<PAGE>
                                  EXHIBIT 10.9


AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT                     PAGES
                                                                       OF PAGES
                                                                       1 of 21

1. CONTRACT ID CODE

2. AMENDMENT/MODIFICATION NO.                      3. EFFECTIVE DATE
   POOOO 16                                           May 1, 2001

4. REQUISITION/PURCHASE RED. NO.                   5. PROJECT NO.

6. ISSUED BY
DEFENSE SUPPLY CENTER, PHILADELPHIA
700 ROBBINS AVENUE
PHILADELPHIA, PA 19111
MARY MARKER, DSCP-CRFA (215) 737-5825

7. ADMINISTERED BY (If other than Item & 6)

DCMD, ATLANTA              CODE: S11031
805 WALKER STREET
MARIETTA, GA 30060

8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and Zip Code)

MC RAE INDUSTRIES, INC.
P.O. BOX 1239
MT. GILEAD, N.C. 27306

CODE: 3A059               FACILITY CODE


[X]     9A.    ADMENDMENT OF SOLICITATION NO.

        9B.    DATED (See ITEM 11)

[X]    10A.    MODIFICATION OF CONTRACT/ORDER NO.
               SPO 100-97-D-0326
       10B.    DATED (SEE ITEM 13)
               15 APRIL 1997

11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS

The above numbered solicitation is amended as set forth in Item 14. The hour
and date specified for receipt of Offers [ ] is extended [ ] is not extended

Offer must acknowledge receipt, of this amendment prior to the hour and date
specified in the solicitation or as amended, by one of the following methods:

(a) By completing Items 8 and 15, and returning ____ copies of the amendment;
(b) By acknowledging receipt of this amendment an each copy of the offer
submitted; or (c) By separate letter or telegram which includes a reference to
the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE
RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR
AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. It by virtue of this
amendment you desire to change an offer already submitted, such change may he
made by telegram or letter, provided each telegram or letter makes reference to
the solicitation and this amendment, and is received prior to the opening hour
and date specified.

12. Accounting and Appropriation Data (If required) ___________________________
ITEM: BOOTS, VARIOUS TYPES                TG: 97X4930.5CT0 01 26.0 S33150

13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.

[X] A.   THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE
         CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN
         ITEM 10A.

    B.   THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE
         ADMINISTRATIVE CHANGES (such as changes in paying office,
         appropriation data, etc). SET FORTH IN ITEM 14, PURSUANT TO THE
         AUTHORITY OF FAR 43.103(b).

X   C.   THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
         MUTUAL AGREEMENT OF PARTIES - IMPLEMENTATION OF BILL AND HOLD

    D.   OTHER (Specify type of modification and authority)

    E.   IMPORTANT:    Contractor [ ] is not
                       [X] is required m sign this document and return
                       1 copies to the issuing office

14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UFC section headings,
including solicitation/contract subject matter where feasible.)

See the following Pages 1A thru 21


Except as provided herein, all terms and conditions of the document referenced
in Item 9A or 10A, as heretofore changed, remains unchanged and in full force
and effect.


                                                                             53
<PAGE>


15A. NAME AND TITLE OF SIGNER (Type or print)

Victor A. Karam        President                4/26/01

15B. CONTRACTOR/OFFICER                     15C. DATE SIGNED
                                                 4-26-01


16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)

SCOTT REIFSNYDER

16B. UNITED STATES OF AMERICA               16C. DATE SIGNED
                                                 5-1-01

BY:

(SIGNATURE OF CONTRACTING OFFICER)

NSN 7540-01-152-9070
PREVIOUS EDITION UNUSABLE
PERFORM (DL A1
STANDARD FORM 30 (REV. 1083)
Prescribeb by GSA
FAR (48 CFR) 53.243


                                                                             54
<PAGE>


SPO100-97-D-0326                                            Page 1A
McRae Industries, Inc.                                      Modification P00016



A.       In lieu of Depot/DVD initiatives stated in the contract, the
contractor shall begin a Bill and Hold initiative as outlined in the attached
Statement of Work. The target effective date for the processing of MRO's under
Bill and Hold is on or around I June 2001.

B.       Under Bill and Hold the Government will issue a Delivery Order and the
contractor will produce the item and "ship it into inventory" in their own
storage facility. All shipments under this contract, unless otherwise directed,
shall be made directly to the contractor's storage facility. Upon Inspection
and Acceptance by the Government QAR, shipment shall be made to the storage
facility. The RIC Code shall be SEJ and the DODAAC shall be SC0106.

C.       The address of the contractor's storage facility is as follows:

                  McRae Footwear Distribution Warehouse Facility
                  1737 Highway 24/27 West
                  Troy, NC 27271

D.       Once shipment is made, receipt shall be posted in the automated system
via a material receipt (D4S) transaction. The D4S will post the stock on DSCP's
records against the contractor's RIC code. See Appendix B-20, Material Receipt
Transaction, Page 18 of this modification.

E.       As requisitions are received from customers, a material release order
will be sent to the contractor. This transaction will outline the stock number,
quantity and location to ship. See Appendix B-7, Material Release Order/MRO
Transmittal Data Document, Page 16 of this modification.

F.       The Government will begin to issue MROS on or around 1 June 2001.

G.       Delivery Orders will be issued at intervals throughout the effective
period of the contract and will reflect sizes/quantities necessary to satisfy
the Government's requirements. Production Leadtime for the Delivery Orders
shall be 60 days.

H.       When stock is shipped from storage, the contractor will send a
material release confirmation (ARO) transaction to DSCP, which will post the
shipment to DSCP's record See Appendix B-14, Material Release/Redistribution
Order Confirmation Document, Page 21 of this modification.

I.       The software package DAMES (DAASC Automated Message Exchange System)
shall be provided to the contractor from Defense Automatic Addressing System
Center, Wright Patterson AFB) at no cost to support these transactions. The
DAMES package can be requested by contacting Wilma Blackman (937) 656-3788.


                                                                             55
<PAGE>


SPOI00-97-D-0326                                            Page 1B
McRae Industries, Inc.                                      Modification P00016

J.       The transportation costs as outlined in the contract that are included
in the present contract prices shall be removed and the Transportation
Reconciliation Clause will no longer apply as it is currently stated in the
contract. The transportation costs associated with the contractor's MRO
shipments will be invoiced in accordance with Section 3.4.10 of the Statement
of Work, Transportation Costs. In accordance with SUBJECT SECTION, MRO
TRANSACTION CLIN WILL BE ESTABLISHED ON DELIVERY ORDERS as follows:

         CLIN 9999AA MRO Transportation

K.       As a result of the above the unit prices under subject contract are
hereby changed as follows:


<TABLE>
<CAPTION>
                            CURRENT             DECREASE                BILLABLE
ITEM                        PRICE               (-TRANS COST)           PRICE*
----                        -----               -------------           ------

<S>                         <C>                 <C>                      <C>
Boot, Hot Weather           $60.0362            $1.25                    $58.7862
Boot, Desert Tan            $60.5305            $1.25                    $59.2805
Boot, Combat                $69.6977            $1.25                    $68.4477
</TABLE>

*        This is the billable price which will appear on the DD 250'S. The MRO
transportation cost of $1.25 per unit will be billed on a monthly basis as a
separate line item after units are shipped to customers (MRO shipments).

L.       Due to the fact that we are changing the mode of operation hereunder,
under the Vendor Enhanced Storage Concept, contractor is entitled to
Distribution Fee for that quantity stored under Delivery Order 0001. Funds will
be obligated via a modification to an existing Delivery Order to reimburse
contractor the Distribution Fee minus Transportation Costs for the entire VEST
quantity.

         $3.2963 (Dist Fee) - $1.25 (Trans Cost) -- $2.0453 x 29,332 Pair
         (VEST qty) - $60,022.07

M.       Reference Page 64 of the solicitation portion of above cited contract
- Transportation Cost Reconciliation (DVD). This clause is hereby deleted for
the Bill and Hold Portion of subject contract and the following clause is
hereby substituted:

TRANSPORTATION COST RECONCILIATION (BILL AND HOLD): In accordance with
Paragraph 3.4.10 Transportation Costs of the Bill and Hold Statement of Work,
$1.25 per pair has been established for Contractor's monthly invoicing for the
MRO "Transportation Cost on the actual number of MRO units shipped during the
previous month (Clin 9999AA). It is agreed that this amount will be adjusted on
a quarterly basis utilizing the actual transportation costs experienced and
documented by the contractor and reported to the Administrative Contracting
Officer on a quarterly basis. The Administrative Contracting Officer shall make
the necessary adjustment no later than fifteen (15) days after the receipt of
the contractor's quarterly transportation report.

