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                                                           Exhibit 10(iii)A (3)

                       NATIONAL SERVICE INDUSTRIES, INC.
                2001 NONEMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN

1.       PURPOSE

         (a)      The purpose of this Plan is to provide a means by which
nonemployee directors of National Service Industries, Inc. (the "Company") may
be given an opportunity to receive or purchase stock of the Company.

         (b)      The Company, by means of the Plan, seeks to secure and retain
the services of persons best qualified to serve as directors of the Company and
to provide incentives for such persons to exert maximum efforts for the success
of the Company.

         (c)      The Company intends that the options issued under the Plan
shall be options which do not qualify as incentive stock options for purposes
of Section 422 of the Code.

2.       DEFINITIONS

         For purposes of the Plan:

         2.1      "Adjusted Fair Market Value" means, in the event of a Change
in Control, the greater of (i) the highest price per Share paid to holders of
the Shares in any transaction (or series of transactions) constituting or
resulting in a Change in Control or (ii) the highest Fair Market Value of a
Share during the ninety (90) day period ending on the date of a Change in
Control.

         2.2      "Agreement" means the written agreement between the Company
and an Optionee or Grantee evidencing the grant of an Option or Award and
setting forth the terms and conditions thereof.

         2.3      "Award" means a grant of Restricted Stock or Stock.

         2.4      "Board" means the Board of Directors of the Company.

         2.5      "Cause" means the commission of an act of fraud or
intentional misrepresentation or an act of embezzlement, misappropriation, or
conversion of assets or opportunities of the Company or any Subsidiary.

         2.6      "Change in Capitalization" means any increase or reduction in
the number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, cash dividend, property dividend, combination or exchange
of shares, repurchase of shares, change in corporate structure, or otherwise.

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         2.7      A "Change in Control" means any of the following events:

         (a)      The acquisition (other than from the Company) by any "Person"
(as the term is used for purposes of Sections 13(d) or 14(d) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more of the combined voting
power of the Company's then outstanding voting securities; or

         (b)      The individuals who, as of the Effective Date were members of
the Board (the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the Board; provided, however, that if the election, or nomination
for election by the Company's stockholders, of any new director was approved by
a vote of at least two-thirds of the Incumbent Board, such new director shall,
for purposes of this Plan, be considered as a member of the Incumbent Board; or

         (c)      A merger or consolidation involving the Company if the
stockholders of the Company immediately before such merger or consolidation do
not, as a result of such merger or consolidation, own, directly or indirectly,
more than seventy percent (70%) of the combined voting power of the then
outstanding voting securities of the corporation resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of the Company outstanding
immediately before such merger or consolidation; or

         (d)      A complete liquidation or dissolution of the Company or an
agreement for the sale or other disposition of all or substantially all of the
assets of the Company.

         Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur pursuant to Section 2.7(a), solely because twenty percent (20%) or
more of the combined voting power of the Company's then outstanding securities
is acquired by (i) a trustee or other fiduciary holding securities under one or
more employee benefit plans maintained by the Company or any of its
subsidiaries or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition.

         2.8      "Code" means the Internal Revenue Code of 1986, as amended.

         2.9      "Company" means National Service Industries, Inc.

         2.10     "Director" means a director of the Company.

         2.11     "Disability" means a physical or mental infirmity which
impairs the Optionee's or Grantee's ability to perform substantially his or her
duties for a period of one hundred eighty (180) consecutive days, as determined
by the Board.

         2.12     "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

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         2.13     "Fair Market Value" on any date means (A) if the Shares are
admitted to trading on a national securities exchange, the last sale price
reported for the Shares on such exchange on such date or, if no sale was
reported on such date, on the last date preceding such date on which a sale was
reported, (B) if the Shares are admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or
other comparable quotation system and have been designated as a National Market
System ("NMS") security, the last sale price reported for the Shares on such
system on such date or on the last day preceding such date on which a sale was
reported, (C) if the Shares are admitted to quotation on NASDAQ and have not
been designated a NMS security, the average of the highest bid and lowest asked
prices of the Shares on such system on such date, or (D) if there have been no
published bid or asked quotations with respect to Shares on such date, the
value established by the Board in good faith and in accordance with Section 422
of the Code.

         2.14     "Grantee" means a person to whom an Award has been granted
under the Plan.

         2.15     "Nonemployee Director" means a Director who is not an officer
or employee of the Company or any subsidiary.

         2.16     "Option" means an option granted under this Plan to purchase
Shares.

         2.17     "Optionee" means a person to whom an Option has been granted
under the Plan.

         2.18     "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.

         2.19     "Plan" means the National Service Industries, Inc. 2001
Nonemployee Directors' Stock Incentive Plan.

         2.20     "Restricted Stock" means Shares issued or transferred to a
Nonemployee Director which are subject to restrictions.

         2.21     "Shares" means the common stock, par value $1.00 per share,
of the Company.

         2.22     "Stock Award" means a grant of Shares that is not generally
subject to restrictions and pursuant to which a certificate for the Shares is
transferred to the Nonemployee Director.

         2.23     "Subsidiary" means any corporation in an unbroken chain of
corporations, beginning with the Company, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. The term "Subsidiary" shall also include a
partnership in which the Company or a Subsidiary owns 50% or more of the
profits interest or capital interest in the partnership.

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3.       ADMINISTRATION

         3.1      The Plan shall be administered by the Board.

         3.2      The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

         (a)      to determine those Nonemployee Directors to whom Options
shall be granted under the Plan and the number of Options to be granted to each
Nonemployee Director and to prescribe the terms and conditions of each Option,
including the purchase price per Share subject to each Option, and to make any
amendment or modification to any Agreement consistent with the terms of the
Plan;

         (b)      to select those Nonemployee Directors to whom Awards shall be
granted under the Plan and to determine the number of Shares and/or shares of
Restricted Stock to be granted pursuant to each Award, the terms and conditions
of each Award, including the restrictions or performance criteria relating to
such Award, the maximum value of each Award, and to make any amendment or
modification to any Agreement consistent with the terms of the Plan;

         (c)      to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan;

         (d)      to construe and interpret the Plan and the Options and Awards
granted hereunder and any condition or restrictions imposed on Shares acquired
pursuant to the exercise of an Option, to define the terms used herein and to
establish, amend, and revoke rules and regulations for administration of the
Plan. The Board in the exercise of this power, may correct any defect,
omission, or inconsistency in the Plan or in any Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective. All decisions and determinations by the Board in the exercise of
this power shall be final, binding and conclusive upon the Company and the
Optionees and Grantees, as the case may be;

         (e)      to amend, modify, suspend, or terminate the Plan in
accordance with Section 10; and

         (f)      generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company in connection with the Plan.

4.       STOCK SUBJECT TO THE PLAN

         4.1      The maximum number of Shares that may be issued or
transferred pursuant to Options and Awards under the Plan is 300,000 Shares (or
the number and kind of shares of stock or other securities to which such Shares
are adjusted upon a Change in Capitalization pursuant to Section 8) and the
Company shall reserve for the purposes of the Plan, out of its

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authorized but unissued Shares or out of Shares held in the Company's treasury,
or partly out of each, such number of Shares as shall be determined by the
Board.

         4.2      Whenever any outstanding Option or Award or portion thereof
expires, is forfeited, is cancelled or is otherwise terminated for any reason
(other than upon the exercise of the Option or upon the surrender of the Option
pursuant to Section 7), the Shares allocable to the cancelled or otherwise
terminated Option or Award or portion thereof may again be the subject of
Options and Awards granted hereunder.

5.       OPTION GRANTS FOR NONEMPLOYEE DIRECTORS

         5.1      Discretionary Grant. The Board may grant Options in
accordance with the Plan and the terms and conditions of each Option shall be
set forth in an Agreement. The Board shall have sole discretion in determining
the number of Shares underlying each Option to grant a Nonemployee Director.

