiaries, and the Acquired Corporation and its Acquired Subsidiaries have
the exclusive right to use all such intellectual property in their respective
business and operations. Except as set forth and so noted in Section 4(l) of
the Disclosure Schedule, Acquired Corporation and its Acquired Subsidiaries own
all intellectual property and other proprietary rights necessary to manufacture
and sell their respective products and to conduct their respective operations
and businesses and none of Acquired Corporation or its Acquired Subsidiaries has
Knowledge of any claim, any potential claim or any valid basis of any claim,
that any of Seller, Acquired Corporation or its Acquired Subsidiaries has
infringed any patent, copyright, trademark, trade name, know-how, trade secret
or other proprietary right of any other person.
{PRIVATE }(m) Contracts{tc \l 2 "(m) Contracts"}. Section 4(m) of the
Disclosure Schedule lists all written contracts (including any customer/vendor
supply/distribution agreements) and other written agreements including
indentures, mortgages, notes, bonds, leases and licenses to which any of
Acquired Corporation and its Acquired Subsidiaries is a party the performance of
which will involve consideration in excess of $25,000 (the "Contracts"). The
Seller has delivered to the Buyer a correct and complete copy of each contract
or other agreement listed in Section 4(m) of the Disclosure Schedule (as amended
to date). Neither Acquired Corporation nor any of its Acquired Subsidiaries is
in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of any Contract.
{PRIVATE }(n) Litigation{tc \l 2 "(n) Litigation"}. Section 4(n) of the
Disclosure Schedule sets forth each instance in which any of Acquired
Corporation and its Acquired Subsidiaries (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator, mediator or panel thereof.
{PRIVATE }(o) Employee Benefits{tc \l 2 "(o) Employee Benefits"}.

(i) Section 4(o) of the Disclosure Schedule lists each Employee
Benefit Plan that any of Acquired Corporation and its Acquired Subsidiaries
maintains or to which any of Acquired Corporation and its Acquired Subsidiaries
contributes.
(ii) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all respects
with the applicable requirements of ERISA and the Code, except where the failure
to comply would not have an adverse effect on the financial condition of such
Employee Benefit Plan.
(iii) All contributions (including all employer contributions
and employee salary reduction contributions) that are due have been paid to each
such Employee Benefit Plan.
(iv) Each such Employee Benefit Plan has received, if issuable, a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Code Section 401(a).
(v) Except as set forth in Section 4(o)(v) of the Disclosure
Schedule, each such Employee Benefit Plan will be fully funded and paid at and
as of the Closing Date.
{PRIVATE }(p) Environmental Matters{tc \l 2 "(p) Environmental
Matters"}. Except as disclosed in Section 4(p) of the Disclosure Schedule, the
Acquired Corporation and its Acquired Subsidiaries are in compliance with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws.
Except as set forth in Section 4(p) the Disclosure Schedule, there is no civil,
criminal or administrative action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter pending or
threatened against the Acquired Corporation and its Acquired Subsidiaries
relating in any way to the Environmental Laws with respect to real property
owned or leased by the Acquired Corporation and its Acquired Subsidiaries.
Except as set forth in Section 4(p) of the Disclosure Schedule, there are no
past or present events, conditions, circumstances, activities, practices,
incidents, actions, omissions or plans which prevent compliance or continued
compliance by the Acquired Corporation and its Acquired Subsidiaries with the
Environmental Laws, or give rise to any liability on the part of the Acquired
Corporation and its Acquired Subsidiaries under the Environmental Laws,
including, without limitation, liability under CERCLA or similar state or local
laws, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, notice of violation, study or investigation against the
Acquired Corporation and its Acquired Subsidiaries, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened release
into the environment, of any Waste by the Acquired Corporation and its Acquired
Subsidiaries.
{PRIVATE }(q) Product Liabilities and Warranty Claims{tc \l 2 "(q)
Product Liabilities and Warranty Claims
"}. Section 4(q) of the Disclosure
Schedule sets forth each liability associated with the Acquired Corporation's
and its Acquired Subsidiaries' products and sets forth each warranty claim
regarding the Acquired Corporation's and its Acquired Subsidiaries' products
where such liability or claim is in an amount greater than $5,000.
{PRIVATE }(r) Labor Matters{tc \l 2 "(r) Labor Matters"}. Except as set
forth in Section 4(r) of the Disclosure Schedule, there are no activities or
controversies, including, without limitation, any labor organizing activities,
election petitions or proceedings, proceedings preparatory thereto, unfair labor
practice complaints, labor strikes, disputes, slowdowns, or work stoppages,
pending, or to the Knowledge of the Acquired Corporation, threatened, between
the Acquired Corporation and its Acquired Subsidiaries and any of its or their
employees.
{PRIVATE }(s) Former Operating Sites{tc \l 2 "(s) Former Operating
Sites"}. Set forth in Section 4(s) of the Disclosure Schedule are any and all
sites utilized by Acquired Corporation or its Acquired Subsidiaries or the
predecessors of Acquired Corporation or its Acquired Subsidiaries for any their
respective operations at any time.
{PRIVATE }5. Pre-Closing Covenants{tc \l 1 "5. Pre-Closing Covenants"}.