N.       All other terms and conditions rernain the same.

O.       This document contains the complete agreement of the parties. There
are no collateral agreements, reservations, or understandings other than
expressly set forth herein. It is agreed that no subsequent modification of
this agreement shall be binding unless reduced to writing and signed by both
parties.



                                                                             56
<PAGE>


SP0100-97-D-0326                                            Page 2
McRae Industries, Inc.                                      Modification P00016

                   BILL AND HOLD STATEMENT OF WORK - PREFACE

Under Bill and Hold, the contractor will receive a Delivery Order with specific
items and quantities and a schedule of shipments that the contractor will make
directly to their own storage facility. The contractor produces the items
according to schedule, and upon Inspection and Acceptance by the Government
QAR, shipment shall be made to the contractor's own storage facility. All
Delivery Order shipments under this contract, unless otherwise directed, shall
be made directly to the contractor's own storage facility.

The contractor is required to send and receive electronic transactions, using
various transaction Document Identifier Codes (DICs) in specific 80 card column
formats, through the DAMES software (see below) to and from DSCP's automated
system SAMMS.

Once a shipment has been placed into inventory (received) at the contractor's
storage facility, SAMMS receipt transactions (DI( D4S) shall be transmitted by
the contractor (via DAMES) to DSCP. The D4S transactions will post the stock to
the National Inventory Record (NIR) against the contractor's Routing Identifier
Code (RIC, to be assigned to the Bill & Hold contractor). Attachment 3,
Materiel Receipt Transaction, which follows the Bill and Hold Statement of
Work, details the 80 card column file layout for this transaction.

At this point, the contractor can invoice the Payment Office for payment using
a DD Form 250.

The customer submits their order to DSCP in the form of a requisition
(typically an AOA transaction). SAMMS in turn generates Materiel Release Order
(MRO, typically an A5A transaction) to the Bill & Hold contractor ordering
shipment to the customer. This transaction will outline the stock number,
quantity, and customer's address. Attachment 1, Materiel Release Order
Document, which follows the Bill and Hold Statement of Work, details the file
layout for this transaction.

In addition, the contractor may be required to ship materiel to a wholesale
distribution facility (depot site) upon receipt of a Redistribution Order (RDO,
an A2A transaction). Attachment 5, Redistribution Order, which follows the Bill
and Hold Statement of Work, details the 80 card column file layout for this
transaction.

The Government can begin to issue Materiel Release Orders and/or Redistribution
Orders to the Bill and Hold contractor immediately upon receipt of the first
shipment (posting of the first shipment to the NIR).

A MRO is a line of data, in 80 card column format, such as the following:

         1        2         3         4         5        6         7         8

<TABLE>
<S>                                                             <C>
12345678901234567890123456789012345678901234567890123456789012345678901234567890
----------------------------------------------------------------------------------
A5ASGZS8405014500074 EA00001W814A291070001NSC0109BXP            7536421S9TAA 0000324
</TABLE>

Important fields:

<TABLE>
<S>                             <C>
1-3       A5A                   Document Identifier Code. Identifies the transaction as a MRO.
4-5       SGZ                   Routing Identifier Code. Three digit code that electronically routes the transaction to the
                                Bill & Hold contractor.

8-20      8405014500074         National Stock Number (NSN) of the item ordered.
23-24     EA                    Unit of Issue code corresponding to the NSN.

25-29 00001                     Quantity being ordered.
30-43                           W814A291070001 Requisition Number
                                (also referred to as the Document
                                Number). Positions 30 through 35
                                indicate the customer's six digit
                                DoDAAC, or Department of Defense
                                Activity Address Code.

45-50 SCO109                    Supplementary Address (also a DoDAAC).
51        B                     Signal Code. If a Signal Code is A, B, C, or D, ship to the requisitioner (DaDAAC in first
                                six digits of the requisition number, which is card columns 30-35). If the Signal Code is J,
                                K, L, or M, ship to the Supplementary Address (DoDAAC in card columns 45-50).
60-61     15                    Priority Code. Indicates the urgency of the customer's order. The lower the number, the
</TABLE>


                                                                             57
<PAGE>


SP0100-97-D-0326                                            PAGE 3
McRae Industries, Inc.                                      Modification P00016


<TABLE>
<S>                             <C>
                                more urgently the order is needed.
62-64    364                    Required Delivery Date. The julian date by which the customer requires delivery of the
                                item(s).
</TABLE>

Note that on the MRO Transmittal Document the customer will have sometimes
filled in the Standard Unit Prices for the item in col. 74-80. These prices are
not the same as the contract prices and do not affect the prices under the
contract.

Upon receipt of the MRO or RDO, the Bill and Hold contractor pulls the order
quantity from inventory and ships to the customer or other distribution
facility (the second type of delivery on this contract). A packing slip is used
with this type of shipment, not a DD 250. A set transportation cost will be
used as set forth in the contract, and the set shipping costs will be
reconciled against actual costs on a quarterly basis.

Immediately after the stock is shipped from storage, the contractor will
electronically send a materiel release confirmation, ARO transaction, to DSCP,
which will post the shipment to DSCP's records. Attachment 2, Materiel
Release/Redistribution Order Confirmation Document, which follows the Bill and
Hold Statement of Work, details the file layout for this transaction.

The current software package that enables the contractor to send/receive these
three transactions is called DAMES (DAASC Automated Message Exchange System).
It will be provided to the awardee (from Defense Automated Addressing System
Center located at Wright Patterson AFB, OH) at no cost to allow the electronic
exchange of these transactions.

Any transportation costs involved with shipping the items to the contractor's
own storage facility should be included in the item's unit price based on FOB
Destination. The transportation costs associated with the contractor's MRO
shipments to customers will be invoiced and paid in accordance with Section
3.4.10 of the Statement of Work, Transportation Costs.

The award unit prices are the billable prices which will appear on the DD250s.
The MRO transportation costs will be billed weekly or monthly as a separate
line item only after units are shipped to customers (MRO shipments).


                                                                             58
<PAGE>


SP0100-97-D-0326                                            PAGE 4
McRae Industries, Inc,                                      Modification P00016

                                 BILL AND HOLD
                               STATEMENT OF WORK

1.       GENERAL OVERVIEW

1.1      SCOPE OF WORK. This Statement of Work (SOW) establishes the scope of
work and accountability for the Bill and Hold initiative with the Defense
Supply Center Philadelphia (DSCP) Clothing and Textiles Directorate. It
describes facilities, personnel, and equipment that shall be used in the
performance of this contract, as well as the Government's expected performance
or work. The contractor shall furnish all facilities, personnel, supervision,
equipment, tools, supplies, services, and materials required to perform the
work outlined herein.

1.2      GOVERNMENT EXPECTATIONS. The Contractor shall ship Delivery Order
requirements as designated in the contract to their own storage facility. The
Contractor shall provide for warehouse materiel handling, storage, packaging,
and distribution of the stored supplies. The contractor shall utilize a
warehouse facility that conforms to commercially acceptable standards. Upon
receipt of automated, written or authorized verbal Materiel Release Order (MRO)
or Redistribution Order (RDO), the contractor shall determine availability;
verify quantity, nomenclature, unit of issue; and process the MRO or RDO for
shipment of materiel to the DSCP customer o wholesale distribution facility.
The Contractor shall store, stack and palletize items considering package size,
shape, weight, quantity, and potential for degradation in storage. The
Contractor shall ensure that items are properly packed, marked, tagged, and
labeled for shipment to various locations worldwide. The Contractor shall
report status of available items, receipts (customer returns), and outbound
shipment status on a daily basis into an automated system. Warehousing and
distribution procedures shall be performed at a level of competency and
responsibility which will require minimum Government direction.

         DISTRIBUTION SITE                            STORAGE FACILITY
         FILL-IN
         -------------------------                    -------------------------

1.3      PERSONNEL. The Contractor shall provide all of the necessary, fully
qualified personnel required to accomplish all contract work within the
timeframes established in this SOW. The Contractor shall provide a Contract
Manager and an alternate who shall be responsible to oversee contract
performance and shall act as the point of contact with the Government. The
names, titles, and telephone numbers of the Contract Manager and alternate
shall be designated in writing to the PCO within a eek after this contract
award/modification. The Contract Manager or alternate shall be available during
normal operating hours s specified in Section 1.4.1 for telephonic or personal
contact with the PCO. The contractor shall notify the PCO within 48 hours of
any changes to the Contract Manager or alternate. Written notification should
follow the verbal notification within 7 business days.