         5.2      Purchase Price. The purchase price for Shares under each
Option shall be equal to 100% of the Fair Market Value of a Share on the date
the Option is granted.

         5.3      Duration. Unless otherwise provided in the Agreement, Options
shall be for a term of ten (10) years, except an Option may terminate earlier
as follows:

         (a)      if an Optionee's service as a Director terminates for Cause,
the Options granted to the Optionee hereunder shall immediately terminate in
full and no rights thereunder may be exercised;

         (b)      if an Optionee's service as a Director terminates for any
reason other than Cause, the Optionee (or any guardian, legal representative,
heir or successor of the Optionee) may for a period of three (3) years after
such termination exercise his or her Options to the extent, and only to the
extent, that such Options or portions thereof were vested and exercisable as of
the date the Optionee's service as a Director terminated, after which time the
Options shall automatically terminate in full.

         This Section 5.3 shall not be construed to extend the term of any
Option or to permit anyone to exercise any Option after expiration of its term,
nor shall it be construed to increase the number of Shares as to which any
Option is exercisable from the amount exercisable on the date of termination of
the Optionee's service as a Director.

         5.4      Vesting. Unless provided otherwise in the Agreement, and
subject to Section 7, each Option shall be exercisable in whole or in part at
any time after one (1) year from the date of grant of the Option.

         5.5      Non-transferability. No Option granted hereunder shall be
transferable by the Optionee to whom granted otherwise than (i) by will or the
laws of descent and distribution and (ii) upon such terms and conditions as the
Company may establish, to immediate family members of the Optionee or to a
trust, partnership or similar vehicle for the benefit of such immediate family
members (collectively, the "Permitted Transferees"). For purposes of this

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Section 5.5, "immediate family" means an Optionee's spouse, parents, children,
grandchildren and spouse of children and grandchildren (including adopted
children and grandchildren, as the case may be). A Permitted Transferee may not
further transfer the Option. An Option transferred pursuant to this Section 5.5
shall remain subject to all of the provisions of the Plan and any Agreement
with respect to such Option and may not be exercised by a Permitted Transferee
unless and until all legal or regulatory approvals, listings, registrations,
qualifications or other clearances as determined by the Company to be required
or appropriate have been obtained. An Option may be exercised during the
lifetime of such Optionee only by the Optionee or his beneficiary or guardian
or legal representative or, if applicable, by Permitted Transferees. The terms
of such Option shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs, successors, and Permitted Transferees of the
Optionee.

         5.6      Method of Exercise. The exercise of an Option shall be made
only by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid in full upon such exercise in cash, by check or by transferring
Shares to the Company upon such terms and conditions as determined by the
Board. The written notice pursuant to this Section 5.6 may also provide
instructions from the Optionee to the Company that upon receipt of the purchase
price in cash from the Optionee's broker or dealer, designated as such on the
written notice, in payment for any Shares purchased pursuant to the exercise of
an Option, the Company shall issue such Shares directly to the designated
broker or dealer. Any Shares transferred to the Company as payment of the
purchase price under an Option shall be valued at their Fair Market Value on
the day preceding the date of exercise of such Option. If requested by the
Board, the Optionee shall deliver the Agreement evidencing the Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Agreement to the Optionee. No fractional Shares (or cash in
lieu thereof) shall be issued upon exercise of an Option and the number of
Shares that may be purchased upon exercise shall be rounded to the nearest
number of whole Shares.

         5.7      Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and until
(i) the Option shall have been exercised pursuant to the terms thereof, (ii)
the Company shall have issued and delivered the Shares to the Optionee, and
(iii) the Optionee's name shall have been entered as a stockholder of record on
the books of the Company. Thereupon, the Optionee shall have full voting,
dividend, and other ownership rights with respect to such Shares.

6.       RESTRICTED STOCK; STOCK AWARDS

         6.1      Grants. The Board may from time to time in its discretion
grant Restricted Stock and Stock Awards to Nonemployee Directors and may
determine the number of Shares of Restricted Stock or Stock Awards to be
granted. The Board shall determine the terms and

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conditions of, and the amount of payment, if any, to be made by the Nonemployee
Director for such Shares or Restricted Stock. A grant of Restricted Stock may,
in addition to other conditions, require the Nonemployee Director to pay for
such Shares of Restricted Stock, but the Board may establish a price below Fair
Market Value at which the Nonemployee Director can purchase the Shares of
Restricted Stock. Each grant of Restricted Stock shall be evidenced by an
Agreement containing terms and conditions not inconsistent with the Plan as the
Board shall determine to be appropriate in its sole discretion.

         6.2      Restricted Period; Lapse of Restrictions. At the time a grant
of Restricted Stock is made, the Board shall establish a period or periods of
time applicable to such grant over which the Restricted Stock will vest or may
establish performance requirements for the vesting of the Restricted Stock.
Subject to the other provisions of this Article 6, when the restrictions lapse,
the Restricted Stock shall vest in the Nonemployee Director. At the time a
grant is made, the Board may, in its discretion, prescribe conditions for the
incremental lapse of restrictions during the restricted period and for the
lapse or termination of restrictions upon the occurrence of other conditions in
addition to or other than the expiration of the restricted period or
satisfaction of performance measures with respect to all or any portion of the
Restricted Stock. Such conditions may, but need not, include the following:

         (a)      The death or Disability of the Nonemployee Director to whom
Restricted Stock is granted, or

         (b)      The occurrence of a Change in Control.

         The Board may also, in its discretion, shorten or terminate the
restricted period, or waive any conditions for the lapse or termination of
restrictions with respect to all or any portion of the Restricted Stock at any
time after the date the grant is made.

         6.3      Rights of Holder; Limitations Thereon. Upon a grant of
Restricted Stock, a stock certificate (or certificates) representing the number
of Shares of Restricted Stock granted to the Nonemployee Director shall be
registered in the Nonemployee Director's name and shall be held in custody by
the Company or a bank selected by the Board for the Nonemployee Director's
account. Unless provided otherwise in the Agreement, following such
registration, the Nonemployee Director shall have the rights and privileges of
a shareholder as to such Restricted Stock, including the right to vote such
Restricted Stock, except that the Nonemployee Director shall not have the right
to dividends and except further that, the following restrictions shall apply:

         (a)      The Nonemployee Director shall not be entitled to delivery of
a certificate until the expiration or termination of the restricted period for
the Shares represented by such certificate and the satisfaction of any and all
other conditions prescribed by the Board;

         (b)      None of the Shares of Restricted Stock may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of during
the restricted period and until the satisfaction of any and all other
conditions prescribed by the Board; and

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         (c)      Unless provided otherwise in the Agreement, all of the Shares
of Restricted Stock that have not vested shall be forfeited and all rights of
the Nonemployee Director to such Shares of Restricted Stock shall terminate
without further obligation on the part of the Company, unless the Nonemployee
Director has remained a Nonemployee Director of the Company or any of its
Subsidiaries, until the expiration or termination of the restricted period and
the satisfaction of any and all other conditions prescribed by the Board
applicable to such Shares of Restricted Stock. Upon the forfeiture of any
Shares of Restricted Stock, such forfeited Shares shall be transferred to the
Company without further action by the Nonemployee Director and shall, in
accordance with Section 4.2, again be available for grant under the Plan. If
the Nonemployee Director paid any amount for the Shares of Restricted Stock
that are forfeited, the Company shall pay the Nonemployee Director the lesser
of the Fair Market Value of the Shares on the date they are forfeited or the
amount paid by the Nonemployee Director.

