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Exhibit 10.3

CAPITAL SOUTHWEST CORPORATION

Form of Restricted Stock Award Agreement

Date of Grant:

   
Name of Holder:
     
Number of Shares
_____ Shares of Common Stock, subject to reduction pursuant to Section 3 below
   
Fair Market Value
$_____  per Share
   
Vesting Schedule:
1/3 on the Trigger Event Date; an additional 1/3 on the first anniversary of the
Trigger Event Date; and the final 1/3 on the second anniversary of the Trigger
Event Date

Capital Southwest Corporation (the “Company”) hereby awards to the Holder (the
“Holder”) the number of shares of the presently authorized but unissued Common
Stock of the Company (the “Restricted Stock”) set forth above pursuant to
Capital Southwest Corporation 2010 Restricted Stock Award Plan, as amended (the
“Plan”).  This Restricted Stock award is not intended to be a Qualified
Performance-Based Award under the Plan.

To the extent not controlled by the terms and conditions contained in the Plan,
the terms and conditions of the Restricted Stock granted hereby shall be
governed by this Restricted Stock Agreement (the “Agreement”) as follows:

1.                   No Right to Continued Employee Status

Nothing contained in this Agreement shall confer upon Holder the right to the
continuation of his or her Employee status, or interfere with the right of the
Company or other member of the Company Group, as applicable, to terminate such
relationship.

2.                   Vesting of Restricted Stock

The Restricted Stock shall vest in accordance with the Vesting Schedule set
forth above.
 

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For purposes hereof, (a)  “Trigger Event” means a transformative transaction
intended to increase the market value of the Company equity for the benefit of
its shareholders, which may involve, for example, a spinoff of one or more
wholly-owned subsidiaries of the Company (collectively, “Spinco”), a going
private transaction, a leveraged recapitalization, or termination of the
Company’s regulated investment company status and (b) “Trigger Event Date” means
the 90th day following the consummation of the Trigger Event, unless the Trigger
Event is a going private transaction, in which case the Trigger Event Date shall
be the closing date of such transaction.

Notwithstanding the foregoing, in the event of a Change of Control that occurs
on or following the consummation of a Trigger Event, all unvested Restricted
Stock shall immediately vest in full.  Further, if the Trigger Event is effected
through a spinoff transaction in connection with which the Holder’s employment
is transferred to Spinco, in the event a Change of Control of Spinco
(substituting Spinco for the Company in such definition) occurs following the
consummation of the Trigger Event, all unvested Restricted Stock shall
immediately vest in full.

3.                   Reduction of Restricted Stock Awarded

The number of shares of Restricted Stock subject to this award shall be reduced
by such number of shares of Restricted Stock, if any, as would cause the Equity
Award Value to exceed the Total Payment Amount.  The number of shares of
Restricted Stock subject to this award, as so adjusted, shall vest in accordance
with the Vesting Schedule and Section 2 above.  For purposes hereof,

(a)            “Aggregate Base Value” means the product of (i) $36.16 and (ii)
the Fully Diluted Shares of the Company outstanding as of the Grant Date, i.e.,
$557,353,318.

(b)            “Aggregate Trigger Event Value” means the sum of (i) the product
of (A) the VWAP of one share of Common Stock of the Company over the 20
consecutive trading days immediately preceding the Trigger Event Date and (B)
the Fully Diluted Shares of the Company outstanding as of the Trigger Event
Date, plus, except as specified in clause (ii), the aggregate value of all
dividends and distributions paid on Common Stock of the Company from the Grant
Date through the Trigger Event Date and (ii) if the Trigger Event results in an
distribution of shares of a newly formed  entity to the Company stockholders
(“Spinco”), the product of (A) the VWAP of one share of Spinco common stock over
the 20 consecutive trading days immediately preceding the Trigger Event Date and
(B) the Fully Diluted Shares of Spinco outstanding as of the Trigger Date,
provided that if the Trigger Event is a going private transaction, the Aggregate
Trigger Event Value shall be the Sale Consideration Value.

(c)            “Equity Award Value” means the sum of (i) the Restricted Stock
Value and (ii) the Option Award Value.