The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
{PRIVATE }(a) General{tc \l 2 "(a) General"}. Each of the Parties
will use its reasonable efforts to take all action and to do all things
necessary in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 7 below).
{PRIVATE }(b) Notices and Consents{tc \l 2 "(b) Notices and Consents
Each Party will give any notices (and cause each of its Subsidiaries to give any
notices) to third parties, and each Party will use its reasonable efforts to
obtain (and will cause each of its Subsidiaries to use its reasonable efforts to
obtain) any third party consents, that the other Party reasonably may request in
connection with the matters referred to in Section 3(a)(iii), Section 3(b)(iii)
and Section 4(c) above and the related Disclosure Schedule. Each of the Parties
will (and the Seller will cause Acquired Corporation and each of its Acquired
Subsidiaries to) give any notices to, make any filings with, and use its
reasonable efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters referred to
in Section 3(a)(iii), Section 3(b)(iii) and Section 4(c) above and the related
Disclosure Schedule. Without limiting the generality of the foregoing, each of
the Parties will file (and will cause each of its Subsidiaries to file as
applicable) any notification and report forms and related material that it may
be required to file with the Internal Revenue Service, the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act or otherwise, will use its reasonable efforts to
obtain (and will cause each of its Subsidiaries to use its reasonable efforts to
obtain) early termination of the applicable waiting period, and will make (and
will cause each of its Subsidiaries to use its reasonable efforts to obtain) any
further filings pursuant thereto that may be necessary.
{PRIVATE }(c) Operation of Business{tc \l 2 "(c) Operation of
Business"}. The Seller will not engage (and will not cause or permit any of
Acquired Corporation and its Acquired Subsidiaries to engage) in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business without the prior written consent of Buyer.
{PRIVATE }(d) Access{tc \l 2 "(d) Access"}. The Seller will permit
(and will cause each of Acquired Corporation and its Acquired Subsidiaries to
permit) representatives of the Buyer to have access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of
Acquired Corporation and its Acquired Subsidiaries, to all premises, properties,
personnel, books, records (including tax records), contracts, and documents of
or pertaining to each of Acquired Corporation and its Acquired Subsidiaries as
Buyer may reasonably request from time to time solely for the purpose of
confirming Seller's compliance with Section 5(c) above. The Buyer will treat
and hold as such any information it receives from the Seller, Acquired
Corporation, and its Acquired Subsidiaries in the course of the reviews
contemplated by this Section 5(d) as confidential pursuant to that certain
Confidentiality Agreement dated September 25, 1997 between Buyer and Business
Search, Ltd. which is hereby incorporated herein by reference, will not use any
of such information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, will return to the Seller,
Acquired Corporation, and its Acquired Subsidiaries all tangible embodiments
(and all copies) of such information that are in its possession.
{PRIVATE }(e) Notice of Developments{tc \l 2 "(e) Notice of
Developments"}.

(i) The Seller, Acquired Corporation and its Acquired
Subsidiaries will give prompt written notice to the Buyer of any development
causing a breach of any of Seller's, Acquired Corporation's or its Acquired
Subsidiaries' representations and warranties in Sections 3 or 4 above. Unless
the Buyer has the right to terminate this Agreement pursuant to Section 9(a)(ii)
or (iii) below by reason of the development and exercises that right within the
period of ten (10) business days referred to in Section 9(a)(ii) or (iii) below,
the written notice pursuant to this Section 5(e)(i) will be deemed to have
amended the Disclosure Schedule, to have qualified the representations and
warranties contained in Section 3 or 4 above, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development except for purposes of Section 9(a)(iii)
including calculating aggregate Losses.
(ii) Buyer will give prompt written notice to the Seller of any
material adverse development causing a breach of any of Buyer's representations
and warranties. No disclosure by Buyer pursuant to this Section 5(e)(ii),
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation or breach of warranty.
{PRIVATE }(f) Reduction in Purchase Price for Losses{tc \l 2 "(f)
Reduction in Purchase Price for Losses"}. To the extent that the Buyer has
received from the Seller, Acquired Corporation or its Acquired Subsidiaries,
prior to the Closing Date, notice(s) pursuant to Section 5(e)(i) above of
developments that in the aggregate would create Losses (as determined in
accordance with and subject to the provisions of Section 9(b) below), the
Initial Payment shall be reduced by the amount of such Losses.
{PRIVATE }(g) Completion of Phase I Studies{tc \l 2 "(g) Completion of
Phase I Studies "}. Buyer shall complete
(with Seller's full cooperation) a
Phase I environmental engineering study of the Acquired Corporation's operations
and plant site(s) (including certain adjoining property and former plant
site(s)) and shall complete boring samples and other tests on the real property
that is the subject of the Real Estate Purchase Agreement.
{PRIVATE }6. Post-Closing Covenants{tc \l 1 "6. Post-Closing
Covenants"}.

The Parties agree as follows with respect to the period following the
Closing.
{PRIVATE }(a) General{tc \l 2 "(a) General"}. In case at any time
after the Closing any further action is necessary to carry out the purposes of
this Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 8 below).
{PRIVATE }(b) Litigation Support{tc \l 2 "(b) Litigation Support"}. In
the event and for so long as any Party actively is contesting or defending
against any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving any of Acquired
Corporation and its Acquired Subsidiaries, the other Party shall cooperate with
such party and such party's counsel in the defense or contest, make available
its personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the defense or contest, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 8 below).
{PRIVATE }(c) Non-Competition, Confidentiality and Non-Solicitation{tc \l
2 "(c) Non-Competition, Confidentiality and Non-Solicitation"}.