         With respect to any Shares received as a result of adjustments under
Section 8 or 9 hereof and any Shares received with respect to cash dividends
declared on Restricted Stock, the Nonemployee Director shall have the same
rights and privileges, and be subject to the same restrictions, as are set
forth in this Article 6.

         6.4      Delivery of Unrestricted Shares. Upon the expiration or
termination of the restricted period for any Shares of Restricted Stock and the
satisfaction of any and all other conditions prescribed by the Board, the
restrictions applicable to such Shares of Restricted Stock shall lapse and a
stock certificate for the number of Shares of Restricted Stock with respect to
which the restrictions have lapsed shall be delivered, free of all such
restrictions except any that may be imposed by law, to the holder of the
Restricted Stock. The Company shall not be required to deliver any fractional
Share but will pay, in lieu thereof, the Fair Market Value (determined as of
the date the restrictions lapse) of such fractional Share to the holder
thereof.

         6.5      Nonassignability of Restricted Stock. Unless the Board
provides otherwise in the Agreement, the Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered prior to the date
Grantee becomes vested in the Restricted Stock, and following such date, shall
be sold, assigned, transferred, pledged or otherwise encumbered only in
accordance with any Shareholders Agreement in effect from time to time.

7.       EFFECT OF CHANGE IN CONTROL

         Unless the Agreement provides otherwise, in the event of a Change in
Control, (i) all conditions and restrictions on Shares of Restricted Stock
shall immediately lapse on the date of such Change in Control, (ii) all Options
outstanding on the date of such Change in Control shall become immediately and
fully exercisable; (iii) an Optionee will be permitted to surrender for
cancellation within sixty (60) days after such Change in Control, any Option or
portion of an Option to the extent not yet exercised and the Optionee will be
entitled to receive a cash payment in an amount equal to the excess, if any, of
(x) the greater of (1) the Fair Market Value, on the date preceding the date of
surrender, of the Shares subject to the

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Option or portion thereof surrendered or (2) the Adjusted Fair Market Value of
the Shares subject to the Option or portion thereof surrendered, over (y) the
aggregate purchase price for such Shares under the Option or portion thereof
surrendered; provided, however, that in the case of an Option granted within
six (6) months prior to the Change in Control, the Optionee shall be entitled
to surrender for cancellation his or her Option during the sixty (60) day
period commencing upon the expiration of six (6) months from the date of grant
of any such Option.

8.       ADJUSTMENT UPON CHANGES IN CAPITALIZATION

         8.1      Subject to Section 9, in the event of a Change in
Capitalization, the Board shall conclusively determine the appropriate
adjustments, if any, to the (i) maximum number and class of Shares or other
stock or securities with respect to which Options and Awards may be granted
under the Plan, (ii) the number and class of Shares or other stock or
securities which are to be subject to Options and Awards to be granted under
Sections 5 and 6; and (iii) the number and class of Shares or other stock or
securities which are subject to outstanding Options and Awards granted under
the Plan, and the purchase price therefor, if applicable; provided, however,
that any stock adjustment in the Shares or other stock or securities subject to
an outstanding Award or Option (including any adjustments in the purchase
price) shall be made only to the extent necessary to maintain the proportionate
interest of the Optionee or Grantee and preserve, without exceeding, the value
of such Option or Award.

         8.2      If, by reason of a Change in Capitalization, an Optionee
shall be entitled to exercise an Option with respect to new, additional or
different shares of stock or securities, such new, additional or different
shares shall thereupon be subject to all of the conditions which were
applicable to the Shares subject to the Option, as the case may be, prior to
such Change in Capitalization.

9.       EFFECT OF CERTAIN TRANSACTIONS

         Subject to Section 7, in the event of (i) the liquidation or
dissolution of the Company or (ii) a merger or consolidation of the Company (a
"Transaction"), the Plan and the Options and Awards issued hereunder shall
continue in effect in accordance with their respective terms and each Optionee
or Grantee shall be entitled to receive in respect of each Share subject to any
outstanding Option or Award, upon exercise of such Option or lapse or
restrictions on such Award, the same number and kind of stock, securities,
cash, property, or other consideration that each holder of a Share was entitled
to receive in the Transaction in respect of a Share. In the event that, after a
Transaction, there occurs any change of a type described in Section 2.6 with
respect to the shares of the surviving or resulting corporation, then
adjustments similar to, and subject to the same conditions as, those in Section
8 shall be made by the Board.

10.      TERMINATION AND AMENDMENT OF THE PLAN

         The Plan shall terminate on the day prior to the tenth anniversary of
the effective date of the Plan, and no Option may be granted thereafter. The
Board may sooner terminate the

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Plan and the Board may from time to time amend, modify, or suspend the Plan;
provided, however that:

         (a)      Except as provided in Sections 7 and 8, no such amendment,
modification, suspension, or termination shall impair or adversely alter any
Options, Awards, or rights theretofore granted under the Plan, except with the
consent of the Optionee or Grantee, nor shall any amendment, modification,
suspension, or termination deprive any Optionee or Grantee of any Shares which
he or she may have acquired through or as a result of the Plan;

         (b)      To the extent required by applicable law, regulation or rule,
no amendment shall be effective unless approved by the stockholders of the
Company in accordance with applicable law and regulations at an annual or
special meeting held within twelve (12) months before or after the date of
adoption of such amendment.

11.      NON-EXCLUSIVITY OF THE PLAN

         (a)      The adoption of the Plan by the Board shall not be construed
as amending, modifying or rescinding any previously approved compensation
arrangement or as creating any limitations on the power of the Board to adopt
such other compensation arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases.

         (b)      Nothing contained in this Plan prohibits a Nonemployee
Director from being appointed as an officer or employee of the Company at any
time; nor does anything contained in this Plan specifically require a
Nonemployee Director to surrender or forfeit an Option solely because he or she
accepts an appointment as an officer or employee of the Company at any time
after election or appointment to the Board. However, during such time as a
Nonemployee Director serves an an officer or employee, he or she shall not be
eligible to receive any additional awards under this Plan.

12.      LIMITATION OF LIABILITY

         As illustrative of the limitations of liability of the Company, but
not intended to be exhaustive thereof, nothing in the Plan shall be construed
to:

                  (i)      give any person any right to be granted an Option or
                           Award other than as specifically provided by the
                           Plan;

                  (ii)     give any person any rights whatsoever with respect
                           to Shares except as specifically provided in the
                           Plan;

                  (iii)    limit in any way the right of the Company to
                           terminate the service of any person as a Director
                           pursuant to the Company's bylaws and articles of
                           incorporation; or nominate or appoint any person as
                           a Director.

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13.      REGULATIONS AND OTHER APPROVALS; GOVERNING LAW

         13.1     This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
Delaware without giving effect to the conflicts of laws principles thereof,
except to the extent that such law is preempted by federal law.

         13.2     The obligation of the Company to sell or deliver Shares with
respect to Options or Awards granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Board.

         13.3     The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Board shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not
affect the validity of the Plan.

         13.4     Each Option and Award is subject to the requirement that, if
at any time the Board determines, in its discretion, that the listing,
registration, or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent, or approval has been effected or obtained
free of any conditions as acceptable to the Board.

         13.5     Notwithstanding anything contained in the Plan to the
contrary, in the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then-current registration statement under the
Securities Act of 1933, as amended, and is not otherwise exempt from such
registration, such Shares shall be restricted against transfer to the extent
required by the Securities Act of 1933, as amended, and Rule 144 or other
regulations thereunder. The Board may require any individual receiving Shares
pursuant to the Plan, as a condition precedent to receipt of such Shares upon
exercise of an Option, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder. The certificates evidencing any of such
Shares shall be appropriately inscribed with a legend reflecting their status
as restricted securities as aforesaid.