1.4      HOURS OF OPERATION

         1.4.1    NORMAL OPERATING HOURS. The Contractor is required to provide
all of the services under this contract during the Contractor's normal
operating hours, except for National holidays as specified below. Normal
operating hours shall be at least 40 hours per week, 8 hours per day, and shall
be consecutive hours between the time period of 6:00 A.M. through 5:30 P.M.
Where National holidays listed below are not observed by the Contractor and
business is transacted with the general public, such shall be considered normal
operating days.

                   New Year's Day       Martin Luther King's Birthday
                   President's Day      Memorial Day
                   Independence Day     Labor Day
                   Columbus Day         Veteran's Day
                   Thanksgiving Day     Christmas Day

         1.4.2    EMERGENCIES/MOBILIZATION. During emergency situations and/or
military mobilization situations, the Contractor may be required to provide
services beyond their normal operating hours, on weekends and holidays. The
Contractor must receive authorization from the PCO prior to providing this
service. Extra services provided without PCO authorization shall be the
responsibility of the Contractor and will not be reimbursed.


                                                                             59
<PAGE>


SP0100-97-D-0326                                            PAGE 5
McRae Industries, Inc.                                      Modification P00016

1.5      CONFLICT OF INTEREST. The Contractor shall not employ any employee of
the United States Government or the Department of Defense, either military or
civilian, if such employment would create a conflict of interest. The
Contractor shall not employ any person who is an employee of the Department of
Defense unless such person receives prior approval in writing from the PCO.

1.6      DISCLOSURE OF INFORMATION

         1.6.1    AUTHORITY TO DISCLOSE INFORMATION. Performance under this
contract may require the Contractor to access data and information proprietary
to a Government Agency or of such nature that its dissemination or use other
than as specified in this work statement would be adverse to the interests of
the Government or others. Neither the Contractor, nor contractor personnel,
shall divulge or release data or information developed or obtained under this
work statement or obtained during the performance of the contract, except to
authorized Government personnel or upon written approval of the PCO. The
Contractor shall not use, disclose, or reproduce proprietary data which bears a
restrictive legend, other than as specified in this work statement.

         1.6.2    INQUIRIES. The Contractor shall direct to the PCO all
inquiries, comments, or complaints arising from matters observed, experienced
or learned as a result of, or in connection with the performance of this
contract, when the resolution of such may require the dissemination of official
information.

         1.6.3    FREEDOM OF INFORMATION ACT (FOIA). Inquiries received by the
Contractor for work performed under this contract shall be referred to the
Government for evaluation under the Freedom of Information Act of 1975, Public
Law 93-5-2, 5 U.S.C., Section 552. The determination of whether, records will
be released will remain with the PCO. The Contractor shall be responsible for
search and submission of records upon request by the Government.

2.       DEFINITION OF TERMS

2.1      ADMINISTRATIVE CONTRACTING OFFICER (ACO): A Government Contracting
Officer located at a contract administration office who is assigned the
responsibility for the administration of Government contracts and having the
authority, only as delegated by the Contracting Officer, to bind the Government
contractually, either verbally or in writing, or to enforce and! make changes
to the contract terms and conditions.

2.2      BUSINESS DAY: A 24 hour period, from Monday through Friday, excluding
weekends and National holidays as specified in Section 1.4.1.

2.3      CONTRACTING OFFICER (KO) OR PROCUREMENT CONTRACTING OFFICER (PCO): A
Government official having the sole authority to bind the Government
contractually, either verbally or in writing, to enforce and make changes to
the contract terms and conditions.

2.4      CONTRACTING OFFICER'S REPRESENTATIVE (COR): An individual designated
in writing by the Contracting office to perform specific contract
administration functions. This individual has no authority to enter into or
change existing U.S. Government contracts.

2.5      CONTRACTOR: An entity in private industry which enters into contract
with the Government to provide goods or services.

2.6      CONTRACTOR FURNISHED PROPERTY (CFP): Standard items hardware,
electrical equipment, and other standard production or commercial items
furnished by a prime contractor as materiel required to perform the contract.

2.7      DEFECT: Any nonconformance of a unit of service with specified
requirements.

2.8      DISCREPANCY IN SHIPMENT REPORT (DISREP), SF 361: A Standard Form used
to report shipping discrepancies.


                                                                             60
<PAGE>


SP0100-97-D-0026                                            PAGE 6
McRae Industries, Inc.                                      Modification P00016

2.9      CLOTHING & TEXTILES' EMERGENCY SUPPLY OPERATIONS CENTER (ESOC): An
organization within the Defense Supply Center Philadelphia which provides
heightened management of high priority requisitions.

2.10     FISCAL YEAR (FY): A U.S. Government year which begins 1 October and
ends 30 September (12 months).

2.11     GOVERNMENT OWNED PROPERTY (GOP): All equipment, goods, and land
possessed by the Government and, subsequently, delivered or otherwise made
available to the contractor.

2.12     ISSUE PRIORITY DESIGNATOR (IPD): A two digit numeric code which
indicates the priority for handling materiel based on the mission and need of
the requiring activity. The IPD is a subset of IPG. See definition of
"PRIORITY" below.

2.13     ISSUE PRIORITY GROUP (IPG): A one digit numeric code (1,2,or 3) which
indicates priority for handling materiel based on mission and need of the
requiring activity.

2.14     MATERIEL ACQUISITION UNIT COST (MAUC): The average acquisition cost of
a National Stock Numbered (NSN) item in the Standard Automated Materiel
Management System's (SAMMS) Supply Control File.

2.15     MATERIEL INSPECTION AND RECEIVING REPORT, FORM DD250: A multi-purpose
Department of Defense form which serves as evidence of inspection and
acceptance, a shipping document, a contractor release, and/or contractor
invoice.

2.16     MATERIEL RELEASE ORDER (MRO): An order issued by an accountable supply
system manager directing a distribution activity (in this case, the Bill & Hold
contractor) to release and ship materiel to a DSCP customer.

2.17     NATIONAL STOCK NUMBER (NSN): The Government stock number which
identifies a particular item type and size. Equivalent to a model number or SKU
number in commercial items.

2.18     PERFORMANCE INDICATOR: A characteristic of an output of a work process
that can be measured.

2.19     PILFERABLE ITEM: Items which are vulnerable to theft because of their
ready resale potential.

2.20     PRIORITY: A customer's Issue Priority Designator (IPD: the two digit
numeric found in card columns 60 through 61 of standard 80 card column
requisition document) and RDD most affect delivery of an order. Issue Priority
Designators can range from 01 through 15. An Issue Priority Designator (IPD) 01
identifies the highest priority order. An IPD of 15 identifies the lower
priority order. Contractors should consult the Statement of Work for the
delivery time frames associated with a specific Issue Priority Designator (IPD)

2.21     PROJECT CODES: This is a 3 digit alphanumeric code such as 9BU or 9FF
found in card columns 67 through 59 of standard 80 card column requisition
document. Project Codes are assigned by the military services or Defense
Logistics Ager (DLA) to identify specific programs or purposes for which
materiel is required. A requisition document with a Project Code, a high issue
priority designator (IPD), and an RDD should be processed before any other
order. A requisition document with a Project Code but no RDD should be
processed in accordance with the IPD.

2.22     QUALITY ASSURANCE: Those actions taken by the Government to assure
that the quality of purchased goods and services received are acceptable in
accordance with established standards and requirements of the contract.

2.23     QUALITY ASSURANCE PLAN: A written document used by the Government for
quality assurance surveillance. The document contains specific methods to
perform surveillance of the Contractor's performance.

2.24     QUALITY ASSURANCE REPRESENTATIVE (QAR): A Government representative
responsible for performing surveillance and inspection of Contractor
performance.

2.25     QUALITY CONTROL: Those actions taken by the Contractor to control the
production of goods or services so that the meet the requirements of the
contract.


                                                                             61
<PAGE>


SP0100-97-D-0326                                            PAGE 7
McRae Industries, Inc.                                      Modification P00016

2.26     REDISTRIBUTION ORDER (RDO): An order issued by an accountable supply
system manager directing a distribution activity (in this case, the Bill & Hold
contractor) to release and ship materiel to another DSCP wholesale distribution
facility.

