THIRD AMENDMENT TO CREDIT AGREEMENT

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made as of the 21st day of September, 2009, by and among COMPX INTERNATIONAL INC. (the “Borrower”), COMPX SECURITY PRODUCTS INC., COMPX PRECISION SLIDES INC., COMPX MARINE INC., CUSTOM MARINE INC. (f/k/a CUSTOM MARINE ACQUISITION, INC.), LIVORSI MARINE, INC., WACHOVIA BANK, NATIONAL ASSOCIATION (“Wachovia”), as Administrative Agent (in such capacity, the “Administrative Agent”) and a Lender (as defined below), and COMERICA BANK, as a Lender.

The Borrower, the Administrative Agent and the Lenders have entered into a certain Credit Agreement dated as of December 23, 2005, as amended by the First Amendment thereto dated as of October 16, 2007 and the Second Amendment thereto dated as of January 15, 2009 (as so amended, the “Credit Agreement”).  Capitalized terms used in this Amendment that are not otherwise defined in this Amendment shall have the respective meanings assigned to them in the Credit Agreement.  In connection with the Credit Agreement, the Subsidiary Guarantors have executed the Subsidiary Guaranty Agreement in favor of the Administrative Agent, for the ratable benefit of the Administrative Agent and the Lenders.

The Borrower and the Subsidiary Guarantors have requested certain amendments to the Credit Agreement, and, subject to the terms and conditions in this Amendment, the Administrative Agent and the Lenders have agreed to such amendments.

In connection with the extension of the term of the Credit Agreement, the Lenders, the Administrative Agent, the Subsidiary Guarantors and the Borrower desire to amend the Credit Agreement upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of these Recitals and the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Subsidiary Guarantors, the Administrative Agent and the Lenders, intending to be legally bound hereby, agree as follows:

SECTION 1.   Recitals .  The Recitals are incorporated herein by reference and shall be deemed to be a part of this Amendment.

SECTION 2.   Amendments .  The Credit Agreement is hereby amended as set forth in this Section 2 .

(a)            Amendments to Section 1.1 .  Section 1.1 of the Credit Agreement is hereby amended by inserting the following new definitions in appropriate alphabetical order to read in their entirety as follows:

“ “ Borrowing Base ” means, on any date of determination, an amount equal to the sum of (a) 80% of the amount of the Borrower’s Consolidated Accounts Receivable, Net at such time  plus (b) 50% of the value of the Borrower’s Consolidated Raw Material Inventory at such time plus (c) 50% of the value of the Borrower’s Consolidated Finished Goods Inventory at such time plus (d) 100% of the Borrower’s Consolidated Unrestricted Cash and Cash Equivalents at such time, all as determined in accordance with GAAP and as set forth in the Consolidated financial statements of the Borrower most recently delivered to the Administrative Agent pursuant to Section 7.1(a) and (b) or, if dated as of a later date, any Officer’s Compliance Certificate delivered pursuant to Section 7.2; provided , however , that, notwithstanding the foregoing, on and after the Fiscal Quarter ending on or about March 31, 2011, the amount of the Borrowing Base shall at all times be deemed to be at least equal to the Aggregate Commitments (as in effect on any date of determination).

“ Cash Interest Expense ” means, with respect to the Borrower and its Subsidiaries for any period, all cash interest paid on any Debt of the Borrower and its Subsidiaries, all determined for such period on a Consolidated basis, without duplication, in accordance with GAAP.

“ Fiscal Quarter ” means the fiscal quarter of the Borrower and its Subsidiaries.

“ Permitted Distribution Amount ” means, on any date of determination, the lesser of (i) twelve and one-half cents ($0.125) times the number of shares of capital stock of the Borrower issued and outstanding as of the last day of the most recently ended calendar quarter and (ii) the amount that Borrower is permitted to distribute as a dividend or like distribution to its shareholders in respect of its shares of capital stock for such quarter pursuant to Applicable Law, its corporate governing documents and any contractual obligations applicable to it; provided, however, that the aggregate Permitted Distribution Amount shall not in any event exceed $8,000,000 in any calendar year.

“ Restricted Payment ” has the meaning set forth in Section 10.06. ”

(b)            Amendments to Article II .    Article II of the Credit Agreement is hereby amended as follows:

(i)            Amendment to Section 2.1.     By amending and restating Section 2.1 therein to read in its entirety as follows:

“SECTION 2.1                                 Revolving Credit Loans .  Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make Revolving Credit Loans in Dollars to the Borrower from time to time from the Closing Date through, but not including, the Revolving Credit Termination Date as requested by the Borrower, in accordance with the terms of Section 2.4; provided, that, based upon the Dollar Amount of all outstanding Loans and L/C Obligations, immediately after the making of any such Revolving Credit Loans, (a) the aggregate amount of all outstanding Loans and L/C Obligations shall not exceed the lesser of (i) the Borrowing Base and (ii) the Aggregate Commitments and (b) the aggregate principal amount of all outstanding Revolving Credit Loans from any Lender to the Borrower shall not at any time exceed such Lender’s Commitment less such Lender’s Commitment Percentage of the sum of all outstanding Swingline Loans, Alternative Currency Loans and L/C Obligations.  Each Revolving Credit Loan by a Lender shall be in a principal amount equal to such Lender’s Commitment Percentage of the aggregate principal amount of Revolving Credit Loans requested on such occasion.  Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder until the Revolving Credit Termination Date.”