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14.      DESIGNATION OF BENEFICIARY

         Each Optionee and Grantee may designate a person or persons to receive
in the event of his or her death, any Option or Award or any amount payable
pursuant thereto, to which he or she would then be entitled. Such designation
will be made upon forms supplied by and delivered to the Company and may be
revoked in writing. If an Optionee or Grantee fails effectively to designate a
beneficiary, then his or her estate will be deemed to be the beneficiary.

15.      EFFECTIVE DATE

         The Plan is effective as of November 27, 2001, the date the Plan was
approved by the Company's Board of Directors, subject to approval by the
Company's stockholders.

         IN WITNESS WHEREOF, the Plan has been executed by the Company on this
28th day of November, 2001, to be effective on the Effective Date.

                                             NATIONAL SERVICE INDUSTRIES, INC.

                                             By: /s/ Brock A. Hattox
                                                -------------------------------

                                      12Exhibit 10.1

    EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS

     This  Amendment,  dated as of November 13, 2001,  is made by and between FM
PRECISION GOLF  MANUFACTURING  CORP., a Delaware  corporation,  and FM PRECISION
GOLF SALES CORP., a Delaware corporation  (collectively,  jointly and severally,
the "Borrower"),  and WELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation
(the "Lender").

                                    Recitals

     The  Borrower  and the  Lender  have  entered  into a Credit  and  Security
Agreement  dated as of October 9, 1998, as amended by that certain  Amendment to
Credit and Security  Agreement  and Waiver of Defaults  dated April 13, 1999, as
amended by that certain Second Amendment to Credit and Security  Agreement dated
November 10,  1999,  as amended by that  certain  Third  Amendment to Credit and
Security  Agreement  dated March 24,  2000,  as amended by that  certain  Fourth
Amendment to Credit and Security  Agreement  dated August 3, 2000, as amended by
that certain Fifth Amendment to Credit and Security  Agreement dated November 8,
2000,  as  amended  by that  certain  Sixth  Amendment  to Credit  and  Security
Agreement dated March 9, 2001, and as amended by that certain Seventh  Amendment
to Credit and Security Agreement dated May 30, 2001  (collectively,  the "Credit
Agreement"). Capitalized terms used in these recitals have the meanings given to
them in the Credit Agreement unless otherwise specified.

     The Borrower has  requested  that certain  amendments be made to the Credit
Agreement,  which  the  Lender  is  willing  to make  pursuant  to the terms and
conditions set forth herein.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
covenants and agreements herein contained, it is agreed as follows:

     1.  DEFINED  TERMS.  Capitalized  terms  used in this  Amendment  which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.

     2. AMENDMENTS. The Credit Agreement is hereby amended as follows:

          (a) The  definition  of  "Collateral"  contained in Section 1.1 of the
Credit Agreement is hereby deleted and replaced as follows:

     "Collateral" means all of the Borrower's  Accounts,  chattel paper, deposit
     accounts,  documents,  Equipment, General Intangibles,  goods, instruments,
     Inventory, Investment Property, letter-of-credit rights, letters of credit,
     all  sums on  deposit  in any  Collateral  Account,  and any  items  in any
     Lockbox;  together  with (i) all  substitutions  and  replacements  for and
     products  of any of the  foregoing;  (ii)  in the  case of all  goods,  all
     accessions;  (iii)  all  accessories,  attachments,  parts,  equipment  and
     repairs now or hereafter  attached or affixed to or used in connection with
     any goods; (iv) all warehouse receipts, bills of lading and other documents
<PAGE>
     of title now or hereafter  covering such goods; (v) all collateral  subject
     to the Lien of any Security  Document;  (vi) any money,  or other assets of
     the Borrower that now or hereafter come into the  possession,  custody,  or
     control of the Lender;  (vii) all sums on deposit in the  Special  Account;
     and (viii) proceeds of any and all of the foregoing.

          (b) The definition of "Borrowing Base" contained in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety and replaced as follows:

     "Borrowing Base" means, at any time the lesser of:

          (a) the Maximum Line; or

          (b)  subject  to  change  from  time  to  time  in the  Lender's  sole
discretion, the sum of:

               (A)  the  lesser  of  (x)  85%  of  Eligible  Accounts,   or  (y)
               $6,500,000.00, plus

               (B) the lesser of (x) 60% of  Eligible  Inventory  (exclusive  of
               Eligible Raw  Materials  Inventory),  or (y)  $2,500,000.00  from
               March 1 through September 30 of each year and $3,000,000.00  from
               October 1 of each year  through  February  28 of each  subsequent
               year, plus

               (C) the lesser of (x) 50% of Eligible Raw Materials Inventory, or
               (y) $500,000.00, plus

               (D) on November  1, 2001 an  overadvance  (the "2001  Overadvance
               Limit")  in an amount  not to exceed  $400,000.00  (which  amount
               shall be  increased  to  $500,000.00  upon  receipt  of  evidence
               satisfactory   to  Lender  that  the  entire   $1,250,000.00   in
               Subordinated  Indebtedness  from the Johnston  Family  Charitable
               Foundation  has been  received  by the  Borrower).  In each  year
               thereafter,  if but only if  Lender,  in its  sole  and  absolute
               discretion, elects to make overadvance Revolving Advances, in any
               given  fiscal  year,  commencing  on November 1 of each year,  an
               overadvance  in  the  amount  not  to  exceed   $500,000.00  (the
               "Overadvance   Limit").  The  2001  Overadvance  Limit  and  each
               Overadvance  Limit thereafter  shall be automatically  reduced to
               $400,000.00  on March 1 of the  immediately  following  year,  to
               $300,000.00  on April 1 of the  immediately  following  year,  to
               $200,000.00  on May 1 of the  immediately  following  year and to

                                        2
<PAGE>
               $0.00 on June 1 of the immediately following year. No Overadvance
               Limit shall  exist at any time from June 1 through  October 31 in
               any year.

          (c) Romanette (xv) of the definition of "Eligible  Accounts" contained
in  Section  1.1 of the Credit  Agreement  is hereby  deleted  and  replaced  as
follows:

     (xv) Accounts owed by Marubeni,  regardless of whether otherwise  eligible,
     in excess of (1) 75% of total Accounts  through and until May 30, 2002, and
     (2) 50% of total Accounts from and after May 30, 2002.

          (d)  The   definitions   of  "Capital   Expenditures   Floating  Rate,
"Overadvance Floating Rate",  "Revolving Floating Rate" and "Term Floating Rate"
contained in Section 1.1 of the Credit Agreement are hereby deleted and replaced
as follows:

     "Capital  Expenditures Floating Rate" means an annual rate equal to the sum
     of the Prime Rate plus three and  one-quarter of one percent  (3.25%).  The
     Capital  Expenditures  Floating Rate shall  automatically  be reduced to an
     annual rate equal to the sum of the Prime Rate plus two and  one-quarter of
     one  percent  (2.25%) on the first day of the first  full  month  following
     Lender's   receipt  of  Borrower's  2002  fiscal  year  audited   financial
     statements  complying  with Section  6.1(a) below,  if but only if (i) said
     financial  statements  indicate that the Borrower and the Covenant Entities
     have  achieved  a Net Loss  (exclusive  of  goodwill  impairment,  non-cash
     increase  in  the  valuation  allowance  on  deferred  income  tax  assets,
     amortization of non-cash expenses  associated with the issuance of warrants
     to the Johnston Family Charitable  Foundation on October 26, 2001, non-cash
     expenses  resulting from the conversion of  subordinated  debt (owed to the
     Johnston Family  Charitable  Foundation  arising  pursuant to an instrument
     dated October 26, 2001), to equity,  expenses  resulting from modifications
     to "in the  money"  options  held  by  employees  who  lost  their  jobs in
     connection with the corporate  restructuring approved on September 25, 2001
     (collectively the "Fiscal Year 2002 Non-Cash Expenses")) for the Borrower's
     2002  fiscal  year  of not  more  than  $600,000.00,  (ii)  said  financial
     statements  indicate that the Borrower and the Covenant Entities  decreased
     their aggregate Net Worth (exclusive of Fiscal Year 2002 Non-Cash Expenses)
     during Borrower's 2002 fiscal year by not more than $600,000.00,  and (iii)
     there is not a then existing Event of Default or Default  Period,  provided
     however,  notwithstanding the above, the Capital Expenditures Floating Rate
     shall  automatically  be reduced to an annual  rate equal to the sum of the
     Prime Rate plus  one-quarter of one percent (0.25%) on the first day of the
     first full month following  Lender's receipt of Borrower's 2002 fiscal year