2.27     REQUIRED DELIVERY DATE (RDD): A Julian date in card-columns 62 through
64 of a standard 80 card column requisition document identifies the julian date
the ordering activity needs the item delivered. A 777, 999, N01, N02, or N03 in
these card columns indicates that the customer has authorized air shipment. On
very large and costly bulk orders for which the ordering activity has
authorized air shipment, contractors should verify the requirement with DSCP
prior to taking action.

2.28     STATEMENT OF WORK (SOW): Contains the full description of services to
be provided by the contractor under this contract in addition to providing the
required supplies and the terms and conditions of the contract.

2.29     TRANSPORTATION DISCREPANCY REPORT, FORM SF361 : A standard form used
by a customer to report to an accountable supply system manager discrepancies
in shipments/transportation.

3.       CONTRACTOR TASKS

3.1      GENERAL. After manufacturing the item in accordance with the
specification or commercial item description and the contract, the Contractor
shall provide for warehouse materiel handling, storage, packaging, and
distribution of the manufactured suppliesin support of the Defense Supply
Center Philadelphia (DSCP) in accordance with this statement of work. Normal
operating hours are listed in Section 1.4.1. After manufacturing the item, the
Contractor shall perform the following major activities:

-        RECEIVE SHIPMENT

-        STORE MATERIEL

-        SHIP MATERIEL RELEASE ORDERS TO NUMEROUS LOCATIONS

-        SHIP REDISTRIBUTION ORDERS TO VARIOUS LOCATIONS

-        PROCESS EMERGENCY ORDERS

-        PERFORM ADMINISTRATIVE FUNCTIONS

-        PREPARE AND SUBMIT REQUIRED REPORTS

-        PERFORM SCHEDULED AND REQUESTED INVENTORIES

3.2      RECEIPT OF SHIPMENT INTO STORAGE

         3.2.1    GENERAL. The Contractor shall make shipments as required to
their own storage facility after the manufactured items have been inspected and
accepted by the Government QAR. Once accepted and approved for `shipment', the
Contractor shall notify DSCP of 'receipt' of the inventory through the
automated system. This is accomplished by transmitting D4S transactions via
DAMES to DSCP as outlined in the attached Attachment 3.

         3.2.2    PROCESSING RECEIVING REPORTS AND RELATED DOCUMENTATION.
Timely and efficient receipt processing is critical to maintaining accurate
inventory records. The Contractor shall process all receiving reports the same
day they place the 'received' materiel into inventory at their storage
facility. The Contractor shall maintain appropriate management control over
receipt procedures to maintain the integrity of inventory. The Contractor shall
process all receipts in accordance with the Document Identifier Codes (DIC)
provided in the attached Appendix A-13.


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         3.2.3    CONTRACTOR RECORDS RETENTION. The Contractor shall make
available books, records, documents, and other supporting evidence to satisfy
contract negotiation, administration, and audit requirements of the contract
unless specified otherwise for certain records. Copies of the shipment DD250s
shall be maintained IAW this paragraph and furnished to the PCO within one
business day via facsimile.

3.3      STORAGE OF MATERIAL

         3.3.1    GENERAL. The Contractor shall store Government-owned materiel
received from Delivery Order shipments under the manufacturing portion of the
contract in Contractor furnished storage facilities. While in inventory, all
Government owned materiel shall be maintained in appropriate condition and
accurately tracked.

         3.3.2    STORAGE OF RECEIVED GOODS. The Contractor's storage facility
must accomplish efficient space utilization, safeguard Government Owned
Property, and allow Government access for surveillance and inspection. The
contractor is required to store inventory in such a way that First-In/First-Out
procedures are followed and the oldest stock is utilized first.

         3.3.3    SECURITY OF ITEMS. The Contractor shall develop and maintain
procedures to assure security of Government-owned materiel.

         3.3.4    INVENTORY RECONCILIATION. The Contractor shall electronically
provide a quarterly inventory report, by NSN, to the PCO (in spreadsheet or
text file format) which will be used to reconcile any differences in inventory
balances between DSCP and the Bill & Hold contractor's records. The contractor
shall be required to advise DSCP of the quantity per NSN being held in
inventory at their facility, as of the established inventory cutoff date, less
any outstanding MRO/RDO quantities (any MROs or RDOs received but not actually
pulled from inventory as of the cutoff date). The QAR is to verify the accuracy
of the listing and conduct occasional spot checks, via a random sampling of
NSNs.

3.4      SHIPMENT OF MATERIEL RELEASE ORDERS AND REDISTRIBUTION ORDERS

         3.4.1    GENERAL. The Contractor is responsible for preparing orders
for shipment authorized by the Government through the automated computer system
(A5_ or A2A transaction, see attachments 1 & 5) or by written shipping order,
in the exact stock number (NSN) and quantity, not to exceed the quantity
indicated by the MRO or RDO. The Contractor must also coordinate, as necessary,
with carriers for pickup and shipment of materiel to fulfill MROs or RDOs. The
Contractor shall be assessed additional transportation and related charges for
material shipped erroneously. When the Contractor uses an inappropriate mode of
shipment or carrier that results in extra cost to the Government, the
Contractor shall be assessed the additional costs. The Contractor shall
determine the type of over-packing, packaging, and labeling requirements for
materiel destined for shipment in accordance with the best commercial practices
for less than full carton shipments. Mode of shipment will be established
according to requisition priority. Once the MRO is shipped, the contractor
shall notify DSCP of shipment via the automated system. This is accomplished by
generating an AR0 transaction as outlined in attached Attachment 2. ***PLEASE
NOTE: In addition to A5_ or A2A transactions, Contractor may receive
transactions with document identifier codes such as AC_ or AF6. These documents
are NOT MROs or RDOs. AC _ documents are cancellations of MROs or RDOs and
shipment processing should be stopped immediately, if possible. AF6 documents
are a followup from DSCP requesting shipment status. These documents usually
mean that there is a problem with the ARO (shipment confirmation) transmission.
The Contractor should review the ARO input, make necessary corrections, and
resubmit the document.

         3.4.2    FREIGHT SHIPMENT MODE. The Contractor shall use the most
economical means to meet the required Receipt Date. (See 3.6). The Contractor
should consider combining shipments to same location to save shipping costs.

         3.4.3    ADMINISTRATIVE CONTROLS. The Contractor should maintain a
reference library covering mandated requirements for packing, packaging,
documenting, and transporting material via U.S. Postal Service, etc,, truck,
water surface, or air to destinations worldwide. The Contractor should also
maintain a liaison with various shipping organizations to ensure materiel is
properly described, labeled, and packed to meet varying modes of
transportation.

         3.4.4    PROCESSING. Contractor personnel shall compare documentation
with the material to determine packing, marking, and labeling requirements,
based upon who and where the customer is, the nature and quantity of the
material, the mode of shipment, and other factors. Plan resources/material to
maximize consolidation of freight with shipping activity schedule. Establish
procedures for the construction/acquisition of appropriate sized skid bases,
plywood boxes, crates, v boards, cap and pallet boards, etc.


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McRae Industries, Inc.                                      Modification P00016


         3.4.5    PACKING/PACKAGING/LABELING REQUIREMENTS. The Contractor will
use the best commercial practice for Packing, Packaging, and Labeling
requirements for contiguous United States shipments. When directed, the
Contractor will use Military Standard MIL-STD-129, Marking For Shipment and
Storage (Parts 1-4) as the document to ascertain Packing, Packaging, and
Labeling requirements. Assemble, construct, and pack material into crates,
boxes, skids, and pallets, as appropriate. Apply stencil markings, labels,
strapping, stretch wrap, block/brace, as appropriate. Determine pieces, weight
and: cube, and process completed documentation. For the marking requirements of
overseas shipments, please see Paragraph 3.4 below.

Refer to clause 52.247-9007, Additional Bar Coding Requirements for Contractor
or Vendor-Originated Shipments, located in the solicitation/contract, for
bar-coding requirements on packages.

Attached to each packing list, the contractor shall provide "Instructions" to
customers of action to take if not satisfied with products received [e.g.
One-for-One Replacement Warranty applies. Problems with your order? Call us at
(insert contractor's name and phone number).]. After award, contractor is to
submit to DSCP a sample of these "Instructions" for review and approval by the
PCO.

         3.4.6    DOCUMENTATION. Complete and accurate documentation of the
processing of materiel shipments is necessary to verify Contractor work.
Documentation will generate complete history files and fulfill communication
requirements imposed by the Government supply system. Documentation shall be
maintained three years beyond the contract period.