(i) Seller acknowledges that Seller's relationships with
Acquired Corporation are of a special character and that Seller's position with
Acquired Corporation places Seller in a position of trust and confidence with
Acquired Corporation's customers and employees and allows Seller access to
confidential information (as hereinafter defined). Furthermore, Seller
acknowledges that the customers of Acquired Corporation and Acquired
Subsidiaries have been developed over several decades, that Acquired Corporation
has expended over the years hundreds of thousands of dollars in developing and
maintaining customer relationships, that customer relationships have tended to
be of long standing nature involving hundreds of hours of employee time
nurturing such relationships to ensure a high level of attentiveness and
customer satisfaction and employee knowledge of customer requirements; that
these investments are important to the Acquired Corporation and Acquired
Subsidiaries due to the expense and difficulty in development of new customers,
that the relationships with many customers are such that the Acquired
Corporation and Subsidiaries regularly produce and ship products monthly over
the years of the relationship. In order to induce Buyer to enter into this
Agreement, Seller hereby covenants and agrees that Seller will not, directly or
indirectly, while Seller is in the employ of Acquired Corporation or any of its
Acquired Subsidiaries and through the period ending four (4) years after the
termination of Seller's employment for any reason whatsoever, or, if Seller is
not in the employ of Acquired Corporation or any of its Acquired Subsidiaries on
the Closing Date, for a period ending four (4) years after the Closing Date:

(A) disclose or use or otherwise exploit for Seller's own
benefit, or the benefit of any other person or entity, except as may be
necessary in the performance of Seller's duties hereunder, any Confidential
Information disclosed to Seller or of which Seller became aware by reason of
Seller's employment with Acquired Corporation;
(B) solicit or divert or appropriate to any Competing
Business, directly or indirectly, on Seller's own behalf or in the service of or
on behalf of any Competing Business, or attempt to solicit or divert or
appropriate to any such Competing Business any person or entity who was a
customer of Acquired Corporation at any time during the last twenty four (24)
months (i) prior to the Closing Date (if Seller is not in the employ of Acquired
Corporation or any of its Acquired Subsidiaries or (ii) of Seller's employment
hereunder and with whom Seller had contact prior to the Closing Date or during
the term of Seller's employment, as applicable;
(C) solicit the employment, attempt to solicit the
employment or assist anyone else in the solicitation of employment of, any
Competing Business any managerial or executive employee of Acquired Corporation
(whether or not such employment is full time or is pursuant to a written
contract with Acquired Corporation); and
(D) engage in or render any services to or be employed by
any Competing Business, within the Area, in the capacity of officer, managerial
or executive employee, director, consultant or shareholder (other than as the
owner of less than one (1%) percent of the shares of a publicly-owned
corporation whose shares are traded on a national securities exchange or in the
over-the-counter market).
(ii) Seller agrees that Seller will not take with Seller or
retain without written authorization, and Seller will promptly deliver to
Acquired Corporation, originals and all copies of all papers, files or other
documents containing any Confidential Information and all other property
belonging to Acquired Corporation and in Seller's possession or under Seller's
control as of the later of (x) the Closing Date if Seller is not employed by
Acquired Corporation or its Acquired Subsidiaries on such date or (y) if
employed by Acquired Corporation or its Acquired Subsidiaries, upon the
termination of Seller's employment (whether voluntarily or involuntarily).
(iii) For purposes of this Section 6(c), the term (x) "Area"
means Arkansas, California, Illinois, Iowa, Missouri, Oklahoma, Pennsylvania,
New York, Texas and Wisconsin; (y) "Competing Business" means any business
engaged in the manufacture or distribution of mechanical or electronic locks,
locking devices, or any product or device currently manufactured or sold by
Acquired Corporation or its Acquired Subsidiaries; and (z) "Confidential
Information" means any and all data and information dated within the last four
(4) years relating to the business of Acquired Corporation that is, has been or
will be disclosed to Seller or of which Seller became or becomes aware as a
consequence of or through Seller's relationship with Acquired Corporation and
that has value to Acquired Corporation and is not generally known by its
competitors, including, without limitation, information relating to Acquired
Corporation's or Seller's financial affairs, products, processes, services,
customers, employees or employees' compensation, research, development,
inventions, manufacture, purchasing, accounting, engineering or marketing.
Confidential Information shall also include information that constitutes a trade
secret, regardless of the age of such information. Notwithstanding the
foregoing, no information will be deemed to be Confidential Information unless
such information has been reduced to writing and marked clearly and
conspicuously as confidential information, or it is otherwise treated by
Acquired Corporation as confidential. Confidential Information shall not
include any data or information that has been voluntarily disclosed to the
public by Acquired Corporation (except where such public disclosure has been
made without authorization by Acquired Corporation), or that has been
independently developed and disclosed by others, or that otherwise enters the
public domain through lawful means.
(iv) Seller acknowledges that irreparable loss and injury would
result to Buyer and, following the Closing, Acquired Corporation upon the breach
of any of the covenants contained in this Section 6(c) and that damages arising
out of such breach would be difficult to ascertain. Seller hereby agrees that,
in addition to all other remedies provided at law or in equity, Buyer or,
following the Closing, Acquired Corporation, may petition from a court of law or
equity both temporary and permanent injunctive relief to prevent a breach by
Seller of any covenant contained in this Section 6(c).
{PRIVATE }7. Conditions to Obligation to Close{tc \l 1 "7. Conditions
to Obligation to Close"}.