                                       3
<PAGE>
     audited  financial  statements  complying with Section 6.1(a) below, if but
     only if (i) said  financial  statements  indicate that the Borrower and the
     Covenant Entities have achieved a Net Income for the Borrower's 2002 fiscal
     year of not less than $600,000.00,  (ii) said financial statements indicate
     that the Borrower and the Covenant  Entities  increased their aggregate Net
     Worth during Borrower's 2002 fiscal year by not less than $600,000.00,  and
     (iii) there is not a then existing Event of Default or Default  Period.  If
     but only if said reduction is not achieved as provided  above,  the Capital
     Expenditures Floating Rate shall automatically be adjusted on the first day
     of the first full month following  Lender's  receipt of Borrower's  audited
     financial  statements  complying  with  Section  6.1(a)  below  in any year
     subsequent to  Borrower's  2002 fiscal year, to an annual rate equal to the
     sum of the Prime Rate plus  one-quarter of one percent (0.25%) in the event
     that (i) said  financial  statements  indicate  that the  Borrower  and the
     Covenant  Entities  have achieved a Net Income  (exclusive of  amortization
     (not to  exceed  $300,000.00)  of  non-cash  expenses  associated  with the
     issuance  of warrants  to the  Johnston  Family  Charitable  Foundation  on
     October 26, 2001 (the  "Non-Cash  Warrant  Expenses"))  for any such fiscal
     year of not less than $600,000.00,  (ii) said financial statements indicate
     that the Borrower and the Covenant  Entities  increased their aggregate Net
     Worth (exclusive of the Non-Cash  Warrant  Expenses) during any such fiscal
     year by not less than  $600,000.00,  and (iii) there is not a then existing
     Event of Default or Default Period. The Capital Expenditures  Floating Rate
     shall change when and as the Prime Rate changes.

     "Overadvance  Floating  Rate"  means an annual rate equal to the sum of the
     Prime  Rate  plus  five  and  one-quarter  of  one  percent  (5.25%).   The
     Overadvance  Floating Rate shall automatically be reduced to an annual rate
     equal to the sum of the Prime Rate plus four and one-quarter of one percent
     (4.25%) on the first day of the first full month following Lender's receipt
     of Borrower's 2002 fiscal year audited financial  statements complying with
     Section 6.1(a) below, if but only if (i) said financial statements indicate
     that the  Borrower  and the  Covenant  Entities  have  achieved  a Net Loss
     (exclusive  of the Fiscal Year 2002 Non-Cash  Expenses) for the  Borrower's
     2002  fiscal  year  of not  more  than  $600,000.00,  (ii)  said  financial
     statements  indicate that the Borrower and the Covenant Entities  decreased
     their  aggregate  Net Worth  (exclusive  of the Fiscal  Year 2002  Non-Cash
     Expenses) during  Borrower's 2002 fiscal year by not more than $600,000.00,
     and (iii) there is not a then existing Event of Default or Default  Period,
     provided however,  notwithstanding the above, the Overadvance Floating Rate
     shall  automatically  be reduced to an annual  rate equal to the sum of the
     Prime Rate plus two and one-quarter of one percent (2.25%) on the first day
     of the first full month  following  Lender's  receipt  of  Borrower's  2002

                                       4
<PAGE>
     fiscal year audited  financial  statements  complying  with Section  6.1(a)
     below,  if but  only if (i) said  financial  statements  indicate  that the
     Borrower  and the  Covenant  Entities  have  achieved  a Net Income for the
     Borrower's  2002  fiscal  year of not  less  than  $600,000.00,  (ii)  said
     financial  statements  indicate that the Borrower and the Covenant Entities
     increased their  aggregate Net Worth during  Borrower's 2002 fiscal year by
     not less than $600,000.00,  and (iii) there is not a then existing Event of
     Default or Default Period. If but only if said reduction is not achieved as
     provided  above,  the  Overadvance  Floating  Rate shall  automatically  be
     adjusted  on the first  day of the  first  full  month  following  Lender's
     receipt of Borrower's audited financial  statements  complying with Section
     6.1(a) below in any year  subsequent to Borrower's  2002 fiscal year, to an
     annual rate equal to the sum of the Prime Rate plus two and  one-quarter of
     one  percent  (2.25%)  in the  event  that  (i) said  financial  statements
     indicate  that the Borrower and the Covenant  Entities  have achieved a Net
     Income  (exclusive  of the Non-Cash  Warrant  Expenses) for any such fiscal
     year of not less than $600,000.00,  (ii) said financial statements indicate
     that the Borrower and the Covenant  Entities  increased their aggregate Net
     Worth (exclusive of the Non-Cash  Warrant  Expenses) during any such fiscal
     year by not less than  $600,000.00,  and (iii) there is not a then existing
     Event of Default or Default  Period.  The  Overadvance  Floating Rate shall
     change when and as the Prime Rate changes.

     "Revolving  Floating  Rate"  means an annual  rate  equal to the sum of the
     Prime Rate plus three and one-quarter of one percent (3.25%). The Revolving
     Floating Rate shall automatically be reduced to an annual rate equal to the
     sum of the Prime Rate plus two and  one-quarter  of one percent  (2.25%) on
     the  first  day of the first  full  month  following  Lender's  receipt  of
     Borrower's  2002 fiscal year audited  financial  statements  complying with
     Section 6.1(a) below, if but only if (i) said financial statements indicate
     that the  Borrower  and the  Covenant  Entities  have  achieved  a Net Loss
     (exclusive  of the Fiscal Year 2002 Non-Cash  Expenses) for the  Borrower's
     2002  fiscal  year  of not  more  than  $600,000.00,  (ii)  said  financial
     statements  indicate that the Borrower and the Covenant Entities  decreased
     their  aggregate  Net Worth  (exclusive  of the Fiscal  Year 2002  Non-Cash
     Expenses) during  Borrower's 2002 fiscal year by not more than $600,000.00,
     and (iii) there is not a then existing Event of Default or Default  Period,
     provided however,  notwithstanding  the above, the Revolving  Floating Rate
     shall  automatically  be reduced to an annual  rate equal to the sum of the
     Prime Rate plus  one-quarter of one percent (0.25%) on the first day of the
     first full month following  Lender's receipt of Borrower's 2002 fiscal year
     audited  financial  statements  complying with Section 6.1(a) below, if but
     only if (i) said  financial  statements  indicate that the Borrower and the

                                       5
<PAGE>
     Covenant Entities have achieved a Net Income for the Borrower's 2002 fiscal
     year of not less than $600,000.00,  (ii) said financial statements indicate
     that the Borrower and the Covenant  Entities  increased their aggregate Net
     Worth during Borrower's 2002 fiscal year by not less than $600,000.00,  and
     (iii) there is not a then existing Event of Default or Default  Period.  If
     but only if said reduction is not achieved as provided above, the Revolving
     Floating Rate shall automatically be adjusted on the first day of the first
     full month  following  Lender's  receipt of  Borrower's  audited  financial
     statements  complying with Section  6.1(a) below in any year  subsequent to
     Borrower's  2002  fiscal  year,  to an annual  rate equal to the sum of the
     Prime Rate plus  one-quarter  of one percent  (0.25%) in the event that (i)
     said  financial  statements  indicate  that the  Borrower  and the Covenant
     Entities  have  achieved a Net Income  (exclusive  of the Non-Cash  Warrant
     Expenses) for any such fiscal year of not less than $600,000.00,  (ii) said
     financial  statements  indicate that the Borrower and the Covenant Entities
     increased  their  aggregate Net Worth  (exclusive  of the Non-Cash  Warrant
     Expenses)  during any such  fiscal year by not less than  $600,000.00,  and
     (iii) there is not a then existing Event of Default or Default Period.  The
     Revolving Floating Rate shall change when and as the Prime Rate changes.