         3.4.7    ACCOUNTABILITY FOR ALL SHIPMENTS AND SHIPMENT DOCUMENTATION.
The Contractor is responsible for verifying all lines shipped, including lines
shipped by freight and small package carrier. The Contractor shall confirm all
shipments made via AR0 transaction) within two business days of the actual
consignment date. The Contractor will be responsible to provide tracer
information to DSCP when requested.

         3.4.8    BEARER PICK-UP. In very few cases, a customer may need to
physically pick up materiel directly from the Contractor facility. In this
event, the Government will notify the Contractor as soon as possible of this
requirement and provide all pertinent information.

         3.4.9    ADDRESSES FOR SHIPMENT.

DODAAC. A DoDAAC is a six digit alpha/numeric code that translates to an
address. MRO positions 30 through 35 indicate the requisitioning activity's
DoDAAC. If a Signal Code in column 51 is A, B, C, or D then the item is to be
shipped to the DoDAAC is the requisition (positions 30-35). If the Signal Code
is J, K, L, or M then the item is to be shipped to the DODAAC in the
Supplementary Address (positions 45-50).

The internet web site http://davnt6.daas.dla.mil/dodaac/dodaac.htm should be
used to translate the DoDAAC into a shipping address. After entering the
DoDAAC, a page will list up to three Type of Address Codes JAC), TAC 1
indicates the mailing address. TAC 2 indicates the shipping address. TAC 3
indicates the billing address (which will never be used by ,_a Bill and Hold
contractor). Generally the TAC 2 address should be used. If a shipment is LESS
THAN 30 POUNDS, you can use the TAC 1 MAILING address in lieu of the TAC 2
SHIPPING address cited in the above DODAAC web site. If there is no TAC 2
address, ship to the TAC 1 address.

The first letter of a DoDAAC can be used as a quick reference guide to the
military service ordering the item. W identifies an Army activity. F identifies
an Air Force activity. M identifies a Marine Corps activity. N, R, and V
identify Navy activities (R & V being ships). H identifies Army/Air Force
Exchange Stores. These are our most common customers. B, D, P, K, and T
identify Foreign Military Service (FMS) customers ordering through the Military
Assistance Program (MAP). Contractors should contact the Emergency Supply
Operations Center (ESOC) at (215) 737-9146 and request agent ID # 4023 for
translation of FMS DoDAACs into a shipping address.

OVERSEAS SHIPMENTS: On orders that require delivery to overseas locations, the
contractor has the option of either shipping direct or shipping through a
consolidation point. To ship direct, a contractor must have: 1) the capability
to ship internationally, a TAC 2 address, 3) a point of contact at the delivery
destination (such as Transportation Officer or a


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McRae Industries, Inc,                                      Modification P00016


more specific title/name), and 4) a commercial phone number. Not all Department
of Defense Activity Address Codes (DoDAACs) provide this information.

EXCEPTION: DoDAACs starting with N, V, or R may cite other shipping
instructions on the web site, especially when the customer is a ship.

CONSOLIDATION POINTS for overseas shipments:

         SHIPMENTS TO ALL PACIFIC REGION DESTINATIONS:

                  XU Defense Distribution Region West
                  Distribution Depot San Joaquin
                  Consolidation and Containerization Point Bldg. 208
                  French Camp, CA 95231-0001

         SHIPMENTS TO NON-PACIFIC DESTINATIONS (INCLUDING PANAMA):

         ARMY & AIR FORCE CUSTOMERS ONLY:

                                       Consolidation and Containerization Point
                                                 DDSP - New Cumberland Facility
                                                  Building CCPOINT Door 135-168
                                                  New Cumberland, PA 17070-5002

         SHIPMENTS TO NON-PACIFIC DESTINATIONS (CONT.):

         NAVY & MARINE CORPS HIGH PRIORITY REQUISITIONS (PRI. 03 AND ABOVE OR
         PRI. 06 WITH A 777 RDD):

                  Norfolk Naval Air Terminal
                  Building LP 205
                  8449 Air Cargo Road
                  Norfolk, VA 23511-4497

         NAVY & MARINE CORPS NON-HIGH PRIORITY REQUISITIONS:

                  Code 302
                  Ocean Terminal Division
                  1968 Gilbert Street, Suite 600
                  Norfolk, VA 23511-3392

When shipping to a Consolidation Point, the package SHALL be marked as follows:


                  SHIP TO: Applicable consolidation address above
                  MARK FOR: Customer address INCLUDING THE DOCUMENT/REQUISITION
                            NUMBER


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         3.4.10   TRANSPORTATION COSTS. The contract will include a separate
line item (OLIN 9999AA) as MRO/RDO Transportation Cost to cover the costs
associated with shipping Material Release Orders to customers and
Redistribution Orders to other DSCP distribution facilities. The transportation
costs (NOTE: covering shipment of Material Release Orders or Redistribution
Orders, not shipment of supplies from manufacturing facility to storage
facility) will be processed according to one of the two following alternatives:

ALTERNATIVE #1:

-        On or near the first of each month, the Contractor shall submit an
invoice to DFAS for the MRO/RDO Transportation Cost CLIN based on the actual
number of MRO/RDO units shipped during the previous, month and the per unit
specified Transportation Cost Reconciliation amount.

         NOTE: Block 1 of the DD250 must refer to a Delivery Order Number. It
         is possible to have several Delivery Orders under the contract all
         shipping to storage. When billing for MRO/RDO transportation, the
         Contractor may use the D.O. number for any OPEN order. Also, the
         Contractor must adhere to the CLIN numbering system. For example, if
         the Contractor's first invoice for Bill and Hold Transportation Costs
         references D.O. 0001, the CLIN is 9999AA. On subsequent invoices for
         transportation that reference D.O. 0001, the CLIN shall be numbered as
         9999AB, 9999AC, 9999AD, etc. If D.O. 0001 completes and shipments to
         storage continue under D.O. 0002, on the first invoice for
         transportation that references D.O. 0002 the CLIN will become 9999AA
         and start the numbering cycle over again.

-        On a quarterly basis, a Transportation Reconciliation Report shall be
submitted by the Contractor to the ACO. This report shall list the following:

         Month (Date)
         Total Quantity of Units Shipped under MROs and/or RDOs Total
         Transportation Payments Received (include invoice numbers and dates)
         Actual Transportation Costs (include documentation from carriers)
         Difference (Plus or Minus)

-        Within fifteen days the ACO will reconcile these costs and issue a
modification for either upward or downward adjustment. In the event that
premium transportation methods were used, the ACO must verify that the IPD
priority code for that requisition required expedient shipment and that premium
transportation did represent the most expedient method to meet the required
delivery. As indicated in Paragraph 3.4.1, the Contractor will be assessed
additional transportation costs for both erroneously shipped MROs/RDOs and the
use of an inappropriate mode of shipment or carrier that results in excess
costs to the Government.

ALTERNATIVE #2:

-        On or near the first of each month, the Contractor shall submit an
invoice to DFAS for the MRO/RDO Transportation Cost CLIN based on the actual
transportation costs of MRO/RDO units shipped during the previous month. NOTE:
Block 1 of the DD250 must refer to a Delivery Order Number. It is possible to
have several Delivery Orders under the contract all shipping to storage. When
billing for MRO/RDO transportation, the Contractor may use the D.O. number for
any OPEN order. Also, the Contractor must adhere to the CLIN numbering system.
For example, if the Contractor's first invoice for Bill and Hold Transportation
Costs references D.O. 0001, the CLIN is 9999AA. On subsequent invoices for
transportation that reference D.O. 0001, the CLIN shall be numbered as 9999AB,
9999AC, 9999AD, etc. If D.O. 0001 completes and shipments to storage continue
under D.O. 0002, on the first invoice for transportation that references D.O.
0002 the CLIN will become 9999AA and start the numbering cycle over again.

-        On a monthly or quarterly basis, as determined by the ACO, a
Transportation Report shall be submitted by the Contractor to the ACO. This
report shall list the following:

         Month (Date)
         Total Quantity of Units Shipped under MROs and/or RDOs
         Actual Transportation Costs (include documentation from carriers)

-        Within fifteen days the ACO will analyze these costs. In the event
that premium transportation methods were used, the ACO must verify that the IPD
priority code for that requisition required expedient shipment and that premium
transportation did represent the most expedient method to meet the required
delivery. As indicated in Paragraph 3.4.1, the Contractor


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will be assessed additional transportation costs for both erroneously shipped
MROs/RDOs and the use of an inappropriate mode of shipment or carrier that
results in excess costs to the Government.