(d)            “Fully Diluted Shares” means, at any time of determination, the
number of shares of common stock of the applicable entity outstanding at such
time, plus the number of shares of issuable upon exercise or conversion or
otherwise pursuant to any in-the-money common stock equivalents of such entity
outstanding at such time.
 

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(e)            “Option Award Value” means the positive difference, if any,
between (i) the sum of (A) the product of (I) the number of shares of Common
Stock of the Company underlying the options awarded to the Executive under the
nonqualified option grant of even date herewith and (II) the VWAP of one share
of Common Stock of the Company over the 20 consecutive trading days immediately
preceding the Trigger Event Date and (B) if the Trigger Event results in a
distribution of shares of Spinco to the Company shareholders, the product of (I)
the number of shares of Spinco common stock that would be distributed upon
exercise of such nonqualified option grant and (II) the VWAP of one share of
Spinco common stock over the 20 consecutive trading days immediately preceding
the Trigger Event Date minus (ii) the aggregate exercise price payable under
such nonqualified option grant, provided that if the Trigger Event is a going
private transaction, the Option Award Value shall be the Sale Consideration
Value payable in respect of the options awarded to the Executive under the
nonqualified option grant of even date herewith.

(f)            “Restricted Stock Value” means (i) the product of (A) the
aggregate number of shares of Restricted Stock granted hereunder and (B) the
VWAP of one share of Common Stock of the Company over the 20 consecutive trading
days immediately preceding the Trigger Event Date plus, except as specified in
clause (ii), the aggregate value of all dividends and distributions, if any,
paid on the Restricted Stock awarded hereunder from the Grant Date through the
Trigger Event Date and (ii) if the Trigger Event results in an distribution of
shares of Spinco, the product of (A) the number of shares of Spinco common stock
distributed in respect of the Restricted Stock awarded hereunder and (B) the
VWAP of one share of Spinco common stock over the 20 consecutive trading days
immediately preceding the Trigger Event Date, provided that if the Trigger Event
is a going private transaction, the Restricted Stock Value shall be the Sale
Consideration Value payable in respect of the Restricted Stock awarded
hereunder.

(g)            “Sale Consideration Value” means, in the event the Trigger Event
is a going private transaction, the fair market value as of the Trigger Event
Date of the aggregate consideration received by the holders of Common Stock and
common stock equivalents of the Company in such transaction, as determined in
good faith by the board of directors of the Company.

(h)            “Total Payout Amount” means (i) two percent (2%) of the positive
difference, if any, of (A) the Aggregate Trigger Event Value less (B) the
Aggregate Base Value (such difference, the “Equity Value Accretion”), up to $7.5
million, plus (ii) _____ percent (_____%) for any excess Equity Value Accretion
over $7.5 million.

(i)            “VWAP” means, for the relevant security, the per share
volume-weighted average price as displayed under the heading “Bloomberg VWAP” on
the Bloomberg AQR page for the relevant security (or its equivalent successor if
such page is not available) in respect of the period from the scheduled open of
trading until the scheduled close of trading of the primary trading session over
the relevant determination period (or if such volume-weighted average price is
unavailable, the market value of one share on each trading day during the
relevant determination period, determined, using a volume-weighted average
method, by a nationally recognized independent investment banking firm retained
for this purpose by the Company).  The VWAP will be determined without regard to
after hours trading or any other trading outside of the regular trading session
trading hours.
 

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4.                   Forfeiture of Shares

In the event that the Holder has become obligated to return all or a portion of
his or her shares of Restricted Stock to the Company due to a forfeiture of such
shares pursuant to this Agreement, and the Holder shall fail to deliver the
certificates representing such shares in accordance with the terms of this
Agreement, the Company may, at its option, in addition to all other remedies it
may have, upon written notice to the Holder cancel on its books the certificates
representing the shares to be returned to the Company and thereupon all of the
rights of the Holder in and to said shares shall terminate.  The Company shall
not be obligated to give notice to any holder of shares of Restricted
Stock if such holder does not appear on the stock transfer ledger of the Company as the
registered holder of such shares.