     "Term  Floating  Rate"  means an annual  rate equal to the sum of the Prime
     Rate  plus  three  and  three-quarters  of one  percent  (3.75%).  The Term
     Floating Rate shall automatically be reduced to an annual rate equal to the
     sum of the Prime Rate plus two and three-quarters of one percent (2.75%) on
     the  first  day of the first  full  month  following  Lender's  receipt  of
     Borrower's  2002 fiscal year audited  financial  statements  complying with
     Section 6.1(a) below, if but only if (i) said financial statements indicate
     that the  Borrower  and the  Covenant  Entities  have  achieved  a Net Loss
     (exclusive  of the Fiscal Year 2002 Non-Cash  Expenses) for the  Borrower's
     2002  fiscal  year  of not  more  than  $600,000.00,  (ii)  said  financial
     statements  indicate that the Borrower and the Covenant Entities  decreased
     their  aggregate  Net Worth  (exclusive  of the Fiscal  Year 2002  Non-Cash
     Expenses) during  Borrower's 2002 fiscal year by not more than $600,000.00,
     and (iii) there is not a then existing Event of Default or Default  Period,
     provided however,  notwithstanding  the above, the Term Floating Rate shall
     automatically  be reduced  to an annual  rate equal to the sum of the Prime
     Rate plus  three-quarters  of one  percent  (0.75%) on the first day of the
     first full month following  Lender's receipt of Borrower's 2002 fiscal year
     audited  financial  statements  complying with Section 6.1(a) below, if but
     only if (i) said  financial  statements  indicate that the Borrower and the
     Covenant Entities have achieved a Net Income for the Borrower's 2002 fiscal
     year of not less than $600,000.00,  (ii) said financial statements indicate

                                       6
<PAGE>
     that the Borrower and the Covenant  Entities  increased their aggregate Net
     Worth during Borrower's 2002 fiscal year by not less than $600,000.00,  and
     (iii) there is not a then existing Event of Default or Default  Period.  If
     but only if said  reduction  is not  achieved as provided  above,  the Term
     Floating Rate shall automatically be adjusted on the first day of the first
     full month  following  Lender's  receipt of  Borrower's  audited  financial
     statements  complying with Section  6.1(a) below in any year  subsequent to
     Borrower's  2002  fiscal  year,  to an annual  rate equal to the sum of the
     Prime Rate plus three-quarters of one percent (0.75%) in the event that (i)
     said  financial  statements  indicate  that the  Borrower  and the Covenant
     Entities  have  achieved a Net Income  (exclusive  of the Non-Cash  Warrant
     Expenses) for any such fiscal year of not less than $600,000.00,  (ii) said
     financial  statements  indicate that the Borrower and the Covenant Entities
     increased  their  aggregate Net Worth  (exclusive  of the Non-Cash  Warrant
     Expenses)  during any such  fiscal year by not less than  $600,000.00,  and
     (iii) there is not a then existing Event of Default or Default Period.  The
     Term Floating Rate shall change when and as the Prime Rate changes.

          (e) Section 1.2 of the Credit Agreement is amended to read as follows:

     "Section 1.2 OTHER DEFINITIONAL  TERMS; RULES OF INTERPRETATION.  The words
     "hereof", "herein" and "hereunder" and words of similar import when used in
     this  Agreement  shall  refer to this  Agreement  as a whole and not to any
     particular provision of this Agreement.  All accounting terms not otherwise
     defined herein have the meanings  assigned to them in accordance with GAAP.
     All terms  defined in the UCC and not  otherwise  defined  herein  have the
     meanings  assigned to them in the UCC.  References  to Articles,  Sections,
     subsections,  Exhibits,  Schedules and the like, are to Articles,  Sections
     and  subsections  of, or Exhibits or Schedules  attached to, this Agreement
     unless otherwise  expressly provided.  The words "include",  "includes" and
     "including"  shall  be  deemed  to  be  followed  by  the  phrase  "without
     limitation".  Unless the  context in which used  herein  otherwise  clearly
     requires,  "or"  has  the  inclusive  meaning  represented  by  the  phrase
     "and/or".  Defined terms  include in the singular  number the plural and in
     the plural number the singular.  Reference to any agreement  (including the
     Loan Documents),  document or instrument means such agreement,  document or
     instrument  as  amended  or  modified  and in  effect  from time to time in
     accordance  with the terms thereof (and, if applicable,  in accordance with
     the terms  hereof and the other Loan  Documents),  except  where  otherwise
     explicitly  provided,  and  reference to any  promissory  note includes any
     promissory note which is an extension or renewal thereof or a substitute or
     replacement  therefor.  Reference  to any  law,  rule,  regulation,  order,

                                       7
<PAGE>
     decree, requirement,  policy, guideline,  directive or interpretation means
     as amended, modified, codified, replaced or reenacted, in whole or in part,
     and in effect on the  determination  date,  including rules and regulations
     promulgated thereunder."

          (f)  Section  3.6 of the  Credit  Agreement  is  amended by adding the
following new sentence before the first sentence of that Section:

     The  Borrower  authorizes  the  Lender  to file  from  time  to time  where
     permitted by law, such financing statements against collateral described as
     "all personal  property" as the Lender deems necessary or useful to perfect
     the Security Interest.

          (g)  Section  6.12 of the  Credit  Agreement  is  hereby  deleted  and
replaced as follows:

     DEBT SERVICE  COVERAGE RATIO.  The Borrower  covenants that FMM and FMS and
     the Covenant Entities shall, as of the last day of each fiscal quarter,  on
     and after August 31, 2002,  maintain a  consolidated  average  minimum debt
     service coverage ratio (based upon the period set forth below) as follows:

     QUARTER ENDING               DEBT SERVICE COVERAGE RATIO
     --------------               ---------------------------
     August 31, 2002 and each     1.0 to 1 based upon the immediately preceding
     August 31 thereafter         three month period

     November 30, 2002 and
     each November 30             .75 to 1 based upon the immediately preceding
     thereafter                   six month period

     February 28, 2003 and
     each February 28             .75 to 1 based upon the immediately preceding
     thereafter                   nine month period

     May 31, 2003 and each        1.05 to 1 based upon the immediately preceding
     May 31 thereafter            twelve month period

          (h)  Section  6.13 of the  Credit  Agreement  is  hereby  deleted  and
replaced as follows:

     Section 6.13 NET WORTH. The Borrower covenants that as of May 31, 2001, the
     aggregate  consolidated Net Worth of FMM, FMS and the Covenant Entities was
     $13,841,589.69. The Borrower covenants that said aggregate consolidated Net
     Worth as of the end of each future fiscal quarter end shall increase by not
     less than (or in the event a  decrease  is  allowed,  decrease  by not more
     than)  the  amounts  set  forth  below as  measured  from  the  immediately
     preceding fiscal year ending aggregate consolidated Net Worth.

