EXHIBIT 10.5
                               AMENDMENT THREE TO
                               ------------------

                        RETIREMENT PLAN FOR EMPLOYEES OF
                        --------------------------------

                CAPITAL SOUTHWEST CORPORATION AND ITS AFFILIATES
                ------------------------------------------------

                 As Amended and Restated Effective April 1, 1989
                 -----------------------------------------------



     WHEREAS,  effective as of April 1, 1989, the Retirement  Plan for Employees
of Capital Southwest Corporation and Its Affiliates (the "Plan") was amended and
restated in its entirety;
     WHEREAS,  by the terms of Section 6.4 of the Plan, the Plan may be amended;
and
     WHEREAS,  it is necessary that certain technical  amendments be made to the
Plan in order  to  comply  with  the  Retirement  Protection  Act of  1994,  the
Uniformed  Services  Employment and  Reemployment  Rights Act of 1994, the Small
Business Job Protection  Act of 1996,  the Taxpayer  Relief Act of 1997, and the
Community  Renewal Tax Relief Act of 2000,  and it is  appropriate  that certain
other amendments be made;

     NOW,  THEREFORE,  the Plan is  hereby  amended,  effective  as of the dates
specified below, as follows:

     1. Effective as of April 1, 1997, the fourth paragraph of Section 1.1(A)(6)
of the Plan (which provides for family aggregation for certain  Participants) is
deleted in its entirety.

     2.  Effective  as of April 1, 2001,  clause (b) in the first  paragraph  of
Section 1.1(A)(6) of the Plan is amended to read in its entirety as follows:

     "(b) the amounts, if any, that would have been includable in the employee's
          Compensation  under (a) above for such  calendar  year if they had not
          been  contributed  on his behalf by the Employer  pursuant to a salary
          reduction  agreement  and had not been  excluded from his gross income
          under the provisions of Section 125 (cafeteria plan) or Section 132(f)
          (qualified transportation fringes) of the Internal Revenue Code."


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                                      -2-

     3.  Effective  as of  January 1, 2002,  Section  1.1(A)(13)  of the Plan is
amended to delete the word "or" in clause  (b), to replace the period at the end
of clause (c) with a  semicolon  and the word "or",  and to add a new clause (d)
which shall read in its entirety as follows:
     "(d) any  individual who by contract is not classified by the Employer as a
          common  law  employee  of the  Employer,  even if such  individual  is
          included on the Employer's  payroll for Federal income tax withholding
          purposes or whether such person is later  classified as an employee by
          the Internal  Revenue  Service,  the Department of Labor, a court,  an
          administrative agency, or an Employer."

     4. Effective as of April 1, 1997, Section 1.1(A)(16) of the Plan is amended
to read in its entirety as follows:

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

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

               The  'determination   year'  shall  be  the  Plan  Year  and  the
               'look-back  year' shall be the  twelve-month  period  immediately
               preceding the determination  year. The calendar year which begins
               with or  within  the  look-back  year  shall  be  treated  as the
               look-back year for purposes of determining whether an employee is
               a  highly  compensated  employee  on  account  of the  employee's
               compensation  for a look-back year under Section  414(q)(1)(B) of
               the Internal Revenue Code.


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                                      -3-

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

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

     5.  Effective  as of  January 1, 1997,  Section  1.1(A)(32)  of the Plan is
amended to add the following paragraph at the end thereof:

          "Notwithstanding  the foregoing provisions of this Section 1.1(A)(32),
          each participant who is not a 5-percent owner, who has attained age 70
          1/2 in a  calendar  year  after 1995 and prior to 2002 and who has not
          retired by the end of such calendar year,  shall be entitled to elect,
          at the time and in the manner  specified by the Committee,  but in any
          event prior to April 1 of the  calendar  year  following  the calendar
          year in which  such  Participant  attained  age 70 1/2,  to defer such
          Participant's  Required  Beginning  Date until April 1 of the calendar
          year that next  follows the  calendar  year in which he retires.  Upon
          such election by the  Participant,  his Required  Beginning Date shall
          become April 1 of the calendar year immediately following the calendar
          year in which he retires.