         3.4.11   CONTINUED MRO/RDO PROCESSING. For a minimum of 3 months and a
maximum of 6 months after the final "Sill and Hold" shipment to inventory, the
contractor will continue to process customer requisitions via MROs and/or
Redistribution Orders to draw down Bill and Hold inventory. Within the 6 month
period, the contractor will be given disposition instructions for the remaining
inventory.

3.5      ADMINISTRATIVE CONTROL

         3.5.1    RECORDS. The Contractor shall establish and maintain
administrative controls over records and files related to the contract.

         3.5.2    UNSHIPPED FILE. The Government will periodically request an
unshipped file listing. The Contractor shall provide information to the PCO to
facilitate the determination of actual shipment status.

3.6      PROCESSING AND SHIPMENT OF MATERIEL RELEASE ORDERS AND REDISTRIBUTION
         ORDERS

         3.6.1    ROUTINE CONTRACTOR FACILITY PROCESSING TIME. Upon receipt of
a MRO or RDO, the Contractor will ship the requested materiel according to the
timeframes specified below.

         3.6.2    EMERGENCY SUPPLY OPERATIONS CENTER (ESOC). MROs under this
category require not more than a total of 24 hours processing and transit time.

         3.6.3    HIGH PRIORITY. MROs/RDOs under this category require not more
than 1 business day warehouse facility processing and not more than 1 business
day transit time. This applies to any request with an IPD 01-03 or an RDD entry
of 999, NXX, EXX.

         3.6.4    PRIORITY. (IPD 04-08) MROs/RDOs under this category require a
total or not more than 5 business days processing and transit time. This
applies to any request.

         3.6.5    ROUTINE. (IPD 09-15) MROs/RDOs under this category require a
total or not more than 7 business days processing and transit times.

                         PROCESSING AND SHIPMENT MATRIX


<TABLE>
<CAPTION>
                  CATEGORY                   IDENTITY                            RECEIPT
                  --------                   --------                            TIMES
                                                                                 -----
                  <S>                        <C>                                 <C>
                  ESOC                       ESOC communication                  24 hours
                                             (Phone, Fax, MRO)
                                             IPD 01-02

                  HIGH PRIORITY              IPD 03                              2 Business
                                                                                 days

                  PRIORITY                   IPD 04-08                           5 Business
                                                                                 days

                  ROUTINE                    IPD 09-15                           7 Business
                                             (Consolidation point for            days
                                             Overseas shipment)
</TABLE>

         3.6.6    PRIORITY EFFECTIVENESS. Priority effectiveness is the
percentage of items shipped on time from the time the contractor receives the
MRO or RDO to the time the customer or distribution facility receives the
order. Shipping must be via the appropriate mode of transportation to meet
standards listed in Paragraph 3.6, Standard Process and Shipping. The
Government will not fault the Contractor for shipments not meeting the
described time standard when the


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deficiencies are caused by inventory holds, computer error, or any other reason
not the fault of the Contractor as determined by the PCO. The Government will
review the Contractor's priority effectiveness on a monthly basis (see 3.7.2
below).

3.7      REPORTS

         3.7.1    CARRIER ON-TIME FILL REPORT. Will be provided to the ACO on a
monthly basis if the information is available at no additional cost to the
Contractor or the Government.

         3.7.2    MRO/RDO SHIPMENTS REPORT. The Contractor shall provide a
weekly report to the ACO consisting of the following information: broken down
by NSN, corresponding contract number, requisition number, date received by
contractor, date shipped, and DATE RECEIVED BY THE CUSTOMER OR DISTRIBUTION
FACILITY. The report should be sorted by NSN. This report may be sent via email
attachment (as a database or text file) or facsimile, and shall also be
provided to the PCO if requested.

         3.7.3    COMMERCIAL WARRANTY REPORTS. The contractor shall provide a
quarterly report to the PCO identifying each Customer Complaint received and
contractor action taken under Clause H005, Commercial Warranty. The report
shall consist of the following information: customer's requisition number, date
complaint received, date resolved by the contractor, an contractor action to
resolve complaint. This report may be sent via mail, facsimile or e-mail.

         3.7.4    INVENTORY RECONCILIATION. The contractor shall electronically
provide a quarterly inventory report, by NSN, to the PCO (in spreadsheet or
text file format) which will be used to reconcile any differences in inventory
balances between DSCP and the Bill and Hold contractor's records. The
contractor shall be required to advise DSCP of the quantity per NSN being held
in inventory at their facility, as of the established inventory cutoff date,
less any outstanding MRO/RDO quantities (any MROs or RDOs received but not
actually pulled from inventory as of the cutoff date). The QAR is to verify the
accuracy of the listing and conduct occasional spot checks, via a random
sampling of NSNs.

4.        GOVERNMENT OWNED PROPERTY (GOP)

4.1      HOLD HARMLESS AND INDEMNIFICATION AGREEMENT. The Contractor shall save
and hold harmless and indemnify the Government against any and all liability,
claims, and costs of whatsoever kind and nature for injury to or death of any
person or persons and for loss or damage to any property occurring in
connection with or in any way incident to or arising out of the occupancy, use,
service, operations, or performance of work under the terms of this contract,
which resulted in whole or in part through the negligent acts or omissions of
his employees, agent(s), or subcontractor(s).

4.2      DAMAGE TO GOVERNMENT PROPERTY FROM CAUSES OTHER THAN CONTRACTOR'S
NEGLIGENCE. Nothing in the above paragraphs shall be considered to preclude the
Government from receiving the benefits or any insurance the Contractor may
carry which provides for indemnification for loss or destruction of, or damage
to property in the custody and care of the Contractor where such loss,
destruction, or damage is to Government property. The Contractor shall do
nothing to prejudice the Government's right to recover against third parties
for loss, destruction of, or damage to Government property. Upon the request of
the PCO or the ACO, the Contractor shall, at the Government's expense, furnish
to the government all reasonable assistance and cooperation (including
assistance in the prosecution of suit and execution of instructions of
assignments in favor of the Government) in obtaining recovery.

4.3      CONTRACTOR LIABILITY FOR LOSS AND/OR DAMAGE INSURANCE. The Contractor
shall be liable for any and E goods lost or damaged while being processed or
stored in its facility and while being delivered to the end destination. The
Contractor shall take appropriate measures to protect materiel from weather
(all hazards including but not limited to temperature extremes and moisture),
pilferage, electronic magnetic hazards, or other hazards while in storage and
in transit.

4.4      INVENTORY

         4.4.1    PHYSICAL INVENTORY. The Contractor shall perform a physical
inventory of all Government-owned property in its possession or control, at any
time, as directed by the PCO. A complete physical inventory of all NSNs will be
conducted prior to the end of each term and coordinated with the PCO. The
contractor shall be required to advise DSCP of the quantity per being held in
inventory at their facility, as of the established inventory cutoff date, less
any outstanding MRO/RDO quantities (any MROs or RDOs received but not actually
pulled from inventory as of the cutoff date). THE CONTRACTOR SHALL REIMBURSE
THE GOVERNMENT THE CONTRACT PRICE FOR ANY INVENTORY SHORTAGES IDENTIFIED AS THE
RESULT OF AN INVENTORY.


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         4.4.2    END OF TERM INVENTORY PROCEDURES. Upon completion of the
physical inventory, a comparison of on hand balances will be made to ensure
that the DSCP record (NIR) agrees with the contractor's physical count. The
accountable record/balance shall be maintained by the Contractor.

                  4.4.2.1  Reconciliation of discrepancies between the actual
physical count and the NIR will require extensive coordination between the
Contractor or subcontractor authorized by the Contractor to conduct the
physical inventory and the Government. Reconciliation is to be completed and a
database file or text file showing the inventory count and outstanding MRO/RDO
count for each NSN is to be provided by the contractor to DSCP. The Government
reserves the right to conduct an audit of inventory maintained at the
contractor's plant at any time.

         4.4.3    ACCOUNTABLE INVENTORY BALANCES

                  4.4.3.1  FIRST YEAR: All receipts recorded by the
                           Contractor's facility minus all MROs and RDOs pulled
                           from inventory.

                  4.4.3.2  OPTION YEARS: Beginning of year on-hand balance
                           (after completion of inventory) plus all receipts
                           minus all MROs and RDOs pulled from inventory.