                                       8
<PAGE>
                                                                  NET WORTH
     QUARTER ENDING                                          INCREASE (DECREASE)
     --------------                                          -------------------
     November 30, 2001                                         ($2,300,000.00)
     February 28, 2002                                         ($2,100,000.00)
     May 31, 2002                                              ($1,050,000.00)
     August 31, 2002 and each August 31 thereafter             $0.00
     November 30, 2002 and each November 30 thereafter         ($300,000.00)
     February 28, 2003 and each February 28 thereafter         ($100,000.00)
     May 31, 2003 and each May 31 thereafter                   $600,000.00

     For purposes of  calculating  the above  covenants for the quarters  ending
     November 30, 2001, February 28, 2002 and May 31, 2002 only, the calculation
     of the Net Worth  Decrease  shall  exclude  the Fiscal  Year 2002  Non-Cash
     Expenses.  For purposes of calculating the above covenants for the quarters
     in the  Borrower's  2003 fiscal year only,  the Net Worth  Increase and Net
     Worth Decrease, as applicable, shall exclude the Non-Cash Warrant Expenses.

          (i)  Section  6.14 of the Credit  Agreement  is hereby  deleted in its
entirety and replaced as follows:

     Section  6.14 NET INCOME.  The  Borrower  covenants  that FMM,  FMS and the
     Covenant Entities shall achieve an aggregate  consolidated Net Income of at
     least (or, in the event a Net Loss is allowed for such  fiscal  quarter,  a
     Net Loss of not more  than)  the  amount  set forth  below for each  fiscal
     quarter as measured from the immediately preceding fiscal year end.

                                       9
<PAGE>
     QUARTER ENDING                                            NET INCOME (LOSS)
     --------------                                            -----------------
     November 30, 2001                                         ($2,300,000.00)
     February 28, 2002                                         ($2,100,000.00)
     May 31, 2002                                              ($1,050,000.00)
     August 31, 2002 and each August 31 thereafter             $0.00
     November 30, 2002 and each November 30 thereafter         ($300,000.00)
     February 28, 2003 and each February 28 thereafter         ($100,000.00)
     May 31, 2003 and each  May 31 thereafter                  $600,000.00

     For purposes of  calculating  the above  covenants for the quarters  ending
     November 30, 2001, February 28, 2002 and May 31, 2002 only, the calculation
     of the Net Loss shall exclude the Fiscal Year 2002 Non-Cash  Expenses.  For
     purposes  of  calculating  the  above  covenants  for the  quarters  in the
     Borrower's  2003  fiscal  year  only,  the  Net  Income  and Net  Loss,  as
     applicable, shall exclude the Non-Cash Warrant Expenses.

          (j)  Section  6.15 of the Credit  Agreement  is hereby  deleted in its
entirety and replaced as follows:

     Section 6.15 MONTHLY NET  INCOME/NET  LOSS.  The  Borrower  covenants  that
     beginning with September 1, 2001, and continuing for each month thereafter,
     FMM, FMS and the Covenant Entities shall achieve an aggregate  consolidated
     Net Income of not less than (or in the event a Net Loss is allowed for such
     month,  a Net Loss of not more than) the  amounts  set forth below for each
     month as measured from the last day of the immediately preceding month.

     MONTH                                                 NET INCOME/(NET LOSS)
     -----                                                 ---------------------
     September, 2001                                       ($375,000.00)
     October, 2001                                         ($400,000.00)
     November, 2001                                        ($1,250,000.00)
     December, 2001                                        ($450,000.00)
     January, 2002                                         ($50,000.00)
     February, 2002                                        $50,000.00
     March, 2002                                           $200,000.00
     April, 2002                                           $200,000.00
     May, 2002                                             $200,000.00
     June of 2002 and each June thereafter                 $0.00

                                       10
<PAGE>
     MONTH                                                 NET INCOME/(NET LOSS)
     -----                                                 ---------------------
     July of 2002 and each July thereafter                 $0.00
     August of 2002 and each August thereafter             ($300,000.00)
     September of 2002 and each September thereafter       ($150,000.00)
     October of 2002 and each October thereafter           ($200,000.00)
     November of 2002 and each November thereafter         ($100,000.00)
     December of 2002 and each December thereafter         ($350,000.00)
     January, 2003 and each January thereafter             ($50,000.00)
     February, 2003 and each February thereafter           $0.00
     March, 2003 and each March thereafter                 $0.00
     April, 2003 and each April thereafter                 $0.00
     May, 2003 and each May thereafter                     $0.00

     For purposes of calculating  the above covenants for the months through and
     until May 31, 2002 only, the  calculation of the Net Income/Net  Loss shall
     exclude the Fiscal Year 2002 Non-Cash Expenses. For purposes of calculating
     the  above  covenants  for  the  months  of  June  through  October  in the
     Borrower's  2003 fiscal year only,  the  calculation  of the Net Income/Net
     Loss shall exclude the Non-Cash Warrant Expenses.

          (k)  Section  7.10 of the  Credit  Agreement  is  hereby  deleted  and
replaced as follows:

     CAPITAL EXPENDITURES.  FMM, FMS and the Covenant Entities will not incur or
     contract  to incur  Capital  Expenditures  in the  aggregate  of more  than
     $750,000.00 during the fiscal year. In addition,  FMM, FMS and the Covenant
     Entities will not incur or contract to incur Capital Expenditures in excess
     of $500,000.00 in any one transaction  without the prior approval of Lender
     which approval can be granted or withheld in Lender's sole discretion.

                                       11
<PAGE>
          (l) There is hereby added a new Section 8.1(u) to the Credit Agreement
which provides as follows:

     "(u)  Failure  on  the  part  of  the  Borrower  to  cause  not  less  than
     $1,250,000.00  in Subordinated  Indebtedness to be received by the Borrower
     from the Johnston  Family  Charitable  Foundation on or before December 31,
     2001."

     3. NO OTHER CHANGES. Except as explicitly amended by this Amendment, all of
the terms and conditions of the Credit  Agreement shall remain in full force and
effect and shall apply to any advance or letter of credit thereunder.

     4. THE EQUIPMENT  APPRAISAL.  The  Borrower,  at its sole cost and expense,
shall cause its Equipment to be appraised by Steve Feldmann (the "Appraisal").

     5.  WAIVER  OF  DEFAULTS.  The  Borrower  is in  default  of the  following
provisions of the Credit Agreement (collectively, the "Existing Defaults"):

          (a) The Borrower and the Covenant  Entities have failed to achieve the
required Debt Service  Coverage  Ratio for the quarter ending August 31, 2001 in
violation of Section 6.12 of the Credit Agreement.

          (b) The Borrower and the Covenant Entities have exceeded the permitted
Net Worth  Decrease  for the  quarter  ending  August 31, 2001 in  violation  of
Section 6.13 of the Credit Agreement.

          (c) The Borrower and the Covenant  Entities have failed to achieve the
required  Net Income for the  quarter  ending  August 31, 2001 in  violation  of
Section 6.14 of the Credit Agreement.

          (d) The Borrower and the Covenant Entities have exceeded the permitted
Net Loss for the month  ending  August 31, 2001 in  violation of Section 6.15 of
the Credit Agreement.

Upon the terms and subject to the  conditions set forth in this  Amendment,  the
Lender hereby waives the Existing Defaults.  This waiver shall be effective only
in this  specific  instance and for the specific  purpose for which it is given,
and this waiver shall not entitle the Borrower to any other or further waiver in
any similar or other circumstances.

     6. AMENDMENT FEE. The Borrower shall pay the Lender as of the date hereof a
fully earned, non-refundable fee in the amount of $25,000.00 in consideration of
the Lender's execution and delivery of this Amendment.