{PRIVATE }(a) Conditions to Obligation of the Buyer{tc \l 2 "(a)
Conditions to Obligation of the Buyer
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(a)
and Section 4 above shall be true and correct in all material respects at and as
of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iv) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified below in Section 7(b)(i)-
(xi) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;
(vi) Employment, Confidentiality and Non-Compete Agreements shall
have been executed in form and substance reasonably satisfactory to Buyer with
Lloyd D. Falk and Jay Fine;
(vii) Buyer shall be reasonably satisfied with the
conclusions of the Phase I and other studies of Section 5(g);
(viii) all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer;
(ix) the Asset Purchase Agreement (which shall be drafted to
contain terms consistent with the Letter of Intent and, to the extent reasonably
prudent, the same terms and conditions as this Agreement), the Escrow Agreement
and the Real Estate Purchase Agreement shall have been executed and delivered by
all parties thereto and the Asset Purchase Agreement and the Real Estate
Purchase Agreement shall be consummated simultaneously with the Closing;
(x) Buyer shall have received from Much Shelist Freed Denenberg
Ament Bell & Rubenstein, P.C., counsel to Acquired Corporation, an opinion or
opinions dated as of the Closing Date covering the matters addressed in Sections
3(a)(ii), (iii), (v), 4(a), (b), (c) and (f) and such other matters as shall be
reasonably requested by Buyer in a form substantially in the form of Exhibit D
(in rendering such opinions such counsel may, as to factual matters rely upon
certificates, of officers and public officials and limit factual statements by
the use of "to our knowledge" or phrases of similar meaning) (it is expressly
understood that such opinion will be based on Illinois law and assuming Delaware
law would be interpreted the same as Illinois); and
(xi) Buyer and Acquired Corporation and its Acquired Subsidiaries
shall have obtained all consents, approvals, permits or authorizations
contemplated by Sections 3(a)(iii), 3(b)(iii) and 4(c) above and the related
Disclosure Schedule except for such consents, approvals, permits or
authorizations which, if not obtained, would not individually or in the
aggregate, reasonably be anticipated to have a material adverse effect on the
Acquired Corporation or its Acquired Subsidiaries. Buyer and Acquired
Corporation and its Acquired Subsidiaries shall also have received from Michael
Hoare a binding waiver of notice and waiver of Mr. Hoare's right to exercise the
options granted to Mr. Hoare under that certain Option Agreement by and between
Mr. Hoare and Acquired Corporation dated June 13, 1995 and that certain Sales
Option Agreement by and between Mr. Hoare and Acquired Corporation dated
June 13, 1995.
The Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
{PRIVATE }(b) Conditions to Obligation of the Seller{tc \l 2 "(b)
Conditions to Obligation of the Seller
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iv) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Section 7(a)(i)-
(ix) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated
and the Parties, Acquired Corporation, and its Subsidiaries shall have received
all other authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(a)(ii), Section 3(b)(ii), and
Section 4(c) above;
(vi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
(vii) Employment, Confidentiality and Non-Compete Agreements
shall have been executed in form and substance reasonably satisfactory to Buyer
with Lloyd D. Falk and Jay Fine;
(viii) Buyer shall be reasonably satisfied with the
conclusions of the Phase I studies of Section 5(g);

(ix) the Asset Purchase Agreement (which shall be drafted to
contain terms consistent with the Letter of Intent and, to the extent reasonably
prudent, the same terms and conditions as this Agreement), the Escrow Agreement
and the Real Estate Purchase Agreement shall have been executed and delivered by
all parties thereto and the Asset Purchase Agreement and the Real Estate
Purchase Agreement shall be consummated simultaneously with the Closing;
(x) Seller shall have received from Rogers & Hardin, counsel to
Buyer, an opinion or opinions dated as of the Closing Date covering the matters
addressed in Sections 3(b)(i) - (iii) (in rendering such opinions such counsel
may, as to factual matters rely upon certificates, of officers and public
officials and limit factual statements by the use of "to our knowledge" or
phrases of similar meaning) (it is expressly understood that such opinion will
be based on Delaware law); and
(xi) Buyer and Acquired Corporation and its Acquired Subsidiaries
shall have obtained all consents, approvals, permits or authorizations
contemplated by Sections 3(a)(iii), 3(b)(iii) and 4(c) above and the related
Disclosure Schedule except for such consents, approvals, permits or
authorizations which, if not obtained, would not individually or in the
aggregate, reasonably be anticipated to have a material adverse effect on the
Acquired Corporation or its Acquired Subsidiaries.
The Seller may waive any condition specified in this Section 7(b) if
it executes a writing so stating at or prior to the Closing.
{PRIVATE }8. Remedies for Breaches of this Agreement{tc \l 1 "8.
Remedies for Breaches of this Agreement"}.

{PRIVATE }(a) Indemnification Provisions for Benefit of the Buyer{tc \l 2
"(a) Indemnification Provisions for Benefit of the Buyer
occurs, and subject to the other provisions of this Section 8, Buyer shall be
entitled to indemnification from each Seller (jointly and severally) for and
shall be held harmless from and against any loss, liability, claim, damage or
expense (including costs of investigation and defense and reasonable attorneys'
fees, and, with respect to claims relating to environmental matters, reasonable
costs of clean-up, containment or other remediation), but excluding lost profits
and unforeseeable consequential damages, whether or not involving a third party
claim (collectively, "Losses"), caused by breaches of any of Seller's, Acquired
Corporation's or its Acquired Subsidiaries' representations, warranties or
covenants contained in this Agreement.
{PRIVATE }(b) Indemnification Provisions for Benefit of the Seller
2 "(b) Indemnification Provisions for Benefit of the Seller
Closing occurs, and subject to the other provisions of this Section 8, Seller
shall be entitled to indemnification for and shall be held harmless from and
against any Losses caused by breaches of any of Buyer's representations,
warranties or covenants contained in this Agreement.
{PRIVATE }(c) Survival of Representations and Warranties{tc \l 2 "(c)
Survival of Representations and Warranties
and warranties of the Parties contained above (other than those in Sections 4(e)
and 4(p) which shall have no limitation on the time in which a claim must be
made) shall survive the Closing and continue in full force and effect until the
expiration of the applicable statute of limitations.
{PRIVATE }(d) Matters Involving Third Parties{tc \l 2 "(d) Matters
Involving Third Parties"}.