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

     6.  Effective  as of  January 1, 2002,  Section  1.1(A)(32)  of the Plan is
amended to add the following paragraph at the end thereof:

          "Notwithstanding  the foregoing provisions of this Section 1.1(A)(32),
          the  Required  Beginning  Date  for  each  Participant  who  is  not a
          5-percent  owner and who  attains  age 70 1/2 on or after  January  1,
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                                      -4-

          2002,  shall be April 1 of the calendar  year  following  the calendar
          year  in  which  such  Participant  attains  age 70  1/2  or  retires,
          whichever occurs later."

     7. Effective as of December 12, 1994,  the second  paragraph in Section 1.3
of the Plan is amended to add the following sentence at the end thereof:

          "Notwithstanding   any   provision  of  this  Plan  to  the  contrary,
          contributions,  benefits and service  credit with respect to qualified
          military service will be provided in accordance with section 414(u) of
          the Internal Revenue Code."

     8. Effective as of January 1, 2002, Section 1 of the Plan is amended to add
a new Section 1.8 which shall read in its entirety as follows:

     "1.8 - SERVICE AND TERMINATION OF SERVICE

          For  purposes  of the  Plan,  an  Employee  or  Participant  shall  be
     considered to be in the service of the Employer and shall not be considered
     to have incurred a termination  of his service until the date of his early,
     normal or disability  retirement,  death,  resignation,  discharge or other
     termination of his employment with an Employer, notwithstanding any payment
     or agreement to pay severance pay in connection with the termination of his
     employment."

     9.  Effective as of January 1, 1997,  Section 2.1(C) of the Plan is amended
to add the following paragraph at the end thereof:

          "Where a Participant's monthly retirement income commences after April
     1 following the calendar year in which such Participant attains age 70 1/2,
     the accrued benefit of such Participant  shall be actuarially  increased in
     accordance  with  regulations  or  other  official  pronouncements  of  the
     Internal Revenue Service to take into account the period beginning on April
     1 following the calendar year in which the  Participant  attains age 70 1/2
     and  ending on the date on which  benefits  under the Plan  commence  after
     retirement  in an amount  sufficient  to satisfy  Section  401(a)(9) of the
     Internal Revenue Code."

     10.  Effective  as of April 1, 1997,  Section  2.4(A)(2)(b)  of the Plan is
amended to read in its entirety as follows:

          "(b) if he had  completed  at least 10 years of Vesting  Service as of
               the  date of  termination  of his  service  and he so  elects  in
               writing filed with the Committee at least 30 but not more than 90
               days prior to the effective  date thereof (or if the  Participant
               waives  the  30-day  notice  period  with  any  required  spousal
               consent, then more than 7 days but not more than 90 days prior to
               the effective date thereof), the first day of any month, which is
               prior to his Normal  Retirement  Date and is on or after the date
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                                      -5-

               on which he attained  the age of 55 years,  that he  specifies in
               his written election filed with the Committee."

     11. Effective as of April 1, 1997, the following parenthetical phrase shall
be inserted in the first sentence of the fourth  paragraph of Section 3.1 of the
Plan after the words "90 days prior to the  effective  date  thereof" and before
the comma which follows such words:
          "(or,  if the  Participant  waives the 30-day  notice  period with any
          required spousal  consent,  then more than 7 days but not more than 90
          days prior to the effective date thereof)"

     12. Effective as of April 1, 1998, the first sentence of Section 3.2 of the
Plan is amended to read in its entirety as follows:

     "3.2 - LUMP-SUM PAYMENT OF SMALL RETIREMENT INCOME
            -------------------------------------------

          Notwithstanding  any  provision  of the Plan to the  contrary,  if the
     single-sum  value of the  retirement  income or other  benefit  payable  on
     behalf  of any  Participant  hereunder  whose  retirement  income  or other
     benefit payments have not commenced does not exceed the maximum amount that
     is  permissible  as an  involuntary  cash-out  of  accrued  benefits  under
     Sections 411(a)(11) and 417(e) of the Internal Revenue Code and regulations
     issued with respect  thereto  ($5,000 as of April 1, 1998),  the  actuarial
     equivalent of such benefit shall be paid in a lump sum; provided,  however,
     that a lump-sum  distribution  under this Section 3.2 will not be permitted
     after the Annuity  Starting Date and will not be permitted in the case of a
     Participant  who  is  entitled  to  receive  disability  retirement  income
     payments."