     7.  CONDITIONS  PRECEDENT.  This  Amendment,  and the  waiver  set forth in
Paragraph 5 hereof,  shall be effective  when the Lender shall have  received an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:

          (a) The  Subordination  Agreement  properly  executed on behalf of the
Borrower, the Covenant Entities and the Johnston Family Charitable Foundation.

                                       12
<PAGE>
          (b) The Acknowledgment and Agreement of Guarantor set forth at the end
of this Amendment, duly executed by the Guarantor.

          (c) A Certificate  of the  Secretary of the Borrower  certifying as to
(i) the  resolutions  of the board of directors of the  Borrower  approving  the
execution and delivery of this Amendment,  (ii) the fact that the certificate of
incorporation and bylaws of the Borrower,  which were certified and delivered to
the Lender pursuant to the Certificate of Authority of the Borrower's  secretary
or  assistant  secretary  dated as of  October  9, 1998 in  connection  with the
execution and delivery of the Credit Agreement continue in full force and effect
and have not been  amended  or  otherwise  modified  except  as set forth in the
Certificate to be delivered,  and (iii) certifying as to the officers and agents
of the  Borrower  who have been  authorized  to sign and to act on behalf of the
Borrower  and setting  forth the sample  signatures  of each of the officers and
agents of the Borrower  authorized to execute and deliver this Amendment and all
other documents, agreements and certificates on behalf of the Borrower.

          (d) An opinion of the  Borrower's  counsel as to the matters set forth
in  Paragraphs 8 (a) and 8(b) hereof and as to such other  matters as the Lender
shall require.

          (e) Payment of the fee described in Paragraph 6.

          (f) Such other matters as the Lender may require.

     8.  REPRESENTATIONS  AND  WARRANTIES.  The Borrower  hereby  represents and
warrants to the Lender as follows:

          (a) The Borrower has all requisite power and authority to execute this
Amendment and to perform all of its  obligations  hereunder,  and this Amendment
has been duly executed and delivered by the Borrower and  constitutes the legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms.

          (b) The  execution,  delivery and  performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate action and do not
(i)  require  any  authorization,   consent  or  approval  by  any  governmental
department,  commission,  board, bureau, agency or instrumentality,  domestic or
foreign,  (ii) violate any  provision of any law,  rule or  regulation or of any
order, writ,  injunction or decree presently in effect,  having applicability to
the Borrower, or the certificate of incorporation or by-laws of the Borrower, or
(iii) result in a breach of or  constitute a default under any indenture or loan
or credit  agreement or any other  agreement,  lease or  instrument to which the
Borrower is a party or by which it or its properties may be bound or affected.

          (c) Except with  respect to (i) the receipt by Borrower of a Notice of
Violation  dated  October 24, 2000 from the State of  Connecticut  Department of
Environmental  Protection and (ii) the inclusion of the Torrington,  Connecticut
Premises on the Comprehensive Environmental Response, Compensation and Liability
Information  System,  all of the  representations  and  warranties  contained in
Article V of the Credit  Agreement  are  correct on and as of the date hereof as
though  made  on  and  as  of  such  date,   except  to  the  extent  that  such
representations and warranties relate solely to an earlier date.

                                       13
<PAGE>
     9.  REFERENCES.  All references in the Credit Agreement to "this Agreement"
shall be deemed to refer to the Credit Agreement as amended hereby;  and any and
all references in the Security Documents to the Credit Agreement shall be deemed
to refer to the Credit Agreement as amended hereby.

     10.  NO OTHER  WAIVER.  Except  as set forth in  Paragraph  5  hereof,  the
execution of this Amendment and acceptance of any documents related hereto shall
not be deemed to be a waiver of any Default,  Event of Default or Default Period
under the  Credit  Agreement  or breach,  default or event of default  under any
Security Document or other document held by the Lender,  whether or not known to
the Lender and whether or not existing on the date of this Amendment.

     11. RELEASE. The Borrower,  and the Guarantor by signing the Acknowledgment
and  Agreement  of  Guarantor  set  forth  below,  each  hereby  absolutely  and
unconditionally  releases  and forever  discharges  the Lender,  and any and all
participants,   parent   corporations,   subsidiary   corporations,   affiliated
corporations,  insurers,  indemnitors,  successors and assigns thereof, together
with all of the present and former directors,  officers, agents and employees of
any of the  foregoing,  from any and all claims,  demands or causes of action of
any  kind,  nature  or  description,  whether  arising  in law or equity or upon
contract  or tort or under  any state or  federal  law or  otherwise,  which the
Borrower or such  Guarantor  has had,  now has or has made claim to have against
any such person for or by reason of any act,  omission,  matter,  cause or thing
whatsoever  arising from the beginning of time to and including the date of this
Amendment,  whether  such  claims,  demands  and causes of action are matured or
unmatured or known or unknown.

     12. COSTS AND EXPENSES.  The Borrower hereby  reaffirms its agreement under
the Credit  Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Loan Documents, including
without  limitation  all  reasonable  fees and  disbursements  of legal counsel.
Without  limiting the  generality of the  foregoing,  the Borrower  specifically
agrees  to pay all fees and  disbursements  of  counsel  to the  Lender  for the
services  performed by such counsel in connection  with the  preparation of this
Amendment and the  documents and  instruments  incidental  hereto.  The Borrower
hereby  agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement,  or apply the proceeds of any loan, for the
purpose of paying any such fees,  disbursements,  costs and expenses and the fee
required under Paragraph 6 hereof.

     13.  MISCELLANEOUS.  This Amendment and the Acknowledgment and Agreement of
Guarantor may be executed in any number of  counterparts,  each of which when so
executed  and   delivered   shall  be  deemed  an  original  and  all  of  which
counterparts, taken together, shall constitute one and the same instrument.

                                       14
<PAGE>
     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
duly executed as of the date first written above.

                                        WELLS FARGO BUSINESS CREDIT, INC.,
                                        a Minnesota corporation

                                        By /s/ Clifton Moschnik
                                           -------------------------------------
                                           Its Vice President

                                        FM PRECISION GOLF MANUFACTURING CORP.,
                                        a Delaware corporation

                                        By /s/ Kevin Neill
                                           -------------------------------------
                                           Its Chief Financial Officer

                                        FM PRECISION GOLF SALES CORP.,
                                        a Delaware corporation

                                        By /s/ Kevin Neill
                                           -------------------------------------
                                           Its Chief Financial Officer

                                       15
<PAGE>
                    ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR

     The  undersigned,  a guarantor of the  indebtedness  of FM  Precision  Golf
Manufacturing   Corp.,  and  FM  Precision  Golf  Sales  Corp.,   each  Delaware
corporations  (collectively,  jointly and severally,  the  "Borrowers") to Wells
Fargo Business Credit,  Inc., (the "Lender")  pursuant to a Guaranty dated as of
October  9,  1998 (the  "Guaranty"),  hereby  (i)  acknowledges  receipt  of the
foregoing  Amendment;  (ii) consents to the terms (including  without limitation
the release set forth in paragraph 11 of the Amendment)  and execution  thereof;
(iii)  reaffirms  its  obligations  to the Lender  pursuant  to the terms of its
Guaranty;  and (iv)  acknowledges  that the Lender may amend,  restate,  extend,
renew or otherwise modify the Credit Agreement and any indebtedness or agreement
of the  Borrower,  or enter into any  agreement  or extend  additional  or other
credit  accommodations,  without  notifying  or  obtaining  the  consent  of the
undersigned  and without  impairing the liability of the  undersigned  under the
Guaranty  for all of the  Borrowers'  present  and  future  indebtedness  to the
Lender.

                                        ROYAL PRECISION, INC.,
                                        a Delaware corporation

                                        By /s/ Kevin Neill
                                           -------------------------------------
                                           Its Chief Financial Officer

                                       16

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