(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") that may give rise to
a claim for indemnification against the other Party (the "Indemnifying Party
under this Section 8, then the Indemnified Party shall promptly (and in any
event within ten (10) business days after receiving notice of the Third Party
Claim) notify the Indemnifying Party thereof in writing.
(ii) The failure to give any notice required shall not relieve an
Indemnifying Party of any obligation except to the extent that the failure to
give timely notice actually and materially prejudices the rights of such
Indemnifying Party or the notice occurs after the applicable survival period on
which the claim is based.
(iii) The Indemnifying Party will have the right to assume
and thereafter conduct the defense of the Third Party Claim with counsel of its
choice.
(iv) Unless and until the Indemnifying Party assumes the defense
of the Third Party Claim as provided in Section 8(d)(ii) above, however, the
Indemnified Party may defend against the Third Party Claim in any manner it
reasonably may deem appropriate.
(v) In no event will the Indemnified Party consent to the entry
of any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party.
{PRIVATE }(e) Other Indemnification Provisions{tc \l 2 "(e) Other
Indemnification Provisions
are the sole remedy any Party may have for breach of representation, warranty,
or covenant other than breaches by Seller of the representations, warranties or
covenants contained in Section 6(c) (relating to non-competition,
confidentiality and non-solicitation) or Section 2(c) (relating to Seller's
repayment of certain outstanding liabilities of Acquired Corporation); provided,
however, that each Party acknowledges and agrees that no claim for
indemnification may be made until the aggregate of all claim(s) for
indemnification against that Party reach a value of U.S. $100,000; whereupon,
such claims will be recoverable from the first dollar of Loss claimed against
such Party including the first $100,000 in claimed Losses. Seller agrees to
indemnify the Buyer from and against (x) the imposition of Taxes, including
interest and penalties thereon, arising out of or attributable to all taxable
periods ending on or before the Closing Date to the extent such Taxes have not
been fully paid or fully reserved by or on the Closing Balance Sheet; (y)
including Taxes of any Person other than any of Acquired Corporation and its
Subsidiaries under Reg. Section 1.1502-6 (or similar provision of state, local
or foreign law); and (z) any foreign transfer taxes attributable to or arising
out of the Purchase and Sale contemplated by this Agreement under Section 2
(collectively all of which being "Additional Taxes"). All claim(s) by Buyer
against Seller shall be capped so that the aggregate value of all Losses
recoverable by Buyer shall be limited to U.S. $2,000,000, including the first
$300,000 in Additional Taxes (it being understood that if Buyer suffered Losses
relating to Additional Taxes in an amount of $300,000 and other Losses in
amounts greater than $1,700,000, under such circumstances Seller would only be
liable to Buyer for up to $1,700,000 of such other Losses). To the extent
Additional Taxes exceed $300,000 Buyer shall be entitled to recover such
Additional Taxes from Seller without limitation. All claim(s) by Seller against
Buyer shall be capped so that the aggregate value of all Losses recoverable by
Seller shall be limited to U.S. $250,000.
{PRIVATE }(f) Determination of Losses in Section 8(e){tc \l 2 "(f)
Determination of Losses in Section 8(e)"}.

(i) The Parties shall make appropriate adjustments for tax
benefits and insurance coverage and take into account the time cost of money
(using the Applicable Rate as the discount rate) in determining Losses for
purposes of this Section 8. All indemnification payments under this Section 8
shall be deemed adjustments to the Purchase Price.
(ii) Seller shall have twenty (20) days after receiving from Buyer a
claim for indemnification for Losses made pursuant to Section 8(d) above to
submit to Buyer written notice setting forth any objection to such claim. If,
such written objection of Seller is not received by Buyer within such twenty
(20) days, then such claim of Buyer shall be binding upon the Parties. In the
event Seller, within such twenty (20) day period, gives written notice to Buyer
of any objection to such claim, Seller and Buyer shall use their best efforts to
reach agreement on all differences within the twenty (20) day period following
the receipt by Seller of the claim for indemnification by Buyer.
(iii) If Seller and Buyer are unable to reach agreement within the
twenty (20) day period described in Section 8(f)(ii) above, the Parties shall
cause such matter to be submitted for determination by arbitration in accordance
with the provisions of the Federal Arbitration Act and the commercial rules of
the American Arbitration Association then in effect. Such proceeding shall take
place in Chicago, Illinois. The arbitrator shall have the right to award or
include in any award such relief which the arbitrator deems proper under the
circumstances, in keeping with the spirit and intent of the terms of this
Agreement, including, without limitation, money damages, specific performance,
injunctive relief and legal fees and costs. The award and decision of the
arbitrator shall be conclusive and binding upon all of the Parties, and judgment
upon the award may be entered in any court of competent jurisdiction.
{PRIVATE }9. Termination{tc \l 1 "9. Termination"}.

{PRIVATE }(a) Termination of Agreement{tc \l 2 "(a) Termination of
Agreement"}. The Parties may terminate this Agreement as provided below:

(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event (A) the
Seller, Acquired Corporation or its Acquired Subsidiaries have within the then
previous ten (10) business days given the Buyer any notice pursuant to Section
5(e)(i) above and (B) the development that is the subject of such notice is in
the nature of a product liability claim or an environmental claim that, in the
reasonable opinion of Buyer will have, when considered together with all other
such developments, a material adverse impact upon the long term financial
condition, results of operations or prospects of Acquired Corporation and its
Subsidiaries taken as a whole;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing in the event the
Seller, Acquired Corporation or its Acquired Subsidiaries has given the Buyer
notice(s) pursuant to Section 5(e)(i) above of developments that in the
aggregate would create Losses in excess of $1,000,000 (as determined in
accordance with and subject to the provisions of Section 9(b) below);
(iv) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event of fraud on
the part of Seller in connection with any representation, warranty, or covenant
contained in this Agreement or in the event that Seller does not provide timely
notice of any material breach of any representation, warranty or covenant
pursuant to Section 5(e)(i); and
(v) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event the Buyer
has breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, the Seller has notified the Buyer of the
breach, and the breach has continued without cure for a period of thirty (30)
days after the notice of breach or (B) if the Closing shall not have occurred on
or before March 16, 1998, by reason of the failure of any condition precedent
under Section 7(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in this
Agreement).
{PRIVATE }(b) Determination of Amount of Losses{tc \l 2 "(b)
Determination of Amount of Losses"}.