5.                   Retention of Certificates

The certificate(s) representing the shares of Restricted Stock granted hereby
will be stamped or otherwise imprinted with the legend required by the Plan with
respect to any applicable restrictions on the sale or transfer of such shares,
and the stock transfer records of the Company will reflect stop transfer
instructions with respect to such shares.  At the election of the Company, the
Company may retain the certificate(s) representing the shares of Restricted
Stock granted to the Holder pursuant to this Agreement until such time as the
vesting restrictions have lapsed and the restrictions on the transfer of such
Restricted Stock have terminated or are removed by the Board of Directors.
Within a reasonable time thereafter, the Company will deliver to the Holder a
new certificate representing such shares, free of the legend referred to
herein.  The issuance of such certificate shall not affect any restrictions upon
the transferability of such shares pursuant to applicable law or otherwise.

6.                   Restrictions on Transfer

Any shares of Restricted Stock granted hereunder shall not be sold, assigned,
transferred, pledged or otherwise encumbered until such shares are fully
vested.  The spouse of the Holder shall execute a signature page to this
Agreement as of the date hereof and agree to be bound in all respects by the
terms hereof to the same extent as the Holder.  The spouse further agrees that
should he/she predecease the Holder or become divorced from the Holder, any of
the shares of Restricted Stock which such spouse may own or in which he/she may
have an interest shall remain subject to this Agreement.

7.                   Dividends and Other Distributions

No cash dividends shall be paid with respect to unvested Restricted Stock.  The
Holder, however, shall have the right to receive any stock and other noncash
dividends and distributions made with respect to the Restricted Stock, subject
to the vesting of such Restricted Stock.  With respect to any unvested shares of
Restricted Stock, such dividends or distributions shall likewise be restricted
and shall vest on the same schedule as the Restricted Stock as to which the
dividends or distributions relate. Any such dividends or distributions shall be
retained by the Company and paid to the Holder promptly following vesting of the
Restricted Stock to which such dividends or distributions pertain. Upon
forfeiture of any shares of Restricted Stock, the dividends and distributions
related thereto shall also be forfeited.
 

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8.                   Voting of Restricted Stock

The Holder shall be entitled to vote shares of Restricted Stock subject to the
rules and procedures adopted by the Committee for this purpose.

9.                   Termination of Service

The transfer of the Holder’s employment to Spinco will not constitute a
Termination of Service under this Agreement and the Holder will be considered,
for purposes of this Agreement, to be an Employee of the Company Group for so
long as Holder’s employment with Spinco continues, notwithstanding that Spinco
ceases to be a subsidiary of the Company.

10.                 Notices

Any notice required to be given pursuant to this Agreement or the Plan shall be
in writing and shall be deemed to be delivered upon receipt or, in the case of
notices by the Company, five (5) days after deposit in the U.S. mail, postage
prepaid, addressed to the Holder at the address last provided for his or her
employee records.

11.                 Agreement Subject to Plan; Applicable Law

This Agreement is made pursuant to the Plan and shall be interpreted to comply
therewith.  A copy of the Plan is attached hereto. Any provision of this
Agreement inconsistent with the Plan shall be considered void and replaced with
the applicable provision of the Plan.  This Agreement shall be governed by the
laws of the State of Texas and subject to the exclusive jurisdiction of the
courts therein.  Unless otherwise provided herein, capitalized terms used herein
that are defined in the Plan and not defined herein shall have the meanings set
forth in the Plan.
 

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IN WITNESS WHEREOF, the parties hereto have executed this Restricted Stock
Agreement as of the date first above written.
 
COMPANY:
     
CAPITAL SOUTHWEST CORPORATION
     
By:
 
Name
 
Title:
     
HOLDER:
     
Name:
     
Address:
 

I, the undersigned, being the spouse of the above-named Holder, hereby
acknowledge that I have read and understand the foregoing Restricted Stock
Agreement under the Capital Southwest Corporation 2010 Restricted Stock Award
Plan, and I agree to be bound by the terms thereof.

     
Name:
 

 

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