(ii)            Amendment to Section 2.2(a) .   By amending and restating clause (a) of Section 2.2 therein to read in its entirety as follows:

“(a)            Availability .  Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties set forth herein, the Alternative Currency Lender agrees to make Alternative Currency Loans to the Borrower from time to time from the Closing Date through, but not including, the Revolving Credit Termination Date as requested by the Borrower in accordance with the terms of Section 2.4; provided , that, based upon the Dollar Amount of all outstanding Loans and L/C Obligations, immediately after the making of any such Alternative Currency Loans, the aggregate principal amount of all outstanding Alternative Currency Loans shall not exceed the lesser of (i) the Alternative Currency Commitment and (ii) the amount that is (A) the lesser of (x) the Borrowing Base and (y) the Aggregate Commitments, less (B) the sum of the aggregate principal amount of all outstanding Revolving Credit Loans and all outstanding Swingline Loans and L/C Obligations; provided further that the Alternative Currency Lender will not make an Alternative Currency Loan from and after the date which is one (1) day after it has received written notice from the Administrative Agent (upon the request of the Required Lenders) that one or more of the applicable conditions to Extensions of Credit specified in Section 5.3 is not then satisfied until such conditions are satisfied or waived in accordance with the provisions of this Agreement (and the Alternative Currency Lender shall be entitled to conclusively rely on any such notice and shall have no obligation to independently investigate the accuracy of such notice and shall have no liability to the Borrower in respect thereof if such notice proves to be inaccurate).  Alternative Currency Loans shall be funded in an amount equal to the Alternative Currency Amount of such Alternative Currency Loan.  Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Alternative Currency Loans hereunder until the Revolving Credit Termination Date.”

(iii)            Amendment to Section 2.3 .   By amending and restating clauses (a) and (b) of Section 2.3 therein to read in its entirety as follows:

“(a)            Availability .  Subject to the terms and conditions of this Agreement, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time from the Closing Date through, but not including, the Swingline Termination Date; provided , that (i) all Swingline Loans shall be denominated in Dollars and (ii) based upon the Dollar Amount of all outstanding Loans and L/C Obligations, immediately after the making of any such Swingline Loans, the aggregate principal amount of all outstanding Swingline Loans shall not exceed the lesser of (A) the Swingline Commitment and (B) the amount that is (1) the lesser of (x) the Borrowing Base and (y) the Aggregate Commitment less (2) the sum of all outstanding Revolving Credit Loans, Alternative Currency Loans and L/C Obligations; provided further that the Swingline Lender will not make a Swingline Loan from and after the date which is one (1) day after it has received written notice from the Administrative Agent (upon the request of the Required Lenders) that one or more of the applicable conditions to Extensions of Credit specified in Section 5.3 is not then satisfied until such conditions are satisfied or waived in accordance with the provisions of this Agreement (and the Swingline Lender shall be entitled to conclusively rely on any such notice and shall have no obligation to independently investigate the accuracy of such notice and shall have no liability to the Borrower in respect thereof if such notice proves to be inaccurate).

(b)            Sweep Plus Service Program .  On each Business Day, the Administrative Agent shall calculate the Net Cash Position.  If the Net Cash Position is less than zero, then the Borrower shall be deemed to have irrevocably requested that the Swingline Lender make a Swingline Loan to the Borrower in an amount equal to the lesser of (i) an amount, which when rounded up to the nearest $1,000, equals or exceeds the amount of the deficit Net Cash Position and (ii) an amount, which when added to the aggregate principal amount of all outstanding Swingline Loans (after giving effect to any amount requested), shall not exceed the lesser of, based upon the Dollar Amount of all outstanding Loans and L/C Obligations, (A) the amount that is (1) the lesser of (x) the Aggregate Commitment and (y) the Borrowing Base less (2) the sum of all outstanding Revolving Credit Loans, all outstanding Alternative Currency Loans and the L/C Obligations and (B) the Swingline Commitment; provided , however , that the obligation of the Swingline Lender to make any such Swingline Loan to the Borrower shall be subject to all the terms and conditions hereof (including, without limitation, Section 5.3 hereof).”