(i) Buyer shall, (x) within ten (10) days after receipt from
Seller, Acquired Corporation or its Acquired Subsidiaries of any notices
pursuant to Section 5(e)(i) above or (y) promptly after otherwise becoming aware
of developments that, in the reasonable opinion of Buyer, individually or in the
aggregate would create Losses that would allow Buyer to make a reduction in the
Initial Payment by the amount of such Losses under Section 5(f) hereof, provide
to Seller a written calculation of any such Losses (a "Calculation") and the
basis for such Calculation (the "Calculation Notice"). If, within ten (10) days
after the date such Calculation Notice is received by Seller, Seller has not
given written notice to Buyer setting forth any objection to such Calculation,
then such Calculation shall be binding upon the Parties (a "Final Calculation").
In the event Seller, within such ten (10) day period, gives written notice to
Buyer of any objection to such Calculation, Seller and Buyer shall use their
best efforts to reach agreement on all differences within the ten (10) day
period following the giving of the Calculation Notice.
(ii) Buyer shall, (x) within ten (10) days after receipt from Seller,
Acquired Corporation or its Acquired Subsidiaries of any notices pursuant to
Section 5(e)(i) above or (y) promptly after otherwise becoming aware of
developments that, in the reasonable opinion of Buyer, individually or in the
aggregate would, at the option of the Buyer, either create Losses that would
allow Buyer to make a reduction in the Initial Payment by an amount greater than
$1,000,000 under Section 5(f) above, or allow Buyer to terminate this Agreement
under Section 9(a)(iii) above (in each case because such Losses were in excess
of $1,000,000), provide to Seller a Calculation Notice. If Buyer intends to
terminate the Agreement as a result of such Losses, the Calculation Notice shall
so state. If, within twenty (20) days after the date such Calculation Notice is
received by Seller, Seller has not given written notice to Buyer setting forth
any objection to such Calculation and/or setting forth its intent to cure the
Losses described in such Calculation Notice within such twenty (20) day period,
then the Calculation shall be a Final Calculation, and Buyer may terminate this
Agreement at the end of such period. In the event Seller, within such twenty
(20) day period, gives written notice to Buyer of any objection to such
Calculation, Seller and Buyer shall use their best effort to reach agreement on
all differences within the twenty (20) day period following the giving of the
Calculation Notice.
(iii) If Seller and Buyer are unable to reach agreement within the
ten (10) day period described in Section 9(b)(i) above or within the twenty (20)
day period described in Section 9(b)(ii) above (as applicable), the Parties
shall cause such matter to be submitted for determination by arbitration in
accordance with the provisions of the Federal Arbitration Act and the commercial
rules of the American Arbitration Association then in effect. Such proceeding
shall take place in Chicago, Illinois. The arbitrator shall have the right to
award or include in any award such relief which the arbitrator deems proper
under the circumstances, in keeping with the spirit and intent of the terms of
this Agreement, including, without limitation, money damages, specific
performance, injunctive relief and legal fees and costs. The award and decision
of the arbitrator shall be conclusive and binding upon all of the Parties, and
judgment upon the award may be entered in any court of competent jurisdiction.
(iv) The Closing Date shall be extended as necessary to accommodate
the notice and response procedures set forth above with respect to the
calculation of any Losses.
{PRIVATE }(c) Effect of Termination{tc \l 2 "(c) Effect of
Termination"}. If any Party terminates this Agreement pursuant to Section 9(a)
above, all rights and obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party (except for any liability
of any Party then in breach); provided, however, that the confidentiality
provisions contained in Section 5(d) above shall survive termination.
{PRIVATE }10. Tax Matters{tc \l 1 "10. Tax Matters"}.