4.5      INVENTORY UPON CONTRACT COMPLETION. Upon contract completion or end of
performance, the Contractor will conduct a wall-to-wall inventory of
Government-owned property. In accordance with paragraph 3.4.11, the PCO will
provide disposition instructions for the Government-owned property remaining at
the Contractor's facility. The Contractor will return all Government-owned
property in inventory in accordance with the disposition instructions provided
by the PCO. THE CONTRACTOR SHALL REIMBURSE THE GOVERNMENT THE CONTRACT PRICE
FOR ALL INVENTORY NOT AVAILABLE TO RETURN TO THE GOVERNMENT.

5.       CONTRACTOR FURNISHED PROPERTY (CFP)

5.1      GENERAL. The Contractor shall furnish all property necessary to
perform the requirements of this contract. Contractor furnished property and
services shall be compatible with existing Government systems.

5.2      MATERIALS. The Contractor is responsible for providing all supplies,
materials and equipment needed to perform the tasks stated in Section 3,
Contractor Tasks, of this contract.

5.3      AUTOMATED DATA PROCESSING EQUIPMENT (ADPE). The Contractor is
responsible for software installation and programming which will interface with
the Government's ADPE. The preferred software communication link between the
automated systems is DAMES. The Contractor's ADPE must be able to interface
with Government's ADPE using the SAMMS DICs listed. The ADPE interface shall be
operational two weeks prior to the first shipment of goods to the Contractor's
storage facility as coordinated with and agreed to by the Contractor and the
Government.

6.       QUALITY

6.1      QUALITY CONTROL

         6.1.1    GENERAL. The Contractor shall establish and maintain a
complete Government approved Quality Control Plan (QCP) to assure the
requirements of the contract are provided as specified. The Contractor's QCP
shall provide at the minimum, their inspection systems for all services
required under this SOW, including: an organizational chart, Points-of-Contact,
inspection points, system(s) for identification and correction of deficiencies,
and a staffing plan for inspection functions. The program will include, but is
not limited to, the following components.

         6.1.2    INSPECTION SYSTEM. An inspection system is required covering
the performance requirements stated in Section 3, Contractor Tasks, of this
SOW. It must specify areas to be inspected on either a scheduled or unscheduled
basis and title of individual(s) who will do the inspection. A method of
identifying deficiencies in the quality of services


                                                                             69
<PAGE>


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performed is required, as well as method of maintaining a file of inspections
conducted by the Contractor and any corrective actions taken. These documents
shall be available to the Government at any time during the term of the
contract.

6.2      QUALITY ASSURANCE

         6.2.1    GENERAL. The Government will monitor the Contractor's

performance in accordance with the Contractor's Quality Control Program.

         6.2.2    PERFORMANCE EVALUATION MEETINGS. The Contract Manager may be
required to meet with the PCO/ACO and QAR personnel at least once monthly
during the first six months of operating Bill and Hold. The ACO will notify the
Contractor at least 7 days prior to the meeting date. Meetings will be as often
as necessary thereafter as determined by the PCO or ACO. However, a meeting
will be held whenever a Contract Discrepancy Report (CDR) is issued. A mutual
effort will b made to resolve all problems identified. The written minutes of
these meetings shall be signed by the Contract Manager, ACO, and QAR. Should
the Contractor not concur with the minutes, he/she shall state in writing to
the ACO any areas of nonconcurrence.

         6.2.3    PLANT ACCESS. The Contractor shall provide access to storage
areas to any personnel authorized by the PCO/ACO for the purpose of touring
and/or inspecting those areas.

         6.2.4    PHYSICAL SECURITY. The Contractor shall implement a physical
security plan. The physical security plan shall include all Government owned
property furnished for the performance of this contract. The Government will
not be responsible in any way for damage to the Contractor's supplies,
materials, equipment, and property or to Contractor personnel= personal
belongings that are damaged or destroyed by fire, theft, accident, or other
disaster.

6.3      WARRANTY PROVISIONS

         6.3.1    WARRANTY FOR MRO/RDO SHIPMENTS. Clause H005, Commercial
Warranty Provisions, shall now apply all MRO/RDO shipments.

         6.3.2    WARRANTY FOR STORAGE SHIPMENTS. In addition, Clause
52.246-9P35, Warranty of Supplies, shall apply to all units shipped in place to
the contractor's storage facility and all units shipped to a government storage
facility (including at contract completion). This warranty shall apply 13
months from the date of the "z" or final shipment under the contract.


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Attachment 1.

                      MATERIEL RELEASE ORDER DOCUMENT (from SAMMS Appendix B-7)

1.       The MRO is the document by which a Defense Supply Center directs the
release of materiel by a distribution activity to a customer.

2.       The following are the fields in the document:


<TABLE>
<CAPTION>
FIELD                              FIELD
LEGEND                            POSITIONS           EXPLANATION/INSTRUCTIONS
------                            ---------           ------------------------

<S>                               <C>                 <C>
Document Identifier Code            1-3               Enter A5_
Routing Identifier Code             4-6               Enter the appropriate code applicable to distribution depot to which
                                                      the MRO is directed (i.e. contractor's RIC code)
Media and Status Code               7                 Enter the code as shown on the requisition.
National Stock Number               8-20              Enter the NSN of the item ordered shipped.
Blank                               21-22             Leave blank.
Unit of Issue                       23-24             Enter the UI applicable to NSN.
Quantity                            25-29             Enter the quantity of the item ordered shipped (field zero-filled
                                                      from left).
Document Number                     30-43             Enter the document number as shown on the requisition.
Suffix Code                         44                When the requisition quantity is divided due to multiple supply
                                                      actions, enter the Suffix Code applicable to this portion of the original
                                                      requisition quantity. When the requisitioned quantity is not
                                                      divided, this field will be left blank.
Supplementary Address               45-50             Enter code as shown on the requisition.
Signal Code                         51                Enter code as shown on the requisition.
Fund Code                           52-53             Enter code as shown on the requisition.
Distribution Code/MDN               54-56             Enter code as shown on the requisition.
Project                             57-59             Enter code as shown on the requisition.
Priority                            60-61             Enter code as shown on the requisition.
Required Delivery Date              62-64             Enter the date as shown on the requisition; if none, blank.
Advice Code                         65-66             Enter code as shown on the requisition.
Routing Identifier Code (From)      67-69             Enter the code applicable to the DSC originating the MRO (DSCP is S9T).
Ownership/Purpose Code              70                Enter applicable
Ownership/Purpose Code.
Condition Code                      71                Enter applicable Condition Code.
Management Code                     72                Enter applicable Management Code.
Blank                               73                Leave blank.
Standard Price                      74-80             Enter the Standard Unit Price applicable to the NSN.
</TABLE>


                                                                             71
<PAGE>


SP0100-97-D-0326                                            PAGE 17
McRae Industries, Inc,                                      Modification P00016

Attachment 2.

                    MATERIEL RELEASE/REDISTRIBUTION ORDER CONFIRMATION DOCUMENT
                                                     (from SAMMS Appendix B-14)

1.       These documents are received by the Defense Supply Center from the
distribution activity as confirmation of shipment of materiel.

2.       The following are the fields in the MRO/RDO Confirmation Document:


<TABLE>
<CAPTION>
FIELD                              FIELD
LEGEND                            POSITIONS           EXPLANATION/INSTRUCTIONS
------                            ---------           ------------------------

<S>                               <C>                 <C>
Document Identifier Code            1-3               DIC AR0 - To indicate exact quantity ordered has been shipped.
Routing Identifier (To) Code        4-6               Enter the RIC of the DSC receiving the shipment confirmation.
Media and Status Code/              7                 For other than FMS shipments, perpetuate M&S Code from MRO. For FMS
  Transportation Bill Code (TBC)                      shipments,enter TBC applicable to the shipment.
National Stock Number               8-20              Enter the NSN to which confirmation is applicable.
Submission Time                     21-22             Leave blank.
Unit of Issue                       23-24             Enter the UI as shown on the MRO/RDO.
Quantity                            25-29             Enter the quantity applicable to the item being supplied
                                                      (zero-filled from left).
Document Number                     30-43             Enter the document number as shown on the MRO/RDO.
Suffix Code                         44                Enter the Suffix Code contained in pos. 44 of the MRO, to indicate that the
                                                      requisitioned quantity was divided into separate supply actions by the
                                                      DSC. Leave blank when pos. 44 of the MRO/RDO is blank.
Supplementary Address               45-50             Enter the coded address as shown on the MRO/RDO.
Hold Code                           51                Leave blank.
Fund Code                           52-53             Enter the code as shown on the MRO/RDO.
Distribution Code                   54-56             Enter the code as shown on the MRO/RDO.
Date Shipped                        57-59             Enter date delivered to carrier.
Transportation Control #            60-76             Enter coding as follows.
(Requisition Document               (60-73)           Enter the requisition document number (DoDAAC, date of requisition, serial
     Number)                                          number of requisition).
(Suffix Code)                       (74)              Enter the Suffix Code from requisition (X if none).
(Partial Shipment Code)             (75)              Code (alpha character except 1, O, X, and Z). The Last Partial Shipment is
                                                      Z. FULL SHIPMENT IS X.
(Split Shipment Code)               (76)              Enter Split Shipment Code (alpha character except 1, O, X, and Z). The
                                                      last Split Shipment is Z. FULL SHIPMENT IS X.
Mode of Shipment Code               77                Enter the appropriate code identifying the mode of shipment
                                                      (see attachment 4).
Date Available for Shipment         78-80             Leave blank.
</TABLE>


                                                                             72
<PAGE>


SP0100-97-D-0326                                            PAGE 18
McRae Industries, Inc.                                      Modification P00016

Attachment 3.