     13.  Effective  as of  January 1, 2000,  Section  4.1(A)(1)  of the Plan is
amended to read in its entirety as follows:

          "(1) Maximum Amount of Retirement Income: Any provisions herein to the
     contrary  notwithstanding,  in no event shall the monthly retirement income
     that is payable on or after the first day of the limitation  year beginning
     in 1987 to a Participant  hereunder exceed the maximum amount of retirement
     income  for  defined  benefit  plans as  specified  in  Section  415 of the
     Internal Revenue Code and regulations and rulings issued pursuant  thereto;
     provided, however, that:

          (a)  the  maximum  amount  of  retirement   income   applicable  to  a
               Participant who was a participant in the Superseded Plan, if any,
               before the  limitation  year beginning in 1983 and whose Credited
               Service   includes   service  that  was  accrued  prior  to  such
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                                      -6-

               limitation  year,  shall  not be less  than his  current  accrued
               benefit within the meaning of Section 235(g)(4) of the Tax Equity
               and Fiscal Responsibility Act of 1982;

               and

          (b)  such  maximum  amount  of  retirement   income  applicable  to  a
               Participant who was a participant in the Superseded Plan, if any,
               before the  limitation  year beginning in 1987 and whose Credited
               Service   includes   service  that  was  accrued  prior  to  such
               limitation  year,  shall  not be less  than his  current  accrued
               benefit  within the meaning of Section  1106(i)(3)(B)  of the Tax
               Reform Act of 1986.

     In determining the maximum monthly  retirement  income payable on behalf of
     any  Participant,  all defined benefit plans (whether or not terminated) of
     the Controlled Group Members are to be treated as one defined benefit plan.
     The proportion of the maximum monthly  retirement  income applicable to all
     such  defined  benefit  plans  of the  Controlled  Group  Members  shall be
     determined on a pro rata basis  depending upon the  actuarially  equivalent
     amount of  retirement  income  otherwise  accrued  under each such  defined
     benefit plan."

     14.  Effective  as of  January 1, 1995,  Section  4.1(A)(2)  of the Plan is
amended to read in its entirety as follows:

          "(2)Actuarial Assumptions:  The mortality assumptions that are used to
     compute the  actuarially  equivalent  maximum  amount of retirement  income
     permitted  under this Section  4.1(A) on and after January 1, 1995 shall be
     based upon the  mortality  table  prescribed  by the  Secretary of Treasury
     pursuant to Section 415(b)(2)(E) of the Internal Revenue Code. The interest
     rate  assumptions  that  are used to  compute  the  actuarially  equivalent
     maximum amounts of retirement income permitted under the provisions of this
     Section  4.1(A)  shall  be the same as  those  that  are used in  computing
     actuarially equivalent benefits payable on behalf of a Participant upon his
     retirement  or  termination  of service  and upon the  exercise of optional
     forms of retirement income under the Plan except that:

          (a)  the interest  rate  assumption  shall not be less than 5% for the
               purposes of converting  the maximum  retirement  income to a form
               other than a straight life annuity (with no ancillary  benefits);
               provided,  however,  for the purposes of  converting  the maximum
               retirement  income to any form of  benefit  which is  subject  to
               Section  417(e)(3)  of the  Internal  Revenue  Code (which  shall
               include  lump-sum  distributions  and other forms of distribution
               that provide payments in the form of a decreasing annuity or that
               provide  payments  for  a  period  less  than  the  life  of  the
               recipient), such minimum interest rate assumption that applies on
               and after  January  1, 1995  shall (in lieu of 5%) be the  annual
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                                      -7-

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

          (b)  the interest rate assumption shall not be greater than 5% for the
               purposes of adjusting the maximum  retirement income payable to a
               Participant who is over the social security retirement age within
               the meaning of Section 415(b)(8) of the Internal Revenue Code (or
               age 65 in the case of a governmental plan or a plan maintained by
               a tax exempt  organization) so that it is actuarially  equivalent
               to such a retirement  income  commencing  at the social  security
               retirement age (or age 65 in the case of a governmental plan or a
               plan maintained by a tax exempt organization); and