{PRIVATE }(a) Income Tax Sharing Agreements{tc \l 2 "(a) Income Tax
Sharing Agreements
Corporation and its Acquired Subsidiaries is terminated as of the Closing Date
and will have no further effect for any future taxable year.
{PRIVATE }(b) Payment of Taxes{tc \l 2 "(b) Payment of Taxes
the amount of Income Taxes attributable to the Acquired Corporation and its
Acquired Subsidiaries prior to the Closing Date which have been paid (but for
which Income Tax Returns were not filed prior to the Closing Date) are
determined to be deficient based on the Post-Closing Audit Seller shall be
liable to Buyer and shall promptly pay to Buyer such deficiency. If it is
determined that Acquired Corporation or its Acquired Subsidiaries overpaid the
amount of such Income Taxes based upon the Post-Closing Audit, Buyer shall
promptly refund the amount of such overpayment to Seller. The amount due to or
from the Seller pursuant to this Section shall be a Purchase Price Adjustment
pursuant to Section 2(b)(ii).
{PRIVATE }(c) Tax Proceedings{tc \l 2 "(c) Tax Proceedings
shall exercise, at its expense, complete control over the handling, disposition
and settlement of any governmental inquiry, examination or proceeding that could
result in a determination with respect to Taxes due or payable by the Acquired
Corporation or its Acquired Subsidiaries with respect to which it is estimated
that a majority of such Taxes due or payable by the Acquired Corporation or its
Acquired Subsidiaries would be paid by the Acquired Corporation or its Acquired
Subsidiaries and would not be subject to indemnification by Seller pursuant to
Section 10(b) above. Seller shall exercise, at its expense, complete control
over the handling, disposition and settlement of any governmental inquiry,
examination or proceeding that could result in a determination with respect to
Taxes due or payable by the Acquired Corporation or its Acquired Subsidiaries
with respect to which it is estimated that a majority of such Taxes due or
payable by the Acquired Corporation or its Acquired Subsidiaries would be
subject to indemnification by the Seller pursuant to Section 10(b) above. Buyer
shall promptly notify Seller if, in connection with any such inquiry,
examination or proceeding, any government authority proposes in writing to make
an assessment or adjustment with respect to Tax items of the Acquired
Corporation or its Acquired Subsidiaries, which assessments or adjustments are
attributable or could affect the taxable periods ending on or before the Closing
Date for which Seller may be liable, or against which Seller may be required to
indemnify Buyer or Acquired Corporation pursuant hereto. Each Party, when it is
not in control of any such inquiry, examination or proceeding following
notification to the other Party, at its own expense, may participate in such
inquiry, examination or proceeding. Each Party shall cooperate with the other
Party, as each may reasonably request, in any such examination or proceeding.
If such inquiry, examination or proceeding results in a Tax deficiency or Tax
refund in excess of or less than, respectively, the amount estimated for such
period in accordance with Section 10(b) which is attributable or partly
attributable to taxable periods ended on or before the Closing Date, Seller
agrees to promptly pay such amount to Buyer. If such inquiry, examination or
proceeding results in a Tax refund or Tax deficiency in excess of or less than,
respectively, the amount estimated for such period in accordance with Section
10(b) which is attributable or partly attributable to taxable periods ended on
or before the Closing Date, Buyer agrees to promptly pay such amount to Seller.
{PRIVATE }(d) Cooperation and Record Retention{tc \l 2 "(d)
Cooperation and Record Retention
provide the other, with such assistance as may reasonably be requested by any of
them in connection with the preparation of any Return, audit or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and provide the other with any
records of other information which may be relevant to such Return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Return of the
other for any period. Without limiting the generality of the foregoing, Buyer
shall retain, and shall cause the Acquired Corporation to retain, and Seller
shall retain, until the applicable statutes of limitations (including any
extensions) have expired, copies of all Returns, supporting work schedules and
other records or information which may be relevant to such returns for all tax
periods or portions thereof ending before or including the Closing Date and
shall not destroy or otherwise dispose of any such records without first
providing the other party with a reasonable opportunity to review and copy the
same.
{PRIVATE }(e) Preparation of Returns{tc \l 2 "(e) Preparation of
Returns"}. Seller agrees to prepare or cause to be prepared Returns for all
taxable periods ending on or before the Closing Date, excluding the short
taxable period beginning on June 29, 1997 and ending on the Closing Date. Buyer
agrees to prepare or cause to be prepared Returns for all taxable periods ending
after the Closing Date and to prepare Returns for the short taxable period
beginning June 29, 1997 and ending on the Closing Date. In this regard, Buyer
and Seller shall fully cooperate with each other in the timely preparation of
such Returns (including the exchange of all necessary information, records, and
documents). Seller agrees to provide Buyer with copies of all Returns to be
filed subsequent to Closing, relating to taxable periods ending on or before the
Closing Date, 30 days prior to their filing. Buyer agrees to provide Seller
copies of all Returns filed for the short taxable period ended on the Closing
Date 30 days prior to their filing.
{PRIVATE }11. Miscellaneous{tc \l 1 "11. Miscellaneous"}.