                        MATERIEL RECEIPT TRANSACTION (FROM SAMMS Appendix B-20)

1.       This document is used by the storage activities for reporting receipt
of materiel from contract source.

2.       The following are the fields in the transaction:


<TABLE>
<CAPTION>
FIELD                              FIELD
LEGEND                            POSITIONS           EXPLANATION/INSTRUCTIONS
------                            ---------           ------------------------

<S>                               <C>                 <C>
Document Identifier Code            1-3      Enter DIC D4S.
Routing Identifier Code (To)        4-6      Enter S9T.
Blank                               7        Leave blank.
National Stock Number               8-20     Enter the NSN of the item received.
Blank                               21-22    Leave blank.
Unit of Issue                       23-24    Enter for item received.
Quantity                            25-29    Enter the quantity of item received (preceding significant digits with zeros).
Procurement Instrument or           30-42    Enter contract number.
Blank                               43       Leave blank.
Suffix Code                         44       Leave blank.
Item Number                         45-50    Identify the Contract Line Item Number (preceding significant digits with zeros).
Blank                               51-53    Leave blank.
Distribution Code                   54-56    Enter (or perpetuate) manufacturing directive number if applicable;
                                             otherwise, leave blank.
Project Code (or ORC)               57-59    Leave blank.
Shipment Number                     60-66    Enter Shipment Number from DD250 (preceding significant digits with zeros).
Routing Identifier Code             67-69    Enter the RIC of the storage activity at which the (From) materiel was
                                             received (contractor's RIC).
Ownership/Purpose Code              70       Enter the letter A.
Condition Code                      71       Enter the letter A.
Management Code                     72       Leave blank.
Date                                73-75    Enter Julian date when materiel was received into inventory.
Blank                               76       Leave blank.
Call/Order Serial Number            77-80    Enter the contract delivery order number, if applicable.
</TABLE>


                                                                             73
<PAGE>


SP0100-97-D-0325                                            PAGE 19
McRae Industries, Inc.                                      Modification P00016

Attachment 4.

                              MODE OF SHIPMENT CODES (from SAMMS Appendix A-17)

1.       This code is a one-digit alpha/numeric character that identifies the
initial method of movement from the shipping activity.


<TABLE>
<CAPTION>
CODE              EXPLANATION

<S>               <C>
A                 Motor, truckload
B                 Motor, Class Rating (Less than truckload)
C                 Van (unpacked, uncrated personal or Government property)
D                 Driveaway, truckaway, towaway
E                 Bus
F                 Military Airlift Command (Channel and Special Assignment Airlift Mission)
G                 Surface parcel post
H                 Air parcel post
I                 Government trucks, for shipment outside local delivery area
J                 Air-Small package carrier
K                 Rail, carload
L                 Rail, less than carload
M                 Surface-Freight forwarder
N                 LOGAIR
O                 Organic military air (including aircraft of foreign governments)
P                 Through Bill of Lading (TGBL)
Q                 Commercial Air Freight-Includes Regular and Expedited Service (Provided by Major Air Lines), Also includes
                  Charters and Air Taxi
R                 Reserved for Future Use
S                 Scheduled Truck Service (STS) (applies to contract carriage, guaranteed traffic routings and/or
                  scheduled service)
T                 Air freight forwarder
U                 QUICKTRANS
V                 SEAVAN
W                 Water, river, lake, coastal (commercial)
X                 Bearer, walk--thru (customer pickup of material)
Y                 Military Intratheater airlift service
Z                 MSC (controlled contract or arranged space)
</TABLE>

*        Includes Trailer/Container-On-Flat-Car (excluding SEAVAN).

<TABLE>
<S>               <C>
2                 Government watercraft, barge, lighter
3                 RORO service
4                 ARFCOS
5                 Surface-Small Package Carrier
6                 Military Official Mail (MOM)
7                 Express mail
8                 Pipeline

9                 Local delivery by Government or commercial truck includes on base transfers, deliveries between air,
                  water, or motor terminals, and adjacent activities. Local delivery areas are identified in commercial
                  carriers' tariffs which are filed and approved by regulatory authorities.
</TABLE>


                                      74
<PAGE>


SP0100-97-D-0326                                            PAGE 20
McRae Industries, Inc.                                      Modification P00016

Attachment 5.

                     REDISTRIBUTION ORDER TRANSACTION (FROM SAMMS Appendix B-5)

1.       The RDO is the document by which a Defense Supply Center directs the
shipment of materiel from one distribution facility to another distribution
facility.

2.       The following are the fields in the document:


<TABLE>
<CAPTION>
FIELD                              FIELD
LEGEND                            POSITIONS           EXPLANATION/INSTRUCTIONS
------                            ---------           ------------------------

<S>                               <C>                 <C>

Document Identifier Code          1-3                 Enter DIC A2A.
Routing Identifier Code           4-6                 Enter S9T (RDO transaction comes from DSCP)
      (From)
Media and Status Code             7                   Enter 0.
National Stock Number             8-20                Enter the NSN of the item ordered shipped.
Blank                             21-22               Leave blank.
Unit of Issue                     23-24               Enter the UI applicable to NSN.
Quantity                          25-29               Enter the quantity of the item ordered shipped (field zero-filled from
                                                      left).
Document Number                   30-43               Enter the DSCP document number.
Suffix Code                       44                  Leave blank.
Supplementary Address             45-50               DoDAAC of the distribution activity the stock is to be shipped to.
Signal Code                       51                  Enter M.
Fund Code                         52-53               Enter KK.
Blank Field                       54-56               Leave blank.
Project                           57-59               Enter a Project Code or leave blank.
Priority                          60-61               Priority designator.
Blank Field                       62-69               Leave blank.
Purpose Code                      70                  Enter A.
Condition Code                    71                  Enter applicable stock Condition Code (usually A).
Blank Field                       72-73               Leave blank.
Routing Identifier Code           74-76               Contractor's RIC (RDO transaction goes to contractor)
      (To)
Output Routing Code               77-78               Code of DSCP originator.
Blank Field                       79-80               Leave blank.
</TABLE>


                                                                             75
<PAGE>


SP0100-97-D-0326                                            PAGE 21
McRae Industries, Inc.                                      Modification P00016

EXCERPT FROM APPENDIX B-14

<Table>
<S>                                 <C>
Transportation Control              (60-76)  Enter the TCN. (See Note)
Number (TCN)

         (Requisition Document      (60-73) Enter the Requisition Document Number:
         Number)                    Requisitioner, date of requisition and Serial Number of requisition.

         (Suffix Code)              (74) Enter the Suffix Code from requisition (X if none).

         (Partial Shipment Code)    (75) Code (alpha character except I, O, X, and Z). The Last Partial Shipment is Z.
                                    Full Shipment is X.

         (Split Shipment Code)      (76) Enter Split Shipment Code (alpha character except I, O, X, and Z). The last Split
                                    Shipment is Z. Full shipment is X.

Mode of Shipment Code               (77) Enter the appropriate code identifying the mode of shipment (see appendix A-17).
                                    Leave blank when shipment has not occurred.

Date Available for Shipment         (78-80) Shipment Status or leave blank in response to follow-up when shipment has not
                                    occurred.

                                    a.       CONUS - Enter date available for shipment.

                                    b.       Overseas - Enter date available for shipment. Leave blank
                                    on parcel post and when shipment has not occurred.

                                    c.       For MAS transactions enter date available for shipment.
</TABLE>

NOTE:    In February 1997, the full 17 position TCN was mandated to be used for
all shipments.


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