          (c)  the factor  for  adjusting  the  maximum  permissible  retirement
               income to a Participant  who is less than age 62 years so that it
               is actuarially  equivalent to such a retirement income commencing
               at age 62 years shall be equal to (i) the factor for  determining
               actuarial equivalence for early retirement under the Plan or (ii)
               an actuarially  computed  reduction  factor  determined  using an
               interest  rate  assumption  of 5% and the  mortality  assumptions
               specified in the first sentence of this Section 4.1(A)(2) (except
               that the mortality  decrement shall be ignored if a death benefit
               at least  equal  to the  single-sum  value  of the  Participant's
               Accrued Deferred Monthly  Retirement  Income Commencing at Normal
               Retirement  Date would be payable under the Plan on behalf of the
               Participant if he remained in the service of the Employer and his
               service were to be terminated by reason of his death prior to his
               Normal  Retirement  Date),  whichever  factor  will  provide  the
               greater   reduction.   The  factor  for   determining   actuarial
               equivalence for early retirement under the Plan for any given age
               below age 62 years  shall be  determined  by  dividing  the early
               retirement  adjustment factor that applies under the Plan at such
               given age by the early retirement  adjustment factor that applies
               under the Plan at age 62 years."

     15.  Effective as of January 1, 1998,  Section  4.1(A)(4)(e) of the Plan is
amended to add the  following  sentence  between the second and third  sentences
thereof:

     "Notwithstanding  any  provisions of this  subsection to the contrary,  the
     term 'IRC 415 Compensation' shall also include (i) any elective deferral as
     defined in Section  402(g)(3) of the Internal  Revenue  Code,  and (ii) any

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                                      -8-

     amount which is  contributed or deferred by the Employer at the election of
     the  Employee  and  which is not  includible  in the  gross  income  of the
     Employee by reason of Section 125 or Section  457 of the  Internal  Revenue
     Code."

     16. Effective as of January 1, 2000, Section 4.1(A)(4) is amended to delete
Subsections  (b), (c), and (d), and to  redesignate  Subsections  (e) and (f) as
Subsections (b) and (c), respectively.

     17.  Effective  as of  January  1,  2001,  the third  sentence  of  Section
4.1(A)(4)(b) of the Plan is amended to read in its entirety as follows:

          "Notwithstanding  any  provisions of this  subsection to the contrary,
     the  term  'IRC 415  Compensation'  shall  also  include  (i) any  elective
     deferral as defined in Section  402(g)(3) of the Internal Revenue Code, and
     (ii) any amount  which is  contributed  or deferred by the  Employer at the
     election of the Employee and which is not includible in the gross income of
     the Employee by reason of Section 125, Section 132(f)(4), or Section 457 of
     the Internal Revenue Code."

     18. Effective as of April 1, 1997, Section 4.1(C) of the Plan is amended to
delete  the  next to the  last  sentence  and  substitute  in lieu  thereof  the
following sentence:

     "Any provisions of Section 3.1 hereof to the contrary  notwithstanding,  if
     any Participant is not provided with the written notification  described in
     the first  sentence  of this  section at least 30 days  before his  Annuity
     Starting  Date but is provided in the written  notification  a period of at
     least 30 days in which to make his  election  under  this  section,  he may
     waive such notice period (with any applicable spousal consent) and file his
     election with the Committee, and his retirement income or other benefit may
     commence  within 30 days after the date on which he was provided  with such
     written notification, but more than 7 days after such date."

     19. Effective as of January 1, 2000,  Section 4.6(D) of the Plan is deleted
in its entirety.

     20.  Effective  as of April 1, 1996,  Section 5.8 of the Plan is amended to
add the following paragraph at the end thereof:

          "Notwithstanding  any  provision of the Plan to the  contrary,  in the
     event that the Plan is terminated, the benefits of any missing participants
     shall  be  transferred  to the  Pension  Benefit  Guaranty  Corporation  in
     accordance with Section 4050 of the Employee Retirement Income Security Act
     of 1974, as amended."

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                                      -9-

     IN  WITNESS  WHEREOF,   CAPITAL  SOUTHWEST   CORPORATION  has  caused  this
instrument  to be  executed by its duly  authorized  officer on this 28th day of
December 2001.

                                                   CAPITAL SOUTHWEST CORPORATION



                                                   By___________________________

                                                   Title:_______________________