{PRIVATE }(a) Press Releases and Public Announcements{tc \l 2 "(a) Press
Releases and Public Announcements
"}. No Party shall issue any press release or
make any public announcement relating to the subject matter of this Agreement
prior to the Closing without the prior written approval of the other Party;
provided, however, that any Party or any affiliate of such Party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the Party that intends, or that has an affiliate that intends, to issue
such press release or make such public announcement will advise the other Party
prior to making the disclosure and provide the other Party opportunity to
comment upon the release or announcement).
{PRIVATE }(b) No Third Party Beneficiaries{tc \l 2 "(b) No Third Party
Beneficiaries"}. This Agreement shall not confer any rights or remedies upon
any Person other than the Parties and their respective successors and permitted
assigns.
{PRIVATE }(c) Entire Agreement{tc \l 2 "(c) Entire Agreement"}. This
Agreement (including the documents referred to herein) constitutes the entire
agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
{PRIVATE }(d) Succession and Assignment{tc \l 2 "(d) Succession and
Assignment"}. This Agreement shall be binding upon and inure to the benefit of
the Parties named herein and their respective successors and permitted assigns.
No Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Party.
{PRIVATE }(e) Counterparts{tc \l 2 "(e) Counterparts"}. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together will constitute one and the same
instrument.
{PRIVATE }(f) Headings{tc \l 2 "(f) Headings"}. The section headings
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
{PRIVATE }(g) Notices{tc \l 2 "(g) Notices"}. All notices, requests,
demands, claims, and other communications hereunder will be in writing. Any
notice, request, demand, claim, or other communication hereunder shall be deemed
duly given if (on the next business day after) it is sent by reputable overnight
courier, charges prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller:
3000 River Road
River Grove, Illinois 60171
Attention: Jay Fine
Telephone: (708) 456-1100
Facsimile: (708) 456-1197
Copy to:
Much Shelist Freed Denenberg
Ament Bell & Rubenstein, P.C.
200 N. LaSalle, Suite 2100
Chicago, Illinois 60601
Attention: Michael R. Shelist
Facsimile: (312) 621-1750
If to the Buyer:
CompX International Inc.
200 Old Mill Road
Mauldin, SC 29662
Attention: David A. Bowers
Facsimile: (864) 297-1202
Copies to:
Valcor, Inc.
Three Lincoln Centre, Suite 1700
5430 LBJ Freeway
Dallas, TX 75240-2697
Attention: J. Mark Hollingsworth
Facsimile: (972) 239-0142
Rogers & Hardin LLP
2700 International Tower
Suite 2700
229 Peachtree Street, NE
Atlanta, Georgia 30313
Attention: Edward J. Hardin
Facsimile: (404) 525-2224
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, registered or certified U.S.
mail, messenger service, telecopy, telex, ordinary mail, or electronic mail),
but no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by the
intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
{PRIVATE }(h) Governing Law{tc \l 2 "(h) Governing Law
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Delaware without giving effect to any choice or conflict of
law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.
{PRIVATE }(i) Amendments and Waivers{tc \l 2 "(i) Amendments and
Waivers"}. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by the Buyer and the Seller. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any such
prior or subsequent occurrence.
{PRIVATE }(j) Severability{tc \l 2 "(j) Severability"}. Any term or
provision of this Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction.
{PRIVATE }(k) Expenses{tc \l 2 "(k) Expenses"}. Each of the Buyer and
the Seller will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing sentence, Buyer shall bear
the costs of any and all transfer taxes, including without limitation any use or
sales taxes, associated with the sale of the Acquired Corporation.
{PRIVATE }(l) Construction{tc \l 2 "(l) Construction"}. In the event
an ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation.
{PRIVATE }(m) Incorporation of Exhibits{tc \l 2 "(m) Incorporation of
Exhibits"}. The Exhibits and any annexes and schedules identified in this
Agreement are incorporated herein by reference and made a part hereof.
{PRIVATE }(n) Trustee Exculpatory Clause{tc \l 2 "(n) Trustee
Exculpatory Clause
individually or personally, but as Trustees as aforesaid, in the exercise of the
power and authority conferred upon and vested in it as such Trustee and under
the express direction of the beneficiaries under such respective trusts. It is
expressly understood and agreed that nothing in this Agreement contained shall
be construed as creating any liability whatsoever against said Trustee
personally, and in particular, without limiting the generality of the foregoing,
there shall be no personal liability to pay any indebtedness accruing hereunder
or to perform any covenant, either express or implied, herein contained, to
keep, preserve or sequester any property of said Trusts, and that all personal
liability of said Trustees, of every sort, if any, is hereby expressly waived by
Buyer, and by every person now or hereafter claiming any right or security
hereunder; and that so far as the parties hereto are concerned, the owner of any
indebtedness or liability accruing hereunder shall look solely to the trust
estate under the respective trusts from time to time for the payment thereof.
It is further understood and agreed that the said Trustees have no beneficial
interest in the Acquired Corporation and merely hold naked title to the Acquired
Corporation Shares hereby described and have no control over the management
thereof or the income therefrom and have no knowledge respecting the Acquired
Corporation, except as represented to it by the beneficiary or beneficiaries of
said Trusts.
*****
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER:
COMPX INTERNATIONAL INC.
By: _/s/ David A. Bowers.__
Title: __President______

SELLER:
LLOYD D. FALK
__/s/ Lloyd D. Falk__________________
Lloyd D. Falk, as trustee of the Lloyd D. Falk
Trust dated June 29, 1989

JUDY FALK
_/s/ Judy Falk
Signature

JAY FINE
__/s/ Jay Fine
Signature

KAREN L. FINE
__/s/ Kanen Fine____________
Signature

JULIE RASKE
__/s/ Julile Raske____
Signature

NICOLE FALK
__/s/ Nicole Falk_______
Signature

FINE FAMILY TRUST
By: _/s/Karen L. Fine____
Karen L. Fine, as trustee of the Fine Family
Trust dated March 31, 1997

JULIE RASKE FAMILY GIFT TRUST
By: __/s/Julie Raske____
Julie Raske, as co-trustee of the Julie Raske
Family Gift Trust dated February 4, 1997
By: __/s/ Arthur M. Cohen____________
Arthur M. Cohen, as co-trustee of the Julie
Raske Family Gift Trust dated February 4, 1997

NICOLE FALK FAMILY GIFT TRUST
By: __/s/ Nicole Falk______________
Nicole Falk, as co-trustee of the Nicole Falk
Family Gift Trust dated February 14, 1997.
By: /s/ Arthur M. Cohen___________
Arthur M. Cohen, as co-trustee of the Nicole
Falk Family Gift Trust dated February 14, 1997.

CompX will provide the Commission with any of the following schedules upon
request.

SCHEDULE II

FINANCIAL STATEMENTS

EXHIBIT A

ASSET PURCHASE AGREEMENT

EXHIBIT B

REAL ESTATE

PURCHASE AGREEMENT

EXHIBIT C

ESCROW AGREEMENT

EXHIBIT D

FORM OF LEGAL OPINION - ACQUIRED CORPORATION'S COUNSEL

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the inclusion in this registration statement on this Form S-1
(File No. 333-42643) of our reports dated January 23, 1998 on our audits of the
consolidated financial statements and financial statement schedules of CompX
International Inc. We also consent to the reference to our firm under the
caption "Experts."

COOPERS & LYBRAND L.L.P.

Dallas, Texas
February 4, 1998

EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the inclusion in this registration statement on this Form S-1
(File No. 333-42643) of our report dated September 26, 1997 on our audits of the
consolidated combined financial statements of Fort Lock Group. We also consent
to the reference to our firm under the caption "Experts."

ALTSCHULER, MELVOIN AND GLASSER LLP

Chicago, Illinois
January 30, 1998

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPX
INTERNATIONAL INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 19,187
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<RECEIVABLES> 14,884
<ALLOWANCES> 311
<INVENTORY> 11,073
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 63,794
<SALES> 108,652
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</TABLE>