(iv)            Amendment to Section 2.4(a)(4) .   By amending and restating subclause (4) of Section 2.4(a) therein to read in its entirety as follows:

“(4)           the amount of such borrowing, which shall be in an amount equal to the amount that is the lesser of (x) the Borrowing Base and (y) the Aggregate Commitment or the Alternative Currency Commitment, as applicable, then available to the Borrower, or if less, (A) with respect to Base Rate Loans (other than Swingline Loans), in an aggregate principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof, (B) with respect to LIBOR Rate Loans denominated in Dollars, in an aggregate principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof and (C) with respect to LIBOR Rate Loans denominated in an Alternative Currency, in an aggregate principal Alternative Currency Amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof; and”

(v)            Amendment to Section 2.5(b) .   By amending and restating clause (b) of Section 2.5 therein to read in its entirety as follows:

“(b)            Mandatory Repayment of Revolving Credit Loans .

(i)            Aggregate Commitmen t.  If at any time (as determined by the Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of all outstanding Loans and L/C Obligations, (A) solely because of currency fluctuation, the outstanding principal amount of all Revolving Credit Loans exceeds one hundred and five percent (105%) of the amount equal to (1) the lesser of (x) the Aggregate Commitment and (y) the Borrowing Base less (2) the sum of all outstanding Swingline Loans, Alternative Currency Loans and L/C Obligations or (B) for any other reason, the outstanding principal amount of all Revolving Credit Loans exceeds the amount equal to (1) the lesser of (x) the Aggregate Commitment and (y) the Borrowing Base less (2) the sum of all outstanding Swingline Loans, Alternative Currency Loans and L/C Obligations, then, in each such case, the Borrower shall (I) first, if (and to the extent) necessary to eliminate such excess, immediately repay outstanding Swingline Loans (and/or reduce any pending request for such Loans on such day by the Dollar Amount of such excess), (II) second, if (and to the extent) necessary to eliminate such excess, immediately repay outstanding Revolving Credit Loans which are Base Rate Loans by the Dollar Amount of such excess (and/or reduce any pending request for such Loans on such day by the Dollar Amount of such excess), (III) third, if (and to the extent) necessary to eliminate such excess, immediately repay Revolving Credit Loans which are LIBOR Rate Loans and Alternative Currency Loans (and/or reduce any pending requests for a borrowing or continuation or conversion of such Loans submitted in respect of such Loans on such day by the Dollar Amount of such excess) and (IV) fourth, with respect to any Letters of Credit then outstanding, make a payment of cash collateral into a cash collateral account opened by the Administrative Agent for the benefit of the Lenders in an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit (such cash collateral to be applied in accordance with Section 11.2(b)).

(ii)            Alternative Currency Commitment .  If at any time (as determined by the Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of all outstanding Loans and L/C Obligations, (A) solely because of currency fluctuation, the outstanding principal amount of all Alternative Currency Loans exceeds the lesser of (1) one hundred and five percent (105%) of the amount equal to (x) the lesser of (I) the Aggregate Commitment and (II) the Borrowing Base less (y) the sum of all outstanding Swingline Loans, Revolving Credit Loans and L/C Obligations and (2) one hundred and five percent (105%) of the Alternative Currency Commitment or (B) for any other reason, the outstanding principal amount of all Alternative Currency Loans exceeds the lesser of (1) the amount equal to (x) the lesser of (I) the Aggregate Commitment and (II) the Borrowing Base less (y) the sum of all outstanding Swingline Loans, Revolving Credit Loans and L/C Obligations and (2) the Alternative Currency Commitment, then, in each such case, such excess shall be immediately repaid, in the currency in which such Alternative Currency Loan or Alternative Currency Loans were initially funded, by the Borrower to the Administrative Agent for the account of the Alternative Currency Lender.

(iii)            Swingline Commitment .  If at any time (as determined by the Administrative Agent under Section 2.5(b)(v)), based upon the Dollar Amount of all outstanding Loans and L/C Obligations, and for any reason the outstanding principal amount of all Swingline Loans exceeds the lesser of (A) the amount equal to (1) the lesser of (x) the Aggregate Commitment and (y) the Borrowing Base less (2) the sum of all outstanding Revolving Credit Loans, Alternative Currency Loans and L/C Obligations and (B) the Swingline Commitment, then, in each such case, such excess shall be immediately repaid by the Borrower to the Administrative Agent for the account of the Swingline Lender.

(iv)            Excess L/C Obligations .  If at any time (as determined by the Administrative Agent under Section 2.5(b)(v)) and for any reason, based upon the Dollar Amount of all outstanding Loans and L/C Obligations, the outstanding amount of all L/C Obligations exceeds the lesser of (A) the amount equal to (1) the lesser of (x) the Aggregate Commitment and (y) the Borrowing Base less (2) the sum of the amount of all outstanding Swingline Loans, Revolving Credit Loans and Alternative Currency Loans and (B) the L/C Commitment, then, in each such case, the Borrower shall make a payment of cash collateral into a cash collateral account opened by the Administrative Agent for the benefit of the Lenders in an amount equal